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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

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

 

For the fiscal year ended December 31, 2022

or

 

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

 

For the transition period from to

Commission File Number 001-37839

 

img144878996_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

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if 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 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 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction

of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s

executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

 

The aggregate market value of the shares of common stock held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on June 30, 2022 as reported by the NASDAQ Global Market on such date was approximately $456 million. Shares of the Registrant’s common stock held by each executive officer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.

As of January 31, 2023, the Registrant had 42,210,245 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, scheduled to be held on May 24, 2023, are incorporated by reference into Part III of this Report.

 

 

 


 

Table of Contents

 

 

 

 

 

Page

PART I

 

 

 

 

Item 1.

 

Business

 

3

Item 1A.

 

Risk Factors

 

16

Item 1B.

 

Unresolved Staff Comments

 

31

Item 2.

 

Properties

 

31

Item 3.

 

Legal Proceedings

 

31

Item 4.

 

Mine Safety Disclosures

 

31

 

 

 

 

 

PART II

 

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

32

Item 6.

 

[Reserved]

 

34

Item 7.

 

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

 

35

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

61

Item 8.

 

Financial Statements and Supplementary Data

 

62

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

62

Item 9A.

 

Controls and Procedures

 

62

Item 9B.

 

Other Information

 

63

 

 

 

 

 

PART III

 

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

64

Item 11.

 

Executive Compensation

 

64

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

64

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

64

Item 14.

 

Principal Accounting Fees and Services

 

64

 

 

 

 

 

PART IV

 

 

 

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

65

Item 16.

 

Form 10-K Summary

 

65

 

 

 

 

 

 

 

 

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 Annual Report on Form 10-K, 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 Annual Report on Form 10-K 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 the COVID-19 pandemic and any other 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;

1


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;
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 under the heading “Risk Factors” included in Part 1, Item 1A of this Annual Report on Form 10-K 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 Annual Report on Form 10-K represent our views as of the date of this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

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PART I

Item 1. Business

Description of Business

TPI Composites, Inc. is the holding company that conducts substantially all of its business operations through its direct and indirect subsidiaries (collectively, the Company, TPI or we). The Company was founded in 1968 and has been producing composite wind blades since 2001. The Company is incorporated in Delaware.

Discontinued Operations

In December 2022, the Company committed to a restructuring plan to rebalance our organization and optimize our global manufacturing footprint. In connection with this plan, we ceased production at our Yangzhou, China manufacturing facility as of December 31, 2022, and plan to shut down our business operations in China. Our business operations in China comprised the entirety of our Asia reporting segment. This shut down will have a meaningful effect on our global manufacturing footprint and consolidated financial results. Accordingly, the historical results of our Asia reporting segment have been presented as discontinued operations in our Consolidated Statements of Operations and Consolidated Balance Sheets. Our China operations represented a geographic operating segment that included (1) the manufacturing of wind blades at our facilities in Dafeng, China and Yangzhou, China, (2) the manufacturing of precision molding and assembly systems at our Taicang Port, China facility and (3) wind blade inspection and repair services. The following discussion reflects continuing operations only, unless otherwise indicated.

Overview

We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We enable many of the industry’s leading wind turbine original equipment manufacturers (OEM) to outsource the manufacturing of a portion of their wind blades through our global footprint of advanced manufacturing facilities strategically located to serve large and growing wind markets in a cost-effective manner. Given the importance of wind energy capture, turbine reliability and cost to power producers, the size, quality and performance of wind blades is highly strategic to our OEM customers. As a result, we have become a key supplier to our OEM customers in the manufacture of wind blades and related precision molding and assembly systems. We have entered into supply agreements pursuant to which we dedicate capacity at our facilities to our customers and manufacture wind blade sets (each set consisting of three wind blades) for our customers. This collaborative dedicated supplier model provides us with contracted volumes that generate revenue visibility, drive capital efficiency and allow us to produce wind blades at a lower total delivered cost, while ensuring critical dedicated capacity for our customers.

 

We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators. Our field service inspection and repairs services include diagnostic, repair and maintenance service offerings for wind blades that have been installed on wind turbines located at wind farms. Our field service inspection and repair services can be performed up-tower, where a blade technician performs these services in the air or from the wind turbine tower on a wind turbine blade, or down tower, where a blade is first removed from a wind turbine and these services are performed on the ground at the wind farm site or in a repair facility.

 

We also leverage our advanced composite technology and history of innovation to supply high strength, lightweight and durable composite products to the automotive market. We supply Proterra, Inc. (Proterra) with Proterra Catalyst® composite bus bodies under a supply agreement that expires in December 2024. In 2021, we began a production program to manufacture a composite component for an electric vehicle manufacturer using our automated production line and commenced production of additional composites components for this manufacturer in 2022. We manufactured approximately 26,000 production components in 2021 and 78,000 production components in 2022. We continue to expand our manufacturing capabilities and have received orders with a major OEM to produce approximately 360,000 production components in 2023.

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Our wind blade and precision molding and assembly systems manufacturing businesses accounted for approximately 92%, 94%, and 95% of our total net sales for each of the years ended December 31, 2022, 2021 and 2020, respectively. As of February 22, 2023, our wind and automotive supply agreements provide for minimum aggregate volume commitments from our customers of approximately $1.4 billion and encourage our customers to purchase additional volume up to, in the aggregate, a total contract value of approximately $2.7 billion through the end of 2025.

Financial Information about Segments and Geographic Areas

We divide our business operations into four geographic operating segments - (1) the United States (U.S.), (2) Mexico, (3) Europe, the Middle East and Africa (EMEA) and (4) India as follows:

Our U.S. segment includes (1) the manufacturing of wind blades at our Newton, Iowa facility in which production has been shut down since the end of the fourth quarter of 2021, and is expected to resume in 2024, (2) the manufacturing of precision molding and assembly systems used for our automotive business at our Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the automotive industry, which we also conduct at our Warren, Rhode Island facility, (4) wind blade inspection and repair services, (5) our advanced engineering center in Kolding, Denmark, which provides technical and engineering resources to our manufacturing facilities, (6) our engineering center in Berlin, Germany and (7) our corporate headquarters.
Our Mexico segment includes (1) the manufacturing of wind blades at our three facilities in Juárez, Mexico and two facilities in Matamoros, Mexico, (2) the manufacturing of precision molding and assembly systems and composite solutions for the automotive industry at our fourth Juárez, Mexico facility and (3) wind blade inspection and repair services.
Our EMEA segment includes (1) the manufacturing of wind blades at our two facilities in Izmir, Türkiye, and wind blade inspection and repair services in Türkiye, (2) our wind blade inspection and repair service facility in Madrid, Spain, and (3) wind blade inspection and repair services in the United Kingdom.
Our India segment manufactures wind blades at our manufacturing facility in Chennai, India.

For additional information regarding our discontinued operations, and operating segments and geographic areas, see Note 2 - Discontinued Operations, and Note 22 – Segment Reporting, respectively, of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Business Strategy

Our long-term success will be driven by our business strategy. The key elements of our business strategy are as follows:

Capitalize on the long-term, global trends of decarbonization of the electric sector and the electrification of vehicles. We believe we are well-positioned to participate and benefit from the long term, global trend of decarbonization of the electric sector. Although regulatory uncertainty, as well as permitting, siting and transmission challenges in the U.S. and Europe has tempered demand for wind energy in the near term, we expect global demand for renewable energy, and wind energy in particular, will continue to grow in the long term due to a multitude of factors, including: increased cost competitiveness of wind energy compared to fossil fuel generated electricity; increased demand from corporations and utility providers for renewable energy; and recent international policy initiatives designed to promote the growth of renewable energy. We believe our global footprint of manufacturing facilities will allow us to capitalize on the expected long term, global growth of wind energy. Similarly, we believe we are well-positioned to capitalize on the projected growth of electric vehicles. As the global vehicle electrification trend continues, reducing the weight of these vehicles is critical to expanding range and/or providing more room for additional batteries or reducing the number of batteries and our composite products can help to shed weight and add strength to such critical components. We believe vehicle manufacturers and vehicle owners will also benefit from the lower cost of total ownership due to the durability and the non-corrosive properties of composites compared to metallic

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materials along with the ability to scale production with lower production investment costs. As a result, we expect there will be an increased demand for composites products for electric vehicles. In addition, we believe there is a potential demand in other strategic markets for composites to replace aluminum or other more expensive composite materials such as carbon reinforcements.
Grow our existing relationships and develop new relationships with leading industry OEMs. We plan to continue growing and expanding our relationships with existing customers who, according to data from BloombergNEF (Bloomberg), represented approximately 37% of the global onshore wind energy market, approximately 77% of that market excluding China, and 87% of the U.S. onshore wind turbine market over the three years ended December 31, 2021, based on megawatts (MWs) of energy capacity installed, as well as developing new relationships with other leading industry OEMs. We expect to be presented with opportunities to expand our existing relationships and develop new relationships with industry OEMs as they seek to capitalize on the benefits of outsourced wind blade manufacturing while maintaining high quality customization and dedicated capacity. In September 2022, we extended our supply agreement with ENERCON for two lines at one of our Türkiye manufacturing facilities through 2025 and extended two of our supply agreements with Nordex for four lines at our Türkiye manufacturing facilities through 2023. In October 2022, we signed an agreement with General Electric International, Inc. and its affiliates (GE Renewable Energy) that enabled us to secure a ten-year lease extension of our manufacturing facility in Newton, Iowa. Under the agreement, GE Renewable Energy and TPI plan to develop competitive blade manufacturing options to best serve GE Renewable Energy’s commitments in the U.S. market with production intended to start in 2024. In December 2022, we extended our supply agreements with GE Renewable Energy for all of our current manufacturing lines at our Mexico manufacturing facilities through 2025. In December 2022, we agreed in principle with Vestas on the material terms and conditions of a long-term global framework agreement governing the supply of wind blades to Vestas from our manufacturing facilities in Matamoros, Mexico, Türkiye, India and potential future facilities beginning in January 2024. We have also agreed in principle to a deal with Nordex to effectively extend four of six lines in Türkiye through 2026 (the other two will be extended through 2024) and add two additional manufacturing lines in India.
Leverage our footprint in large and growing wind markets, capitalize on the continuing outsourcing trend, evaluate building wind blades for the growing offshore wind market and evaluate strategic acquisitions. As many wind turbine OEMs continue to shift towards increased outsourcing of wind blade manufacturing, we believe we are well-positioned with our global footprint. We utilize our strengths in composites technology and manufacturing, combined with our collaborative dedicated supplier model to provide our customers with an efficient solution for their expansion in large and growing onshore wind markets. We also are evaluating opportunities to manufacture wind blades for the growing offshore wind market. In addition, our demonstrated ability to enter into new markets and the strength of our manufacturing capabilities afford us the optionality to build new factories or grow through strategic acquisitions.
Continue to ensure that wind energy remains competitive with other energy sources. We continue to work with our customers on larger size wind blade models that maximize the capture of wind energy so that the levelized cost of energy for wind energy remains competitive with other energy sources such as solar and natural gas. We also continue to utilize our advanced technology, regional manufacturing facilities strategically located to cost effectively serve large and growing wind markets and ability to source materials globally at competitive costs to deliver high-performing, composite wind blades. Our collaborative engineering approach and our advanced precision molding and assembly systems allow us to integrate our customer’s design requirements with cost-efficient, replicable and scalable manufacturing processes. This collaborative engineering approach with our customers also allows us to reduce manufacturing cycle times, new line and factory start up times and new blade model transition times. We also continue to work with our customers to minimize the impacts of inflation, including increases in the cost of materials and production in a manner that further strengthens our customer relationships and mitigates the impact to our margins.
Expand our field service inspection and repair business and introduce new ancillary products and services to help our customers better manage the full life cycle of a wind blade. We plan to continue to expand our field service inspection and repair business by leveraging our existing wind blade manufacturing and composites expertise and global footprint. We believe there is an increasing demand

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and growing market for experienced wind blade inspection and repair services worldwide as the number of wind turbines installed worldwide continues to grow and the fleet of existing wind turbines continues to age. We also expect that the operating margins at our field service inspection and repair business will improve in 2023 and will be higher than the operating margins of our wind blade manufacturing business in future periods. We also are seeking to develop a more comprehensive suite of products and services such as wind blade design, engineering and recycling services to help our customers better manage the full life cycle of a wind turbine blade.
Focus on continuing innovation. We have a history of innovation in advanced composite technologies and production techniques and use several proprietary technologies related to wind blade manufacturing. With this culture of innovation and a collaborative “design for manufacturability” approach, we continue to address increasing physical dimensions, demanding technical specifications and strict quality control requirements for our customers’ most advanced wind blades. We also invest in ongoing simplification and selective automation of production processes for increased efficiency and precision. In addition, we plan to leverage our history of composite industry-first innovations to grow our business in the automotive market, in which we believe there is a demand for high precision, structural composites manufacturing as well as high-speed, high-volume manufacturing of structural composite components, particularly in the automotive market.

