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06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2024

OR

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

Commission File Number 001-37839

 

img146697208_0.jpg 

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

20-1590775

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

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 April 30, 2024, there were 47,468,503 shares of common stock outstanding.

 

 


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2024 and 2023

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2024 and 2023

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

 

 

 

 

 

ITEM 2.

 

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

21

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

32

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

33

 

 

 

 

 

ITEM 1A.

 

Risk Factors

33

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

33

 

 

 

 

 

ITEM 3.

 

Defaults Upon Senior Securities

33

 

 

 

 

 

ITEM 4.

 

Mine Safety Disclosures

33

 

 

 

 

 

ITEM 5.

 

Other Information

33

 

 

 

 

 

ITEM 6.

 

Exhibits

34

 

 

 

 

 

SIGNATURES

 

35

 

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

competition from other wind blade and wind blade turbine manufacturers;
the discovery of defects in our products and our ability to estimate the future cost of warranty campaigns;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
the increasing cost and availability of additional capital, should such capital be needed;
our projected sales and costs, including materials costs and capital expenditures, during the current fiscal year;
our projected business model during the current fiscal year, including with respect to the number of wind blade manufacturing lines we anticipate;
our ability to service our current debt and comply with any covenants related to such debt;
the current status of the wind energy market and our addressable market;
our ability to absorb or mitigate the impact of price increases in resin, carbon reinforcements (or fiber), other raw materials and related logistics costs that we use to produce our products;
our ability to absorb or mitigate the impact of wage inflation in the countries in which we operate;
our ability to procure adequate supplies of raw materials and components to fulfill our wind blade volume commitments to our customers;
the potential impact of the increasing prevalence of auction-based tenders in the wind energy market and increased competition from solar energy on our gross margins and overall financial performance;
our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow and ability to achieve or maintain profitability;
changes in domestic or international government or regulatory policy, including without limitation, changes in trade policy and energy policy;
changes in global economic trends and uncertainty, geopolitical risks, and demand or supply disruptions from global events;
changes in macroeconomic and market conditions, including the potential impact of any pandemic, risk of recession, rising interest rates and inflation, supply chain constraints, commodity prices and exchange rates, and the impact of such changes on our business and results of operations;
our ability to attract and retain customers for our products, and to optimize product pricing;
our ability to effectively manage our growth strategy and future expenses, including our startup and transition costs;
our ability to successfully expand in our existing wind energy markets and into new international wind energy markets, including our ability to expand our field service inspection and repair services business;
our ability to keep up with market changes and innovations;
our ability to successfully open new manufacturing facilities and expand existing facilities on time and on budget;
the impact of the pace of new product and wind blade model introductions on our business and our results of operations;
our ability to identify and execute a strategic alternative to enable the growth of our automotive business;
our ability to maintain, protect and enhance our intellectual property;

2


 

our ability to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products;
the attraction and retention of qualified associates and key personnel;
our ability to maintain good working relationships with our associates, and avoid labor disruptions, strikes and other disputes with labor unions that represent certain of our associates; and
the potential impact of one or more of our customers becoming bankrupt or insolvent, or experiencing other financial problems.

These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We have described 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)

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands, except par value data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

116,850

 

 

$

161,059

 

Restricted cash

 

 

12,035

 

 

 

10,838

 

Accounts receivable

 

 

125,870

 

 

 

138,029

 

Contract assets

 

 

93,149

 

 

 

112,237

 

Prepaid expenses

 

 

18,536

 

 

 

17,621

 

Other current assets

 

 

41,003

 

 

 

34,564

 

Inventories

 

 

13,679

 

 

 

9,420

 

Assets held for sale

 

 

22,253

 

 

 

17,787

 

Current assets of discontinued operations

 

 

1,036

 

 

 

1,520

 

Total current assets

 

 

444,411

 

 

 

503,075

 

Property, plant and equipment, net

 

 

126,379

 

 

 

128,808

 

Operating lease right of use assets

 

 

135,858

 

 

 

136,124

 

Other noncurrent assets

 

 

39,205

 

 

 

36,073

 

Total assets

 

$

745,853

 

 

$

804,080

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

220,300

 

 

$

227,723

 

Accrued warranty

 

 

37,500

 

 

 

37,483

 

Current maturities of long-term debt

 

 

78,576

 

 

 

70,465

 

Current operating lease liabilities

 

 

22,373

 

 

 

22,017

 

