0001564590-20-051359 10-Q 85 20200930 20201105 20201105 TPI COMPOSITES, INC 0001455684 3510 201590775 10-Q 34 001-37839 201290888 8501 N SCOTTSDALE ROAD GAINEY CENTER II, SUITE 100 SCOTTSDALE AZ 85253 480-305-8910 8501 N SCOTTSDALE ROAD GAINEY CENTER II, SUITE 100 SCOTTSDALE AZ 85253 TPI COMPOSITES INC 20090206 10-Q 1 tpic-10q_20200930.htm 10-Q false 2020 Q3 0001455684 --12-31 true true true true true true true true 2020 2023-04-30 us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent P3M P1Y P1Y P1Y P1Y P7Y10M24D P7Y7M6D P2Y6M P3Y2M12D 0001455684 2020-01-01 2020-09-30 xbrli:shares 0001455684 2020-10-31 iso4217:USD 0001455684 2020-09-30 0001455684 2019-12-31 iso4217:USD xbrli:shares 0001455684 2020-07-01 2020-09-30 0001455684 2019-07-01 2019-09-30 0001455684 2019-01-01 2019-09-30 0001455684 us-gaap:CommonStockMember 2019-12-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001455684 us-gaap:RetainedEarningsMember 2019-12-31 0001455684 us-gaap:TreasuryStockMember 2019-12-31 0001455684 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001455684 2020-01-01 2020-03-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001455684 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001455684 us-gaap:TreasuryStockMember 2020-01-01 2020-03-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001455684 us-gaap:CommonStockMember 2020-03-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001455684 us-gaap:RetainedEarningsMember 2020-03-31 0001455684 us-gaap:TreasuryStockMember 2020-03-31 0001455684 2020-03-31 0001455684 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001455684 2020-04-01 2020-06-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001455684 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001455684 us-gaap:TreasuryStockMember 2020-04-01 2020-06-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001455684 us-gaap:CommonStockMember 2020-06-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001455684 us-gaap:RetainedEarningsMember 2020-06-30 0001455684 us-gaap:TreasuryStockMember 2020-06-30 0001455684 2020-06-30 0001455684 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001455684 us-gaap:CommonStockMember 2020-07-01 2020-09-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001455684 us-gaap:CommonStockMember 2020-09-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001455684 us-gaap:RetainedEarningsMember 2020-09-30 0001455684 us-gaap:TreasuryStockMember 2020-09-30 0001455684 us-gaap:CommonStockMember 2018-12-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001455684 us-gaap:RetainedEarningsMember 2018-12-31 0001455684 us-gaap:TreasuryStockMember 2018-12-31 0001455684 2018-12-31 0001455684 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0001455684 2019-01-01 2019-03-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0001455684 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0001455684 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0001455684 us-gaap:CommonStockMember 2019-03-31 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001455684 us-gaap:RetainedEarningsMember 2019-03-31 0001455684 us-gaap:TreasuryStockMember 2019-03-31 0001455684 2019-03-31 0001455684 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001455684 2019-04-01 2019-06-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001455684 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001455684 us-gaap:CommonStockMember 2019-06-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001455684 us-gaap:RetainedEarningsMember 2019-06-30 0001455684 us-gaap:TreasuryStockMember 2019-06-30 0001455684 2019-06-30 0001455684 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0001455684 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0001455684 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0001455684 us-gaap:CommonStockMember 2019-09-30 0001455684 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0001455684 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0001455684 us-gaap:RetainedEarningsMember 2019-09-30 0001455684 us-gaap:TreasuryStockMember 2019-09-30 0001455684 2019-09-30 0001455684 us-gaap:AccountingStandardsUpdate201613Member 2020-09-30 0001455684 us-gaap:AccountingStandardsUpdate201813Member 2020-09-30 0001455684 us-gaap:AccountingStandardsUpdate201912Member 2020-09-30 0001455684 tpic:WindBladesMember tpic:UnitedStatesSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:AsiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:MexicoSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:WindBladesMember 2020-07-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:AsiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:MexicoSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember 2020-07-01 2020-09-30 0001455684 tpic:TransportationMember tpic:UnitedStatesSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:TransportationMember tpic:MexicoSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:TransportationMember 2020-07-01 2020-09-30 0001455684 