Wind Blade Manufacturing Operations and Process

We have developed significant expertise in advanced composite technology and we use high performance composite materials, precision molding and assembly systems including modular tooling, and advanced process technology, as well as sophisticated measurement, inspection, testing and quality assurance tools, allowing us to produce over 84,000 wind blades since 2001 from our continuing and discontinued operations with a strong, long-term field performance record in a market where reliability is critical to our customers’ success. We manufacture or have manufactured wind blades ranging from 30 meters to over 80 meters in length across our global facilities and have the capability to manufacture wind blades of greater lengths as required by existing or new customers. In combination with our advanced technologies, we seek to create manufacturing processes that are replicable and scalable in our manufacturing facilities located worldwide, regardless of cultural or language barriers. Using continuous improvement principles, we can customize each manufacturing step, from raw materials to finished products. This also allows us to systematically design for the entire manufacturing process so that we can achieve better quality control and increase production efficiencies. We believe that our focus on simplifying and, where feasible, automating production processes is critical to manufacturing high-precision, lightweight and durable products at a reasonable cost to our customers. We produce high unit volumes of near-aerospace grade products at industrial costs.

Raw Materials

The key raw materials for the wind blades we manufacture include highly advanced fiberglass fabrics, select carbon reinforcements, foam, balsa wood, resin, adhesives for assembly of molded components, gel coat or paint for preparation of cosmetic surfaces and attachment hardware including steel components. Most of these materials are available in multiple geographic regions and in reasonably close proximity to our manufacturing facilities. Our agreements for the supply of raw materials are designed to secure volumes that we believe will be required to fulfill our customers’ wind blade commitments for fixed prices with limited contractual price adjustment provisions. A portion of our raw materials are subject to price volatility, such as the resins and carbon reinforcements used in our manufacturing processes.

Although the majority of materials incorporated into our products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers. We seek multiple suppliers for our raw materials and continually evaluate potential new supplier relationships. Our largest customer, however, sources all of the critical raw materials that we use to produce such customers' wind blades. Since we do not source procurement of these raw materials for our largest customer, we have fewer controls and remedies to mitigate raw material and supply chain risks and disruptions relating to such raw materials.

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Precision Molding and Assembly Systems

Over the last decade, we have produced hundreds of precision molding and assembly systems, ranging from 30 meters to over 80 meters in length, to support our global operations. In 2020, we transitioned our North American precision molding and assembly system production capabilities to a new facility in Juárez, Mexico, which serves customers globally. Our precision molding and assembly systems have been used to build tens of thousands of wind blades worldwide.

Our tooling solutions include precision wind blade patterns, precision molding and assembly systems, including modular tooling techniques. We believe that our technological and production expertise are key factors in our continued competitiveness, as we address continually increasing physical dimensions, demanding technical specifications, and strict quality control requirements for wind blades.

Wind Blade Production Process

Production of wind blades requires adherence to the unique specifications of each of our customers, who design their wind turbines and wind blades to optimize performance, reliability and total delivered cost. With our culture of innovation and a collaborative “design for manufacturability” approach, we have the capability and expertise to manufacture wind blades of different designs, utilizing fiberglass, carbon fiber, or other advanced composite materials to meet unique customer specifications. We also have the flexibility to quickly transition our manufacturing facilities to produce different wind blade models and sizes using our precision molding and assembly systems, including modular tooling techniques.

We have developed a highly dependable method for making high-quality wind blades. In conjunction with our continuous improvement principles, we design our proprietary manufacturing processes to be replicable, scalable and transferable to each of our advanced manufacturing facilities worldwide. As a result, we can repeatedly move a product from its design phase to volume production while maintaining quality, even in developing regions of the world. Similarly, we have developed the manual portions of our manufacturing processes based on proven technologies and production methods that can be learned and implemented rapidly by line personnel. We focus on safety, consistency and quality control across our facilities, using hands-on training methods and employing repeatable manufacturing processes.

We use an advanced form of vacuum-assisted resin transfer tooling process to pull liquid resin into a dry lay-up, resulting in light, strong, and reliable composite structures. In our manufacturing process, fiber reinforcements and core materials are laid up in a mold while dry, followed by a vacuum bag that is placed over the layup and sealed to the mold. The wind blade component is then placed under vacuum. The resin is introduced into the wind blade component via resin inlet ports and then distributed through the reinforcement and core materials via a flow medium and a series of channels, saturating the wind blade component. The vacuum removes air and gases during processing, thereby eliminating voids. Pressure differentials drive resin uniformly throughout the wind blade component, providing a consistent laminate. By using a variety of reinforcement and core materials, the structural characteristics of the wind blade can be highly engineered to suit the custom specifications of our customers. Although only occasionally required by our customers, we are also capable of employing additional composite fabrication processes, such as pre-impregnated laminates, in addition to our vacuum infusion process.

Wind Blade Supply Agreements

Our current wind blade customers, which include Vestas, GE Renewable Energy, Nordex, and ENERCON GmbH (ENERCON), are some of the world’s largest wind turbine manufacturers. According to data from Bloomberg, our customers represented approximately 37% of the global onshore wind energy market, approximately 77% of that market excluding China, and 87% of the U.S. onshore wind turbine market over the three years ended December 31, 2021, based on MWs of energy capacity installed. In our collaborative dedicated supplier model, our customers are incentivized to maximize the volume of wind blades purchased through lower pricing at higher purchase volumes. As of February 22, 2023, our existing wind blade supply agreements provide for minimum aggregate volume commitments from our customers of approximately $1.4 billion and encourage our customers to purchase additional volume up to, in the aggregate, a total contract value of approximately $2.7 billion through the end of 2025, which we believe provides us with significant future revenue visibility and helps to insulate us from

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potential short-term fluctuations or legislative changes in any one market. Our supply agreements generally contain liquidated damages provisions in the event of late delivery, however, we generally do not bear the responsibility for transporting the wind blades we manufacture to our customers.

Some of our supply agreements with our customers provide downside protection for us through minimum annual volume commitments, as well as encourage our customers to maximize the volume of wind blades they purchase from us, since purchasing less than a specified amount typically triggers higher pricing. Some of our supply agreements also provide for annual sales price reductions reflecting assumptions regarding increases in our manufacturing efficiency and productivity. We work to continue to drive down or minimize the impact of increases in the cost of materials and production through innovation and global sourcing, a portion of the benefit of which we share with our customers contractually, further strengthening our deep customer relationships. Similarly, we typically share any raw material price increases with our customers. Our largest customer, however, sources all of the critical raw materials that we use to produce its wind blades and this customer assumes 100% of any such raw material price increases or decreases. Wind blade pricing is based on annual commitments of volume as established in the customer’s contract, with orders less than committed volume resulting in additional costs per wind blade to customers. Orders in excess of annual commitments may but generally do not result in discounts to customers from the contracted price for the committed volume. Customers may utilize early payment discounts, which are reported as a reduction of revenue at the time the discount is taken.

Vestas

Each of our current supply agreements with Vestas provides for a minimum number of wind blade sets to be purchased by Vestas each year during the term, the schedule for which is established at the outset of the agreement. In return, we commit to dedicate a specific number of manufacturing lines to Vestas for each of the years under the supply agreements. Additionally, we have manufactured some of the model-specific tooling that we use to produce wind blades for Vestas. If either party commits a material breach of the supply agreement, the non-breaching party may terminate the supply agreement if the breach is not remedied or if the parties have not mutually agreed to a plan for cure within 30 days after notice of breach has been given. In December 2021, we extended our supply agreement with Vestas at one of our Izmir, Türkiye plants for an additional year through December 2023. We consolidated our manufacturing footprint for Vestas in China at the end of 2021 by stopping production at our Dafeng, China facility and agreeing to add four new manufacturing lines to our Yangzhou, China manufacturing facility through December 2023. In December 2022, we entered into a settlement agreement with Vestas to terminate the supply agreement with Vestas at our Yangzhou, China manufacturing facility. In December 2022, we agreed in principle with Vestas upon the material terms and conditions of a long-term global framework agreement governing the supply of wind blades to Vestas from our manufacturing facilities in Türkiye, India and Matamoros, Mexico, and potential future facilities beginning in January 2024.

GE Renewable Energy

We have multiple supply agreements with GE Renewable Energy to manufacture wind blades from two manufacturing facilities in Juárez, Mexico. We ceased production of GE Renewable Energy blades at our Iowa manufacturing facility during the fourth quarter of 2021. In October 2022, we signed an agreement with GE Renewable Energy that enabled us to secure a ten-year lease extension of our Iowa manufacturing facility. Under the agreement, GE Renewable Energy and TPI plan to develop competitive blade manufacturing options with production intended to start in 2024. In December 2022, we extended our supply agreements with GE Renewable Energy for all of our lines in our Mexico manufacturing facilities through the end of 2025. In addition, either party may terminate these supply agreements upon a material breach by the other party which goes uncured for 30 days after written notice has been provided.

Nordex

Generally, our supply agreements with Nordex provide for a minimum number of wind blade sets to be purchased by Nordex each year during the term, and we commit to dedicate a specific number of manufacturing lines to Nordex for each of the years under the supply agreements. We supply wind blades to Nordex from our manufacturing facilities in Türkiye, India and Matamoros, Mexico. In Matamoros, we took over a facility from Nordex, pursuant to a three-year supply agreement expiring on June 30, 2024. If the supply agreement for the

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Matamoros manufacturing facility is not extended, then Nordex will resume management and operation of the Matamoros wind blade manufacturing facility at the end of the three-year term. In September 2022, we extended two of our supply agreements with Nordex at our Türkiye manufacturing facilities for four lines through 2023. We have also agreed in principle to a deal with Nordex to effectively extend four of six lines in Türkiye through 2026 (the other two will be extended through 2024) and add two additional manufacturing lines in India.

Other Supply Agreements

In September 2022, we extended our supply agreement in Türkiye with ENERCON through the end of 2025. With respect to this supply agreement, we have agreed to dedicate capacity for a set number of wind blades for each calendar year during the term of the agreement in exchange for a commitment to purchase minimum annual volumes of wind blade sets. Unless otherwise terminated, this supply agreement remains in effect for a period of several years and either party may terminate the supply agreement upon a material breach by the other party which goes uncured. This supply agreement contains provisions that allow for our customer to purchase less volume in later years of this supply agreement, reduce the number of dedicated manufacturing lines or to terminate the supply agreement upon notice for reasons such as our failure to deliver the contracted wind blade volumes or our failure to meet certain mutually agreed upon cost reduction targets. See “Risk Factors—Risks Related to Our Wind Blade Business." — Some of our supply agreements with our customers are subject to early termination and volume reductions at the discretion of our customers, and any early termination of or reduced volumes of wind blades purchased under these agreements could materially harm our business, financial condition and results of operations” included in Part I, Item 1A of this Annual Report on Form 10-K.

Research and Development

We conduct research and development in close collaboration with our customers on the design, development, and deployment of innovative manufacturing processes, including automation, advanced materials and sophisticated product quality inspection tools. We have partnered with the U.S. Department of Energy (DOE), government laboratories, universities and our customers to innovate through cost sharing of advanced manufacturing and other innovative programs. In 2021, we began a collaboration with the University of Maine pursuant to a grant from the U.S. DOE’s Advanced Manufacturing Office to develop a rapid, low-cost additive manufacturing solution (3D printing) for fabricating large, segmented wind blade molds. Additionally, we participate on collaborative programs as a working member of the Institute for Advanced Composite Manufacturing Innovation (IACMI), a US DOE National Network of Manufacturing Innovation consortium. Specifically, this effort includes new material systems focused on creating an economical solution to end-of-life reclamation of materials for reuse and recycling. This work includes cost sharing of engineering and laboratory support to develop new process technologies. In 2022, we collaborated with WindSTAR, a National Science Foundation funded Industry-University Cooperative Research Center, to design a composite manufacturing process based on a digital twin approach. The project leveraged machine learning (ML) using big data to serve as the digital twin of the blade manufacturing process. This ML framework provides real-time feedback during fabrication, results in reduced defects, and enables more efficient production of wind blades versus the current high computational costs of the physics-based models.

We employ a highly experienced workforce of engineers in various facets of our business, from research and development projects, to the ongoing, real-time development and implementation of incremental manufacturing and material improvements. Our research and development effort places a priority on improving quality through process and procedure improvement, in addition to reducing cost through specification changes and sourcing of more cost-effective suppliers. Other areas of emphasis include composite design, in-house fabrication of precision molding and assembly systems, prototyping, testing, optimization and volume production capabilities. We also encourage our associates to invent and develop new technologies to maintain our competitiveness in the marketplace. In addition to our internal research and development activities, from time to time, we also conduct research and development activities pursuant to funded development arrangements with our customers and other third parties and we intend to continue to seek opportunities for product development programs that could create recurring revenue and increase our overall profitability over the long term.

In July 2019, we acquired certain IP and hired a team of engineering resources from the EUROS group, based in Berlin, Germany. This team of technical experts focuses on blade design, tooling, materials and process technology development. This acquisition strengthened our technical capabilities in support of our global operations

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and growth. In addition, we established an advanced engineering center in Kolding, Denmark which provides technical and engineering resources to our manufacturing facilities and our customers.

Competition

The wind blade market is highly concentrated, competitive and subject to evolving customer needs and expectations. Our competitors include LM Wind Power (a subsidiary of GE Renewable Energy) and other independent wind blade manufacturers such as Sinoma Science & Technology Co. Ltd., Shanghai Aeolon Wind Energy Technology Development (Group) Co., Ltd., Aeris Industria E Comercio De Equipamentos Para Geracao De Energia S.A. and ZhongFu Lianzhong Composites Group Co., Ltd., as well as regional wind blade suppliers in geographic areas where our current or prospective manufacturing facilities are or will be located.

We also compete with, and in a number of cases supplement, vertically integrated wind turbine OEMs that manufacture their own wind blades.

