06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37839
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) |
9200 E. Pima Center Parkway, Suite 250
Scottsdale, AZ 85258
(480) 305-8910
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, par value $0.01 |
TPIC |
NASDAQ Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☐ |
Emerging growth company |
|
☐ |
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2024, there were 47,553,773 shares of common stock outstanding.
TPI COMPOSITES, INC. AND SUBSIDIARIES
INDEX
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ITEM 1. |
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4 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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4 |
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5 |
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6 |
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7 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 |
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9 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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11 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
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ITEM 3. |
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35 |
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ITEM 4. |
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36 |
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ITEM 1. |
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37 |
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ITEM 1A. |
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37 |
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ITEM 2. |
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37 |
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ITEM 3. |
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37 |
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ITEM 4. |
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37 |
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ITEM 5. |
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37 |
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ITEM 6. |
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38 |
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39 |
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1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
2
These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We have described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the United States Securities and Exchange Commission (SEC) on February 22, 2024 the principal risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to update any forward-looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of unanticipated events except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
3
PART I. FINANCIAL INFORMATION
ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30, |
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December 31, |
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2024 |
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2023 |
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(in thousands, except par value data) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
101,861 |
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$ |
161,059 |
|
Restricted cash |
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8,451 |
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|
10,838 |
|
Accounts receivable |
|
|
145,907 |
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138,029 |
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Contract assets |
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111,228 |
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|
112,237 |
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Prepaid expenses |
|
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19,380 |
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17,621 |
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Other current assets |
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29,278 |
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34,564 |
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Inventories |
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5,454 |
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9,420 |
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Current assets of discontinued operations |
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|
867 |
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|
19,307 |
|
Total current assets |
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422,426 |
|
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503,075 |
|
Property, plant and equipment, net |
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120,787 |
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128,808 |
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Operating lease right of use assets |
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133,745 |
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136,124 |
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Other noncurrent assets |
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38,464 |
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36,073 |
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Total assets |
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$ |
715,422 |
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$ |
804,080 |
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Liabilities and Stockholders’ Deficit |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
250,602 |
|
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$ |
227,723 |
|
Accrued warranty |
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34,000 |
|
|
|
37,483 |
|
Current maturities of long-term debt |
|
|
106,163 |
|
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70,465 |
|
Current operating lease liabilities |
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|
24,815 |
|
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22,017 |
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Contract liabilities |
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4,408 |
|
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24,021 |
|
Current liabilities of discontinued operations |
|
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1,777 |
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|
4,712 |
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Total current liabilities |
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421,765 |
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386,421 |
|
Long-term debt, net of current maturities |
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448,283 |
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414,728 |
|
Noncurrent operating lease liabilities |
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112,420 |
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|
117,133 |
|
Other noncurrent liabilities |
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7,213 |
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|
8,102 |
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Total liabilities |
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989,681 |
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926,384 |
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Stockholders’ deficit: |
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Common shares, $0.01 par value, 100,000 shares authorized, 48,601 |
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486 |
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|
470 |
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Paid-in capital |
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434,975 |
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431,335 |
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Accumulated other comprehensive loss |
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(9,032 |
) |
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(7,627 |
) |
Accumulated deficit |
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(688,905 |
) |
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(536,348 |
) |
Treasury stock, at cost, 1,047 shares at June 30, 2024 and 519 shares at |
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(11,783 |
) |
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(10,134 |
) |
Total stockholders’ deficit |
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(274,259 |
) |
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(122,304 |
) |
Total liabilities and stockholders’ deficit |
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$ |
715,422 |
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$ |
804,080 |
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See accompanying notes to our unaudited condensed consolidated financial statements.
4
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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(in thousands, except per share data) |
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Net sales |
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$ |
309,817 |
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$ |
374,021 |
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$ |
603,863 |
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$ |
767,826 |
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Cost of sales |
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313,562 |
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411,461 |
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613,057 |
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795,512 |
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Startup and transition costs |
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20,678 |
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3,377 |
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42,907 |
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5,357 |
|
Total cost of goods sold |
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334,240 |
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414,838 |
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655,964 |
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800,869 |
|
Gross loss |
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(24,423 |
) |
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(40,817 |
) |
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(52,101 |
) |
|
|
(33,043 |
) |
General and administrative expenses |
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9,211 |
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6,767 |
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17,614 |
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13,801 |
|
Loss on sale of assets and asset impairments |
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3,083 |
|
|
|
5,819 |
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4,918 |
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9,412 |
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Restructuring charges, net |
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298 |
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2,248 |
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|
480 |
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2,224 |
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Loss from continuing operations |
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(37,015 |
) |
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(55,651 |
) |
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(75,113 |
) |
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(58,480 |
) |
Other income (expense): |
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Interest expense, net |
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(22,428 |
) |
|
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(1,876 |
) |
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(43,811 |
) |
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(4,401 |
) |
Foreign currency income (loss) |
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132 |
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(1,564 |
) |
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(499 |
) |
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(2,746 |
) |
Miscellaneous income |
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227 |
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|
682 |
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|
2,702 |
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|
1,115 |
|
Total other expense |
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(22,069 |
) |
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(2,758 |
) |
|
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(41,608 |
) |
|
|
(6,032 |
) |
Loss from continuing operations before income taxes |
|
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(59,084 |
) |
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(58,409 |
) |
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(116,721 |
) |
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(64,512 |
) |
Income tax provision |
|
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(2,412 |
) |
|
|
(287 |
) |
|
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(5,654 |
) |
|
|
(4,116 |
) |
Net loss from continuing operations |
|
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(61,496 |
) |
|
|
(58,696 |
) |
|
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(122,375 |
) |
|
|
(68,628 |
) |
Preferred stock dividends and accretion |
|
|
— |
|
|
|
(15,598 |
) |
|
|
— |
|
|
|
(30,771 |
) |
Net loss from continuing operations attributable to common stockholders |
|
|
(61,496 |
) |
|
|
(74,294 |
) |
|
|
(122,375 |
) |
|
|
(99,399 |
) |
Net loss from discontinued operations |
|
|
(29,593 |
) |
|
|
(6,541 |
) |
|
|
(30,182 |
) |
|
|
(18,736 |
) |
Net loss attributable to common stockholders |
|
$ |
(91,089 |
) |
|
$ |
(80,835 |
) |
|
$ |
(152,557 |
) |
|
$ |
(118,135 |
) |
|
|
|
|
|
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||||
Weighted-average shares of common stock outstanding: |
|
|
|
|
|
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|
|
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|
|
|
||||
Basic |
|
|
47,504 |
|
|
|
42,517 |
|
|
|
47,354 |
|
|
|
42,386 |
|
Diluted |
|
|
47,504 |
|
|
|
42,517 |
|
|
|
47,354 |
|
|
|
42,386 |
|
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Net loss from continuing operations per common share: |
|
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||||
Basic |
|
$ |
(1.30 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.58 |
) |
|
$ |
(2.35 |
) |
Diluted |
|
$ |
(1.30 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.58 |
) |
|
$ |
(2.35 |
) |
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Net loss from discontinued operations per common share: |
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Basic |
|
$ |
(0.62 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
Diluted |
|
$ |
(0.62 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
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Net loss per common share: |
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Basic |
|
$ |
(1.92 |
) |
|
$ |
(1.90 |
) |
|
$ |
(3.22 |
) |
|
$ |
(2.79 |
) |
Diluted |
|
$ |
(1.92 |
) |
|
$ |
(1.90 |
) |
|
$ |
(3.22 |
) |
|
$ |
(2.79 |
) |
See accompanying notes to our unaudited condensed consolidated financial statements.
5
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
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(in thousands) |
|
|||||||||||||
Net loss from continuing operations attributable to common stockholders |
|
$ |
(61,496 |
) |
|
$ |
(74,294 |
) |
|
$ |
(122,375 |
) |
|
$ |
(99,399 |
) |
Net loss from discontinued operations |
|
|
(29,593 |
) |
|
|
(6,541 |
) |
|
|
(30,182 |
) |
|
|
(18,736 |
) |
Net loss attributable to common stockholders |
|
|
(91,089 |
) |
|
|
(80,835 |
) |
|
|
(152,557 |
) |
|
|
(118,135 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
(147 |
) |
|
|
(816 |
) |
|
|
(1,405 |
) |
|
|
1,194 |
|
Unrealized gain on hedging derivatives, net of taxes of |
|
|
— |
|
|
|
1,885 |
|
|
|
— |
|
|
|
1,885 |
|
Comprehensive loss |
|
$ |
(91,236 |
) |
|
$ |
(79,766 |
) |
|
$ |
(153,962 |
) |
|
$ |
(115,056 |
) |
See accompanying notes to our unaudited condensed consolidated financial statements.
6
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIT
(Unaudited)
|
|
Six Months Ended June 30, 2024 |
|
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Accumulated |
|
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|
|
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|
|
Series A Preferred Stock |
|
|
|
Common |
|
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Paid-in |
|
|
other comprehensive |
|
|
Accumulated |
|
|
Treasury stock, |
|
|
Total stockholders' |
|
|||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
at cost |
|
|
deficit |
|
|||||||||
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||
Balance at December 31, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
|
46,990 |
|
|
$ |
470 |
|
|
$ |
431,335 |
|
|
$ |
(7,627 |
) |
|
$ |
(536,348 |
) |
|
$ |
(10,134 |
) |
|
$ |
(122,304 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(61,468 |
) |
|
|
— |
|
|
|
(61,468 |
) |
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,258 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,258 |
) |
Common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,641 |
) |
|
|
(1,641 |
) |
Issuances under share- |
|
|
— |
|
|
|
— |
|
|
|
|
1,524 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
Share-based |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
2,589 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,589 |
|
Balance at |
|
|
— |
|
|
|
— |
|
|
|
|
48,514 |
|
|
|
485 |
|
|
|
433,924 |
|
|
|
(8,885 |
) |
|
|
(597,816 |
) |
|
|
(11,775 |
) |
|
|
(184,067 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(91,089 |
) |
|
|
— |
|
|
|
(91,089 |
) |
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(147 |
) |
|
|
— |
|
|
|
— |
|
|
|
(147 |
) |
Common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
(8 |
) |
Issuances under share- |
|
|
— |
|
|
|
— |
|
|
|
|
87 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Share-based |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
1,051 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,051 |
|
Balance at |
|
|
— |
|
|
$ |
— |
|
|
|
|
48,601 |
|
|
$ |
486 |
|
|
$ |
434,975 |
|
|
$ |
(9,032 |
) |
|
$ |
(688,905 |
) |
|
$ |
(11,783 |
) |
|
$ |
(274,259 |
) |
7
|
|
Six Months Ended June 30, 2023 |
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Series A Preferred Stock |
|
|
|
Common |
|
|
Paid-in |
|
|
other comprehensive |
|
|
Accumulated |
|
|
Treasury stock, |
|
|
Total stockholders' |
|
|||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
loss |
|
|
deficit |
|
|
at cost |
|
|
deficit |
|
|||||||||
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|||||||||||||||||||||||||||
Balance at December 31, 2022 |
|
|
350 |
|
|
$ |
309,877 |
|
|
|
|
42,369 |
|
|
$ |
424 |
|
|
$ |
407,570 |
|
|
$ |
(15,387 |
) |
|
$ |
(334,569 |
) |
|
$ |
(7,551 |
) |
|
$ |
50,487 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22,127 |
) |
|
|
— |
|
|
|
(22,127 |
) |
Preferred stock dividends |
|
|
— |
|
|
|
10,706 |
|
|
|
|
— |
|
|
|
— |
|
|
|
(10,706 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,706 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,010 |
|
|
|
— |
|
|
|
— |
|
|
|
2,010 |
|
Common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,549 |
) |
|
|
(2,549 |
) |
Issuances under share- |
|
|
— |
|
|
|
— |
|
|
|
|
627 |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Share-based |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
2,720 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,720 |
|
Accretion of Series A |
|
|
— |
|
|
|
4,467 |
|
|
|
|
— |
|
|
|
— |
|
|
|
(4,467 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,467 |
) |
Capped call transactions |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(18,590 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18,590 |
) |
Balance at |
|
|
350 |
|
|
|
325,050 |
|
|
|
|
42,996 |
|
|
|
430 |
|
|
|
376,527 |
|
|
|
(13,377 |
) |
|
|
(356,696 |
) |
|
|
(10,100 |
) |
|
|
(3,216 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(65,237 |
) |
|
|
— |
|
|
|
(65,237 |
) |
Preferred stock dividends |
|
|
— |
|
|
|
11,118 |
|
|
|
|
— |
|
|
|
— |
|
|
|
(11,118 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,118 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,069 |
|
|
|
— |
|
|
|
— |
|
|
|
1,069 |
|
Common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(34 |
) |
|
|
(34 |
) |
Issuances under share- |
|
|
— |
|
|
|
— |
|
|
|
|
93 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Share-based |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
3,926 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,926 |
|
Accretion of Series A |
|
|
— |
|
|
|
4,480 |
|
|
|
|
— |
|
|
|
— |
|
|
|
(4,480 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,480 |
) |
Balance at |
|
|
350 |
|
|
$ |
340,648 |
|
|
|
|
43,089 |
|
|
$ |
431 |
|
|
$ |
364,855 |
|
|
$ |
(12,308 |
) |
|
$ |
(421,933 |
) |
|
$ |
(10,134 |
) |
|
$ |
(79,089 |
) |
See accompanying notes to our unaudited condensed consolidated financial statements.