Contract liabilities

 

 

10,234

 

 

 

24,021

 

Liabilities held for sale

 

 

2,834

 

 

 

1,897

 

Current liabilities of discontinued operations

 

 

1,950

 

 

 

2,815

 

Total current liabilities

 

 

373,767

 

 

 

386,421

 

Long-term debt, net of current maturities

 

 

431,038

 

 

 

414,728

 

Noncurrent operating lease liabilities

 

 

116,755

 

 

 

117,133

 

Other noncurrent liabilities

 

 

8,360

 

 

 

8,102

 

Total liabilities

 

 

929,920

 

 

 

926,384

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

Common shares, $0.01 par value, 100,000 shares authorized, 48,514 
   shares issued and
47,469 shares outstanding at March 31, 2024
   and
100,000 shares authorized, 46,990 shares issued and 46,471 shares
   outstanding at December 31, 2023

 

 

485

 

 

 

470

 

Paid-in capital

 

 

433,924

 

 

 

431,335

 

Accumulated other comprehensive loss

 

 

(8,885

)

 

 

(7,627

)

Accumulated deficit

 

 

(597,816

)

 

 

(536,348

)

Treasury stock, at cost, 1,045 shares at March 31, 2024 and 519 shares at
   December 31, 2023

 

 

(11,775

)

 

 

(10,134

)

Total stockholders’ deficit

 

 

(184,067

)

 

 

(122,304

)

Total liabilities and stockholders’ deficit

 

$

745,853

 

 

$

804,080

 

See accompanying notes to our unaudited condensed consolidated financial statements.

4


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

(in thousands, except per share data)

 

Net sales

 

$

299,062

 

 

$

404,066

 

Cost of sales

 

 

307,084

 

 

 

399,381

 

Startup and transition costs

 

 

22,229

 

 

 

1,980

 

Total cost of goods sold

 

 

329,313

 

 

 

401,361

 

Gross profit (loss)

 

 

(30,251

)

 

 

2,705

 

General and administrative expenses

 

 

6,699

 

 

 

7,034

 

Loss on sale of assets and asset impairments

 

 

1,830

 

 

 

3,593

 

Restructuring charges, net

 

 

182

 

 

 

75

 

Loss from continuing operations

 

 

(38,962

)

 

 

(7,997

)

Other income (expense):

 

 

 

 

 

 

Interest expense, net

 

 

(21,385

)

 

 

(2,528

)

Foreign currency loss

 

 

(640

)

 

 

(1,214

)

Miscellaneous income

 

 

2,479

 

 

 

453

 

Total other expense

 

 

(19,546

)

 

 

(3,289

)

Loss from continuing operations before income taxes

 

 

(58,508

)

 

 

(11,286

)

Income tax provision

 

 

(3,289

)

 

 

(3,860

)

Net loss from continuing operations

 

 

(61,797

)

 

 

(15,146

)

Preferred stock dividends and accretion

 

 

 

 

 

(15,173

)

Net loss from continuing operations attributable to common stockholders

 

 

(61,797

)

 

 

(30,319

)

Net income (loss) from discontinued operations

 

 

329

 

 

 

(6,981

)

Net loss attributable to common stockholders

 

$

(61,468

)

 

$

(37,300

)

 

 

 

 

 

 

 

Weighted-average shares of common stock outstanding:

 

 

 

 

 

 

Basic

 

 

47,204

 

 

 

42,284

 

Diluted

 

 

47,204

 

 

 

42,284

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share:

 

 

 

 

 

 

Basic

 

$

(1.31

)

 

$

(0.72

)

Diluted

 

$

(1.31

)

 

$

(0.72

)

 

 

 

 

 

 

 

Net income (loss) from discontinued operations per common share:

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

(0.16

)

Diluted

 

$

0.01

 

 

$

(0.16

)

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(1.30

)

 

$

(0.88

)

Diluted

 

$

(1.30

)

 

$

(0.88

)

 

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

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Net loss from continuing operations attributable to common stockholders

 

$

(61,797

)

 

$

(30,319

)

Net income (loss) from discontinued operations

 

 

329

 

 

 

(6,981

)

Net loss attributable to common stockholders

 

 

(61,468

)

 

 

(37,300

)

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,258

)

 

 

2,010

 

Comprehensive loss

 

$

(62,726

)

 

$

(35,290

)

 

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)

 

 

 

Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 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
repurchased
for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,641