The principal competitive factors in the wind blade market include reliability, total delivered cost, manufacturing capability, product quality, engineering capability and on-time delivery of wind blades. We believe we compete favorably with our competitors on the basis of the foregoing factors. Our ability to remain competitive will depend to a great extent upon our ongoing performance in the areas of manufacturing capability, on-time delivery and product quality.

Competitive advantages in the wind blade service market include speed of response, local footprint, repair quality, competitive labor pricing and capacity to work across regions as demand adapts to business seasonality. We have proven strong in many of these criteria and our ability to remain competitive will depend on continued strength and our ability to improve our offering, including strengthening our response time, adding and managing labor resources, sourcing materials globally at competitive rates while further expanding into new countries, and offering additional value-added engineering support and technical solutions.

The automotive supply industry is highly competitive, and our composite solutions compete against alternative materials and a broad range of competitive suppliers. Our ability to remain competitive will depend on time to market, continuing to provide a lower upfront investment for our customers, and providing superior performance attributes with our composite solutions.

Automotive Products

We seek to create additional recurring revenue opportunities through the supply of other composite structures outside the wind energy market. We believe automotive products, including buses, trucks, electric vehicles and high-performance automotive products and components, are ideally suited for our advanced composite technology because of the benefits derived from weight reduction, corrosion resistance, strength, durability and lower upfront capital costs. These benefits should allow us to develop structural composite solutions to assist our customers in developing electric vehicles, including light, medium and heavy-duty trucks, buses and automobiles with clean propulsion systems or in meeting new and developing fuel economy standards.

In addition, by producing a range of composite structures, we are able to leverage the materials and manufacturing process technology and expertise developed through one project to maximize production quality, improve performance and minimize costs across our other manufacturing efforts, including our wind blade business. Our projects for customers in the automotive market have historically generated project-related revenues for a specific duration. We continue to enhance our relationships with these customers, and seek new customers, in order to generate recurring revenue and business opportunities that will contribute to our overall profitability over the long term.

Our facilities in Warren, Rhode Island and Juárez, Mexico manufacture products for customers in the automotive market using, in some cases, similar proprietary and replicable manufacturing processes that we use to produce wind blades. Our projects for customers in the automotive market include, or have included, the supply of all-composite bodies for electric buses and last-mile delivery as well as automated people mover systems for

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airports. In November 2017, we signed a five-year supply agreement with Proterra to supply Proterra Catalyst® composite bus bodies. In June 2021, we extended our supply agreement with Proterra through December 2024.

In 2021, we began a production program to manufacture a composite component for an electric vehicle manufacturer using our automated production line and commenced production of additional components for this manufacturer in 2022. We manufactured approximately 26,000 production components in 2021 and 78,000 production components in 2022. We continue to expand our manufacturing capabilities and have received orders with a major OEM to produce approximately 360,000 production components in 2023.

Our current principal competitors in the automotive market include suppliers of conventional steel and aluminum products and non-structural automotive fiberglass and other advanced composites-based manufacturers for automotive applications.

Intellectual Property

We have a variety of intellectual property (IP) rights, including trademarks, copyrights and patents issued, filed and applied-for in a number of jurisdictions, including the U.S., Germany, the European Union and China, trademarks and copyrights, but we believe that our continued success and competitive position depend, in large part, on our proprietary materials, tooling, process and inspection technologies and our ability to innovate and not on our IP alone. Accordingly, we take measures to protect the confidentiality and control the disclosure of our proprietary technology. We rely primarily on a combination of patents, know-how and trade secrets to establish and protect our proprietary rights and preserve our competitive position. We also seek to protect our proprietary technology, in part, by confidentiality agreements with our customers, associates, consultants and other contractors. Trade secrets, however, are difficult to protect. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our customers, associates, consultants or contractors use IP owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Backlog

As of December 31, 2022 and 2021, our backlog for wind blades and related wind products totaled $919.9 million and $669.9 million, respectively. Our backlog includes purchase orders issued in connection with our supply agreements. We generally record a purchase order into backlog when the following requirements have been met: a signed supply agreement or other contractual agreement has been executed with our customer, a purchase order has been issued by our customer and we expect to ship wind blades to or produce the related wind products for such customer in satisfaction of any purchase order within 12 months. Backlog as of any particular date should not be relied upon as indicative of our revenue for any future period.

Regulation

Wind Energy

Our operations are subject to various foreign, federal, state and local regulations related to environmental protection, health and safety, labor relationships, general business practices and other matters. These regulations are administered by various foreign, federal, state and local environmental agencies and authorities, including the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration of the U.S. Department of Labor and comparable agencies in Mexico, Türkiye, India and individual U.S. states. In addition, our manufacturing operations in Mexico, Türkiye and India are subject to those countries’ wage and price controls, currency exchange control regulations, investment and tax laws, laws restricting our ability to repatriate profits, trade restrictions and laws that may restrict foreign investment in certain industries. Some of these laws have only been recently adopted or are subject to further rulemaking or interpretation, and their impact on our operations, including the cost of complying with these laws, is uncertain. We believe that our operations currently comply, in all material respects, with applicable laws and regulations. Further, as a U.S. corporation, we are subject to The Foreign Corrupt Practices Act of 1977 (FCPA), which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. As a U.S.

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corporation with global operations, we are also subject to foreign antibribery laws and regulations in the countries where we conduct business, including the U.K. Bribery Act and the India Prevention of Corruption Act.

In addition, our business has been and will continue to be affected by subsidization of the wind turbine industry with its influence declining over time as wind energy reaches grid parity with traditional sources of energy. In the U.S., the federal government has encouraged capital investment in renewable energy primarily through tax incentives. Production tax credits for new renewable energy projects were first established in 1992. The Production Tax Credit for Renewable Energy (PTC) provided the owner of a wind turbine placed in operation before January 1, 2015 with a 10-year credit against its U.S. federal income tax obligations based on the amount of electricity generated by the wind turbine.

The PTC was extended in 2015 for wind power projects through December 31, 2019, and was to be phased down over the term of the PTC extension. Specifically, the PTC was kept at the same rate in effect at the end of 2014 for wind power projects that either commenced construction or met certain safe harbor requirements by the end of 2016, and thereafter was to be reduced by 20% per year in 2017, 2018 and 2019, respectively. In December 2019, the U.S. Congress extended the PTC through the end of 2020 and increased the rate from 40% to 60% for projects that either commenced construction or met certain safe harbor requirements by the end of 2020 and are commissioned by the end of 2024. In December 2020, the U.S. Congress extended the PTC through the end of 2021, continuing the rate of 60% for projects that either commenced construction or met certain safe harbor requirements by the end of 2021 and are commissioned by the end of 2025.

In August 2022, the U.S. Congress passed the Inflation Reduction Act of 2022 (IRA) which effectively extended the PTC until the later of 2032 or when greenhouse gas emissions have been reduced by 75% compared to 2022. Although we are encouraged by the passing of the IRA and the expected long-term incentive certainty that the IRA provides in the U.S. market, the wind industry is waiting on guidance from the Internal Revenue Services and U.S. Treasury Department, among others, to define and clarify the implementation of this complex legislation.

At the state level, as of December 31, 2021, 30 states, the District of Columbia and Puerto Rico have implemented renewable portfolio standard (RPS) programs that generally require that, by a specified date, a certain percentage of a utility’s electricity supplied to consumers within such state is to be from renewable sources (ranging from 10% to 100% and from between the present and 2050).

In addition, there are also increasing regulatory efforts globally to promote renewable power. In December 2020, the European Union (EU) agreed to reduce EU greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. In May 2022, the EU announced the REPowerEU plan which seeks to rapidly reduce the EU's dependence on fossil fuels by 2027. Furthermore, the EU introduced the Green Deal Industrial Plan that is expected to further accelerate the expansion of renewable energy and green technologies including easing state aid rules to enable higher subsidies. A key component of the Green Deal Industrial Plan is the Net-Zero Industry Act to simplify regulations, speed up permits and promote cross-border projects to accelerate climate neutrality. Similarly, in December 2020, China announced its goal to reach carbon neutrality by 2060, and in November 2021, India targeted to increase its renewable energy capacity to 500 gigawatts by 2030 and to reach carbon neutrality by 2070. Additionally, Türkiye enacted Law No. 5346 in 2005, which was amended and extended in January 2021, to promote renewable-based electricity generation within their domestic electricity market through feed-in- tariffs and purchase obligations for distribution companies requiring purchases from certified renewable energy producers.

Human Capital

As of December 31, 2022, we employed more than 13,500 full-time associates, approximately 500 of whom were located in the U.S., 6,100 in Mexico, 4,500 in Türkiye 1,300 in India, and an additional 1,100 related to our discontinued operations in China. Certain of our associates in Türkiye and at our manufacturing facilities in Matamoros, Mexico are represented by labor unions. We believe that our relations with our associates are generally good.

Our human capital strategy focuses on creating an exceptional associate experience and ensuring that we foster a learning culture where our associates want to grow with us. Our primary focus areas of our human capital strategy are as follows:

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Culture

We believe our unique culture is a key strategic advantage for us. Our associates are highly engaged and committed to the Company, their teams, and the jobs they perform based on our most recent associate engagement surveys. This strong associate engagement is due in part to a strong sense of purpose given our role in the broader renewable energy supply chain. We believe strong associate engagement translates into a strong quality focus and orientation. It is through the efforts of our approximately 13,500 associates at year-end 2022 that we have been able to continue to achieve high levels of performance. When we select new persons to join our team, we ensure that the individuals have high levels of commitment and adaptability in addition to the skills needed for the role. Our associates embrace our core values of safety, operational excellence, commitment, integrity and leadership. Our team members bring our values to life by applying their diverse backgrounds and skillsets to the jobs they are performing, demonstrating high discretionary effort, and embracing our values in their day-to-day lives.

Safety

Safety is our most important and first core value. We strongly believe that all accidents are preventable and that every associate should return at the end of their shift to their families in the same healthy condition in which they showed up for work. To help drive these beliefs it is our goal to continuously improve our zero-harm culture and implement a global behavior-based safety (BBS) program resulting in zero unsafe behaviors. All of our manufacturing facilities have safety management systems in place that cover their associates and activities. We ensure the safety of our associates to support our zero-harm culture in a variety of ways, starting with safety education. Safety education is the foundation for our other safety measures. Associates receive regular training on environmental, health and safety (EHS) related topics. This training includes but is not limited to:

 

general awareness EHS training
ergonomics training
compliance training
hazard-specific training as required for the job or task
fire hazard and prevention training
hazardous material training
equipment-specific safety training
safety incident and corrective action training

Inclusion, Diversity, Equity and Awareness

We value diversity in all forms, especially diversity of thought, and aspire to create an environment that recognizes and celebrates the benefits that come with a diverse workforce. We know that diversity of our associate population makes us better and we strive to continue to improve and act with intention in these areas. Most importantly we strive to create a culture of inclusion where everyone has a true sense of belonging and feels they can be themselves in the workplace. In 2022, we rebranded our Diversity, Equity and Inclusion (DE&I) program to Inclusion, Diversity, Equity and Awareness (IDEA) to reinforce the point that diversity without inclusion is not what we are driving for culturally, inclusion needed to come first.

As a global business, we have an incredible opportunity to benefit from the diversity we have in our Company. We can and will do more to maximize the positive impact that diversity, equity, inclusion, and a feeling of belonging can bring. We believe that this and the rest of our vision statement for inclusion, diversity, equity, and awareness is a solid representation of what we believe in, are committed to, and how we will hold associates and leaders accountable. We recognize that one of our greatest areas of opportunity is to increase the representation of women and overall racial and ethnic diversity at all levels of leadership as we add more talent to our leadership levels.

Talent

We market open jobs across multiple platforms such as our website, LinkedIn, internal postings and local job boards to ensure that our candidate pool is as diverse as possible. We promote having diversity on the interviewing and selection panel to ensure different points of view are considered as part of the final selection process. We enjoy

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high levels of retention across all of our geographies. On a global basis, our overall turnover rate increased slightly in 2022 after three years of decline. We facilitate an annual talent review process in all regions and functional teams to promote the internal development and promotion of internal talent. We have enjoyed high participation in associate surveys, high engagement levels against industry normative data, and also facilitated a COVID-19 and inclusion survey in 2021 and 2022.

Environmental, Health and Safety

We are subject to various environmental, health and safety laws, regulations and permit requirements in the jurisdictions in which we operate governing, among other things, health, safety, pollution and protection of the environment and natural resources, the handling and use of hazardous substances, the generation, storage, treatment and disposal of wastes, and the cleanup of any contaminated sites. We are not aware of any pending environmental compliance or remediation matters that are reasonably likely to have a material adverse effect on our business, financial position or results of operations. However, failure by us to comply with applicable environmental and other requirements could result in fines, penalties, enforcement actions, third party claims, remediation actions, and could negatively impact our reputation with customers. We have adopted environmental, health and safety policies outlining our commitment to environmental responsibility and accountability and our desire to eliminate unsafe behaviors in the workplace. These policies apply to the Company as a whole, and our vendors and suppliers and are available on our website. We have a company-wide focus on safety and have implemented a number of measures to promote workplace safety. Customers are increasingly focused on safety records in their sourcing decisions due to increased regulations to report all incidents that occur at their sites and the costs associated with such incidents.