8
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(152,557 |
) |
|
$ |
(87,364 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
15,829 |
|
|
|
20,216 |
|
Loss on sale of discontinued operations |
|
|
5,560 |
|
|
|
— |
|
Loss on sale of assets and asset impairments |
|
|
24,287 |
|
|
|
11,333 |
|
Share-based compensation expense |
|
|
3,640 |
|
|
|
6,703 |
|
Amortization of debt issuance costs |
|
|
15,654 |
|
|
|
315 |
|
Paid-in-kind interest |
|
|
22,308 |
|
|
|
— |
|
Deferred income taxes |
|
|
(2,414 |
) |
|
|
(3,827 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
(16,747 |
) |
|
|
18,361 |
|
Contract assets and liabilities |
|
|
(19,018 |
) |
|
|
(19,946 |
) |
Operating lease right of use assets and operating lease liabilities |
|
|
464 |
|
|
|
(7,622 |
) |
Inventories |
|
|
331 |
|
|
|
5,038 |
|
Prepaid expenses |
|
|
(1,599 |
) |
|
|
1,735 |
|
Other current assets |
|
|
4,905 |
|
|
|
(10,121 |
) |
Other noncurrent assets |
|
|
(857 |
) |
|
|
4,599 |
|
Accounts payable and accrued expenses |
|
|
28,678 |
|
|
|
(42,370 |
) |
Accrued warranty |
|
|
(3,483 |
) |
|
|
26,941 |
|
Other noncurrent liabilities |
|
|
(889 |
) |
|
|
1,755 |
|
Net cash used in operating activities |
|
|
(75,908 |
) |
|
|
(74,254 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
(15,405 |
) |
|
|
(6,694 |
) |
Net cash used in investing activities |
|
|
(15,405 |
) |
|
|
(6,694 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from issuance of convertible notes |
|
|
— |
|
|
|
132,500 |
|
Purchase of capped calls |
|
|
— |
|
|
|
(18,590 |
) |
Payments of debt issuance costs |
|
|
— |
|
|
|
(4,810 |
) |
Proceeds from working capital loans |
|
|
112,621 |
|
|
|
72,736 |
|
Repayments of working capital loans |
|
|
(80,102 |
) |
|
|
(71,180 |
) |
Principal repayments of finance leases |
|
|
(610 |
) |
|
|
(1,014 |
) |
Net proceeds from (repayments of) other debt |
|
|
(853 |
) |
|
|
1,050 |
|
Repurchase of common stock including shares withheld in lieu of income taxes |
|
|
(1,649 |
) |
|
|
(2,583 |
) |
Net cash provided by financing activities |
|
|
29,407 |
|
|
|
108,109 |
|
Impact of foreign exchange rates on cash, cash equivalents and restricted cash |
|
|
131 |
|
|
|
914 |
|
Net change in cash, cash equivalents and restricted cash |
|
|
(61,775 |
) |
|
|
28,075 |
|
Cash, cash equivalents and restricted cash, beginning of year |
|
|
172,813 |
|
|
|
153,069 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
111,038 |
|
|
$ |
181,144 |
|
See accompanying notes to our unaudited condensed consolidated financial statements.
9
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
6,665 |
|
|
$ |
3,178 |
|
Cash paid for income taxes, net of refunds |
|
|
15,283 |
|
|
|
6,110 |
|
Noncash investing and financing activities: |
|
|
|
|
|
|
||
Right of use assets obtained in exchange for new operating lease liabilities |
|
|
11,376 |
|
|
|
893 |
|
Property, plant, and equipment obtained in exchange for new finance lease liabilities |
|
|
235 |
|
|
|
197 |
|
Accrued capital expenditures in accounts payable |
|
|
3,630 |
|
|
|
2,973 |
|
Paid-in-kind preferred stock dividends and accretion |
|
|
— |
|
|
|
30,771 |
|
Reconciliation of Cash, Cash Equivalents and Restricted Cash: |
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
$ |
101,861 |
|
|
$ |
161,059 |
|
|
$ |
170,096 |
|
|
$ |
133,546 |
|
Restricted cash |
|
|
8,451 |
|
|
|
10,838 |
|
|
|
9,239 |
|
|
|
9,854 |
|
Cash and cash equivalents of discontinued operations |
|
|
726 |
|
|
|
916 |
|
|
|
1,809 |
|
|
|
9,669 |
|
Total cash, cash equivalents and restricted cash shown in |
|
$ |
111,038 |
|
|
$ |
172,813 |
|
|
$ |
181,144 |
|
|
$ |
153,069 |
|
See accompanying notes to our unaudited condensed consolidated financial statements.
10
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by us without audit, pursuant to the rules and regulations of the SEC and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 included in our Annual Report on Form 10-K. Although we believe the disclosures that are made are adequate to make the information presented herein not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted, as permitted by the SEC. The accompanying condensed consolidated financial statements reflect, in the opinion of our management, all normal recurring adjustments necessary to present fairly our financial position at June 30, 2024, and the results of our operations, comprehensive income (loss) and cash flows for the periods presented. Interim results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The accompanying condensed consolidated financial statements include the accounts of TPI Composites, Inc. and all of our majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated.
References to TPI Composites, Inc, the “Company,” “we,” “us” or “our” in these notes refer to TPI Composites, Inc. and its consolidated subsidiaries.
Recently Issued Accounting Pronouncements - Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments are intended to increase reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The ASU is effective on a retrospective basis for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the standard for full fiscal years on January 1, 2024, and plans to adopt the standard for interim periods beginning January 1, 2025, with early adoption permitted. The Company is evaluating the potential impact of its adoption on the Company’s audited Consolidated Financial Statements but does not anticipate that such adoption will have a material impact.
Recently Issued Accounting Pronouncements - Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. This ASU also includes certain other amendments intended to improve the effectiveness of income tax disclosures. This ASU is effective for the Company’s fiscal year beginning January 1, 2025 and allows the use of a prospective or retrospective approach. The Company plans to adopt the standard on January 1, 2025 and has not yet determined the potential impact of its adoption on the Company’s audited Consolidated Financial Statements.
Note 2. Discontinued Operations
On June 30, 2024, we completed the divestiture of our wholly-owned subsidiary, TPI, Inc. (the “Automotive” subsidiary) for cash proceeds of one US Dollar. The Automotive subsidiary was engaged in the development, commercialization and implementation of the Company’s automotive industry related products. The Automotive subsidiary was classified as held for sale in the Company’s Consolidated Balance Sheets as of December 31, 2023 and March 31, 2024. As a result of the divestiture, the Company recorded an $19.7 million non-cash impairment charge related to property, plant and equipment, and a $5.6 million loss on sale of the discontinued operations. The divestiture constituted a strategic shift as the Company will focus entirely on executing on its core business in the wind industry going forward, and accordingly, the historical results of our Automotive subsidiary have been reclassified as
11
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
discontinued operations for all periods presented in the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets.
In December 2022, we 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, had an adverse impact on demand and profitability 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 are in the final stages of shutting down our business operations in China. Our business operations in China comprised the entirety of our "Asia" reporting segment. The shut down had 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 Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets.
The following tables present the carrying amounts of major classes of assets and liabilities that were included in discontinued operations:
|
|
June 30, 2024 |
|
|||||||||
|
|
(in thousands) |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
Cash and cash equivalents |
|
$ |
— |
|
|
$ |
726 |
|
|
$ |
726 |
|
Other classes of assets |
|
|
— |
|
|
|
141 |
|
|
|
141 |
|
Total assets of discontinued operations |
|
$ |
— |
|
|
$ |
867 |
|
|
$ |
867 |
|
|
|
|
|
|
|
|
|
|
|
|||
Accounts payable and accrued expenses |
|
$ |
— |
|
|
$ |
1,021 |
|
|
$ |
1,021 |
|
Accrued restructuring |
|
|
— |
|
|
|
756 |
|
|
|
756 |
|
Total liabilities of discontinued operations |
|
$ |
— |
|
|
$ |
1,777 |
|
|
$ |
1,777 |
|
|
|
December 31, 2023 |
|
|||||||||
|
|
(in thousands) |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
Cash and cash equivalents |
|
$ |
— |
|
|
$ |
916 |
|
|
$ |
916 |
|
Property, plant and equipment, net |
|
|
14,204 |
|
|
|
— |
|
|
|
14,204 |
|
Other classes of assets that are not major |
|
|
3,583 |
|
|
|
604 |
|
|
|
4,187 |
|
Total assets of discontinued operations |
|
$ |
17,787 |
|
|
$ |
1,520 |
|
|
$ |
19,307 |
|
|
|
|
|
|
|
|
|
|
|
|||
Accounts payable and accrued expenses |
|
$ |
1,897 |
|
|
$ |
1,632 |
|
|
$ |
3,529 |
|
Accrued restructuring |
|
|
— |
|
|
|
1,183 |
|
|
|
1,183 |
|
Total liabilities of discontinued operations |
|
$ |
1,897 |
|
|
$ |
2,815 |
|
|
$ |
4,712 |
|
A summary of the results from discontinued operations included in the Condensed Consolidated Statements of Operations are as follows:
|
|
Three Months Ended June 30, 2024 |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Net sales |
|
$ |
7,270 |
|
|
$ |
— |
|
|
$ |
7,270 |
|
Cost of sales |
|
|
11,305 |
|
|
|
17 |
|
|
|
11,322 |
|
Gross loss |
|
|
(4,035 |
) |
|
|
(17 |
) |
|
|
(4,052 |
) |
Loss on sale of assets and asset impairments |
|
|
19,712 |
|
|
|
— |
|
|
|
19,712 |
|
Loss on sale of discontinued operations |
|
|
5,560 |
|
|
|
— |
|
|
|
5,560 |
|
Restructuring charges, net |
|
|
465 |
|
|
|
— |
|
|
|
465 |
|
Loss from discontinued operations |
|
|
(29,772 |
) |
|
|
(17 |
) |
|
|
(29,789 |
) |
Total other income |
|
|
187 |
|
|
|
54 |
|
|
|
241 |
|
Income (loss) before income taxes |
|
|
(29,585 |
) |
|
|
37 |
|
|
|
(29,548 |
) |
Income tax provision |
|
|
(45 |
) |
|
|
— |
|
|
|
(45 |
) |
Net income (loss) from discontinued operations |
|
$ |
(29,630 |
) |
|
$ |
37 |
|
|
$ |
(29,593 |
) |
12
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
Three Months Ended June 30, 2023 |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Net sales |
|
$ |
7,250 |
|
|
$ |
34 |
|
|
$ |
7,284 |
|
Cost of sales |
|
|
13,806 |
|
|
|
1,667 |
|
|
|
15,473 |
|
Gross loss |
|
|
(6,556 |
) |
|
|
(1,633 |
) |
|
|
(8,189 |
) |
Loss on sale of assets and asset impairments |
|
|
— |
|
|
|
(256 |
) |
|
|
(256 |
) |
Restructuring charges, net |
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
Loss from discontinued operations |
|
|
(6,556 |
) |
|
|
(1,379 |
) |
|
|
(7,935 |
) |
Total other income |
|
|
95 |
|
|
|
1,317 |
|
|
|
1,412 |
|
Loss before income taxes |
|
|
(6,461 |
) |
|
|
(62 |
) |
|
|
(6,523 |
) |
