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06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2023

OR

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

Commission File Number 001-37839

 

img145773687_0.jpg 

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

20-1590775

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

8501 N. Scottsdale Rd.

Gainey Center II, Suite 100

Scottsdale, AZ 85253

(480) 305-8910

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

TPIC

NASDAQ Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

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

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

As of April 29, 2023, there were 42,479,774 shares of common stock outstanding.

 

 


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2023 and 2022

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022

9

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

11

 

 

 

 

 

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

38

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

39

 

 

 

 

 

ITEM 1A.

 

Risk Factors

39

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

 

 

ITEM 3.

 

Defaults Upon Senior Securities

40

 

 

 

 

 

ITEM 4.

 

Mine Safety Disclosures

40

 

 

 

 

 

ITEM 5.

 

Other Information

40

 

 

 

 

 

ITEM 6.

 

Exhibits

41

 

 

 

 

 

SIGNATURES

 

42

 

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

competition from other wind blade and wind blade turbine manufacturers;
the discovery of defects in our products and our ability to estimate the future cost of warranty campaigns;
the current status of the wind energy market and our addressable market;
our ability to absorb or mitigate the impact of price increases in resin, carbon reinforcements (or fiber), other raw materials and related logistics costs that we use to produce our products;
our ability to absorb or mitigate the impact of wage inflation in the countries in which we operate;
our ability to procure adequate supplies of raw materials and components to fulfill our wind blade volume commitments to our customers;
the potential impact of the increasing prevalence of auction based tenders in the wind energy market and increased competition from solar energy on our gross margins and overall financial performance;
our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow and ability to achieve or maintain profitability;
changes in domestic or international government or regulatory policy, including without limitation, changes in trade policy and energy policy;
changes in global economic trends and uncertainty, geopolitical risks, and demand or supply disruptions from global events;
changes in macroeconomic and market conditions, including the potential impact of any pandemic, risk of recession, inflation, supply chain constraints, commodity prices and exchange rates, and the impact of such changes on our business and results of operations;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to attract and retain customers for our products, and to optimize product pricing;
our ability to effectively manage our growth strategy and future expenses, including our startup and transition costs;
our ability to successfully expand in our existing wind energy markets and into new international wind energy markets, including our ability to expand our field service inspection and repair services business and manufacture wind blades for offshore wind energy projects;
our ability to keep up with market changes and innovations;
our ability to successfully open new manufacturing facilities and expand existing facilities on time and on budget;
the impact of the pace of new product and wind blade model introductions on our business and our results of operations;
our ability to successfully expand our automotive business and execute upon our strategy of entering new markets outside of wind energy;
our ability to maintain, protect and enhance our intellectual property;
our ability to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products;
the attraction and retention of qualified associates and key personnel;

2


 

our ability to maintain good working relationships with our associates, and avoid labor disruptions, strikes and other disputes with labor unions that represent certain of our associates; and
the potential impact of one or more of our customers becoming bankrupt or insolvent, or experiencing other financial problems.

These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We have described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the United States Securities and Exchange Commission (SEC) on February 22, 2023 the principal risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to update any forward-looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of unanticipated events except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

 

3


 

PART I. FINANCIAL INFORMATION

ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands, except par value data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

164,231

 

 

$

133,546

 

Restricted cash

 

 

8,793

 

 

 

9,854

 

Accounts receivable

 

 

178,651

 

 

 

184,809

 

Contract assets

 

 

233,932

 

 

 

215,939

 

Prepaid expenses

 

 

32,606

 

 

 

29,119

 

Other current assets

 

 

30,764

 

 

 

26,052

 

Inventories

 

 

14,539

 

 

 

10,661

 

Current assets of discontinued operations

 

 

22,692

 

 

 

35,182

 

Total current assets

 

 

686,208

 

 

 

645,162

 

Property, plant and equipment, net

 

 

131,087

 

 

 

136,841

 

Operating lease right of use assets

 

 