Available Information

Our website address is www.tpicomposites.com. All of our filings with the Securities and Exchange Commission (SEC), including this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements of changes in beneficial ownership and amendments to those reports, along with any exhibits to such reports, are available free of charge on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained on our website is neither a part of, nor incorporated by reference into, this Annual Report on Form 10-K. The SEC also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

Our investor relations website address is https://ir.tpicomposites.com/websites/tpicomposites/English/0/investor-relations.html and includes key information about our corporate governance initiatives, including our Nominating and Corporate Governance Committee charter, charters of the Audit and Compensation committees and our Code of Business Conduct & Ethics.

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Information about our Executive Officers

The following table sets forth certain information regarding our Executive Officers as of February 22, 2023:

 

Name, Age

 

Position

 

Year Appointed as Executive
Officer of TPI Composites, Inc.

Business Experience since January 1, 2018

William Siwek, 60

 

President, Chief Executive Officer and Director

 

2013

TPI Composites, Inc.: Chief Executive Officer since May 2020, President from May 2019 to May 2020, Chief Financial Officer from August 2013 to May 2019.

American Clean Power Association: Director since March 2021.

Ramesh Gopalakrishnan, 55

 

President, Chief Operating Officer, Wind

 

2019

TPI Composites, Inc.: President and Chief Operating Officer, Wind since January 2022, Chief Operating Officer, Wind from May 2019 to January 2022, Senior Vice President, Global Quality, Technology and Latin American Operations from February 2019 to May 2019, Senior Vice President, Technology and Industrialization from August 2017 to February 2019.

Benchmark Electronics, Inc.: Director since October 2021.

Ryan Miller, 48

 

Chief Financial Officer

 

2022

TPI Composites, Inc.: Chief Financial Officer since May 2022.

Collins Aerospace: Vice President and Chief Financial Officer of Avionics Division from November 2018 to February 2022.

Rockwell Collins: Vice President and Controller of the Commercial Systems Division from April 2017 to November 2019.

Lance Marram, 51

 

Chief Commercial Officer, Wind

 

2022

TPI Composites, Inc.: Chief Commercial Officer since January 2022, Senior Vice President, Global Service from October 2019 to January 2022.

Senvion North America: Managing Director from June 2017 to July 2019.

Jerry Lavine, 54

 

President, Automotive

 

2021

TPI Composites, Inc.: President, Automotive since June 2021.

Independent Consultant: From January 2021 to June 2021.

Bordrin New Energy Vehicle Corporation: Chief Technology Officer and President of North America from November 2017 to January 2021.

Steven Fishbach, 53

 

General Counsel and Secretary

 

2015

TPI Composites, Inc.: General Counsel since January 2015.

 

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Item 1A. Risk Factors

You should carefully consider the following risk factors. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations, financial condition, growth prospects and cash flows could suffer significantly. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.

Risks Related to Our Wind Business

A significant portion of our business is derived from a small number of customers, and three wind blade customers in particular, therefore any loss of or reduction in purchase orders, failure of these customers to fulfill their obligations or our failure to secure supply agreement renewals from these customers could materially harm our business.

Substantially all of our revenues are derived from three wind blade customers. Vestas, GE Renewable Energy and Nordex accounted for 36.2%, 20.8% and 32.6%, respectively, of our total net sales for the year ended December 31, 2022, and 30.9%, 29.0% and 25.4%, respectively, of our total net sales for the year ended December 31, 2021, and 30.4%, 34.2% and 18.6%, respectively, of our total net sales for the year ended December 31, 2020. Accordingly, we are substantially dependent on continued business from our current wind blade customers. If one or more of our wind blade customers were to reduce or delay wind blade orders, file for bankruptcy or become insolvent, fail to pay amounts due or satisfactorily perform their respective contractual obligations with us or otherwise terminate or fail to renew their supply agreements with us, our business, financial condition and results of operations could be materially harmed.

Defects in materials and workmanship or wind blade failures could harm our reputation, expose us to product warranty or other liability claims, decrease demand for wind blades we manufacture, or materially harm existing or prospective customer relationships, and our reserves for warranty expenses might not be sufficient to cover all future costs.

Defects in the wind blades we manufacture are unpredictable and an inherent risk in manufacturing technically advanced products that involve a significant amount of manual labor and processes. Defects may arise from multiple causes, including design, engineering, materials, manufacturing and components failures as well as deficiencies in our manufacturing processes. Under our supply agreements, we warranty the materials and workmanship of the wind blades while our customers are responsible for the fitness of use and design of the wind blades. We have experienced wind blade failures and defects at some of our facilities during the startup manufacturing phase of new products, and we may experience failures or defects in the future. Wind blades that we have manufactured have also failed in the field. Any wind blade failures or other product defects in the future could materially harm our existing and prospective customer relationships. Specifically, negative publicity about the quality of the wind blades we manufacture or defects in the wind blades supplied to our customers could result in a reduction in wind blade orders, increased warranty claims, product liability claims and other damages or termination of our supply agreements or business relationships with current or new customers. Any of the foregoing could materially harm our business, operating results and financial condition.

We provide warranties for all of the wind blades and precision molding and assembly systems we produce, including parts and labor, for periods that typically range from two to five years depending on the product sold. Our estimate of warranty expense requires us to make assumptions about matters that are highly uncertain, including future rates of product failure, repair costs, shipping and handling and de-installation and re-installation costs at customers’ sites. Our assumptions could be materially different from the actual performance of our products and these remediation expenses in the future. The expenses associated with wind blade repair and remediation activities can be substantial and may include changes to our manufacturing processes. If our estimates prove materially incorrect, we could incur warranty expenses that exceed our reserves and we could be required to make material unplanned cash expenditures, which could materially harm our business, operating results and financial condition.

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We have experienced, and could in the future experience, quality or operational issues in connection with plant construction, expansion or assumption which could result in losses and cause delays in our ability to complete our projects and may therefore materially harm our business, financial condition and results of operations.

We dedicate most of the capacity of our current wind blade manufacturing facilities to existing customers and, as a result, we may need to build additional manufacturing capacity or facilities to serve the needs of new customers or expanded needs of existing customers. Since the third quarter of 2016, we commenced operations at five manufacturing facilities in Mexico, one in Türkiye, one in Yangzhou, China and one in Chennai, India. We ceased operations at our Yangzhou, China manufacturing facility at the end of 2022. The construction of new plants and the expansion or assumption of existing plants involves significant time, cost and other risks. We generally expect our plants to generate losses in their first 12 to 18 months of operations related to production startup costs. Additionally, numerous factors can contribute, and have in the past contributed, to delays or difficulties in the startup of, or the adoption of our manufacturing lines to produce larger wind blade models, which we refer to as model transitions, in our manufacturing facilities. These factors include permitting, construction or renovation delays, defects or issues with product tooling, the engineering and fabrication of specialized equipment, the modification of our general production know-how and customer-specific manufacturing processes to address the specific wind blades to be tested and built, changing and evolving customer specifications and expectations and the hiring and training of plant personnel. Any delays or difficulties in plant startup, expansion or assumption may result in cost overruns, production delays, contractual penalties, loss of revenues, reduced margins and impairment of customer relationships, which could materially harm our business, financial condition and results of operations. In 2021 and 2022, we experienced significant production delays at the Matamoros, Mexico manufacturing facility that we took over from Nordex in July 2021, which adversely impacted our profitability and financial condition.

Some of our supply agreements with our customers are subject to early termination and volume reductions at the discretion of our customers, and any early termination of or reduced volumes of wind blades purchased under these agreements could materially harm our business, financial condition and results of operations.

Our supply agreements expire between the end of 2023 and the end of 2025. Some of our supply agreements contain provisions that allow for the early termination of these agreements upon the customer providing us with advance written notice and paying an early termination fee. Our supply agreements generally establish annual purchase requirements on which we rely for our future production and financial forecasts. However, the timing and volume of purchases, within certain parameters, may be subject to change by our customers. The amount of the annual purchase requirements typically decline in the later years of our supply agreements. Our customers may not continue to maintain supply agreements with us in the future. For example, Vestas did not renew its Dafeng, China supply agreement, and GE did not renew its Iowa supply agreement, both of which expired at the end of 2021. In addition, Vestas terminated its Yangzhou, China supply agreement at the end of 2022, which was set to expire at the end of 2023, and paid to us an early termination fee. If one or more of our customers terminate, or reduce the number of manufacturing lines and volumes of wind blades purchased, or fail to renew their supply agreements with us, it may materially harm our business, financial condition and results of operations.

Although a majority of our manufacturing facilities are located outside the U.S., our business is still heavily dependent upon the demand for wind energy in the U.S. and any downturn in demand for wind energy in the U.S. could materially harm our business.

We have developed a global footprint to serve the growing wind energy market worldwide and have wind blade manufacturing facilities in the U.S., Mexico, Türkiye and India, and manufacturing facilities in China related to our discontinued operations. Although a majority of our manufacturing facilities are located outside of the U.S., historically more than half of the wind blades that we produced were deployed in wind farms located within the U.S. Our Iowa manufacturing facility, where production has been temporarily shut down since the end of the fourth quarter of 2021, and our Mexico manufacturing facilities manufacture wind blades that are generally deployed within the U.S. In addition, many of our wind blades are exported from our China, Türkiye and India manufacturing facilities to the U.S. In addition, tariffs imposed on components of wind turbines from China, including wind blades, has had a negative impact on demand for our wind blades manufactured in our Chinese manufacturing facilities. This, among other things, including optimizing our global footprint and right sizing our organization, has led to ceasing production at our China facilities. Consequently, demand for wind energy and our wind blade sales could be adversely affected by a variety of reasons and factors, and any downturn in demand for wind energy in the U.S. could materially harm our business. We expect that demand for wind turbine blades in 2023 will be slightly down

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compared to 2022 due in large part to the discontinuation of our China operations and due to our customers and wind farm developers continuing to defer investments into the future until inflationary pressure and global economies stabilize, and there is clearer regulatory guidance with respect to the IRA and actions proposed by the EU under the REPowerEU plan and the Green Deal Industrial Plan.

We have recently experienced significant price increases and supply constraints of raw materials and components that are critical to our manufacturing needs, as well as ongoing inflationary pressures impacting many of our labor and other costs, and we may continue to, or in the future, experience such price increases, supply constraints, and inflationary pressures, which may hinder our ability to perform under our supply agreements and adversely impact our profitability and financial condition.

We rely upon third parties for raw materials, such as fiberglass, carbon fiber, resins, foam core and balsa wood, and various components for the wind blades we manufacture. Some of these raw materials and components may only be purchased from a limited number of suppliers. The after-effects of the COVID-19 pandemic, the current geopolitical situation, and economic environment, including with respect to inflation, continue to evolve and affect supply chain performance and underlying assumptions in various ways – specifically with volatility in commodity, energy, and logistics costs. We expect the prices of resin, carbon fiber, fiberglass and other raw materials to remain elevated in the near term compared to pre-pandemic levels. We also expect logistics costs to remain elevated from pre-pandemic levels. However, we have seen prices stabilize and logistics costs have come down from 2022. In 2023, we believe our supply chain costs will be flat to slightly down compared to 2022. If the prices for these raw materials and logistics costs revert back to the levels we experienced in 2021 and 2022, such elevated price levels could have a material impact on our results of operations.

Additionally, our ability to purchase the appropriate quantities of raw materials is constrained by our customers’ transitioning wind blade designs and specifications. As a result, we maintain, closely monitor and manage inventory and acquire raw materials and components as needed and with consideration to lead time factors. Due to significant international demand for these raw materials from many industries, and extended logistics lead times, we may be unable to acquire sufficient quantities or secure a stable supply for our manufacturing needs. Our largest customer sources all of the critical raw materials that we use to produce its wind blades and in some instances, our customers source the purchase of certain key raw materials and components. Since we do not source the procurement of these raw materials for our largest customer, we have fewer controls and remedies to mitigate raw material and supply chain risks and disruptions relating to these raw materials.

In 2022, we procured approximately 20% of our raw materials from China so any ocean logistic delays, weather events, strikes, other force majeure events or geopolitical developments impacting China could disrupt our supply chain. In addition, a disruption in any aspect of our global supply chain caused by transportation delays, customs delays, cost issues or other factors could result in a shortage of raw materials or components critical to our manufacturing needs. Any supply shortages, delays in the shipment of materials or components from third party suppliers, or changes in the terms on which they are available could disrupt or materially harm our business, operating results and financial condition.

Ongoing inflationary pressures have caused and may continue to cause many of our material, labor, and other costs to increase, which can have adverse impacts on our results of operations. The governments of Mexico and Türkiye increased minimum wages approximately 20% and 55%, respectively, effective January 1, 2023, and there may be further wage increases enacted throughout the year. While our customer contracts allow us to pass a portion of these increases to our customers, we will not be able to recover 100% of the wage inflation. If our manufacturing facilities in these countries continue to experience wage inflation at these levels and the increased costs in local currency are not offset with favorable foreign currency fluctuations, such elevated wages could have a material impact on our results of operations and financial condition.

Demand for the wind blades we manufacture may fluctuate for a variety of reasons, including the growth of the wind industry, and decreases in demand could materially harm our business and may not be sufficient to support our growth strategy.