Income tax provision |
|
|
(18 |
) |
|
|
— |
|
|
|
(18 |
) |
Net loss from discontinued operations |
|
$ |
(6,479 |
) |
|
$ |
(62 |
) |
|
$ |
(6,541 |
) |
|
|
Six Months Ended June 30, 2024 |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Net sales |
|
$ |
12,286 |
|
|
$ |
— |
|
|
$ |
12,286 |
|
Cost of sales |
|
|
18,894 |
|
|
|
71 |
|
|
|
18,965 |
|
Gross loss |
|
|
(6,608 |
) |
|
|
(71 |
) |
|
|
(6,679 |
) |
General and administrative expenses |
|
|
(1,704 |
) |
|
|
— |
|
|
|
(1,704 |
) |
(Gain) loss on sale of assets and asset impairments |
|
|
19,707 |
|
|
|
(338 |
) |
|
|
19,369 |
|
Loss on sale of discontinued operations |
|
|
5,560 |
|
|
|
— |
|
|
|
5,560 |
|
Restructuring charges, net |
|
|
465 |
|
|
|
— |
|
|
|
465 |
|
Income (loss) from discontinued operations |
|
|
(30,636 |
) |
|
|
267 |
|
|
|
(30,369 |
) |
Total other income |
|
|
180 |
|
|
|
99 |
|
|
|
279 |
|
Income (loss) before income taxes |
|
|
(30,456 |
) |
|
|
366 |
|
|
|
(30,090 |
) |
Income tax provision |
|
|
(92 |
) |
|
|
— |
|
|
|
(92 |
) |
Net income (loss) from discontinued operations |
|
$ |
(30,548 |
) |
|
$ |
366 |
|
|
$ |
(30,182 |
) |
|
|
Six Months Ended June 30, 2023 |
|
|||||||||
|
|
Automotive |
|
|
Asia |
|
|
Total |
|
|||
|
|
(in thousands) |
|
|||||||||
Net sales |
|
$ |
17,511 |
|
|
$ |
2,201 |
|
|
$ |
19,712 |
|
Cost of sales |
|
|
29,136 |
|
|
|
7,403 |
|
|
|
36,539 |
|
Gross loss |
|
|
(11,625 |
) |
|
|
(5,202 |
) |
|
|
(16,827 |
) |
Loss on sale of assets and asset impairments |
|
|
— |
|
|
|
1,921 |
|
|
|
1,921 |
|
Restructuring charges, net |
|
|
99 |
|
|
|
1,460 |
|
|
|
1,559 |
|
Loss from discontinued operations |
|
|
(11,724 |
) |
|
|
(8,583 |
) |
|
|
(20,307 |
) |
Total other income |
|
|
80 |
|
|
|
1,540 |
|
|
|
1,620 |
|
Loss before income taxes |
|
|
(11,644 |
) |
|
|
(7,043 |
) |
|
|
(18,687 |
) |
Income tax provision |
|
|
(49 |
) |
|
|
— |
|
|
|
(49 |
) |
Loss from discontinued operations |
|
$ |
(11,693 |
) |
|
$ |
(7,043 |
) |
|
$ |
(18,736 |
) |
13
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents summarized cash flows from discontinued operations that are included in the Condensed Consolidated Statements of Cash Flows:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Net cash used in operating activities from discontinued operations |
|
$ |
2,625 |
|
|
$ |
(7,852 |
) |
Net cash used in investing activities from discontinued operations |
|
|
(3,387 |
) |
|
|
(364 |
) |
Additional non-cash items related to operating activities from discontinued operations: |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
(74 |
) |
|
|
177 |
|
Depreciation and amortization |
|
|
457 |
|
|
|
1,657 |
|
Note 3. Revenue From Contracts with Customers
For a detailed discussion of our revenue recognition policy, refer to the discussion in Note 1, Summary of Operations and Summary of Significant Accounting Policies – (c) Revenue Recognition, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K for the year ended December 31, 2023.
The following tables represent the disaggregation of our net sales by product for each of our reportable segments:
|
|
Three Months Ended June 30, 2024 |
|
|||||||||||||||||
|
|
U.S. |
|
|
Mexico |
|
|
EMEA |
|
|
India |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Wind blade, tooling and other wind |
|
$ |
— |
|
|
$ |
158,844 |
|
|
$ |
102,375 |
|
|
$ |
43,071 |
|
|
$ |
304,290 |
|
Field service, inspection and |
|
|
2,558 |
|
|
|
467 |
|
|
|
2,502 |
|
|
|
— |
|
|
|
5,527 |
|
Total net sales |
|
$ |
2,558 |
|
|
$ |
159,311 |
|
|
$ |
104,877 |
|
|
$ |
43,071 |
|
|
$ |
309,817 |
|
|
|
Three Months Ended June 30, 2023 |
|
|||||||||||||||||
|
|
U.S. |
|
|
Mexico |
|
|
EMEA |
|
|
India |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Wind blade, tooling and other wind |
|
$ |
— |
|
|
$ |
166,767 |
|
|
$ |
132,614 |
|
|
$ |
63,353 |
|
|
$ |
362,734 |
|
Field service, inspection and |
|
|
9,110 |
|
|
|
211 |
|
|
|
1,966 |
|
|
|
— |
|
|
|
11,287 |
|
Total net sales |
|
$ |
9,110 |
|
|
$ |
166,978 |
|
|
$ |
134,580 |
|
|
$ |
63,353 |
|
|
$ |
374,021 |
|
|
|
Six Months Ended June 30, 2024 |
|
|||||||||||||||||
|
|
U.S. |
|
|
Mexico |
|
|
EMEA |
|
|
India |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Wind blade, tooling and other wind |
|
$ |
— |
|
|
$ |
311,205 |
|
|
$ |
198,161 |
|
|
$ |
83,829 |
|
|
$ |
593,195 |
|
Field service, inspection and |
|
|
6,760 |
|
|
|
564 |
|
|
|
3,344 |
|
|
|
— |
|
|
|
10,668 |
|
Total net sales |
|
$ |
6,760 |
|
|
$ |
311,769 |
|
|
$ |
201,505 |
|
|
$ |
83,829 |
|
|
$ |
603,863 |
|
|
|
Six Months Ended June 30, 2023 |
|
|||||||||||||||||
|
|
U.S. |
|
|
Mexico |
|
|
EMEA |
|
|
India |
|
|
Total |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Wind blade, tooling and other wind |
|
$ |
— |
|
|
$ |
321,229 |
|
|
$ |
299,451 |
|
|
$ |
129,646 |
|
|
$ |
750,326 |
|
Field service, inspection and |
|
|
14,469 |
|
|
|
389 |
|
|
|
2,642 |
|
|
|
— |
|
|
|
17,500 |
|
Total net sales |
|
$ |
14,469 |
|
|
$ |
321,618 |
|
|
$ |
302,093 |
|
|
$ |
129,646 |
|
|
$ |
767,826 |
|
14
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For a further discussion regarding our operating segments, see Note 14, Segment Reporting.
Contract Assets and Liabilities
Contract assets consist of the amount of revenue recognized over time for performance obligations in production where control has transferred to the customer but the contract does not yet allow for the customer to be billed. Typically, customers are billed when the product finishes production and meets the technical specifications contained in the contract. The majority of the contract asset balance relates to materials procured based on customer specifications. The contract assets are recorded as current assets in the condensed consolidated balance sheets. Contract liabilities consist of advance payments in excess of revenue earned. The contract liabilities are recorded as current liabilities in the condensed consolidated balance sheets and are reduced as we record revenue over time.
These contract assets and liabilities are reported on the condensed consolidated balance sheets net on a contract-by-contract basis at the end of each reporting period.
Contract assets and contract liabilities consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
|
|
|
|||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Gross contract assets |
|
$ |
146,301 |
|
|
$ |
121,483 |
|
|
$ |
24,818 |
|
Less: reclassification from contract liabilities |
|
|
(35,073 |
) |
|
|
(9,246 |
) |
|
|
(25,827 |
) |
Contract assets |
|
$ |
111,228 |
|
|
$ |
112,237 |
|
|
$ |
(1,009 |
) |
|
|
June 30, |
|
|
December 31, |
|
|
|
|
|||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Gross contract liabilities |
|
$ |
39,481 |
|
|
$ |
33,267 |
|
|
$ |
6,214 |
|
Less: reclassification to contract assets |
|
|
(35,073 |
) |
|
|
(9,246 |
) |
|
|
(25,827 |
) |
Contract liabilities |
|
$ |
4,408 |
|
|
$ |
24,021 |
|
|
$ |
(19,613 |
) |
Gross contract assets increased by $24.8 million from December 31, 2023 to June 30, 2024, primarily due to an increase in customer specific material purchases and incremental unbilled production related to startups and transitions during the six months ended June 30, 2024. Gross contract liabilities increased by $6.2 million from December 31, 2023 to June 30, 2024, primarily due to an increase in customer advances during the six months ended June 30, 2024.
For the six months ended June 30, 2024, we recognized $19.6 million of revenue related to customer advances, which was included in the corresponding contract liability balance at the beginning of the period.
Performance Obligations
Remaining performance obligations represent the transaction price for which work has not been performed and excludes any unexercised contract options. The transaction price includes estimated variable consideration as determined based on the estimated production output within the range of the contractual guaranteed minimum volume obligations and production capacity.
As of June 30, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $1.0 billion. We estimate that we will recognize the remaining performance obligations as revenue as follows:
|
|
$ |
|
|
% of Total |
|
||
|
|
(in thousands) |
|
|||||
Year Ending December 31, |
|
|
|
|
|
|
||
|
$ |
633,957 |
|
|
|
61.3 |
% |
|
|
|
400,094 |
|
|
|
38.7 |
|
|
Total remaining performance obligations |
|
$ |
1,034,051 |
|
|
|
100.0 |
% |
15
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the three and six months ended June 30, 2024, net revenue recognized from our performance obligations satisfied in previous periods decreased by $14.6 million and $20.0 million, respectively. For the three and six months ended June 30, 2023, net revenue recognized from our performance obligations satisfied in previous periods decreased by $11.2 million and $15.5 million, respectively. The decrease for the three and six months ended June 30, 2024 primarily relate to changes in certain of our estimated total contract values and related direct costs to complete the performance obligations.
Note 4. Significant Risks and Uncertainties
Our revenues and receivables are earned from a small number of customers. As such, our production levels are dependent on these customers’ orders. See Note 13, Concentration of Customers.
We maintain our U.S. cash in bank deposit and money market mutual fund accounts that, at times, exceed U.S. federally insured limits. U.S. bank accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) in an amount up to $250,000 during 2024 and 2023. U.S. money market mutual fund accounts are not guaranteed by the FDIC. At June 30, 2024 and December 31, 2023, we had $87.1 million and $116.0 million, respectively, of cash in bank deposit and money market mutual fund accounts in U.S. banks, which were in excess of FDIC limits. We have not experienced losses to date in any such accounts.
We also maintain cash in bank deposit accounts outside the U.S. that are not subject to FDIC limits. At June 30, 2024, this included $5.0 million in Türkiye, $5.7 million in India, $2.5 million in Mexico and $1.6 million in other countries. As of December 31, 2023, this included $40.6 million in Türkiye, $1.9 million in India, $1.2 million in Mexico and $1.3 million in other countries. We have not experienced losses to date in these accounts. In addition, at June 30, 2024 and December 31, 2023, we had short-term deposits in interest bearing accounts in the U.S. of $8.5 million and $10.8 million, respectively, which are reported as restricted cash in our condensed consolidated balance sheets. In addition, at June 30, 2024 and December 31, 2023, we had unrestricted cash and cash equivalents related to our discontinued operations of $0.7 million and $0.9 million, respectively.