tpic:OtherMember tpic:UnitedStatesSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:OtherMember tpic:AsiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:OtherMember tpic:MexicoSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:OtherMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:OtherMember 2020-07-01 2020-09-30 0001455684 tpic:UnitedStatesSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:AsiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:MexicoSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-07-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:UnitedStatesSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:AsiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:MexicoSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:WindBladesMember 2019-07-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:UnitedStatesSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:AsiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:MexicoSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember 2019-07-01 2019-09-30 0001455684 tpic:TransportationMember tpic:UnitedStatesSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:TransportationMember 2019-07-01 2019-09-30 0001455684 tpic:OtherMember tpic:UnitedStatesSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:OtherMember tpic:AsiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:OtherMember tpic:MexicoSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:OtherMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:OtherMember 2019-07-01 2019-09-30 0001455684 tpic:UnitedStatesSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:AsiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:MexicoSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-07-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:UnitedStatesSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:AsiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:MexicoSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:WindBladesMember 2020-01-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:AsiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:MexicoSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember 2020-01-01 2020-09-30 0001455684 tpic:TransportationMember tpic:UnitedStatesSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:TransportationMember tpic:MexicoSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:TransportationMember 2020-01-01 2020-09-30 0001455684 tpic:OtherMember tpic:UnitedStatesSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:OtherMember tpic:AsiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:OtherMember tpic:MexicoSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:OtherMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:OtherMember 2020-01-01 2020-09-30 0001455684 tpic:UnitedStatesSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:AsiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:MexicoSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-01-01 2020-09-30 0001455684 tpic:WindBladesMember tpic:UnitedStatesSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:AsiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:MexicoSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:WindBladesMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:WindBladesMember 2019-01-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:UnitedStatesSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:AsiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember tpic:MexicoSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsMember 2019-01-01 2019-09-30 0001455684 tpic:TransportationMember tpic:UnitedStatesSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:TransportationMember 2019-01-01 2019-09-30 0001455684 tpic:OtherMember tpic:UnitedStatesSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:OtherMember tpic:AsiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:OtherMember tpic:MexicoSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:OtherMember tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:OtherMember 2019-01-01 2019-09-30 0001455684 tpic:UnitedStatesSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:AsiaSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:MexicoSegmentMember 2019-01-01 2019-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-01-01 2019-09-30 0001455684 us-gaap:SalesChannelDirectlyToConsumerMember us-gaap:LongTermContractWithCustomerMember 2020-01-01 2020-09-30 0001455684 srt:MinimumMember 2020-01-01 2020-09-30 0001455684 srt:MaximumMember 2020-01-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsAndWindBladesMember 2020-01-01 2020-09-30 0001455684 tpic:PrecisionMoldingAndAssemblySystemsAndWindBladesMember 2020-07-01 2020-09-30 0001455684 2020-10-01 2020-09-30 0001455684 2021-01-01 2020-09-30 0001455684 2022-01-01 2020-09-30 0001455684 2023-01-01 2020-09-30 0001455684 2024-01-01 2020-09-30 xbrli:pure 0001455684 srt:MaximumMember 2020-09-30 