Our revenues, business prospects and growth strategy heavily depend on the continued growth of the wind industry and our customers’ continuing demand for wind blades. Customer demand could decrease from anticipated

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levels due to numerous factors outside of our control that may affect the development of the wind energy market generally, portions of the market or individual wind project developments, including:

general economic conditions;
the general availability and demand for electricity;
wind energy market volatility;
cost-effectiveness, availability and reliability of alternative sources of energy and competing methods of producing electricity, including solar and non-renewable sources such as natural gas;
foreign, federal and state governmental tariffs, subsidies and tax or regulatory policies;
delays or cancellations of government tenders or auctions for wind energy projects;
the availability of financing for wind development projects;
the development of electrical transmission infrastructure, the ability to implement a proper grid connection for wind development projects, and the ability to obtain timely permitting approvals;
permitting and siting regulations and challenges;
foreign, federal and state laws and regulations regarding avian protection plans, noise or turbine setback requirements and other environmental laws and regulations;
our customers’ cost of transporting wind blades from our manufacturing facilities to wind farms;
increases in the price or lack of availability of raw materials used to produce our wind blades;
administrative and legal challenges to proposed wind development projects; and
public perception and localized community responses to wind energy projects.

In 2022, we experienced a decline in demand for our wind turbine blades due primarily to regulatory uncertainty as our customers and wind farm developers continued to defer investments into the future until inflationary pressure and global economies stabilize, and there is clearer regulatory guidance with respect to the IRA and actions proposed by the EU under the REPowerEU plan, which adversely impacted our operating results. We expect that demand for wind turbine blades in 2023 will be slightly down compared to 2022. In 2023, we expect to be operating fewer manufacturing lines as a result of closing down our factory in Yangzhou, China. In addition to factors affecting the wind energy market generally, our customers’ demand may also fluctuate based on other factors beyond our control. Any decline in customer demand below anticipated levels could materially harm our revenues and operating results and could delay or impede our growth strategy.

We have experienced in the past, and our future wind blade production could be affected by, operating problems at our facilities, which may materially harm our operating results and financial condition.

Our wind blade manufacturing processes and production capacity have in the past been, and could in the future be, disrupted by a variety of issues, including:

production outages to conduct maintenance activities that cannot be performed safely during operations;
prolonged power failures or reductions;
breakdowns, failures or substandard performance of machinery and equipment;
our inability to comply with material environmental requirements or permits;
inadequate transportation infrastructure, including problems with railroad tracks, bridges, tunnels or roads;
supply shortages of key raw materials and components;

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damage or production delays caused by earthquakes, fires, floods, tornadoes, hurricanes, extreme weather conditions such as windstorms, hailstorms, drought, temperature extremes, typhoons or other natural disasters or terrorism or health epidemics such as the COVID-19 pandemic; and
labor unrest or shortages in skilled labor.

The cost of repeated or prolonged interruptions, reductions in production capacity, or the repair or replacement of complex and sophisticated tooling and equipment may be considerable and could result in damages under or the termination of our supply agreements or penalties for regulatory non-compliance, any of which could materially harm our business, operating results and financial condition.

We operate a substantial portion of our business in international markets and we may be unable to effectively manage a variety of currency, legal, regulatory, economic, social and political risks associated with our global operations and those in developing markets.

We currently operate manufacturing facilities in the U.S., Mexico, Türkiye, and India. Since the third quarter of 2016, we commenced operations at five new manufacturing facilities in Mexico, one in Türkiye, and one in Chennai, India. For the years ended December 31, 2022, 2021 and 2020, approximately 94%, 87% and 84%, respectively, of our net sales were derived from our continuing international operations. Our overall success depends, in part, upon our ability to succeed in differing legal, regulatory, economic, social and political conditions. The global nature of our operations is subject to a variety of risks, including:

difficulties in staffing and managing multiple international locations;
the risk of significant wage inflation in Türkiye, Mexico and other countries in which we operate, and continuing general inflationary pressures in these markets;
increased exposure to foreign currency exchange rate risk or currency exchange controls imposed by foreign countries;
the risk of import, export and transportation regulations and tariffs on foreign trade and investment, including boycotts and embargoes;
taxation and revenue policies or other restrictions, including royalty and tax increases, retroactive tax claims and the imposition of unexpected taxes;
the imposition of, or rapid or unexpected adverse changes in, foreign laws, regulatory requirements or trade policies;
restrictions on repatriation of earnings or capital or transfers of funds into or out of foreign countries;
limited protection for IP rights in some jurisdictions;
inability to obtain adequate insurance;
difficulty administering internal controls and legal and compliance practices in countries with different cultural norms and business practices;
the possibility of being subjected to the jurisdiction of foreign courts in connection with legal disputes and the possible inability to subject foreign persons to the jurisdiction of courts in the U.S.;
the misinterpretation of local contractual terms, renegotiation or modification of existing supply agreements and enforcement of contractual terms in disputes before local courts;
the inability to maintain or enforce legal rights and remedies at a reasonable cost or at all; and
the potential for political unrest, expropriation, nationalization, revolution, war or acts of terrorism in countries in which we operate.

As we continue to operate our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. We may be unsuccessful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business or

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conduct operations. Our failure to manage these risks successfully could materially harm our business, operating results and financial condition.

A drop in the price of energy sources other than wind energy, or our inability to deliver wind blades that compete with the price of other energy sources, may materially harm our business, financial condition and results of operations.

We believe that the decision to purchase wind energy is, to a significant degree, driven by the relative cost of electricity generated by wind turbines compared to the applicable price of electricity from traditional (i.e., thermal) and other renewable energy sources. Decreases in the prices of electricity from traditional or renewable energy sources other than wind energy, such as solar, could harm the market for wind energy. In particular, a drop in natural gas prices could lessen the appeal of wind-generated electricity. Technological advancements or the construction of a significant number of power generation plants, including nuclear, coal, natural gas or power plants utilizing other renewable energy technologies, government support for other forms of renewable energy or construction of additional electric transmission and distribution lines could reduce the price of electricity produced by competing methods, thereby making the purchase of wind energy less attractive. The ability of energy conservation technologies, public initiatives and government incentives to reduce electricity consumption or support other forms of renewable energy could also lead to a reduction in the price of electricity, which would undermine the attractiveness of wind energy and thus wind turbines, and, ultimately wind blades. If prices for electricity generated by wind turbines are not competitive, our business, financial condition and results of operations may be materially harmed.

We encounter intense competition for limited customers from other wind blade manufacturers, as well as in-house production by wind turbine OEMs, which may make it difficult to enter into supply agreements, keep existing customers and potentially get new customers.

We face significant competition from other wind blade manufacturers, and this competition may intensify in the future. The wind turbine market is characterized by a relatively small number of large OEMs. The competitive environment in the wind energy industry recently has become more challenging primarily due to ongoing regulatory uncertainty and supply chain constraints and significant raw material price increases. This challenging environment may lead to further consolidation in the industry, which could lead to us having even fewer customers. In addition, a significant percentage of wind turbine OEMs, including all of our current customers, produce some of their own wind blades in-house. As a result, we compete for business from a limited number of customers that outsource the production of wind blades. We also compete with a number of wind blade manufacturers in China, who are growing in terms of their technical capability and aspire to expand outside of China. Some of our competitors have more experience in the wind energy industry, as well as greater financial, technical or human resources than we do, which may limit our ability to compete effectively with them and maintain or improve our market share. Additionally, our supply agreements dedicate capacity at our facilities to our customers, which may also limit our ability to compete if our facilities cannot accommodate additional capacity. If we are unable to compete effectively for the limited number of customers that outsource production of wind blades, our ability to enter into supply agreements with potential new and existing customers may be materially harmed.

Various legislation, infrastructure, regulations including permitting and siting and incentives that are expected to support the growth of wind energy in the U.S. and around the world may not be extended or may be discontinued, phased out or changed, or may not be successfully implemented, which could materially harm wind energy programs and materially decrease demand for the wind blades we manufacture.

The U.S. wind energy industry has been dependent in part upon governmental support through certain incentives including federal tax incentives and state RPS programs and may not be economically viable if a large number of these incentives are not continued. Government-sponsored tax incentive programs including the PTC, and the Investment Tax Credit (ITC) have supported the U.S. growth of wind energy. In August 2022, the PTC was extended until the later of 2032 or when greenhouse gas emissions have been reduced by 75% compared to 2022. In addition, a new advanced manufacturing production tax credit (AMPC) was created that can be claimed for the domestic production and sale of clean energy components, such as wind turbine blades. There are also increasing regulatory efforts globally to promote renewable energy. In December 2020, the EU agreed to reduce EU greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. In May 2022, the EU announced the

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REPowerEU plan which seeks to rapidly reduce the EU's dependence on fossil fuels by 2027. Furthermore, the EU introduced the Green Deal Industrial Plan that is expected to further accelerate the expansion of renewable energy and green technologies including easing state aid rules to enable higher subsidies. A key component of the Green Deal Industrial Plan is the Net-Zero Industry Act to simplify regulations, speed up permits and promote cross-border projects to accelerate climate neutrality. Although our near-term outlook remains challenging, we are encouraged by the passing of the IRA and the expected long-term incentive certainty that the IRA provides in the U.S. market. We anticipate the provisions of the IRA related to the energy incentives such as the AMPC will have a favorable impact on our business. However, the wind industry is waiting on guidance from the Internal Revenue Service (IRS) and U.S. Treasury Department, among others, to define and clarify the implementation of this complex legislation and this has resulted in decreased demand for our wind blades in 2022 compared to 2021 and we expect moderated demand for our wind blades from our customers to continue in 2023.

Because of the long lead times necessary to develop wind energy projects, including obtaining necessary permits or access to transmission infrastructure, any uncertainty or delay in reinstituting the PTC and ITC or adopting, extending or renewing other incentives promoting wind energy beyond their current or future expiration dates could negatively impact potential wind energy installations and result in industry volatility. There can be no assurance that governmental programs or subsidies for renewable energy will remain in effect in their present form or at all, or that the required transmission infrastructure expansion occurs, and the elimination, reduction, or modification of these programs or subsidies could materially harm wind energy programs in the U.S. and international markets and materially decrease demand for the wind blades we manufacture and, in turn, materially harm our business, operating results and financial condition. Although regulatory uncertainty, as well as permitting, siting and transmission challenges in the U.S. and Europe has tempered demand for wind energy in the near term, we expect global demand for renewable energy, and wind energy in particular, will continue to grow in the long term due to a multitude of factors, including: increased cost competitiveness of wind energy compared to fossil fuel generated electricity; increased demand from corporations and utility providers for renewable energy; and recent international policy initiatives designed to promote the growth of renewable energy.

Risks Related to Our Automotive Business

Our efforts to expand our automotive business and enter into other strategic markets may not be successful.

While our primary focus has been to manufacture composite wind blades, our strategy is to expand our automotive business and to enter into other strategic markets. We have experienced startup challenges and incurred significant losses to date in connection with the supply of bus bodies to Proterra. The expansion of our automotive business and our entry into other strategic markets will require improved execution in terms of our start up activity and ongoing manufacturing performance as well as significant levels of investment. There can be no assurance that our automotive business or other strategic markets will develop as anticipated or that we will have success in any such markets, and if we do not, we may be unable to recover our investment, which could adversely impact our business, financial condition and results of operations.

We may incur material losses and costs as a result of product liability and warranty claims, litigation and other disputes and claims.

We are exposed to warranty and product liability claims if our automotive products fail to perform as expected. We may in the future be required to participate in a recall of these products or the vehicles incorporating our products. If public safety concerns are raised, we may have to participate in a recall even if our products are ultimately found not to be defective. Vehicle manufacturers have experienced increasing recall campaigns in recent years. Our customers may look to us for contribution when faced with recalls and product liability claims. If our customers demand higher warranty-related cost recoveries, or if our automotive products fail to perform as expected, our business, financial condition and results of operations could materially suffer.

Risks Related to Our Business as a Whole

Servicing our debt and obligations to our Series A Preferred Stockholders will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial indebtedness and Series

22


A Preferred Stock obligations, and our indebtedness and obligations to our Series A Preferred Stockholders may adversely affect our business, results of operations and financial condition.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance or repay, our indebtedness, and our ability to pay dividends on and redeem our Series A Preferred Stock, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We have incurred substantial losses over the past three years and our business may not be able to generate cash flow from operations in the future sufficient to service our debt, satisfy our obligations to our Series A Preferred Stockholders and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness and/or redeem our Series A Preferred Stock will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt or our obligations to our Series A Preferred Stockholders. In addition, the Certificate of Designations governing our Series A Preferred Stock contains, and our future debt agreements may contain, restrictive covenants that may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of our debt and require us to redeem our Series A Preferred Stock.

In addition, our indebtedness and obligations to our Series A Preferred Stock Stockholders could adversely affect our business, results of operations and financial condition by, among other things:

requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our debt and pay dividends and redeem our Series A Preferred Stock, which would reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other general corporate purposes;
limiting our ability to borrow additional amounts to fund debt service requirements, working capital, capital expenditures, acquisitions, execution of our growth strategy and other general corporate purposes;
making us more vulnerable to adverse changes in general economic, industry and regulatory conditions and in our business by limiting our flexibility in planning for, and making it more difficult to react quickly to, changing conditions;
placing us at a competitive disadvantage compared with those of our competitors that have less debt and preferred stock, and lower debt service and preferred stock service requirements;
making us more vulnerable to increases in interest rates since some of our indebtedness is subject to variable rates of interest; and
making it more difficult for us to satisfy our financial obligations.

Our business, operations and financial condition during the years ended December 31, 2021 and 2020 were adversely affected by the COVID-19 pandemic and we cannot estimate the duration of the COVID-19 pandemic and our business may be adversely affected in the future if the COVID-19 pandemic persists.