147,944

 

 

 

152,312

 

Other noncurrent assets

 

 

27,658

 

 

 

27,861

 

Total assets

 

$

992,897

 

 

$

962,176

 

 

 

 

 

 

 

Liabilities, Mezzanine Equity and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

278,684

 

 

$

280,499

 

Accrued warranty

 

 

22,973

 

 

 

22,347

 

Current maturities of long-term debt

 

 

61,624

 

 

 

59,975

 

Current operating lease liabilities

 

 

22,591

 

 

 

22,220

 

Contract liabilities

 

 

 

 

 

17,100

 

Current liabilities of discontinued operations

 

 

15,574

 

 

 

54,440

 

Total current liabilities

 

 

401,446

 

 

 

456,581

 

Long-term debt, net of current maturities

 

 

128,710

 

 

 

1,198

 

Noncurrent operating lease liabilities

 

 

129,753

 

 

 

133,363

 

Other noncurrent liabilities

 

 

11,154

 

 

 

10,670

 

Total liabilities

 

 

671,063

 

 

 

601,812

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

Series A Preferred Stock, $0.01 par value, 400 shares authorized; 350 shares
   issued and outstanding at March 31, 2023 and December 31, 2022; liquidation
   preference of $
484,795 at March 31, 2023 and $475,735 at December 31, 2022

 

 

325,050

 

 

 

309,877

 

Stockholders’ equity:

 

 

 

 

 

 

Common shares, $0.01 par value, 100,000 shares authorized, 42,996 shares issued
   and
42,480 shares outstanding at March 31, 2023 and 100,000 shares authorized,
   
42,369 shares issued and 42,044 shares outstanding at December 31, 2022

 

 

430

 

 

 

424

 

Paid-in capital

 

 

376,527

 

 

 

407,570

 

Accumulated other comprehensive loss

 

 

(13,377

)

 

 

(15,387

)

Accumulated deficit

 

 

(356,696

)

 

 

(334,569

)

Treasury stock, at cost, 516 shares at March 31, 2023 and 325 shares at
   December 31, 2022

 

 

(10,100

)

 

 

(7,551

)

Total stockholders’ equity

 

 

(3,216

)

 

 

50,487

 

Total liabilities, mezzanine equity and stockholders’ equity

 

$

992,897

 

 

$

962,176

 

See accompanying notes to our unaudited condensed consolidated financial statements.

4


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

(in thousands, except per share data)

 

Net sales

 

$

404,066

 

 

$

343,525

 

Cost of sales

 

 

399,381

 

 

 

332,421

 

Startup and transition costs

 

 

1,980

 

 

 

10,077

 

Total cost of goods sold

 

 

401,361

 

 

 

342,498

 

Gross profit

 

 

2,705

 

 

 

1,027

 

General and administrative expenses

 

 

7,034

 

 

 

7,860

 

Loss on sale of assets and asset impairments

 

 

3,593

 

 

 

908

 

Restructuring charges, net

 

 

75

 

 

 

457

 

Loss from continuing operations

 

 

(7,997

)

 

 

(8,198

)

Other income (expense):

 

 

 

 

 

 

Interest expense, net

 

 

(2,528

)

 

 

(707

)

Foreign currency income (loss)

 

 

(1,214

)

 

 

403

 

Miscellaneous income

 

 

453

 

 

 

54

 

Total other expense

 

 

(3,289

)

 

 

(250

)

Loss from continuing operations before income taxes

 

 

(11,286

)

 

 

(8,448

)

Income tax provision

 

 

(3,860

)

 

 

(2,944

)

Net loss from continuing operations

 

 

(15,146

)

 

 

(11,392

)

Preferred stock dividends and accretion

 

 

(15,173

)

 

 

(14,132

)

Net loss from continuing operations attributable to common stockholders

 

 

(30,319

)

 

 

(25,524

)

Net loss from discontinued operations

 

 

(6,981

)

 

 

(4,408

)