Note 5. Accrued Warranty
The warranty accrual activity for the periods noted consisted of the following:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Warranty accrual at beginning of period |
|
$ |
37,500 |
|
|
$ |
22,973 |
|
|
$ |
37,483 |
|
|
$ |
22,347 |
|
Accrual during the period |
|
|
2,895 |
|
|
|
3,225 |
|
|
|
5,486 |
|
|
|
6,078 |
|
Cost of warranty services provided during the period |
|
|
(6,262 |
) |
|
|
(9,570 |
) |
|
|
(16,867 |
) |
|
|
(13,834 |
) |
Changes in estimate for pre-existing warranties, |
|
|
(133 |
) |
|
|
32,660 |
|
|
|
7,898 |
|
|
|
34,697 |
|
Warranty accrual at end of period |
|
$ |
34,000 |
|
|
$ |
49,288 |
|
|
$ |
34,000 |
|
|
$ |
49,288 |
|
16
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6. Debt
Long-term debt, net of current maturities, consisted of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
11% Senior secured term loan—U.S. (1) |
|
$ |
417,349 |
|
|
$ |
395,041 |
|
5.25% Convertible senior unsecured notes—U.S. (2) |
|
|
132,500 |
|
|
|
132,500 |
|
Unsecured financing—EMEA |
|
|
95,049 |
|
|
|
62,891 |
|
Secured and unsecured working capital—India |
|
|
13,460 |
|
|
|
13,902 |
|
Equipment finance leases—Mexico |
|
|
729 |
|
|
|
1,098 |
|
Equipment finance leases—EMEA |
|
|
533 |
|
|
|
623 |
|
Other equipment finance leases |
|
|
118 |
|
|
|
85 |
|
Total debt—principal |
|
|
659,738 |
|
|
|
606,140 |
|
Less: Debt issuance costs |
|
|
(3,550 |
) |
|
|
(4,023 |
) |
Less: Debt discount (3) |
|
|
(101,742 |
) |
|
|
(116,924 |
) |
Total debt, net of debt issuance costs and debt discount |
|
|
554,446 |
|
|
|
485,193 |
|
Less: Current maturities of long-term debt (4) |
|
|
(106,163 |
) |
|
|
(70,465 |
) |
Long-term debt, net of current maturities |
|
$ |
448,283 |
|
|
$ |
414,728 |
|
(1) As of June 30, 2024, includes principal balance of $393.0 million and $24.3 million of paid in kind interest.
(2) The conversion requirements were not satisfied as of June 30, 2024 and as a result, the 5.25% Convertible senior unsecured notes (the “Convertible Notes”) will not be eligible for optional conversion during the third quarter of 2024.
(3) Unamortized debt discount is related to our 11% senior secured term loan. The fair value of the senior secured term loan at issuance was $274.7 million, representing an initial $118.3 million discount. The debt discount is amortized to interest expense using the effective interest method over the term of the debt.
(4) Current maturities of long-term debt are primarily related to outstanding working capital facilities of $91.7 million and $13.5 million in Türkiye and India, respectively.
Note 7. Share-Based Compensation Plans
During the six months ended June 30, 2024, we granted to certain employees an aggregate of 722,534 timed-based restricted stock units (RSUs), 151,795 performance-based restricted stock units (PSUs) that vest upon achievement of annual, adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) targets measured from January 1, 2024 through December 31, 2026, 181,371 PSUs that vest upon achievement of certain cumulative total shareholder return (TSR) targets measured from January 1, 2024 through December 31, 2026 and 66,261 stock options. The RSUs that were granted during the period vest over a three-year period with 25% of the RSUs vesting on the first and second anniversary of the grant date, and 50% vesting on the third anniversary of the grant date. Each of the time-based and performance-based RSU awards are subject to the recipient’s continued service with us, the terms and conditions of our stock option and incentive plan and the applicable award agreement. Additionally, during the six months ended June 30, 2024, we issued 1,022,318 shares related to previous RSU awards with a guaranteed value. These additional shares were issued on the second anniversary of the grant date to maintain the original guaranteed award value.
The share-based compensation expense recognized in the condensed consolidated statements of operations was as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cost of goods sold |
|
$ |
197 |
|
|
$ |
1,074 |
|
|
$ |
890 |
|
|
$ |
1,151 |
|
General and administrative expenses |
|
|
965 |
|
|
|
2,894 |
|
|
|
2,798 |
|
|
|
5,374 |
|
Total share-based compensation expense |
|
$ |
1,162 |
|
|
$ |
3,968 |
|
|
$ |
3,688 |
|
|
$ |
6,525 |
|
17
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The share-based compensation expense recognized by award type was as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
RSUs |
|
$ |
991 |
|
|
$ |
3,051 |
|
|
$ |
2,905 |
|
|
$ |
5,111 |
|
Stock options |
|
|
172 |
|
|
|
297 |
|
|
|
414 |
|
|
|
451 |
|
PSUs |
|
|
(1 |
) |
|
|
620 |
|
|
|
369 |
|
|
|
963 |
|
Total share-based compensation expense |
|
$ |
1,162 |
|
|
$ |
3,968 |
|
|
$ |
3,688 |
|
|
$ |
6,525 |
|
Note 8. Leases
We have operating and finance leases for our manufacturing facilities, warehouses, offices, automobiles and certain of our machinery and equipment. Our leases have remaining lease terms of between and ten years, some of which may include options to extend the leases up to ten years.
The components of lease cost were as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Total operating lease cost |
|
$ |
12,170 |
|
|
$ |
10,122 |
|
|
$ |
19,423 |
|
|
$ |
20,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of assets under finance leases |
|
$ |
905 |
|
|
$ |
1,039 |
|
|
$ |
1,994 |
|
|
$ |
2,048 |
|
Interest on finance leases |
|
|
72 |
|
|
|
32 |
|
|
|
148 |
|
|
|
65 |
|
Total finance lease cost |
|
$ |
977 |
|
|
$ |
1,071 |
|
|
$ |
2,142 |
|
|
$ |
2,113 |
|
Total lease assets and liabilities were as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Operating Leases |
|
|
|
|
|
|
||
Operating lease right of use assets |
|
$ |
133,745 |
|
|
$ |
136,124 |
|
|
|
|
|
|
|
|
||
Current operating lease liabilities |
|
$ |
24,815 |
|
|
$ |
22,017 |
|
Noncurrent operating lease liabilities |
|
|
112,420 |
|
|
|
117,133 |
|
Total operating lease liabilities |
|
$ |
137,235 |
|
|
$ |
139,150 |
|
|
|
|
|
|
|
|
||
Finance Leases |
|
|
|
|
|
|
||
Property, plant and equipment, gross |
|
$ |
36,694 |
|
|
$ |
37,044 |
|
Less: accumulated depreciation |
|
|
(30,564 |
) |
|
|
(29,316 |
) |
|
|
$ |
6,130 |
|
|
$ |
7,728 |
|
|
|
|
|
|
|
|
||
|
$ |
992 |
|
|
$ |
1,035 |
|
|
|
|
388 |
|
|
|
771 |
|
|
Total finance lease liabilities |
|
$ |
1,380 |
|
|
$ |
1,806 |
|
18
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Supplemental cash flow information related to leases was as follows:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
19,044 |
|
|
$ |
18,784 |
|
Operating cash flows from finance leases |
|
|
148 |
|
|
|
65 |
|
Financing cash flows from finance leases |
|
|
610 |
|
|
|
1,014 |
|
Note 9. Income Taxes
For the three and six months ended June 30, 2024, we reported an income tax provision of $2.4 million and $5.7 million, respectively, as compared to an income tax provision of $0.3 million and $4.1 million, respectively, in the comparative prior year periods. The increased income tax provision during the three and six months ended June 30, 2024, resulted primarily from the change in the mix of earnings of foreign jurisdictions.
No changes in tax law occurred during the three and six months ended June 30, 2024, which had a material impact on our income tax provision. We do not record a deferred tax liability related to unremitted earnings as we maintain our assertion to indefinitely reinvest our unremitted foreign earnings.
19
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10. Net Loss Per Common Share
The following table sets forth the computation of basic and diluted net loss per common share:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands, except per share data) |
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss from continuing operations |
|
$ |
(61,496 |
) |
|
$ |
(58,696 |
) |
|
$ |
(122,375 |
) |
|
$ |
(68,628 |
) |
Preferred stock dividends and accretion |
|
|
— |
|
|
|
(15,598 |
) |
|
|
— |
|
|
|
(30,771 |
) |
Net loss from continuing operations attributable to common stockholders |
|
|
(61,496 |
) |
|
|
(74,294 |
) |
|
|
(122,375 |
) |
|
|
(99,399 |
) |
Net loss from discontinued operations |
|
|
(29,593 |
) |
|
|
(6,541 |
) |
|
|
(30,182 |
) |
|
|
(18,736 |
) |
Net loss attributable to common stockholders |
|
$ |
(91,089 |
) |
|
$ |
(80,835 |
) |
|
$ |
(152,557 |
) |
|
$ |
(118,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted-average shares outstanding |
|
|
47,504 |
|
|
|
42,517 |
|
|
|
47,354 |
|
|
|
42,386 |
|
Effect of dilutive awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted weighted-average shares outstanding |
|
|
47,504 |
|
|
|
42,517 |
|
|
|
47,354 |
|
|
|
42,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from continuing operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(1.30 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.58 |
) |
|
$ |
(2.35 |
) |
Diluted |
|
$ |
(1.30 |
) |
|
$ |
(1.75 |
) |
|
$ |
(2.58 |
) |
|
$ |
(2.35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from discontinued operations per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.62 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
Diluted |
|
$ |
(0.62 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.64 |
) |
|
$ |
(0.44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(1.92 |
) |
|
$ |
(1.90 |
) |
|
$ |
(3.22 |
) |
|
$ |
(2.79 |
) |
Diluted |
|
$ |
(1.92 |
) |
|
$ |
(1.90 |
) |
|
$ |
(3.22 |
) |
|
$ |
(2.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive shares excluded from the calculation |
|
|
577 |
|
|
|
292 |
|
|
|
346 |
|
|
|
485 |
|
Anti-dilutive share-based compensation awards |
|
|
487 |
|
|
|
76 |
|
|
|
790 |
|
|
|
75 |
|
We use the if-converted method for calculating any potential dilutive effect of the Convertible Notes on diluted net loss per common share. The Convertible Notes would have a diluted impact on net income per share when the average price of our Common Stock for a given period exceeds the respective conversion price of the Convertible Notes. During the six months ended June 30, 2024 and 2023, we had 8,816,881 potentially issuable shares of Common Stock related to our Convertible Notes that were not included in the computation of diluted net loss per common share as the effect of including these shares in the calculation would have been anti-dilutive.
20
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11. Stockholders’ Deficit
Accumulated Other Comprehensive Loss
The following tables presents the changes in accumulated other comprehensive loss (AOCL) by component:
|
|
Six Months Ended June 30, 2024 |
|
|||||||||
|
|
Foreign |
|
|
Foreign |
|
|
|
|
|||
|
|
currency |
|
|
exchange |
|
|
|
|
|||
|
|
translation |
|
|
forward |
|
|
Total |
|
|||
|
|
adjustments |
|
|
contracts |
|
|
AOCL |
|
|||
|
|
(in thousands) |
|
|||||||||
Balance at December 31, 2023 |
|
$ |
(7,627 |
) |
|
$ |
— |
|
|
$ |
(7,627 |
) |
Other comprehensive income before reclassifications |
|
|
(1,258 |
) |
|
|
— |
|
|
|
(1,258 |
) |
Amounts reclassified from AOCL |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income |
|
|
(1,258 |
) |
|
|
— |
|
|
|
(1,258 |
) |
Balance at March 31, 2024 |
|
|
(8,885 |
) |
|
|
— |
|
|
|
(8,885 |
) |
Other comprehensive income before reclassifications |
|
|
(147 |
) |
|
|
— |
|
|
|
(147 |
) |
Amounts reclassified from AOCL |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income |
|
|
(147 |
) |
|
|
— |
|
|
|
(147 |
) |
Balance at June 30, 2024 |
|
$ |
(9,032 |
) |
|
$ |
— |
|
|
$ |
(9,032 |
) |
|
|
Six Months Ended June 30, 2023 |
|
|||||||||
|
|
Foreign |
|
|
Foreign |
|
|
|
|
|||
|
|
currency |
|
|
exchange |
|
|
|
|
|||
|
|
translation |
|
|
forward |
|
|
Total |
|
|||
|
|
adjustments |
|
|
contracts |
|
|
AOCL |
|
|||
|
|
(in thousands) |
|
|||||||||
Balance at December 31, 2022 |
|
$ |
(10,845 |
) |
|
$ |
(4,542 |
) |
|
$ |
(15,387 |
) |
Other comprehensive income before reclassifications |
|
|
2,010 |
|
|
|
— |
|
|
|
2,010 |
|
Amounts reclassified from AOCL |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income |
|
|
2,010 |
|
|
|
— |
|
|
|
2,010 |
|
Balance at March 31, 2023 |
|
|
(8,835 |
) |
|
|
(4,542 |
) |
|
|
(13,377 |
) |
Other comprehensive income before reclassifications |
|
|
(816 |
) |
|
|
1,943 |
|
|
|
1,127 |
|
Amounts reclassified from AOCL |
|
|
— |
|
|
|
(58 |
) |
|
|
(58 |
) |
Net tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net current period other comprehensive income |
|
|
(816 |
) |
|
|
1,885 |
|
|
|
1,069 |
|
Balance at June 30, 2023 |
|
$ |
(9,651 |
) |
|
$ |
(2,657 |
) |
|
$ |
(12,308 |
) |
Note 12. Commitments and Contingencies
Legal Proceedings
From time to time, we are party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which may not be covered by insurance. Upon resolution of any pending legal matters, we may incur charges in excess of presently established reserves. Our management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.