The COVID-19 pandemic adversely affected our business and operations during the years ended December 31, 2021 and 2020 but did not have a material impact on our business during the year ended December 31, 2022. During the first quarter of 2020, our China manufacturing facilities were adversely impacted by the COVID-19 pandemic in the form of reduced production levels and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. During the second quarter of 2020, all of our manufacturing facilities with the exception of our China manufacturing facilities and our Rhode Island manufacturing facility were required to temporarily suspend production or operate at reduced production levels due primarily to certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. By the end of the second quarter of 2020, most of our manufacturing facilities had returned to operating at or near normal production levels. During the third quarter of 2021, our manufacturing facility in Yangzhou, China was required to temporarily suspend production due to a COVID-19 outbreak in Yangzhou City.

Although all of our manufacturing facilities currently are operating without any COVID-19 impacts or restrictions, we may be required to reinstate temporary production suspensions or volume reductions at our other

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manufacturing facilities to the extent there is a resurgence of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities.

The after-effects of the COVID-19 pandemic, the current geopolitical situation, and economic environment, including with respect to inflation, continue to evolve and affect supply chain performance and underlying assumptions in various ways – specifically with volatility in commodity, energy, and logistics costs.

Our financial position, revenue, operating results, profitability and cash flows are difficult to predict and may vary from quarter to quarter, which could cause our share price to decline significantly.

Our quarterly revenue, operating results, profitability and cash flows have varied in the past and are likely to vary significantly from quarter to quarter in the future. The factors that are likely to cause these variations include:

operating and startup costs of new manufacturing facilities;
wind blade model transitions;
differing quantities of wind blade production;
unanticipated contract or project delays or terminations;
changes in the costs of raw materials or disruptions in raw material supply;
scrap of defective products;
payment of liquidated damages to our customers for late deliveries of our products;
warranty expense;
availability of qualified personnel;
associate wage levels and wage inflation in Türkiye, Mexico and other countries in which we operate, and continuing general inflationary pressures in these markets;
costs incurred in the expansion of our existing manufacturing capacity;
volume reduction requests from our customers pursuant to our customer agreements;
damage or production delays caused by earthquakes, fires, floods, tornadoes, hurricanes, extreme weather conditions such as windstorms, hailstorms, drought, temperature extremes, typhoons or other natural disasters or terrorism or health epidemics such as the COVID-19 pandemic;
changes in our effective tax rate;
general economic conditions; and
the complexity of the financial assumptions we must use for forecasting our revenue, profitability and operating results under the revenue recognition standard and the impact that unanticipated blade transitions have on those estimates.

As a result, our revenue, operating results, profitability and cash flows for a particular period are difficult to predict and may decline in comparison to corresponding prior periods regardless of the strength of our business. It is also possible that in some future periods our revenue, operating results and profitability may not meet the expectations of securities analysts or investors. If this occurs, the trading price of our common stock could fall substantially, either suddenly or over time, and our business, operating results and financial condition would be materially harmed.

The fluctuation of foreign currency exchange rates could materially harm our financial results.

Since we conduct a significant portion of our operations internationally, our business is subject to foreign currency risks, including currency exchange rate fluctuations. The exchange rates are affected by, among other things, changes in political and economic conditions. For example, an increase in our Türkiye sales and operations will result in a larger portion of our net sales and expenditures being denominated in the Euro and Turkish Lira.

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Significant fluctuations in the exchange rate between the Turkish Lira and the U.S. dollar, the Turkish Lira and the Euro or the Euro and the U.S. dollar may adversely affect our revenue, expenses, as well as the value of our assets and liabilities. To the extent our future revenues and expenses are generated outside of the U.S. in currencies other than the U.S. dollar, including the Euro, the Turkish Lira, Mexican Peso or India Rupee, among others, we will be subject to increased risks relating to foreign currency exchange rate fluctuations which could materially harm our business, financial condition and operating results.

Our manufacturing operations and future growth are dependent upon the availability of capital, which may be insufficient to support our capital expenditures.

Our current wind blade manufacturing activities and future growth will require substantial capital investment. For the years ended December 31, 2022 and 2021, our capital expenditures, including those related to discontinued operations, were $18.8 million and $37.1 million, respectively, including assets acquired under finance leases in 2022 and 2021 of $0.2 million and $1.8 million, respectively. We plan to make continued investments in our U.S., Türkiye, Mexico, and India facilities. Our ability to grow our business is predicated upon us making significant additional capital investments to expand our existing manufacturing facilities and build and operate new manufacturing facilities in existing and new markets or access capital to acquire new businesses. We may not have the capital to undertake these capital investments. In addition, our capital expenditures may be significantly higher if our estimates of future capital investments are incorrect and may increase substantially if we are required to undertake actions to comply with new regulatory requirements or compete with new technologies. The cost of some projects may also be affected by foreign exchange rates if any raw materials or other goods must be paid for in foreign currency. We cannot assure you that we will be able to raise funds on favorable terms, if at all, or that future financings would not be dilutive to holders of our capital stock. We also cannot assure you that completed capital expenditures will yield the anticipated results. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants, or other restrictions on our business that could impair our operational flexibility, and would require us to fund additional interest expense. If we are unable to obtain sufficient capital at a reasonable cost or at all, we may not be able to expand our business to take advantage of changes in the marketplace or may be required to delay, reduce or eliminate some or all of our current operations, which could materially harm our business, operating results and financial condition.

Our business and reputation could be adversely impacted by any violations of the FCPA, the U.K. Bribery Act, and other foreign anti-corruption laws.

As a U.S. corporation, we are subject to the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. Other countries in which we operate also have anti-corruption laws, some of which prohibit improper payments to government and non-government persons and entities, and others extend their application to activities outside their country of origin. We have manufacturing facilities in Mexico, Türkiye and India, countries with a fairly high risk of corruption. Those facilities are subject to routine government oversight. In addition, a number of our raw materials and components suppliers are state-owned, particularly in China. Moreover, due to our need to import raw materials across international borders, we also routinely have interactions, directly or indirectly, with customs officials. In many foreign countries, under local custom, businesses engage in practices that may be prohibited by the FCPA or other similar laws and regulations. Additionally, we continue to hire associates around the world as we continue to expand. Although we have implemented certain policies, procedures and controls designed to ensure compliance with the FCPA and similar laws, there can be no guarantee that all of our associates and agents, as well as those companies to which we outsource certain of our business operations, have not taken and will not take actions that violate our policies and the FCPA or other anti-corruption laws, which could subject us to fines, penalties, disgorgement, and loss of business, harm our reputation and impact our ability to compete in certain jurisdictions. In addition, these laws are complex and far-reaching in nature, and, as a result, we may be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Moreover, our competitors may not be subject to the FCPA or similar laws, which could provide them with a competitive advantage in some jurisdictions.

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Effective internal controls are necessary for us to provide reliable financial reports and effectively address fraud risks.

We maintain a system of internal controls to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (GAAP). The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to establish and maintain a system of internal controls that will be adequate to satisfy the reporting obligations of a public company. The effectiveness of our internal controls depends in part on the cooperation of senior managers worldwide.

Any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. Any failure to maintain that system, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business, and lead to our becoming subject to litigation, sanctions or investigations by The NASDAQ Global Market (NASDAQ), the SEC or other regulatory governmental agencies and bodies. Furthermore, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price.

Much of our intellectual property consists of trade secrets and know-how that is very difficult to protect. If we experience loss of protection for our trade secrets or know-how, our business would be substantially harmed.

We have a variety of IP rights, including patents, trademarks and copyrights, but much of our most important IP rights consist of trade secrets and know-how and effective IP protection may be unavailable, limited or outside the scope of the IP rights we pursue in the U.S. and in foreign countries where we operate. Although we strive to protect our IP rights, there is always a risk that our trade secrets or know-how will be compromised or that a competitor could lawfully reverse-engineer our technology or independently develop similar or more efficient technology. We have confidentiality agreements with each of our customers, suppliers, key associates and independent contractors in place to protect our IP rights, but it is possible that a customer, supplier, associate or contractor might breach the agreement, intentionally or unintentionally. It is also possible that our confidentiality agreements with customers, suppliers, associates and contractors will not be effective in preserving the confidential nature of our IP rights. The patents we own could be challenged, invalidated, narrowed or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Once our patents expire, or if they are invalidated, narrowed or circumvented, our competitors may be able to utilize the inventions protected by our patents. Additionally, the existence of our IP rights does not guarantee that we will be successful in any attempt to enforce these rights against third parties in the event of infringement, misappropriation or other misuse, which may materially and adversely affect our business. Because our ability to effectively compete in our industry depends upon our ability to protect our proprietary technology, we might lose business to competitors and our business, revenue, operating results and prospects could be materially harmed if we suffer loss of trade secret and know-how protection or breach of our confidentiality agreements.

We may be subject to significant liabilities and costs relating to environmental and health and safety requirements.

We are subject to various environmental, health and safety laws, regulations and permit requirements in the jurisdictions in which we operate governing, among other things, health, safety, pollution and protection of the environment and natural resources, the handling and use of hazardous substances, the generation, storage, treatment and disposal of wastes, and the cleanup of any contaminated sites.

We have incurred, and expect to continue to incur, capital and operating expenditures to comply with such laws, regulations and permit requirements. While we believe that we currently are in material compliance with all such laws, regulations and permit requirements, any noncompliance may subject us to a range of enforcement measures, including the imposition of monetary fines and penalties, other civil or criminal sanctions, remedial obligations, and the issuance of compliance requirements restricting our operations.

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There can be no assurance that we will not in the future become subject to compliance requirements, obligations to undertake cleanup or related activities, or claims or proceedings relating to environmental, health or safety matters, hazardous substances or wastes, contaminated sites, or other environmental or natural resource damages, that could impose significant liabilities and costs on us and materially harm our business, operating results and financial condition.

Work disruptions resulting from our collective bargaining agreements could result in increased operating costs and materially harm our business, operating results and financial condition.

Certain of our associates in Türkiye and Matamoros, Mexico, which in the aggregate represented approximately 35% of our workforce as of December 31, 2022, are covered by collective bargaining agreements.

In January 2019, thousands of workers employed in dozens of manufacturing facilities in Matamoros, Mexico, went on strike. In general, these workers, who were represented by several different labor unions, demanded an increase in their wage rate and an annual bonus. In February 2019, our manufacturing production associates in Matamoros, Mexico, who were represented by a labor union, went on strike also demanding an increase in their hourly wage rate and the payment of an annual bonus. During this strike, our Matamoros manufacturing facility stopped production for several weeks until we reached a revised agreement with our labor union. We amended this Matamoros collective bargaining agreement to adjust the salaries and bonuses payable to our associates for calendar year 2022 that are covered by this agreement. This collective bargaining agreement is in effect through March 2023. We are in the process of negotiating an amendment to this agreement.

In July 2021, we took over a manufacturing facility from Nordex in Matamoros, Mexico pursuant to a 3-year supply agreement. We have a collective bargaining agreement for the associates at this facility that is in effect through April 2023.We are in the process of negotiating an amendment to this agreement.

In July 2022, we experienced a brief labor disruption in our Türkiye manufacturing facilities as we worked with the union to address the inflationary pressures on wages. Our Türkiye manufacturing facilities have experienced significant wage inflation over the course of the past year and we expect that trend to continue in 2023. The government of Türkiye increased minimum wages approximately 55% effective January 1, 2023 and there may be further wage increases enacted throughout the year. Our collective bargaining agreement for our Türkiye facilities was in effect through the end of 2022. We are in the process of negotiating an amendment to this agreement for calendar year 2023.

Additionally, our other associates working at other manufacturing facilities may vote to be represented by a labor union in the future. There can be no assurance that we will not experience labor disruptions such as work stoppages or other slowdowns by workers at any of our facilities. Should significant industrial action, threats of strikes or related disturbances occur, or other challenges with negotiating and extending our collective bargaining agreements with our unionized associates, we could experience further disruptions of operations and increased labor costs in Türkiye, Mexico or other locations, which could materially harm our business, operating results or financial condition. Any such work stoppage or slow-down at any of our facilities could also result in additional expenses and possible loss of revenue for us.

Our information technology infrastructure could experience serious failures or cyber security attacks, the failure of which could materially harm our business, operating results and financial condition.

Information technology is part of our business strategy and operations. It enables us to streamline operation processes, facilitate the collection and reporting of business data, and provide for internal and external communications. There are risks that information technology system failures, network disruptions, breaches of data security and phishing and ransomware attacks could disrupt our operations. Any significant disruption or breach may materially harm our business, operating results and financial condition.

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Risks Related to Our Series A Preferred Stock

Holders of our Series A Preferred Stock may exercise influence over us, including through their ability to designate a member of our board of directors.

In November 2021, we issued 350,000 shares of Series A Preferred Stock to certain funds affiliated with Oaktree Capital Management, L.P. (the Series A Preferred Stockholders) for an aggregate purchase price of $350 million. The Series A Preferred Stockholders are entitled to designate one representative to be appointed to our board of directors so long as 33% of the Series A Preferred Stock originally issued remains outstanding. Notwithstanding the fact that all directors are subject to fiduciary duties to us and subject to applicable law, the interests of the director designated by the Series A Preferred Stockholders may differ from the interests of holders of our common stock or of our other directors.