Net loss attributable to common stockholders

 

$

(37,300

)

 

$

(29,932

)

 

 

 

 

 

 

 

Weighted-average shares of common stock outstanding:

 

 

 

 

 

 

Basic

 

 

42,284

 

 

 

41,899

 

Diluted

 

 

42,284

 

 

 

41,899

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share:

 

 

 

 

 

 

Basic

 

$

(0.72

)

 

$

(0.61

)

Diluted

 

$

(0.72

)

 

$

(0.61

)

 

 

 

 

 

 

 

Net loss from discontinued operations per common share:

 

 

 

 

 

 

Basic

 

$

(0.16

)

 

$

(0.10

)

Diluted

 

$

(0.16

)

 

$

(0.10

)

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(0.88

)

 

$

(0.71

)

Diluted

 

$

(0.88

)

 

$

(0.71

)

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

5


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net loss from continuing operations attributable to common stockholders

 

$

(30,319

)

 

$

(25,524

)

Net loss from discontinued operations

 

 

(6,981

)

 

 

(4,408

)

Net loss attributable to common stockholders

 

 

(37,300

)

 

 

(29,932

)

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

2,010

 

 

 

43,369

 

Unrealized gain (loss) on hedging derivatives, net of taxes of
  $
0 and $0 respectively

 

 

 

 

 

2,705

 

Comprehensive income (loss)

 

$

(35,290

)

 

$

16,142

 

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

6


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

 

Common

 

 

Paid-in

 

 

other comprehensive

 

 

Accumulated

 

 

Treasury stock,

 

 

Total stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

at cost

 

 

equity

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at December 31, 2022

 

 

350

 

 

$

309,877

 

 

 

 

42,369

 

 

$

424

 

 

$

407,570

 

 

$

(15,387

)

 

$

(334,569

)

 

$

(7,551

)

 

$

50,487

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,127

)

 

 

 

 

 

(22,127

)

Preferred stock dividends

 

 

 

 

 

10,706

 

 

 

 

 

 

 

 

 

 

(10,706

)

 

 

 

 

 

 

 

 

 

 

 

(10,706

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,010

 

 

 

 

 

 

 

 

 

2,010

 

Common stock
repurchased
for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,549

)

 

 

(2,549

)

Issuances under share-
based compensation
plan

 

 

 

 

 

 

 

 

 

627

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Share-based
compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,720

 

 

 

 

 

 

 

 

 

 

 

 

2,720

 

Accretion of Series A
Preferred Stock

 

 

 

 

 

4,467

 

 

 

 

 

 

 

 

 

 

(4,467

)

 

 

 

 

 

 

 

 

 

 

 

(4,467

)

Capped call transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,590

)

 

 

 

 

 

 

 

 

 

 

 

(18,590

)

Balance at
   March 31, 2023

 

 

350

 

 

$

325,050

 

 

 

 

42,996

 

 

$

430

 

 

$

376,527

 

 

$

(13,377

)

 

$

(356,696

)

 

$

(10,100

)

 

$

(3,216

)

 

 

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

 

Common

 

 

Paid-in

 

 

other comprehensive

 

 

Accumulated

 

 

Treasury stock,

 

 

Total stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

at cost

 

 

equity

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at December 31, 2021

 

 

350

 

 

$

250,974

 

 

 

 

37,418

 

 

$

374

 

 

$

451,440

 

 

$

(54,006

)

 

$

(269,264

)

 

$

(6,592

)

 

$

121,952

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,800

)

 

 

 

 

 

(15,800

)

Preferred stock dividends

 

 

 

 

 

9,605

 

 

 

 

 

 

 

 

 

 

(9,605

)

 

 

 

 

 

 

 

 

 

 

 

(9,605

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,074

 

 

 

 

 

 

 

 

 

46,074

 

Common stock
repurchased
for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(343

)

 

 

(343

)

Issuances under share-
based compensation
plan

 

 

 

 

 

 

 

 

 

106