In January 2021, we received a complaint that was filed by the administrator for the Senvion GmbH (Senvion) insolvency estate in the Hamburg District court. The complaint asserts voidance claims against us in the aggregate amount of $13.3 million. The alleged voidance claims relate to payments that Senvion made to us for wind blades that we produced prior to Senvion filing for insolvency protection. We filed a response to these alleged voidance claims in August 2021 and filed a supplemental response in April 2022. In November 2022, the court appointed an independent expert to assess whether Senvion was solvent at the time of the relevant payments. The independent expert has not yet submitted its assessment to the court. We believe we have meritorious defenses to the
21
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
alleged voidance claims. Due to the current procedural posture of this claim, we have determined that the ultimate outcome cannot be reasonably estimated at this time.
Note 13. Concentration of Customers
Net sales from certain customers (in thousands) in excess of 10 percent of our total consolidated net sales are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
Customer |
|
Net sales |
|
|
% of Total |
|
|
Net sales |
|
|
% of Total |
|
|
Net sales |
|
|
% of Total |
|
|
Net sales |
|
|
% of Total |
|
||||||||
Nordex |
|
$ |
108,658 |
|
|
|
35.1 |
% |
|
$ |
114,641 |
|
|
|
30.7 |
% |
|
$ |
215,353 |
|
|
|
35.7 |
% |
|
$ |
253,650 |
|
|
|
33.0 |
% |
GE |
|
|
94,722 |
|
|
|
30.6 |
|
|
|
98,923 |
|
|
|
26.4 |
|
|
|
194,788 |
|
|
|
32.3 |
|
|
|
180,179 |
|
|
|
23.5 |
|
Vestas |
|
|
86,634 |
|
|
|
28.0 |
|
|
|
133,725 |
|
|
|
35.8 |
|
|
|
150,334 |
|
|
|
24.9 |
|
|
|
277,387 |
|
|
|
36.1 |
|
Note 14. Segment Reporting
Our operating segments 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 a detailed discussion of our operating segments, refer to the discussion in Note 22, Segment Reporting, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K for the year ended December 31, 2023.
Our U.S. and India segments operate in the U.S. dollar. Our Mexico segment operates in its local currency and includes a U.S. parent company that operates in the U.S. dollar. Our EMEA segment operates in the Euro.
22
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth certain information regarding each of our segments:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net sales by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
2,558 |
|
|
$ |
9,110 |
|
|
$ |
6,760 |
|
|
$ |
14,469 |
|
Mexico |
|
|
159,311 |
|
|
|
166,978 |
|
|
|
311,769 |
|
|
|
321,618 |
|
EMEA |
|
|
104,877 |
|
|
|
134,580 |
|
|
|
201,505 |
|
|
|
302,093 |
|
India |
|
|
43,071 |
|
|
|
63,353 |
|
|
|
83,829 |
|
|
|
129,646 |
|
Total net sales |
|
$ |
309,817 |
|
|
$ |
374,021 |
|
|
$ |
603,863 |
|
|
$ |
767,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales by geographic location: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
$ |
2,558 |
|
|
$ |
9,110 |
|
|
$ |
6,760 |
|
|
$ |
14,469 |
|
Mexico |
|
|
159,311 |
|
|
|
166,978 |
|
|
|
311,769 |
|
|
|
321,618 |
|
Türkiye |
|
|
104,828 |
|
|
|
133,194 |
|
|
|
199,675 |
|
|
|
300,312 |
|
Spain |
|
|
49 |
|
|
|
1,386 |
|
|
|
1,830 |
|
|
|
1,781 |
|
India |
|
|
43,071 |
|
|
|
63,353 |
|
|
|
83,829 |
|
|
|
129,646 |
|
Total net sales |
|
$ |
309,817 |
|
|
$ |
374,021 |
|
|
$ |
603,863 |
|
|
$ |
767,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. (1) |
|
$ |
(8,884 |
) |
|
$ |
(3,446 |
) |
|
$ |
(15,661 |
) |
|
$ |
(7,418 |
) |
Mexico |
|
|
(24,513 |
) |
|
|
(63,942 |
) |
|
|
(51,958 |
) |
|
|
(81,961 |
) |
EMEA |
|
|
(5,817 |
) |
|
|
5,537 |
|
|
|
(10,129 |
) |
|
|
20,934 |
|
India |
|
|
2,199 |
|
|
|
6,200 |
|
|
|
2,635 |
|
|
|
9,965 |
|
Total loss from continuing operations |
|
$ |
(37,015 |
) |
|
$ |
(55,651 |
) |
|
$ |
(75,113 |
) |
|
$ |
(58,480 |
) |
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Property, plant and equipment, net: |
|
|
|
|
|
|
||
U.S. |
|
$ |
9,573 |
|
|
$ |
10,660 |
|
Mexico |
|
|
46,227 |
|
|
|
49,921 |
|
EMEA |
|
|
39,481 |
|
|
|
40,435 |
|
India |
|
|
25,506 |
|
|
|
27,792 |
|
Total property, plant and equipment, net |
|
$ |
120,787 |
|
|
$ |
128,808 |
|
(1) The losses from operations in our U.S. segment includes corporate general and administrative costs of $9.2 million and $17.6 million, respectively, for the three and six months ended June 30, 2024, and $6.8 million and $13.8 million, respectively, in the comparative prior year periods.
23
ITEM 2. 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 condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to plans and strategy for our business, 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 Quarterly Report on Form 10-Q or in our previously filed Annual Report on Form 10-K for the year ended December 31, 2023, particularly those under the heading “Risk Factors.”
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 (OEM) in the wind market. We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators. 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.
Our business operations are defined geographically into four geographic operating segments—(1) the United States (U.S.), (2) Mexico, (3) Europe, the Middle East and Africa (EMEA) and (4) India. See Note 14, Segment Reporting, to our condensed consolidated financial statements for more details about our operating segments.
Discontinued Operations
In June 2024, we completed the divestiture of our wholly-owned subsidiary, TPI, Inc. (the “Automotive” subsidiary) for cash proceeds of one US Dollar. The Automotive subsidiary was engaged in the development, commercialization and implementation of the Company’s automotive industry related products. The Automotive subsidiary was classified as held for sale in the Company’s Consolidated Balance Sheets as of December 31, 2023 and March 31, 2024. As a result of the divestiture, the Company recorded an $19.7 million non-cash impairment charge related to property, plant and equipment, and a $5.6 million loss on sale of the discontinued operations. The divestiture constituted a strategic shift as the Company will focus entirely on executing on its core business in the wind industry going forward, and accordingly, the historical results of our Automotive subsidiary have been reclassified as discontinued operations for all periods presented in the Condensed Consolidated Statements of Operations and Condensed Consolidated Balance Sheets.
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. The global demand for clean energy continues to rise, driven by factors such as the growing need for data centers, semiconductor chip manufacturers, the adoption of electric vehicles, and the electrification of buildings. Over the course of the past few years, we have seen numerous government policy initiatives aimed at expanding the use of renewable energy, including the passing of the IRA in the U.S. and several policy initiatives in the EU that are expected to simplify regulations, speed up permitting and promote cross-border projects to accelerate climate neutrality. We expect these recent trends in governmental policy will enable long-term revenue growth in the wind industry. As the majority of our wind blades are installed in the U.S. and Europe, these policy trends are expected to have a material impact on our business and the pace of long-term growth.
Despite these favorable long-term policy trends, we expect reduced demand in the near term while the wind industry still awaits clarity on critical details on implementing key components of the IRA, the potential impact on provisions of the IRA depending on the outcome of the U.S. elections in November and more robust policies in the EU. In addition, permitting, transmission, transmission queues, the ability of the broader wind industry supply chain to ramp volume, elevated interest rates and inflation, and the cost and availability of capital are further factors limiting the timing of the wind market recovery. We expect sales in 2024 to be down slightly from 2023 due to these factors and lower utilization for our manufacturing lines that are in startup or transition. However, we expect sales in the second half of 2024 to be higher than the first half of the year as we expect the lines that are in startup and transition will achieve serial production resulting in at least mid-single digit adjusted EBITDA margins and positive free cash flow. We also expect sales of our wind blades to increase moderately in 2025 due to increased forecasted demand from our customers primarily for wind blades in the US market but partially offset by lower forecasted demand for wind blades in the European market.
24
Effective June 30, 2024, we shut down the Matamoros, Mexico manufacturing facility for Nordex that we took over from them in July 2021. Our results of operations were adversely impacted by the performance of this facility due to higher than anticipated losses driven by cancelled orders and production inefficiencies resulting from Nordex’s request for us to shut down the plant at the conclusion of the contract on June 30, 2024, including releasing all associates working in the factory. While Nordex funded all of our severance costs for the headcount reduction, our results of operations for the three and six months ended June 30, 2024 were negatively impacted by significantly less demand from Nordex than expected and production inefficiencies relating to the closure of the facility. We experienced a loss from operations of $21.9 million and $31.4 million at this facility for the three and six months ended June 30, 2024, respectively, and a loss from operations of $13.1 million and $19.8 million at this facility for the three and six months ended June 30, 2023, respectively. The increase in this loss from operations compared to the prior year was primarily due to a 66% and 44% decrease for the three and six month periods, respectively, in the volume of wind blades produced, due to environmental conditions at this facility affecting production in early 2024 and cancelled orders along with inefficiencies resulting from the closure of the facility in the second quarter of 2024. The loss from operations for the three and six months ended June 30, 2024, was reduced by the impact of $5.0 million in additional fees received from Nordex related to the cancelled orders and production inefficiencies during the closure of the facility.
Ongoing inflationary pressures have caused and may continue to cause many of our production expenses to increase, which adversely impacts our results of operations. The government of Mexico increased minimum wages 20% effective January 1, 2024. The government of Türkiye increased minimum wages 49% effective January 1, 2024. 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 increased labor costs caused by this 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 or productivity improvements, such elevated wages will have a material impact on our results of operations.
KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE
In addition to measures of financial performance presented in our condensed 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, manufacturing lines installed, and weighted-average sales price (ASP) per wind blade, all of which help us evaluate our operational performance. We believe that these measures are useful to investors in evaluating our performance. For a detailed discussion of our key financial measures and our key operating metrics, refer to the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics Used By Management To Measure Performance” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
KEY FINANCIAL MEASURES
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net sales |
|
$ |
309,817 |
|
|
$ |
374,021 |
|
|
$ |
603,863 |
|
|
$ |
767,826 |
|
Net loss from continuing operations |
|
|
(61,496 |
) |
|
|
(58,696 |
) |
|
|
(122,375 |
) |
|
|
(68,628 |
) |
EBITDA (1) |
|
|
(29,322 |
) |
|
|
(46,890 |
) |
|
|
(57,538 |
) |
|
|
(41,552 |
) |
Adjusted EBITDA (1) |
|
|
(24,911 |
) |
|
|
(33,291 |
) |
|
|
(47,953 |
) |
|
|
(20,645 |
) |
Capital expenditures (2) |
|
|
|
|
|
|
|
|
15,405 |
|
|
|
6,694 |
|
||
Free cash flow (1)(2) |
|
|
|
|
|
|
|
|
(91,313 |
) |
|
|
(80,948 |
) |
||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Total debt, net of debt issuance costs and debt discount |
|
$ |
554,446 |
|
|
$ |
485,193 |
|
Net debt (1) |
|
|
(451,859 |
) |
|
|
(323,218 |
) |
25
The following tables reconcile our non-GAAP key financial measures to the most directly comparable GAAP measures:
EBITDA and adjusted EBITDA are reconciled as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Net loss attributable to common stockholders |
|
$ |
(91,089 |
) |
|
$ |
(80,835 |
) |
|
$ |
(152,557 |
) |
|
$ |
(118,135 |
) |
Net loss from discontinued operations |
|
|
29,593 |
|
|
|
6,541 |
|
|
|
30,182 |
|
|
|
18,736 |
|
Net loss from continuing operations attributable |
|
|
(61,496 |
) |
|
|
(74,294 |
) |
|
|
(122,375 |
) |
|
|
(99,399 |
) |
Preferred stock dividends and accretion |
|
|
— |
|
|
|
15,598 |
|
|
|
— |
|
|
|
30,771 |
|
Net loss from continuing operations |
|
|
(61,496 |
) |
|
|
(58,696 |
) |
|
|
(122,375 |
) |
|
|
(68,628 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
7,334 |
|
|
|
9,643 |
|
|
|
15,372 |
|
|
|
18,559 |
|
Interest expense, net |
|
|
22,428 |
|
|
|
1,876 |
|
|
|
43,811 |
|
|
|
4,401 |
|
Income tax provision |
|
|
2,412 |
|
|
|
287 |
|
|
|
5,654 |
|
|
|
4,116 |
|
EBITDA |
|
|
(29,322 |
) |
|
|
(46,890 |
) |
|
|
(57,538 |
) |
|
|
(41,552 |
) |
Share-based compensation expense |
|
|
1,162 |
|
|
|
3,968 |
|
|
|
3,688 |
|
|
|
6,525 |
|
Foreign currency (income) loss |
|
|
(132 |
) |
|
|
1,564 |
|
|
|
499 |
|
|
|
2,746 |
|
Loss on sale of assets and asset impairments |
|
|
3,083 |
|
|
|
5,819 |
|
|
|
4,918 |
|
|
|
9,412 |
|
Restructuring charges, net |
|
|
298 |
|
|
|
2,248 |
|
|
|
480 |
|
|
|
2,224 |
|
Adjusted EBITDA |
|
$ |
(24,911 |
) |
|
$ |
(33,291 |
) |
|
$ |
(47,953 |
) |
|
$ |
(20,645 |
) |
Free cash flow is reconciled as follows:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Net cash used in operating activities |
|
$ |
(75,908 |
) |
|
$ |
(74,254 |
) |
Capital expenditures |
|
|
(15,405 |
) |
|
|
(6,694 |
) |
Free cash flow |
|
$ |
(91,313 |
) |
|
$ |
(80,948 |
) |
Net cash (debt) is reconciled as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
$ |
101,861 |
|
|
$ |
161,059 |
|
Cash and cash equivalents of discontinued operations |
|
|
726 |
|
|
|
916 |
|
Total debt, net of debt issuance costs and debt discount |
|
|
(554,446 |
) |
|
|
(485,193 |
) |
Net debt |
|
$ |
(451,859 |
) |
|
$ |
(323,218 |
) |
26
KEY OPERATING METRICS
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Sets |
|
|
473 |
|
|
|
661 |
|
|
|
961 |
|
|
|
1,316 |
|
Estimated megawatts |
|
|
2,024 |
|
|
|
2,910 |
|
|
|
4,074 |
|
|
|
5,858 |
|
Utilization |
|
|
63 |
% |
|
|
85 |
% |
|
|
65 |
% |
|
|
84 |
% |
Dedicated manufacturing lines |
|
|
38 |
|
|
|
37 |
|
|
|
38 |
|
|
|
37 |
|
Manufacturing lines installed |
|
|
38 |
|
|
|
37 |
|
|
|
38 |
|
|
|
37 |
|
Wind blade ASP (in $ thousands) |
|
$ |
208 |
|
|
$ |
179 |
|
|
$ |
197 |
|
|
$ |
187 |
|
RESULTS OF OPERATIONS
The following table summarizes our operating results as a percentage of net sales for the three and six months ended June 30, 2024 and 2023 that have been derived from our condensed consolidated statements of operations:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
101.2 |
|
|
|
110.0 |
|
|
|
101.5 |
|
|
|
103.6 |
|
Startup and transition costs |
|
|
6.7 |
|
|
|
0.9 |
|
|
|
7.1 |
|
|
|
0.7 |
|
Total cost of goods sold |
|
|
107.9 |
|
|
|
110.9 |
|
|
|
108.6 |
|
|
|
104.3 |
|
Gross loss |
|
|
(7.9 |
) |
|
|
(10.9 |
) |
|
|
(8.6 |
) |
|
|
(4.3 |
) |
General and administrative expenses |
|
|
2.9 |
|
|
|
1.8 |
|
|
|
2.9 |
|
|
|
1.8 |
|
Loss on sale of assets and asset impairments |
|
|
1.0 |
|
|
|
1.6 |
|
|
|
0.8 |
|
|
|
1.2 |
|
Restructuring charges, net |
|
|
0.1 |
|
|
|
0.6 |
|
|
|
0.1 |
|
|
|
0.3 |
|
Loss from continuing operations |
|
|
(11.9 |
) |
|
|
(14.9 |
) |
|
|
(12.4 |
) |
|
|
(7.6 |
) |
Total other expense |
|
|
(7.2 |
) |
|
|
(0.7 |
) |
|
|
(6.9 |
) |
|
|
(0.8 |
) |
Loss before income taxes |
|
|
(19.1 |
) |
|
|
(15.6 |
) |
|
|
(19.3 |
) |
|
|
(8.4 |
) |
Income tax provision |
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
(1.0 |
) |
|
|
(0.5 |
) |
Net loss from continuing operations |
|
|
(19.8 |
) |
|
|
(15.7 |
) |
|
|
(20.3 |
) |
|
|
(8.9 |
) |
Preferred stock dividends and accretion |
|
|
— |
|
|
|
(4.2 |
) |
|
|
— |
|
|
|
(4.0 |
) |
Net loss attributable to common stockholders from continuing operations |
|
|
(19.8 |
) |
|
|
(19.9 |
) |
|
|
(20.3 |
) |
|
|
(12.9 |
) |
Net loss from discontinued operations |
|
|
(9.6 |
) |
|
|
(1.7 |
) |
|
|
(5.0 |
) |
|
|
(2.5 |
) |
Net loss attributable to common stockholders |
|
|
(29.4 |
)% |
|
|
(21.6 |
)% |
|
|
(25.3 |
)% |
|
|
(15.4 |
)% |
Net sales
Consolidated discussion
The following table summarizes our net sales by product/service for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Wind blade, tooling |
|
$ |
304,290 |
|
|
$ |
362,734 |
|
|
$ |
(58,444 |
) |
|
|
(16.1 |
)% |
|
$ |
593,195 |
|
|
$ |
750,326 |
|
|
$ |
(157,131 |
) |
|
|
(20.9 |
)% |
Field service, |
|
|
5,527 |
|
|
|
11,287 |
|
|
|
(5,760 |
) |
|
|
(51.0 |
) |
|
|
10,668 |
|
|
|
17,500 |
|
|
|
(6,832 |
) |
|
|
(39.0 |
) |
Total net sales |
|
$ |
309,817 |
|
|
$ |
374,021 |
|
|
$ |
(64,204 |
) |
|
|
(17.2 |
)% |
|
$ |
603,863 |
|
|
$ |
767,826 |
|
|
$ |
(163,963 |
) |
|
|
(21.4 |
)% |
The decrease in net sales of wind blades, tooling and other wind related sales (collectively, Wind) for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a 28% and 27% decrease for the three and six month
27
periods, respectively, in the number of wind blades produced due primarily to the number and pace of startups and transitions, expected volume declines based on market activity levels, cancelled orders for the Nordex Matamoros facility, and unfavorable foreign currency fluctuations. This decrease was partially offset by higher average sales prices of wind blades due to changes in the mix of wind blade models produced, in particular the startup of production at one of our previously idled facilities in Juarez, Mexico, and an increase in tooling sales in preparation for manufacturing line startups and transitions. The decrease in field service, inspection and repair services (collectively, Field Services) sales for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a reduction in technicians deployed to revenue generating projects due to an increase in time spent on non-revenue generating inspection and repair activities. The fluctuating U.S. dollar relative to the Euro had an unfavorable impact of 1.1% and a favorable impact of 0.1% on the EMEA segment's net sales, respectively, during the three and six months ended June 30, 2024 as compared to the same periods in 2023.
Segment discussion
The following table summarizes our net sales by our four geographic operating segments for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
U.S. |
|
$ |
2,558 |
|
|
$ |
9,110 |
|
|
$ |
(6,552 |
) |
|
|
(71.9 |
)% |
|
$ |
6,760 |
|
|
$ |
14,469 |
|
|
$ |
(7,709 |
) |
|
|
(53.3 |
)% |
Mexico |
|
|
159,311 |
|
|
|
166,978 |
|
|
|
(7,667 |
) |
|
|
(4.6 |
) |
|
|
311,769 |
|
|
|
321,618 |
|
|
|
(9,849 |
) |
|
|
(3.1 |
) |
EMEA |
|
|
104,877 |
|
|
|
134,580 |
|
|
|
(29,703 |
) |
|
|
(22.1 |
) |
|
|
201,505 |
|
|
|
302,093 |
|
|
|
(100,588 |
) |
|
|
(33.3 |
) |
India |
|
|
43,071 |
|
|
|
63,353 |
|
|
|
(20,282 |
) |
|
|
(32.0 |
) |
|
|
83,829 |
|
|
|
129,646 |
|
|
|
(45,817 |
) |
|
|
(35.3 |
) |
Total net sales |
|
$ |
309,817 |
|
|
$ |
374,021 |
|
|
$ |
(64,204 |
) |
|
|
(17.2 |
)% |
|
$ |
603,863 |
|
|
$ |
767,826 |
|
|
$ |
(163,963 |
) |
|
|
(21.4 |
)% |
U.S. Segment
The following table summarizes our net sales by product/service for the U.S. segment for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Field service, |
|
$ |
2,558 |
|
|
$ |
9,110 |
|
|
$ |
(6,552 |
) |
|
|
(71.9 |
)% |
|
$ |
6,760 |
|
|
$ |
14,469 |
|
|
$ |
(7,709 |
) |
|
|
(53.3 |
)% |
Total net sales |
|
$ |
2,558 |
|
|
$ |
9,110 |
|
|
$ |
(6,552 |
) |
|
|
(71.9 |
)% |
|
$ |
6,760 |
|
|
$ |
14,469 |
|
|
$ |
(7,709 |
) |
|
|
(53.3 |
)% |
The decrease in Field Services for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a reduction in technicians deployed to revenue generating projects due to an increase in time spent on non-revenue generating inspection and repair activities.