Although the Series A Preferred Stockholders do not have any voting rights or rights to convert such preferred shares into shares of common stock, we must obtain the prior written consent of holders of a majority of the outstanding shares of Series A Preferred Stock for, among other things: (i) amending our organizational documents to the extent such amendment has an adverse effect on the Series A Preferred Stockholders, (ii) effecting any change of control, liquidation event or merger or consolidation of us unless the entirety of the applicable redemption price is paid with respect to all the then issued and outstanding Series A Preferred Stock (iii) increasing or decreasing the number of authorized shares of Series A Preferred Stock, (iv) making certain material acquisitions or dispositions or entering into joint ventures or similar transactions, (v) incurring indebtedness except for indebtedness incurred under our existing loan facilities and agreements so long as the total amount of such indebtedness does not exceed $80 million, and (vi) committing to any capital expenditures or agreements to construct or acquire new manufacturing facilities, and (vii) certain other specified actions.

As a result, the Series A Preferred Stockholders have the ability to influence the outcome of certain matters affecting our governance and capitalization. The sponsors of the Series A Preferred Stockholders are in the business of making or advising on investments in companies, including businesses that may directly or indirectly compete with certain portions of our business, and they may have interests that diverge from, or even conflict with, those of our other stockholders. They may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. Our obligations to the Series A Preferred Stockholders could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our results of operations and financial condition.

Our Series A Preferred Stock has rights, preferences, and privileges that are not held by, and are preferential to, the rights of holders of our common stock, which could adversely affect our liquidity and financial condition.

The Series A Preferred Stockholders have certain liquidation, dividend and redemption rights requiring us, among other things, to repurchase their shares of Series A Preferred Stock under specified circumstances, and these rights are senior to the rights of holders of our common stock. We may not be able to generate sufficient cash flow from our operations to satisfy our dividend, liquidation and redemption obligations to the Series A Preferred Stockholder and could impact our liquidity and reduce the amount of cash available for working capital, capital expenditures, growth opportunities, acquisitions, and other general corporate purposes. Our obligations to the Series A Preferred Stockholders could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition. If we fail to meet our dividend, liquidation redemption and other material covenant obligations owing to the Series A Stockholders, the Series A Stockholders are entitled to additional rights and preferences, including an increased dividend rate, additional control rights over the management of our business and the right to require us to pursue a financing or other transaction to repay all outstanding dividend and redemption obligations owing to the Series A Preferred Stockholders.

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Risks Related to Ownership of Our Common Stock

The price of our common stock may fluctuate substantially and your investment may decline in value.

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

actual or anticipated fluctuations in our results of operations;
our ability to provide products due to shipments subject to delayed delivery and deferred revenue arrangements;
loss of or changes in our relationship with one or more of our customers;
failure to meet our earnings estimates;
conditions and trends in the energy and manufacturing markets in which we operate and changes in estimates of the size and growth rate of these markets;
announcements by us or our competitors of significant contracts, developments, acquisitions, strategic partnerships or divestitures;
availability of equipment, labor and other items required for the manufacture of wind blades;
changes in governmental policies;
our ability to successfully grow our automotive business;
additions or departures of members of our senior management or other key personnel;
changes in market valuation or earnings of our competitors;
sales of our common stock, including sales of our common stock by our directors and officers or by our other principal stockholders;
the trading volume of our common stock; and
general market and economic conditions.

These broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, securities class-action litigation has often been instituted against a company following periods of volatility in the market price of that company’s securities. Securities class-action litigation, if instituted against us, could result in substantial costs or damages and a diversion of management’s attention and resources, which could materially harm our business and operating results.

A significant portion of our total outstanding shares may be sold into the public market in future sales, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market can occur at any time. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, 2022, we had 42,044,611 shares of common stock outstanding. All shares can now be sold, subject to any applicable volume limitations under federal securities laws. We may issue debt or equity securities in other registered or unregistered convertible debt or equity offerings.

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you and may cause the market price of our common stock to drop significantly.

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The exercise of options and warrants and other issuances of shares of common stock or securities convertible into common stock under our equity compensation plans will dilute your interest.

Under our existing equity compensation plans, as of December 31, 2022, we had outstanding options to purchase 1,180,971 shares of our common stock, 1,293,707 restricted stock units and 299,466 performance stock units to our associates and non-employee directors. From time to time, we expect to grant additional options and other stock awards. In November 2021, we issued warrants to purchase 4,666,667 shares of common stock at an exercise price of $0.01 per share to the Series A Preferred Stockholders. In August 2022, the Series A Preferred Stockholders exercised the outstanding, fully vested warrants at a price of $0.01 per share to purchase an aggregate of 4,666,667 shares of common stock on a cashless basis, resulting in the net issuance to the Series A Preferred Stockholders of an aggregate of 4,664,155 shares of common stock. As of December 31, 2022, the Series A Preferred Stockholders held an aggregate of 700,739 shares of common stock. The exercise of options and warrants at prices below the market price of our common stock could adversely affect the price of shares of our common stock. Additionally, any issuance of our common stock that is not made solely to then-existing stockholders proportionate to their interests, such as in the case of a stock dividend or stock split, will result in dilution to each stockholder by reducing their percentage ownership of the total outstanding shares. If we issue options or warrants to purchase our common stock in the future and those options or warrants are exercised or we issue stock, stockholders may experience further dilution.

Provisions of Delaware law or our charter documents could delay or prevent an acquisition of our Company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management.

Provisions of Delaware law and our amended and restated certificate of incorporation and amended and restated by-laws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or delay attempts by stockholders to replace or remove our current management or members of our board of directors. These provisions include: a classified board of directors; limitations on the removal of directors; advance notice requirements for stockholder proposals and nominations; the inability of stockholders to act by written consent or to call special meetings; the ability of our board of directors to make, alter or repeal our amended and restated by-laws; and the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine.

The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote, and not less than 75% of the outstanding shares of each class entitled to vote thereon as a class, is necessary to amend or repeal the above provisions that are contained in our amended and restated certificate of incorporation. In addition, absent approval of our board of directors, our amended and restated by-laws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote.

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which limits business combination transactions with stockholders of 15% or more of our outstanding voting stock that our board of directors has not approved. These provisions and other similar provisions make it more difficult for stockholders or potential acquirers to acquire us without negotiation. These provisions may apply even if some stockholders may consider the transaction beneficial to them.

As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a premium over the then current market price for our common stock.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our headquarters is located in Scottsdale, Arizona, and we own or lease various other facilities in the U.S., China, Mexico, Türkiye, India, Denmark, Germany and Spain. We believe that our properties are generally in good condition, are well maintained and are generally suitable and adequate to carry out our business at expected capacity for the foreseeable future. The table below lists various information regarding our facilities as of February 22, 2023:

 

 

 

Operating

 

Year

 

Leased or

 

Approximate

 

 

 

Location

 

Segment

 

Commenced

 

Owned

 

Square
Footage

 

 

Description of Use

Newton, IA, U.S.

 

U.S.

 

2008

 

Leased

 

 

337,922

 

 

Wind Blade Manufacturing Facility

Newton, IA, U.S.

 

U.S.

 

2018

 

Leased

 

 

114,078

 

 

Automotive Manufacturing Facility

Taicang Port, China

 

Asia

 

2007

 

Owned

 

 

208,445

 

 

Precision Molding Manufacturing Facility

Yangzhou, China

 

Asia

 

2018

 

Leased

 

 

934,133

 

 

Wind Blade Manufacturing Facility

Juárez, Mexico

 

Mexico

 

2013

 

Leased

 

 

345,984

 

 

Wind Blade Manufacturing Facility

Juárez, Mexico

 

Mexico

 

2016

 

Leased

 

 

453,096

 

 

Wind Blade Manufacturing Facility

Juárez, Mexico

 

Mexico

 

2017

 

Leased

 

 

339,386

 

 

Wind Blade Manufacturing Facility

Juárez, Mexico

 

Mexico

 

2018

 

Leased

 

 

300,277

 

 

Precision Molding and Automotive Manufacturing Facility

Matamoros, Mexico

 

Mexico

 

2017

 

Leased

 

 

527,442

 

 

Wind Blade Manufacturing Facility

Izmir, Türkiye

 

EMEA

 

2012

 

Leased

 

 

343,000

 

 

Wind Blade Manufacturing Facility

Izmir, Türkiye

 

EMEA

 

2015

 

Leased

 

 

817,078

 

 

Wind Blade Manufacturing Facility

Warren, RI, U.S.

 

U.S.

 

2004

 

Leased

 

 

108,750

 

 

Precision Molding Development and Manufacturing and Research and Development Facility, Automotive Manufacturing Facility

Santa Teresa, NM, U.S.

 

Mexico

 

2014

 

Leased

 

 

503,710

 

 

Wind Blade Storage Facility/Wind Blade Services Facility

Scottsdale, AZ, U.S.

 

U.S.

 

2015

 

Leased

 

 

22,508

 

 

Corporate Headquarters

Kolding, Denmark

 

U.S.

 

2018

 

Leased

 

 

2,583

 

 

Advanced Engineering Center

Chennai, India

 

India

 

2019

 

Leased

 

 

776,280

 

 

Wind Blade Manufacturing Facility

Madrid, Spain

 

U.S.

 

2021

 

Leased

 

 

26,124

 

 

Wind Blade Services Facility

Berlin, Germany

 

U.S.

 

2019

 

Leased

 

 

4,684

 

 

Engineering Center

 

For a discussion of our legal proceedings, refer to Note 17 – Commitments and Contingencies – Legal Proceedings of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures

Not applicable.

31


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

On July 22, 2016, our common stock began trading on NASDAQ under the symbol “TPIC.” Prior to that time, there was no public market for our stock.

Performance Graph

The following graph and table illustrate the total stockholder return from July 22, 2016 through December 31, 2022, on our common stock, the Russell 2000 Index, the S&P Small Cap 600 Energy (Sector) Index and the NASDAQ Clean Edge Green Energy Index, assuming an investment of $100.00 on July 22, 2016 including the reinvestment of dividends.

img144878996_1.jpg 

 

 

 

Base Period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7/22/16

 

 

12/30/16

 

 

12/29/17

 

 

12/31/18

 

 

12/31/19

 

 

12/31/20

 

12/31/21

 

12/30/22

 

TPI Composites, Inc.

 

$

100.00

 

 

$

118.29

 

 

$

150.88

 

 

$

181.27

 

 

$

136.50

 

 

$

389.23

 

$

110.32

 

$

74.78

 

Russell 2000

 

$

100.00

 

 

$

111.89

 

 

$

126.60

 

 

$

111.19

 

 

$

137.56

 

 

$

162.82

 

$

185.12

 

$

145.21

 

S&P Small Cap 600 Energy (Sector)

 

$

100.00

 

 

$

133.11

 

 

$

97.60

 

 

$

55.64

 

 

$

47.19

 

 

$

28.17

 

$

44.86

 

$

65.17

 

NASDAQ Clean Edge Green Energy

 

$

100.00

 

 

$

102.59

 

 

$

134.16

 

 

$

116.50

 

 

$

163.93

 

 

$

462.91

 

$

448.76

 

$

311.51

 

 

Holders

As of January 31, 2023, there were five stockholders of record of our common stock, although there is a much larger number of beneficial owners.

32


Dividends

We have never declared or paid any cash dividends on shares of our capital stock. We currently intend to retain earnings, if any, to finance the development and growth of our business and do not anticipate paying cash dividends on the common stock in the future. The holders of our Series A Preferred Stock are entitled to cash dividends following the second anniversary of the Series A Preferred Stock closing date. Any payment of any future dividends to holders of our common stock, will be at the discretion of the board of directors, junior to the rights of the Series A Preferred Stockholders to receive dividends, and subject to compliance with certain covenants in our loan agreements, after taking into account various factors, including our financial condition, operating results, capital requirements, restrictions contained in any future financing instruments, growth plans and other factors the board deems relevant. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” included in Part II, Item 7 of this Annual Report on Form 10-K.

Certain of our subsidiaries related to our discontinued operations are limited in their ability to declare dividends without first meeting statutory restrictions of China, including retained earnings as determined under Chinese-statutory accounting requirements. Until 50% ($16.1 million) of registered capital is contributed to a surplus reserve, our discontinued China operations can only pay dividends equal to 90% of after-tax profits (10% must be contributed to the surplus reserve). Once the surplus reserve fund requirement is met, our discontinued China operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. As of December 31, 2022, the amount of the surplus reserve fund was $1.5 million. In July 2021, one of our subsidiaries in China paid a dividend of approximately $19.5 million, net of withholding taxes, to our subsidiary in Switzerland. In November 2022, one of our subsidiaries in China made a return of capital of approximately $18.0 million, to our subsidiary in Switzerland. In December 2022, our subsidiaries in China paid dividends of approximately $3.9 million, net of withholding taxes, to our subsidiaries in the U.S. and Switzerland. We plan to shut down our business operations in China in the next 12 months. After all assets and liabilities related to our discontinued operations have been disposed of and/or sold, and after all legal and Chinese-statutory requirements have been met, our subsidiaries in China may distribute any remaining shareholders’ equity, including retained earnings, to our subsidiary in Switzerland. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” included in Part II, Item 7 of this Annual Report on Form 10-K.

Securities Authorized for Issuance under Equity Compensation Plans

The information required in response to Item 201(d) of Regulation S-K is set forth in Part III, Item 12 of this Annual Report on Form 10-K which is incorporated herein by reference.

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities during the year ended December 31, 2022 and from the period from December 31, 2022 to the filing date of this Annual Report on Form 10-K which have not previously been disclosed in a Quarterly Report on Form 10-Q or in a Current Report on Form 8-K.

Use of Proceeds from Registered Securities

None.