)

 

 

(1,641

)

Issuances under share-
based compensation
plan

 

 

 

 

 

 

 

 

 

1,524

 

 

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Share-based
compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,589

 

 

 

 

 

 

 

 

 

 

 

 

2,589

 

Balance at
   March 31, 2024

 

 

 

 

$

 

 

 

 

48,514

 

 

$

485

 

 

$

433,924

 

 

$

(8,885

)

 

$

(597,816

)

 

$

(11,775

)

 

$

(184,067

)

 

 

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

 

Common

 

 

Paid-in

 

 

other comprehensive

 

 

Accumulated

 

 

Treasury stock,

 

 

Total stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

at cost

 

 

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
repurchased
for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,549

)

 

 

(2,549

)

Issuances under share-
based compensation
plan

 

 

 

 

 

 

 

 

 

627

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Share-based
compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,720

 

 

 

 

 

 

 

 

 

 

 

 

2,720

 

Accretion of Series A
Preferred Stock

 

 

 

 

 

4,467

 

 

 

 

 

 

 

 

 

 

(4,467

)

 

 

 

 

 

 

 

 

 

 

 

(4,467

)

Capped call transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,590

)

 

 

 

 

 

 

 

 

 

 

 

(18,590

)

Balance at
   March 31, 2023

 

 

350

 

 

$

325,050

 

 

 

 

42,996

 

 

$

430

 

 

$

376,527

 

 

$

(13,377

)

 

$

(356,696

)

 

$

(10,100

)

 

$

(3,216

)

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

7


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(61,468

)

 

$

(22,127

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

8,900

 

 

 

9,722

 

Loss on sale of assets and asset impairments

 

 

1,492

 

 

 

5,770

 

Share-based compensation expense

 

 

2,589

 

 

 

2,668

 

Amortization of debt issuance costs

 

 

7,713

 

 

 

79

 

Paid-in-kind interest

 

 

11,017

 

 

 

 

Deferred income taxes

 

 

(2,273

)

 

 

(267

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

7,657

 

 

 

2,126

 

Contract assets and liabilities

 

 

4,736

 

 

 

(34,588

)

Operating lease right of use assets and operating lease liabilities

 

 

244

 

 

 

(8,395

)

Inventories

 

 

(5,469

)

 

 

(2,514

)

Prepaid expenses

 

 

(744

)

 

 

(6,466

)

Other current assets

 

 

(7,010

)

 

 

(5,042

)

Other noncurrent assets

 

 

(791

)

 

 

4,608

 

Accounts payable and accrued expenses

 

 

(5,871

)

 

 

(30,541

)

Accrued warranty

 

 

17

 

 

 

626

 

Other noncurrent liabilities

 

 

257

 

 

 

480

 

Net cash used in operating activities

 

 

(39,004

)

 

 

(83,861

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(8,285

)

 

 

(3,275

)

Net cash used in investing activities

 

 

(8,285

)

 

 

(3,275

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of convertible notes

 

 

 

 

 

132,500

 

Purchase of capped calls

 

 

 

 

 

(18,590

)

Payments of debt issuance costs

 

 

 

 

 

(4,803

)

Proceeds from working capital loans

 

 

52,009

 

 

 

34,741

 

Repayments of working capital loans

 

 

(44,556

)

 

 

(33,982

)

Principal repayments of finance leases

 

 

(297

)

 

 

(578

)

Net proceeds from (repayments of) other debt

 

 

(1,635

)

 

 

1,007

 

Repurchase of common stock including shares withheld in lieu of income taxes

 

 

(1,641

)

 

 

(2,549

)

Net cash provided by financing activities

 

 

3,880

 

 

 

107,746

 

Impact of foreign exchange rates on cash, cash equivalents and restricted cash

 

 

333

 

 

 

730

 

Net change in cash, cash equivalents and restricted cash

 

 

(43,076

)

 

 

21,340

 

Cash, cash equivalents and restricted cash, beginning of year

 

 

172,813

 

 

 

153,069

 

Cash, cash equivalents and restricted cash, end of period

 

$

129,737

 

 

$

174,409

 

 

 

See accompanying notes to our unaudited condensed consolidated financial statements.