Mexico Segment
The following table summarizes our net sales by product/service for the Mexico segment for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Wind blade, tooling |
|
$ |
158,844 |
|
|
$ |
166,767 |
|
|
$ |
(7,923 |
) |
|
|
(4.8 |
)% |
|
$ |
311,205 |
|
|
$ |
321,229 |
|
|
$ |
(10,024 |
) |
|
|
(3.1 |
)% |
Field service, |
|
|
467 |
|
|
|
211 |
|
|
|
256 |
|
|
|
121.3 |
|
|
|
564 |
|
|
|
389 |
|
|
|
175 |
|
|
|
45.0 |
|
Total net sales |
|
$ |
159,311 |
|
|
$ |
166,978 |
|
|
$ |
(7,667 |
) |
|
|
(4.6 |
)% |
|
$ |
311,769 |
|
|
$ |
321,618 |
|
|
$ |
(9,849 |
) |
|
|
(3.1 |
)% |
28
The decrease in the Mexico segment’s net sales of Wind for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a 27% and 19% net decrease, for the three and six month periods respectively, in the number of wind blades produced across our Mexico manufacturing facilities, partially offset by higher average sales prices of wind blades in Mexico due to changes in the mix of wind blade models produced and the impact of inflation on wind blade prices. The change in volume was primarily associated with decreased production at one of our Matamoros, Mexico manufacturing facilities due to the transition of several of the manufacturing lines at this facility to larger wind blade models that have not yet achieved serial production levels. The change in volume was also due to a decrease in the number of wind blades produced at the Nordex Matamoros, Mexico facility, primarily due to cancelled orders and production inefficiencies resulting from Nordex’s request for us to shut down the plant at the conclusion of the contract on June 30, 2024. These decreases were partially offset by a combined increase in volume across our facilities in Juarez, Mexico, including the restart of production at one of our previously idled facilities, and a $6.1 million increase in tooling sales in preparation for manufacturing line startups and transitions.
EMEA Segment
The following table summarizes our net sales by product/service for the EMEA segment for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Wind blade, tooling |
|
$ |
102,375 |
|
|
$ |
132,614 |
|
|
$ |
(30,239 |
) |
|
|
(22.8 |
)% |
|
$ |
198,161 |
|
|
$ |
299,451 |
|
|
$ |
(101,290 |
) |
|
|
(33.8 |
)% |
Field service, |
|
|
2,502 |
|
|
|
1,966 |
|
|
|
536 |
|
|
|
27.3 |
|
|
|
3,344 |
|
|
|
2,642 |
|
|
|
702 |
|
|
|
26.6 |
|
Total net sales |
|
$ |
104,877 |
|
|
$ |
134,580 |
|
|
$ |
(29,703 |
) |
|
|
(22.1 |
)% |
|
$ |
201,505 |
|
|
$ |
302,093 |
|
|
$ |
(100,588 |
) |
|
|
(33.3 |
)% |
The decrease in the EMEA segment’s net sales of Wind for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a 31% and 37% decrease, for the three and six month periods respectively, in the number of wind blades produced due to reduced market demand for one of our customers' wind blade models at one of our Türkiye manufacturing facilities and the transition of certain manufacturing lines to a different customers' wind blade model at our other Türkiye facility, as well as unfavorable foreign currency fluctuations. These decreases were partially offset by higher average sales prices of wind blades in Türkiye due to such changes in the mix of wind blade models produced. The fluctuating U.S. dollar relative to the Euro had an unfavorable impact of 1.1% and a favorable impact of 0.1% on the EMEA segment's net sales, respectively, during the three and six months ended June 30, 2024, as compared to the same periods in 2023.
India Segment
The following table summarizes our net sales by product/service for the India segment for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Wind blade, tooling |
|
$ |
43,071 |
|
|
$ |
63,353 |
|
|
$ |
(20,282 |
) |
|
|
(32.0 |
)% |
|
$ |
83,829 |
|
|
$ |
129,646 |
|
|
$ |
(45,817 |
) |
|
|
(35.3 |
)% |
Total net sales |
|
$ |
43,071 |
|
|
$ |
63,353 |
|
|
$ |
(20,282 |
) |
|
|
(32.0 |
)% |
|
$ |
83,829 |
|
|
$ |
129,646 |
|
|
$ |
(45,817 |
) |
|
|
(35.3 |
)% |
The decrease in the India segment’s net sales of Wind for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a 27% and 25% decrease, for the three and six month periods respectively, in the number of wind blades produced due to a decrease in market demand for one of our customers' wind blades models produced at this facility, and lower average sales prices due to the impact of raw material and logistic cost reductions on wind blade prices.
29
Total cost of goods sold
The following table summarizes our total cost of goods sold for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Cost of sales |
|
$ |
313,562 |
|
|
$ |
411,461 |
|
|
$ |
(97,899 |
) |
|
|
(23.8 |
)% |
|
$ |
613,057 |
|
|
$ |
795,512 |
|
|
$ |
(182,455 |
) |
|
|
(22.9 |
)% |
Startup costs |
|
|
7,319 |
|
|
|
— |
|
|
|
7,319 |
|
|
NM |
|
|
|
13,682 |
|
|
|
— |
|
|
|
13,682 |
|
|
NM |
|
||
Transition costs |
|
|
13,359 |
|
|
|
3,377 |
|
|
|
9,982 |
|
|
NM |
|
|
|
29,225 |
|
|
|
5,357 |
|
|
|
23,868 |
|
|
NM |
|
||
Total startup and |
|
|
20,678 |
|
|
|
3,377 |
|
|
|
17,301 |
|
|
NM |
|
|
|
42,907 |
|
|
|
5,357 |
|
|
|
37,550 |
|
|
NM |
|
||
Total cost of |
|
$ |
334,240 |
|
|
$ |
414,838 |
|
|
$ |
(80,598 |
) |
|
|
(19.4 |
)% |
|
$ |
655,964 |
|
|
$ |
800,869 |
|
|
$ |
(144,905 |
) |
|
|
(18.1 |
)% |
% of net sales |
|
|
107.9 |
% |
|
|
110.9 |
% |
|
|
|
|
|
(3.0 |
)% |
|
|
108.6 |
% |
|
|
104.3 |
% |
|
|
|
|
|
4.3 |
% |
||
NM – not meaningful
Total cost of goods sold as a percentage of net sales decreased by approximately 3.0% for the three months ended June 30, 2024, as compared to the same period in 2023, primarily related to the $32.7 million warranty charge recorded in the second quarter of the prior year. Total cost of goods sold as a percentage of net sales increased by approximately 4.3% for the six months ended June 30, 2024, as compared to the same period in 2023, primarily driven by an increase in startup and transition costs associated with four manufacturing lines in startup in Juarez, Mexico at a previously idle manufacturing facility, two manufacturing lines in transition at one of our Türkiye facilities where two longer blade models are replacing three blade models due to space considerations, and four manufacturing lines in transition at one of our Matamoros, Mexico manufacturing facilities. The increase in cost of goods sold as a percentage of net sales was also due to increased labor costs in Türkiye and Mexico as a result of wage increases, and continued cost challenges at facilities in Matamoros, Mexico, including a $31.4 million loss from operations for the six months ended June 30, 2024 at our facility that we operated for Nordex. These increases were partially offset for the six months ended June 30, 2024 compared to the same period in 2023 due to the $32.7 million warranty charge recorded in the second quarter of the prior year. The fluctuating U.S. dollar against the Euro, Turkish Lira, Mexican Peso and Indian Rupee had a combined favorable impact of 5.0% and 4.7%, respectively, on consolidated cost of goods sold for the three and six months ended June 30, 2024, as compared to the same periods in 2023.
General and administrative expenses
The following table summarizes our general and administrative expenses for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
General and |
|
$ |
9,211 |
|
|
$ |
6,767 |
|
|
$ |
2,444 |
|
|
|
36.1 |
% |
|
$ |
17,614 |
|
|
$ |
13,801 |
|
|
$ |
3,813 |
|
|
|
27.6 |
% |
% of net sales |
|
|
2.9 |
% |
|
|
1.8 |
% |
|
|
|
|
|
1.1 |
% |
|
|
2.9 |
% |
|
|
1.8 |
% |
|
|
|
|
|
1.1 |
% |
||
General and administrative expenses as a percentage of net sales increased by approximately 1.1% for both the three and six months ended June 30, 2024, as compared to the same periods in 2023, and was primarily driven by an increase in accrued bonus compensation, and professional service and consulting fees, partially offset by reduced share-based compensation and depreciation expenses.
Loss on sale of assets and asset impairments
The following table summarizes our loss on sale of assets and asset impairments for the three and six months ended June 30, 2024 and 2023:
30
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Loss on sale |
|
$ |
2,540 |
|
|
$ |
5,825 |
|
|
$ |
(3,285 |
) |
|
|
(56.4 |
)% |
|
$ |
3,927 |
|
|
$ |
9,389 |
|
|
$ |
(5,462 |
) |
|
|
(58.2 |
)% |
Loss on sale |
|
|
543 |
|
|
|
(6 |
) |
|
|
549 |
|
|
NM |
|
|
|
991 |
|
|
|
23 |
|
|
|
968 |
|
|
NM |
|
||
Total loss on sale of |
|
$ |
3,083 |
|
|
$ |
5,819 |
|
|
$ |
(2,736 |
) |
|
|
(47.0 |
) |
|
$ |
4,918 |
|
|
$ |
9,412 |
|
|
$ |
(4,494 |
) |
|
|
(47.7 |
) |
% of net sales |
|
|
1.0 |
% |
|
|
1.6 |
% |
|
|
|
|
|
(0.6 |
)% |
|
|
0.8 |
% |
|
|
1.2 |
% |
|
|
|
|
|
(0.4 |
)% |
||
The decrease in loss on sale of assets and asset impairments for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in the volume of receivables sold through our accounts receivable financing arrangements with certain of our customers.
Income (loss) from operations
Segment discussion
The following table summarizes our income (loss) from operations by our four geographic operating segments for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
U.S. |
|
$ |
(8,884 |
) |
|
$ |
(3,446 |
) |
|
$ |
(5,438 |
) |
|
|
(157.8 |
)% |
|
$ |
(15,661 |
) |
|
$ |
(7,418 |
) |
|
$ |
(8,243 |
) |
|
|
(111.1 |
)% |
Mexico |
|
|
(24,513 |
) |
|
|
(63,942 |
) |
|
|
39,429 |
|
|
|
61.7 |
|
|
|
(51,958 |
) |
|
|
(81,961 |
) |
|
|
30,003 |
|
|
|
36.6 |
|
EMEA |
|
|
(5,817 |
) |
|
|
5,537 |
|
|
|
(11,354 |
) |
|
NM |
|
|
|
(10,129 |
) |
|
|
20,934 |
|
|
|
(31,063 |
) |
|
|
(148.4 |
) |
|
India |
|
|
2,199 |
|
|
|
6,200 |
|
|
|
(4,001 |
) |
|
|
(64.5 |
) |
|
|
2,635 |
|
|
|
9,965 |
|
|
|
(7,330 |
) |
|
|
(73.6 |
) |
Total income (loss) |
|
$ |
(37,015 |
) |
|
$ |
(55,651 |
) |
|
$ |
18,636 |
|
|
NM |
|
|
$ |
(75,113 |
) |
|
$ |
(58,480 |
) |
|
$ |
(16,633 |
) |
|
|
(28.4 |
)% |
|
% of net sales |
|
|
(11.9 |
)% |
|
|
(14.9 |
)% |
|
|
|
|
|
3.0 |
% |
|
|
(12.4 |
)% |
|
|
(7.6 |
)% |
|
|
|
|
|
(4.8 |
)% |
||
U.S. Segment
The increase in the loss from operations in the U.S. segment for the three and six months ended June 30, 2024, as compared to the same periods in 2023 was primarily due to a reduction in field services sales as technicians spent time on non-revenue generating inspection and repair activities. The increase in the loss was also impacted by an increase in accrued bonus compensation expense, an increase in professional service and consulting fees, and recoveries of COVID-19-related relief for payroll tax credits in the prior comparative period that were not in the current period, partially offset by reduced share-based compensation and depreciation expenses.
Mexico Segment
The decrease in loss from operations in the Mexico segment for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to lower warranty costs as compared to the prior comparative period at one of our Juarez, Mexico facilities, and higher average sales prices in the current period due to a change in the mix of wind blades. This was offset by a 27% and 19% net decrease, for the three and six month periods respectively, in the volume of wind blades produced, increased startup and transition costs, increased labor costs, continued cost challenges at our facilities in Matamoros, Mexico, and unfavorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Mexican Peso had an unfavorable impact of 0.4% and 1.2%, respectively, on the Mexico segment’s cost of goods sold for the three and six months ended June 30, 2024, as compared to the same periods in 2023.