33


Purchases of Equity Securities by the Issuer

The following table summarizes the total number of shares of our common stock that we repurchased during the three months ended December 31, 2022 from certain associates who surrendered common stock to pay the taxes in connection with the vesting of restricted stock units.

 

Period

 

Total Number
of Shares Purchased

 

 

Average Price
Paid per Share

 

 

Total Number
of Shares Purchased as Part of Publicly Announced Program

 

 

Maximum Number of Shares That May
Yet Be Purchased Under the Program

 

October (October 1 - October 31)

 

 

 

 

$

 

 

 

 

 

 

 

November (November 1 - November 30)

 

 

 

 

 

 

 

 

 

 

 

 

December (December 1 - December 31)

 

 

56,308

 

 

 

10.14

 

 

 

 

 

 

 

Total

 

 

56,308

 

 

$

10.14

 

 

 

 

 

 

 

 

Item 6. [Reserved]

34


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes included in Part II, Item 8 of this Annual Report on Form 10-K and other financial information appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly those under “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.

OVERVIEW

Our Company

We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We deliver high-quality, cost-effective composite solutions through long term relationships with leading original equipment manufacturers in the wind and automotive markets. We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators, and we supply high strength, lightweight and durable composite products to the automotive market. We are headquartered in Scottsdale, Arizona and operate factories in the U.S., Mexico, Türkiye, and India. We operate additional engineering development centers in Denmark and Germany and a services facility in Spain. For a further overview of our Company, refer to the discussion in “Business—Overview” included in Part I, Item 1 of this Annual Report on Form 10-K.

In December 2022, the Company committed to a restructuring plan to rebalance our organization and optimize our global manufacturing footprint. Changing economic and geopolitical factors, including increased logistics costs and tariffs imposed on components of wind turbines from China, including wind blades, has had an adverse impact on demand for our wind blades manufactured in our Chinese facilities. In connection with our restructuring plan, we ceased production at our Yangzhou, China manufacturing facility as of December 31, 2022 and plan to shut down our business operations in China in the next 12 months. Our business operations in China comprised the entirety of our Asia reporting segment. This shut down will have a meaningful effect on our global manufacturing footprint and consolidated financial results. Accordingly, the historical results of our Asia reporting segment have been presented as discontinued operations in our Consolidated Statements of Operations and Consolidated Balance Sheets. Our China operations represented a geographic operating segment that included (1) the manufacturing of wind blades at our facilities in Dafeng, China and Yangzhou, China, (2) the manufacturing of precision molding and assembly systems at our Taicang Port, China facility and (3) wind blade inspection and repair services. The following discussion reflects continuing operations only, unless otherwise indicated. For further information regarding our discontinued operations, refer to Note 2 – Discontinued Operations of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Our business operations are defined geographically into four geographic operating segments - (1) the U.S., (2) Mexico, (3) Europe, the Middle East and Africa (EMEA) and (4) India. For further information regarding our operating segments, refer to Note 22 – Segment Reporting of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

KEY TRENDS AND RECENT DEVELOPMENTS AFFECTING OUR BUSINESS

Geopolitical events around the world have accelerated regional needs for energy independence and security. Climate change also continues to drive the need for renewable energy solutions and net-zero carbon emissions. Over the course of the past year, we have seen numerous government policy initiatives aimed at expanding the use of renewable energy. We expect these recent trends in governmental policy will enable long-term revenue growth in the wind industry. For example, the wind industry is awaiting formal implementation guidance from the Internal Revenue Service (IRS) and United States Treasury Department with respect to the recently enacted, Inflation Reduction Act of 2022 (IRA). In addition, the industry anticipates more robust policies in the European Union (EU) such as the Green Deal Industrial Plan (Plan) that is expected to accelerate the expansion of renewable energy and

35


green technologies including easing state aid rules to enable higher subsidies. The Plan builds on previous initiatives and relies on strengths of the EU Single Market, complementing ongoing efforts under the European Green Deal and REPowerEU. A key component of the Plan is the Net-Zero Industry Act to simplify regulations, speed up permits and promote cross-border projects to accelerate climate neutrality. Despite these favorable long term policy trends, we expect 2023 to be a transition year and expect our revenue in 2023 to be slightly down from 2022 due primarily to the shutdown of our China operations.

In preparation for the expected long-term growth in the wind industry, we have entered into or agreed to enter into several recent arrangements with our customers, including:

o
extending our supply agreement with ENERCON for two lines at one of our Türkiye manufacturing facilities through 2025;
o
signing an agreement with GE Renewable Energy that enabled us to secure a ten-year lease extension of our manufacturing facility in Newton, Iowa. Under the agreement, GE Renewable Energy and TPI plan to develop competitive blade manufacturing options to best serve GE Renewable Energy's commitments in the U.S. market with production intended to start in 2024;
o
extending our supply agreements with GE Renewable Energy for all of our lines in our Mexico manufacturing facilities through 2025;
o
extending two of our supply agreements with Nordex at our Türkiye manufacturing facilities for four lines through 2023; and
o
agreeing in principle to a deal with Nordex to effectively extend four of six lines in Türkiye through 2026 (the other two will be extended through 2024) and add two additional manufacturing lines in India;
o
agreeing in principle with Vestas to a seven-year global partner framework agreement that aims to provide flexibility and capacity to Vestas while enabling better facility utilization in the geographies that we serve Vestas.

Given the current challenging global macroeconomic and wind industry environment, we have commenced multiple cost saving initiatives to better position us for 2023 and the long term, including optimizing our global manufacturing footprint and implementing structural cost reductions. In connection with our restructuring plan announced in December 2022, we have ceased production at our Yangzhou, China manufacturing facility as of December 31, 2022, and plan to shut down our business operations in China in the next 12 months. We have recorded $17.5 million in restructuring and $16.6 million in impairment charges during the fourth quarter ended December 31, 2022 with respect to closing this facility, as well as additional headcount reductions in our other continuing manufacturing facilities and corporate functions to drive structural cost improvements throughout our organization.

The after-effects of the COVID-19 pandemic, the current geopolitical situation, and economic environment, including with respect to inflation, continue to evolve and affect supply chain performance and underlying assumptions in various ways – specifically with volatility in commodity, energy, and logistics costs. We expect the prices of resin, carbon fiber, fiberglass and other raw materials to remain elevated in the near term compared to pre-pandemic levels. We also expect logistics costs to remain elevated from pre-pandemic levels. However, we have seen prices stabilize and logistics costs have come down over 2022. In 2023, we believe our supply chain costs will be flat to slightly down compared to 2022. If the prices for these raw materials and logistics costs revert back to the levels we experienced in 2021 and 2022, such elevated price levels could have a material impact on our results of operations.

Our results of operations for the year ended December 31, 2022 have been adversely impacted by the performance of our Matamoros, Mexico manufacturing facility that we took over from Nordex in 2021. We experienced a loss from operations of $40.8 million at this facility for the year ended December 31, 2022 and we expect our operation of this facility will have a similar negative impact on our results of operations during 2023. We have been working with our customer to reduce the impact over the remaining term of the agreement.

36


Ongoing inflationary pressures have caused and may continue to cause many of our material, labor, and other costs to increase, which can have adverse impacts on our results of operations. The governments of Mexico and Türkiye increased minimum wages approximately 20% and 55%, respectively, effective January 1, 2023 and there may be further wage increases enacted throughout the year. While our customer contracts allow us to pass a portion of these increases to our customers, we will not be able to recover 100% of the wage inflation. If our manufacturing facilities in these countries continue to experience wage inflation at these levels and the increased costs in local currency are not offset with favorable foreign currency fluctuations, such elevated wages will have a material impact on our results of operations.

We believe there is an increasing demand for composite products for electric vehicles. As part of our diversification strategy, we have made significant investments to expand our automotive business during the last several years. In 2018 through 2022, we experienced significant losses relating to our automotive business and experienced operational challenges as we are expanding this business. From 2018 to 2022, we invested approximately $81 million in our automotive business. We expect our automotive business will continue to operate at a loss in 2023. We expect to invest an additional $10 million to $15 million in that business in 2023.

COMPONENTS OF RESULTS OF OPERATIONS

Net Sales

We recognize revenue from the majority of our manufacturing services over time as our customers control the product as it is produced, and we may not use or sell the product to fulfill other customers’ contracts. Net sales include amounts billed to our customers for our products, including wind blades, precision molding and assembly systems and other products and services, as well as the progress towards the completion of the performance obligation for products in progress, which is determined on a ratio of direct costs incurred to date in fulfillment of the contract to the total estimated direct costs required to complete the performance obligation.

Cost of Goods Sold

Cost of goods sold includes the costs we incur at our production facilities to make products saleable on both products invoiced during the period as well as products in progress towards the satisfaction of the related performance obligations for which we have an enforceable right to payment upon termination and we may not use or sell the product to fulfill other customers’ contracts. All costs incurred at our production facilities, as well as the allocated portion to our production facilities of costs incurred at our corporate headquarters and our research facilities, are directly or indirectly related to the manufacturing of products or services and are presented in cost of goods sold. Cost of goods sold includes such items as raw materials, direct and indirect labor and facilities costs, including purchasing and receiving costs, plant management, inspection costs, production process improvement activities, product engineering and internal transfer costs. In addition, all depreciation associated with assets used in the production of our products is also included in cost of goods sold. Direct labor costs consist of salaries, benefits and other personnel related costs for associates engaged in the manufacturing of our products and services. All direct labor costs, excluding non-productive labor costs, are included in the measure of progress towards completion of the relevant performance obligation when determining revenue to be recognized during the period.

Startup and transition costs are primarily unallocated fixed overhead costs and underutilized direct labor costs incurred during the period production facilities are transitioning wind blade models and ramping up manufacturing. The cost of sales for the initial products from a new model manufacturing line is generally higher than when the line is operating at optimal production volume levels due to inefficiencies during ramp-up related to labor hours per blade, cycle times per blade and raw material usage. Additionally, these costs as a percentage of net sales are generally higher during the period in which a facility is ramping up to full production capacity due to underutilization of the facility. Manufacturing overhead at each of our facilities includes virtually all indirect costs (including share-based compensation costs) incurred at the plants, including engineering, finance, information technology, human resources and plant management.

37


General and Administrative Expenses

General and administrative expenses primarily relate to the unallocated portion of costs incurred at our corporate headquarters and our research facilities and include salaries, benefits and other personnel related costs for associates engaged in research and development, engineering, finance, internal audit, information technology, human resources, business development, global operational excellence, global supply chain, in-house legal and executive management. Other costs include outside legal and accounting fees, risk management (insurance), share-based compensation and certain other administrative and global resources costs.

The unallocated research and development expenses incurred at our Warren, Rhode Island location as well as at our Kolding, Denmark advanced engineering center and our Berlin, Germany engineering center are also included in general and administrative expenses. For the years ended December 31, 2022, 2021 and 2020, research and development expenses totaled $1.1 million, $1.0 million and $1.0 million, respectively.

Loss on Sale of Assets and Asset Impairments

Loss on sale of assets represents the losses on the sale of certain receivables, on a non-recourse basis under supply chain financing arrangements with our customers, to financial institutions and losses on the sale of other assets at our corporate and manufacturing facilities. Asset impairments represent the losses on the impairment of our assets at our corporate and manufacturing facilities.

Restructuring Charges

Restructuring charges primarily consist of associate severance, one-time termination benefits and ongoing benefits related to the reduction of our workforce and other costs associated with exit activities, which may include costs related to leased facilities to be abandoned and facility and associate relocation costs.

Other Income (Expense)

Other income (expense) consists of interest expense on our debt borrowings and the amortization of deferred financing costs on such borrowings, foreign currency income and losses, interest income, losses on extinguishment of debt and miscellaneous income and expense.

Income Taxes

Income taxes consists of federal, state, provincial, local and foreign taxes based on income in jurisdictions in which we operate, including in the U.S., Mexico, Türkiye, India and various countries within Europe. The income tax rate, tax provisions, deferred tax assets and liabilities vary according to the jurisdiction in which the income or loss arises. Tax laws are complex and subject to different interpretations by management and the respective governmental taxing authorities and require us to exercise judgment in determining our income tax provision, our deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets.

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

In addition to measures of financial performance presented in our consolidated financial statements in accordance with GAAP, we use certain other financial measures and operating metrics to analyze our performance. These “non-GAAP” financial measures consist of EBITDA, adjusted EBITDA, free cash flow and net cash (debt), which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance. The key operating metrics consist of wind blade sets produced, estimated megawatts of energy capacity to be generated by wind blade sets produced, utilization, dedicated manufacturing lines, and manufacturing lines installed, which help us evaluate our operational performance. We believe that these measures are useful to investors in evaluating our performance.

38


Key Financial Measures

The following discussion reflects continuing operations only, unless otherwise indicated. Certain prior period amounts have been reclassified to conform to the current period's presentation.

The key financial measures as of and for the years ended December 31 are as follow:

 

 

 

2022

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Net sales

 

$

1,522,741

 

 

$

1,472,386

 

 

$

1,143,054

 

Net loss from continuing operations

 

 

(55,550

)

 

 

(155,894

)

 

 

(85,397

)

EBITDA(1)

 

 

17,864

 

 

 

(74,818

)

 

 

(33,631

)

Adjusted EBITDA(1)

 

 

37,857

 

 

 

(20,055

)

 

 

(3,973

)

Capital expenditures(2)

 

 

18,832

 

 

 

37,119

 

 

 

65,666

 

Free cash flow(1)(2)

 

 

(81,104

)