 

 

 

8


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

4,799

 

 

$

1,654

 

Cash paid for income taxes, net of refunds

 

 

9,484

 

 

 

3,344

 

Noncash investing and financing activities:

 

 

 

 

 

 

Right of use assets obtained in exchange for new operating lease liabilities

 

 

6,633

 

 

 

786

 

Property, plant, and equipment obtained in exchange for new finance lease liabilities

 

 

170

 

 

 

197

 

Accrued capital expenditures in accounts payable

 

 

4,381

 

 

 

1,814

 

Paid-in-kind preferred stock dividends and accretion

 

 

 

 

 

15,173

 

 

 

Reconciliation of Cash, Cash Equivalents and Restricted Cash:

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

  Cash and cash equivalents

 

$

116,850

 

 

$

161,059

 

 

$

164,231

 

 

$

133,546

 

  Restricted cash

 

 

12,035

 

 

 

10,838

 

 

 

8,793

 

 

 

9,854

 

  Cash and cash equivalents of discontinued operations

 

 

852

 

 

 

916

 

 

 

1,385

 

 

 

9,669

 

Total cash, cash equivalents and restricted cash shown in
  the condensed consolidated statements of cash flows

 

$

129,737

 

 

$

172,813

 

 

$

174,409

 

 

$

153,069

 

 

 

See accompanying notes to our unaudited condensed consolidated financial statements.

9


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 March 31, 2024, and the results of our operations, comprehensive income (loss) and cash flows for the periods presented. Interim results for the three months ended March 31, 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

The Company has determined that no recent accounting pronouncements apply to our operations or could otherwise have a material impact on our condensed consolidated financial statements.

10


TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Discontinued Operations

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. This 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 table presents the carrying amounts of major classes of assets and liabilities that were included in discontinued operations:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Cash and cash equivalents

 

$

852

 

 

$

916

 

Other classes of assets that are not major

 

 

184

 

 

 

604

 

Total assets of discontinued operations

 

$

1,036

 

 

$

1,520

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

1,116

 

 

$

1,632

 

Accrued restructuring

 

 

834

 

 

 

1,183

 

Total liabilities of discontinued operations

 

$

1,950

 

 

$

2,815

 

The following table presents the components of net income (loss) from discontinued operations:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Net sales

 

$

 

 

$

2,167

 

Cost of sales

 

 

54

 

 

 

5,736

 

Gross loss

 

 

(54

)

 

 

(3,569

)

(Gain) loss on sale of assets and asset impairments

 

 

(338

)

 

 

2,177

 

Restructuring charges, net

 

 

 

 

 

1,458

 

Income (loss) from discontinued operations

 

 

284

 

 

 

(7,204

)

Total other income

 

 

45

 

 

 

223

 

Income (loss) before income taxes

 

 

329

 

 

 

(6,981

)

Income tax provision

 

 

 

 

 

 

Net income (loss) from discontinued operations

 

$

329

 

 

$

(6,981

)

The following table presents summarized cash flows from discontinued operations:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Net cash used in operating activities from discontinued operations

 

$

(64

)

 

$

(8,067

)

Net cash used in investing activities from discontinued operations

 

 

 

 

 

(185

)

Additional non-cash items related to operating activities from discontinued operations:

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

115

 

 

11


TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following is a summary of our restructuring liability activity related to discontinued operations for the periods presented:

 

 

 

Severance

 

 

Other

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2023

 

$

317

 

 

$

866

 

 

$

1,183

 

Restructuring charges, net

 

 

 

 

 

 

 

 

 

Payments

 

 

(317

)

 

 

(32

)

 

 

(349

)

Balance at March 31, 2024

 

$

 

 

$

834

 

 

$

834

 

 

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 March 31, 2024

 

 

 

U.S.

 

 

Mexico

 

 

EMEA

 

 

India

 

 

Total

 

 

 

(in thousands)

 

Wind blade, tooling and other wind
   related sales

 

$

 

 

$

152,361

 

 

$

95,786

 

 

$

40,758

 

 

$

288,905

 

Automotive sales

 

 

5,016

 

 

 

 

 

 

 

 

 

 

 

 

5,016

 

Field service, inspection and
   repair services sales

 

 

4,202

 

 

 

97

 

 

 

842

 

 

 

 

 

 

5,141

 

Total net sales

 

$

9,218

 

 

$

152,458

 

 

$

96,628

 

 

$

40,758

 

 

$

299,062

 

 

 

 

Three Months Ended March 31, 2023

 

 

 

U.S.