EMEA Segment
The increase in loss from operations in the EMEA segment for the three and six months ended June 30, 2024, as compared to the same periods in 2023 was primarily due to a 31% and 37% decrease, for the three and six month periods respectively, in the volume of wind
31
blades produced, increased startup and transition costs, inflation impacting operating costs that we were not able to pass on to our customers, and increased labor costs as a result of wage increases in Türkiye. These decreases were partially offset by an increase in wind blade prices, cost savings initiatives, and favorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had a favorable impact of 17.7% and 18.3%, respectively, on the EMEA segment's cost of goods sold, for the three and six months ended June 30, 2024, as compared to the same periods in 2023.
India Segment
The decrease in income from operations in the India segment for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a 27% and 25% decrease, for the three and six month periods respectively, in the volume of wind blades produced and lower average sales prices.
Other income (expense)
The following table summarizes our total other income (expense) for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Interest expense, net |
|
$ |
(22,428 |
) |
|
$ |
(1,876 |
) |
|
$ |
(20,552 |
) |
|
NM |
|
|
$ |
(43,811 |
) |
|
$ |
(4,401 |
) |
|
$ |
(39,410 |
) |
|
NM |
|
||
Foreign currency loss |
|
|
132 |
|
|
|
(1,564 |
) |
|
|
1,696 |
|
|
|
108.4 |
|
|
|
(499 |
) |
|
|
(2,746 |
) |
|
|
2,247 |
|
|
|
81.8 |
|
Miscellaneous income |
|
|
227 |
|
|
|
682 |
|
|
|
(455 |
) |
|
|
(66.7 |
) |
|
|
2,702 |
|
|
|
1,115 |
|
|
|
1,587 |
|
|
|
142.3 |
|
Total other expense |
|
$ |
(22,069 |
) |
|
$ |
(2,758 |
) |
|
$ |
(19,311 |
) |
|
NM |
|
|
$ |
(41,608 |
) |
|
$ |
(6,032 |
) |
|
$ |
(35,576 |
) |
|
NM |
|
||
% of net sales |
|
|
-7.2 |
% |
|
|
-0.7 |
% |
|
|
|
|
|
(6.5 |
)% |
|
|
-6.9 |
% |
|
|
-0.8 |
% |
|
|
|
|
|
(6.1 |
)% |
||
Total other expense as a percentage of net sales increased by 6.5% and 6.1%, respectively, for the three and six months ended June 30, 2024, as compared to the same periods in 2023, primarily due to an increase in interest expense and non-cash amortization of debt discount related to the refinancing and issuance of our 11% senior secured term loan in the fourth quarter of 2023.
Income taxes
The following table summarizes our income taxes for the three and six months ended June 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
June 30, |
|
|
Change |
|
|
June 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
|
2024 |
|
|
2023 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
|
|
|
(in thousands) |
|
|
|
|
||||||||||||||||||||
Income tax provision |
|
$ |
(2,412 |
) |
|
$ |
(287 |
) |
|
$ |
(2,125 |
) |
|
NM |
|
|
$ |
(5,654 |
) |
|
$ |
(4,116 |
) |
|
$ |
(1,538 |
) |
|
|
(37.4 |
)% |
|
Effective tax rate |
|
|
(0.7 |
)% |
|
|
(0.1 |
)% |
|
|
|
|
|
(0.6 |
)% |
|
|
(1.0 |
)% |
|
|
(0.5 |
)% |
|
|
|
|
|
(0.5 |
)% |
||
See Note 9, Income Taxes, to our condensed consolidated financial statements for more details about our income taxes for the three and six months ended June 30, 2024 and 2023.
Net loss from continuing operations
The following table summarizes our net loss from continuing operations for the three and six months ended June 30, 2024 and 2023:
The increase in the net loss from continuing operations for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to the reasons set forth above.
Net loss from discontinued operations
32
The following table summarizes our net income (loss) from discontinued operations for the three and six months ended June 30, 2024 and 2023:
The increase in net loss from discontinued operations for the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to divestiture of our Automotive subsidiary in June 2024, which resulted in approximately $19.7 million of asset impairment charges related to property, plant and equipment, and $5.6 million of loss on the sale of discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
Our primary needs for liquidity have been, and in the future will continue to be, capital expenditures, purchases of raw materials, new facility startup costs, the impact of line startups and transitions, working capital, debt service costs, warranty costs and restructuring costs associated with the optimization of our global footprint. Our capital expenditures have been primarily related to machinery and equipment for new facilities or facility expansions. Historically, we have funded our working capital needs through cash flows from operations, the proceeds received from our credit facilities and term debt, and proceeds received from the issuance of stock.
We had net proceeds under all of our various financing arrangements of $31.1 million for the six months ended June 30, 2024 as compared to net proceeds under our financing arrangements of $110.7 million in the comparable period of 2023, primarily due to the issuance of the Convertible Notes in the prior comparative period. As of June 30, 2024 and December 31, 2023, we had $554.4 million and $485.2 million in outstanding indebtedness, net of issuance costs and debt discount, respectively. As of June 30, 2024, $106.2 million of outstanding indebtedness, consisting primarily of our working capital facilities in Türkiye and India, matures within the next twelve months. As of June 30, 2024, we had an aggregate of $57.8 million of remaining capacity for cash and non-cash financing, including $51.8 million of remaining availability for cash borrowing under our various credit facilities. Based upon current and anticipated levels of operations, we believe that cash on hand, available credit facilities, and cash flow from operations will be adequate to fund our working capital and capital expenditure requirements and to make required payments of principal and interest on our indebtedness over the next twelve months.
We anticipate that any new facilities and future facility expansions will be funded through cash flows from operations, the incurrence of other indebtedness and other potential sources of liquidity. The 11% senior secured term loan contains certain covenants and rights including, but not limited to, amount of indebtedness, capital expenditure limitations, a U.S. cash on hand balance requirement of $40.0 million through September 30, 2024 and $50.0 million thereafter.
At June 30, 2024 and December 31, 2023, we had unrestricted cash, cash equivalents and short-term investments totaling $101.9 million and $161.1 million, respectively. The June 30, 2024 balance includes $14.8 million of cash located outside of the United States, including $5.0 million in Türkiye, $5.7 million in India, $2.5 million in Mexico and $1.6 million in other countries. The December 31, 2023 balance included $45.0 million of cash located outside of the U.S., $40.6 million in Türkiye, $1.9 million in India, $1.2 million in Mexico and $1.3 million in other countries. In addition to these amounts, at June 30, 2024 and December 31, 2023 we had $0.7 million and $0.9 million, respectively, of unrestricted cash and cash equivalents related to our discontinued operations which is held outside of the U.S.
33
Financing Facilities
Our total principal amount of debt outstanding as of June 30, 2024 was $659.7 million, including our convertible senior notes, secured and unsecured financing, working capital and term loan agreements and equipment finance leases. See Note 6, Debt, to our condensed consolidated financial statements for more details on our debt balances.
Cash Flow Discussion
The following table summarizes our key cash flow activities for the six months ended June 30, 2024 and 2023:
|
|
Six Months Ended |
|
|
|
|
||||||
|
|
June 30, |
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Net cash used in operating activities |
|
$ |
(75,908 |
) |
|
$ |
(74,254 |
) |
|
$ |
(1,654 |
) |
Net cash used in investing activities |
|
|
(15,405 |
) |
|
|
(6,694 |
) |
|
|
(8,711 |
) |
Net cash provided by financing activities |
|
|
29,407 |
|
|
|
108,109 |
|
|
|
(78,702 |
) |
Impact of foreign exchange rates on cash, cash equivalents |
|
|
131 |
|
|
|
914 |
|
|
|
(783 |
) |
Net change in cash, cash equivalents and restricted cash |
|
$ |
(61,775 |
) |
|
$ |
28,075 |
|
|
$ |
(89,850 |
) |
Operating Cash Flows
Net cash used in operating activities increased by $1.7 million for the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to an increase in net losses during the current period, an increase in cash paid for income taxes, and working capital changes, offset by higher payments in the prior comparative period related to restructuring activities associated with the shutdown of our China operations at the end of 2022.
Investing Cash Flows
Net cash used in investing activities increased by $8.7 million for the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to capital expenditures for the startup and transition of our manufacturing lines at our facilities in Mexico and Türkiye.
Financing Cash Flows
Net cash provided by financing activities decreased by $78.7 million for the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to the proceeds from the Convertible Notes in the prior comparative period.
We are not presently involved in any off-balance sheet arrangements, including transactions with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity or capital resources, other than our accounts receivable assignment agreements described below. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes.
Our segments enter into accounts receivable assignment agreements with various financial institutions. Under these agreements, the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to our segments' customers at an agreed-upon discount rate.
34
The following table summarizes certain key details of each of the accounts receivable assignment agreements in place as of June 30, 2024:
Year Of Initial Agreement |
|
Segment(s) Related To |
|
Current Annual Interest Rate |
2019 |
|
Asia and Mexico |
|
LIBOR plus 1.00% |
2020 |
|
EMEA |
|
EURIBOR plus 1.95% |
2020 |
|
India |
|
LIBOR plus 1.00% |
2020 |
|
U.S. |
|
SOFR plus 0.29% |
2021 |
|
Mexico |
|
SOFR plus 0.29% |
2022 |
|
EMEA |
|
EURIBOR plus 1.97% |
As the receivables are purchased by the financial institutions under the agreements noted above, the receivables are removed from our condensed consolidated balance sheet. During the three and six months ended June 30, 2024, $124.1 million and $219.1 million, respectively, of receivables were sold under the accounts receivable assignment agreements described above as compared to $283.3 million and $507.7 million, respectively, in the comparative prior year period.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business. These market risks are principally limited to changes in foreign currency exchange rates and commodity prices.
Foreign Currency Exchange Rate Risk. We conduct international operations in Mexico, Türkiye, India and Europe. Our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the functional currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant functional currency and then translated into U.S. dollars for inclusion in our condensed consolidated financial statements. In recent years, exchange rates between these foreign currencies and the U.S. dollar have fluctuated significantly and may do so in the future. A hypothetical change of 10% in the exchange rates for the countries above would have resulted in a change to income from operations of approximately $8.1 million for the six months ended June 30, 2024.
Commodity Price Risk. We are subject to commodity price risk under agreements for the supply of our raw materials. We have not hedged our commodity price exposure. We generally lock in pricing for most of our key raw materials for 12 months which protects us from price increases within that period, which we believe helps to mitigate the impact of raw material price increases. As many of our raw material supply agreements have meet or release clauses, if raw materials prices decrease, we are able to benefit from the reductions in price.
Resin, resin systems, and carbon fiber are the primary commodities for which we do not have fixed pricing. Approximately 52% of the resin and resin systems, and approximately 71% of the carbon fiber, we use is purchased under contracts either controlled or borne by two of our customers and therefore they receive/bear 100% of any decrease or increase in resin and carbon fiber costs further limiting our exposure to price fluctuations.
Taking into account the contractual obligations of our customers to share with us the cost savings or increases resulting from a change in the current forecasted price of resin, resin systems, and carbon fiber, we believe that a 10% change in the current forecasted price of resin, resin systems and carbon fiber for the customers in which we are exposed to fluctuating prices would have an impact to income from operations of approximately $5.7 million for the six months ended June 30, 2024. With respect to our other customer supply agreements, our customers typically receive approximately 70% of the cost savings or increases resulting from a change in the price of resin, resin systems and carbon fiber.
Interest Rate Risk. As of June 30, 2024, all remaining secured and unsecured financing and finance lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates.
35
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(b) promulgated under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the design and operating effectiveness as of June 30, 2024 of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
36
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
See Note 12, Commitments and Contingencies, under the heading “Legal Proceedings” to our condensed consolidated financial statements for a discussion of legal proceedings and other related matters.
Item 1A. RISK FACTORS
There have been no material changes to the Risk Factors (Part I, Item 1A) in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition, and/or future results.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
Not applicable.
Issuer Purchases of Equity Securities
Not applicable.
Use of Proceeds
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
None.
37
Item 6. EXHIBITS
Exhibit Number |
|
Exhibit Description |
|
|
|
2.1* |
|
|
|
|
|
31.1* |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1** |
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.2** |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* Filed herewith.
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
TPI COMPOSITES, INC. |
||
|
|
|
|
|
|
|
|
|
|
Date: August 8, 2024 |
|
By: |
|
/s/ Ryan Miller |
|
|
|
|
Ryan Miller |
|
|
|
|
Chief Financial Officer |
|
|
|
|
(Principal Financial Officer) |
39