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
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 |
|
☐ |
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|
|
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
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Page |
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ITEM 1. |
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4 |
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Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 |
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4 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 |
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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 Three Months Ended March 31, 2024 and 2023 |
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8 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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10 |
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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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21 |
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ITEM 3. |
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31 |
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ITEM 4. |
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32 |
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ITEM 1. |
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33 |
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ITEM 1A. |
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33 |
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ITEM 2. |
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33 |
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ITEM 3. |
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33 |
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ITEM 4. |
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33 |
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ITEM 5. |
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33 |
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ITEM 6. |
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34 |
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35 |
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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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March 31, |
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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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$ |
116,850 |
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$ |
161,059 |
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Restricted cash |
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|
12,035 |
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|
10,838 |
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Accounts receivable |
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|
125,870 |
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138,029 |
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Contract assets |
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|
93,149 |
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112,237 |
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Prepaid expenses |
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18,536 |
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17,621 |
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Other current assets |
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41,003 |
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34,564 |
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Inventories |
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13,679 |
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9,420 |
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Assets held for sale |
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22,253 |
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17,787 |
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Current assets of discontinued operations |
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1,036 |
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|
1,520 |
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Total current assets |
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444,411 |
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503,075 |
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Property, plant and equipment, net |
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126,379 |
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128,808 |
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Operating lease right of use assets |
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135,858 |
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136,124 |
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Other noncurrent assets |
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39,205 |
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36,073 |
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Total assets |
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$ |
745,853 |
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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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$ |
220,300 |
|
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$ |
227,723 |
|
Accrued warranty |
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37,500 |
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37,483 |
|
Current maturities of long-term debt |
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78,576 |
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70,465 |
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Current operating lease liabilities |
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22,373 |
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22,017 |
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Contract liabilities |
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10,234 |
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24,021 |
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Liabilities held for sale |
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2,834 |
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1,897 |
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Current liabilities of discontinued operations |
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1,950 |
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2,815 |
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Total current liabilities |
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373,767 |
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386,421 |
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Long-term debt, net of current maturities |
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431,038 |
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414,728 |
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Noncurrent operating lease liabilities |
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116,755 |
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117,133 |
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Other noncurrent liabilities |
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8,360 |
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8,102 |
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Total liabilities |
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929,920 |
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926,384 |
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Stockholders’ deficit: |
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Common shares, $0.01 par value, 100,000 shares authorized, 48,514 |
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485 |
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470 |
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Paid-in capital |
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433,924 |
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431,335 |
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Accumulated other comprehensive loss |
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(8,885 |
) |
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(7,627 |
) |
Accumulated deficit |
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(597,816 |
) |
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(536,348 |
) |
Treasury stock, at cost, 1,045 shares at March 31, 2024 and 519 shares at |
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(11,775 |
) |
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(10,134 |
) |
Total stockholders’ deficit |
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(184,067 |
) |
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(122,304 |
) |
Total liabilities and stockholders’ deficit |
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$ |
745,853 |
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$ |
804,080 |
|
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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March 31, |
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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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$ |
299,062 |
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$ |
404,066 |
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Cost of sales |
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307,084 |
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399,381 |
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Startup and transition costs |
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22,229 |
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1,980 |
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Total cost of goods sold |
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329,313 |
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401,361 |
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Gross profit (loss) |
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(30,251 |
) |
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2,705 |
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General and administrative expenses |
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6,699 |
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7,034 |
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Loss on sale of assets and asset impairments |
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1,830 |
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3,593 |
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Restructuring charges, net |
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182 |
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|
75 |
|
Loss from continuing operations |
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(38,962 |
) |
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|
(7,997 |
) |
Other income (expense): |
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Interest expense, net |
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(21,385 |
) |
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(2,528 |
) |
Foreign currency loss |
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(640 |
) |
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(1,214 |
) |
Miscellaneous income |
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2,479 |
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|
453 |
|
Total other expense |
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(19,546 |
) |
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(3,289 |
) |
Loss from continuing operations before income taxes |
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(58,508 |
) |
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(11,286 |
) |
Income tax provision |
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(3,289 |
) |
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(3,860 |
) |
Net loss from continuing operations |
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(61,797 |
) |
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(15,146 |
) |
Preferred stock dividends and accretion |
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— |
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(15,173 |
) |
Net loss from continuing operations attributable to common stockholders |
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(61,797 |
) |
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(30,319 |
) |
Net income (loss) from discontinued operations |
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329 |
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(6,981 |
) |
Net loss attributable to common stockholders |
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$ |
(61,468 |
) |
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$ |
(37,300 |
) |
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Weighted-average shares of common stock outstanding: |
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Basic |
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47,204 |
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42,284 |
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Diluted |
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47,204 |
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42,284 |
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Net loss from continuing operations per common share: |
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Basic |
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$ |
(1.31 |
) |
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$ |
(0.72 |
) |
Diluted |
|
$ |
(1.31 |
) |
|
$ |
(0.72 |
) |
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Net income (loss) from discontinued operations per common share: |
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Basic |
|
$ |
0.01 |
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$ |
(0.16 |
) |
Diluted |
|
$ |
0.01 |
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$ |
(0.16 |
) |
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Net loss per common share: |
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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 |
|
|||||
|
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March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
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(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)
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Three Months Ended March 31, 2024 |
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Accumulated |
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Series A Preferred Stock |
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Common |
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Paid-in |
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other comprehensive |
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Accumulated |
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Treasury stock, |
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Total stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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capital |
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loss |
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deficit |
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|
at cost |
|
|
deficit |
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(in thousands) |
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Balance at December 31, 2023 |
|
|
— |
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|
$ |
— |
|
|
|
|
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 |
) |
|
|
Three Months Ended March 31, 2023 |
|
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|
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|
|
|
|
|
|
|
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|
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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 |
) |
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 |
|
$ |
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 |
|
$ |
— |
|
|
$ |
152,361 |
|
|
$ |
95,786 |
|
|
$ |
40,758 |
|
|
$ |
288,905 |
|
Automotive sales |
|
|
5,016 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,016 |
|
Field service, inspection and |
|
|
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 |
|
$ |
— |
|
|
$ |
154,462 |
|
|
$ |
166,837 |
|
|
$ |
66,293 |
|
|
$ |
387,592 |
|
Automotive sales |
|
|
10,261 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,261 |
|
Field service, inspection and |
|
|
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, |
|
|
|
|
|
|
||
|
$ |
882,763 |
|
|
|
72.4 |
% |
|
|
|
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, |
|
|
8,031 |
|
|
|
2,037 |
|
Warranty accrual at end of period |
|
$ |
37,500 |
|
|
$ |
22,973 |
|