 

 

Mexico

 

 

EMEA

 

 

India

 

 

Total

 

 

 

(in thousands)

 

Wind blade, tooling and other wind
   related sales

 

$

 

 

$

154,462

 

 

$

166,837

 

 

$

66,293

 

 

$

387,592

 

Automotive sales

 

 

10,261

 

 

 

 

 

 

 

 

 

 

 

 

10,261

 

Field service, inspection and
   repair services sales

 

 

5,359

 

 

 

178

 

 

 

676

 

 

 

 

 

 

6,213

 

Total net sales

 

$

15,620

 

 

$

154,640

 

 

$

167,513

 

 

$

66,293

 

 

$

404,066

 

 

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.

12


TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract assets and contract liabilities consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

$ Change

 

 

 

(in thousands)

 

Gross contract assets

 

$

136,306

 

 

$

121,483

 

 

$

14,823

 

Less: reclassification from contract liabilities

 

 

(43,157

)

 

 

(9,246

)

 

 

(33,911

)

Contract assets

 

$

93,149

 

 

$

112,237

 

 

$

(19,088

)

 

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

$ Change

 

 

 

(in thousands)

 

Gross contract liabilities

 

$

53,391

 

 

$

33,267

 

 

$

20,124

 

Less: reclassification to contract assets

 

 

(43,157

)

 

 

(9,246

)

 

 

(33,911

)

Contract liabilities

 

$

10,234

 

 

$

24,021

 

 

$

(13,787

)

 

 

Gross contract assets increased by $14.8 million from December 31, 2023 to March 31, 2024, primarily due to an increase in customer specific material purchases and incremental unbilled production during the three months ended March 31, 2024. Gross contract liabilities increased by $20.1 million from December 31, 2023 to March 31, 2024, primarily due to an increase in customer advances during the three months ended March 31, 2024.

 

For the three months ended March 31, 2024, we recognized $13.8 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 March 31, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $1.2 billion. We estimate that we will recognize the remaining performance obligations as revenue as follows:

 

 

 

$

 

 

% of Total

 

 

 

(in thousands)

 

Year Ending December 31,

 

 

 

 

 

 

Remainder of 2024

 

$

882,763

 

 

 

72.4

%

2025

 

 

335,952

 

 

 

27.6

 

  Total remaining performance obligations

 

$

1,218,715

 

 

 

100

%

For the three months ended March 31, 2024 and 2023, net revenue recognized from our performance obligations satisfied in previous periods decreased by $5.4 million and $4.3 million, respectively. The decrease for the three months ended March 31, 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.

There have been numerous government initiatives over the past few years aimed at expanding the use of renewable energy, including the Inflation Reduction Act (IRA) in the U.S, and several policy initiatives in the European Union (EU) that are expected to accelerate the expansion of renewable energy and green technologies, simplify regulations, speed up permitting and promote cross-border projects to accelerate climate neutrality. Despite these favorable long-term policy trends, we expect reduced demand in the near term while the wind industry awaits clarity on the implementation guidance related to key components of the IRA, clarity around more robust policies in the EU, and industry headwinds caused by rising interest rates and inflation.

13


TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 March 31, 2024 and December 31, 2023, we had $106.0 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 March 31, 2024, this included $4.3 million in Türkiye, $1.2 million in India, $2.8 million in Mexico and $2.5 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 March 31, 2024 and December 31, 2023, we had short-term deposits in interest bearing accounts in the U.S. of $12.0 million and $10.8 million, respectively, which are reported as restricted cash in our condensed consolidated balance sheets. In addition, at March 31, 2024 and December 31, 2023, we had unrestricted cash and cash equivalents related to our discontinued operations of $0.9 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

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

(in thousands)

 

Warranty accrual at beginning of period

 

$

37,483

 

 

$

22,347

 

Accrual during the period

 

 

2,591

 

 

 

2,853

 

Cost of warranty services provided during the period

 

 

(10,605

)

 

 

(4,264

)

Changes in estimate for pre-existing warranties,
    including expirations during the period
    and foreign exchange impact

 

 

8,031

 

 

 

2,037

 

Warranty accrual at end of period

 

$

37,500

 

 

$

22,973

 

 

Note 6. Debt

Long-term debt, net of current maturities, consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

11% Senior secured term loan—U.S. (1)

 

$

406,058

 

 

$

395,041

 

5.25% Convertible senior unsecured notes—U.S. (2)

 

 

132,500

 

 

 

132,500

 

Unsecured financing—EMEA