0001455684 srt:MaximumMember 2019-12-31 0001455684 country:US 2020-09-30 0001455684 country:US 2019-12-31 0001455684 country:CN 2020-09-30 0001455684 country:TR 2020-09-30 0001455684 country:IN 2020-09-30 0001455684 country:MX 2020-09-30 0001455684 tpic:OtherCountriesMember 2020-09-30 0001455684 tpic:MoldAndWindBladeProductsMember srt:MinimumMember 2020-01-01 2020-09-30 0001455684 tpic:MoldAndWindBladeProductsMember srt:MaximumMember 2020-01-01 2020-09-30 0001455684 country:US tpic:SeniorRevolvingLoanMember 2020-09-30 0001455684 country:US tpic:SeniorRevolvingLoanMember 2019-12-31 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:AccountsReceivableFinancingMember 2019-12-31 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:UnsecuredFinancingMember 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:EquipmentFinancingMember 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:EquipmentFinancingMember 2019-12-31 0001455684 country:US tpic:FinanceLeaseObligationsMember 2020-09-30 0001455684 country:US tpic:FinanceLeaseObligationsMember 2019-12-31 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:FinanceLeaseObligationsMember 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaMember tpic:FinanceLeaseObligationsMember 2019-12-31 0001455684 country:MX tpic:FinanceLeaseObligationsMember 2020-09-30 0001455684 country:MX tpic:FinanceLeaseObligationsMember 2019-12-31 0001455684 us-gaap:RevolvingCreditFacilityMember country:US tpic:SeniorRevolvingLoanMember 2018-04-30 0001455684 us-gaap:RevolvingCreditFacilityMember country:US tpic:SeniorRevolvingLoanMember 2020-02-29 0001455684 us-gaap:RevolvingCreditFacilityMember country:US tpic:SeniorRevolvingLoanMember 2020-01-01 2020-09-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember tpic:CreditAgreementMember tpic:SeniorRevolvingLoanMember 2020-01-01 2020-09-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember tpic:CreditAgreementMember tpic:SeniorRevolvingLoanMember 2020-06-01 2020-06-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember tpic:CreditAgreementAmendmentMember tpic:SeniorRevolvingLoanMember 2020-06-01 2020-06-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember tpic:CreditAgreementAmendmentMember tpic:SeniorRevolvingLoanMember 2020-06-01 2020-06-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember tpic:CreditAgreementAmendmentMember tpic:SeniorRevolvingLoanMember 2020-06-01 2020-06-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:TwoPercentageFixedRateMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 iso4217:TRY 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:TwoPercentageFixedRateMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2019-12-31 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:TwoPercentageFixedRateMember us-gaap:SubsequentEventMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-10-01 2020-10-31 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:TwoPointFourPercentageFixedRateMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:FivePercentageFixedRateMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 iso4217:EUR 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:EURIBORMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:EURIBORMember tpic:LettersOfCreditAndOtherNonCashItemsMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:EURIBORMember us-gaap:RevolvingCreditFacilityMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:EURIBORMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-01-01 2020-09-30 0001455684 tpic:TurkishFinancialInstitutionMember us-gaap:UnsecuredDebtMember tpic:ThreePercentageFixedRateMember tpic:EuropeMiddleEastAfricaAndIndiaMember 2020-09-30 0001455684 tpic:TimedBasedRestrictedStockUnitsMember 2020-01-01 2020-09-30 0001455684 tpic:PerformanceBasedRestrictedStockUnitsMember 2020-01-01 2020-09-30 0001455684 tpic:PerformanceBasedRestrictedStockUnitsMember tpic:CertainStockPriceHurdlesMember 2020-01-01 2020-09-30 0001455684 us-gaap:CostOfSalesMember 2020-07-01 2020-09-30 0001455684 us-gaap:CostOfSalesMember 2019-07-01 2019-09-30 0001455684 us-gaap:CostOfSalesMember 2020-01-01 2020-09-30 0001455684 us-gaap:CostOfSalesMember 2019-01-01 2019-09-30 0001455684 us-gaap:GeneralAndAdministrativeExpenseMember 2020-07-01 2020-09-30 0001455684 us-gaap:GeneralAndAdministrativeExpenseMember 2019-07-01 2019-09-30 0001455684 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-09-30 0001455684 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-09-30 0001455684 us-gaap:RestrictedStockUnitsRSUMember 2020-07-01 2020-09-30 0001455684 us-gaap:RestrictedStockUnitsRSUMember 2019-07-01 2019-09-30 0001455684 us-gaap:RestrictedStockUnitsRSUMember 2020-01-01 2020-09-30 0001455684 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-09-30 0001455684 us-gaap:EmployeeStockOptionMember 2020-07-01 2020-09-30 0001455684 us-gaap:EmployeeStockOptionMember 2019-07-01 2019-09-30 0001455684 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-09-30 0001455684 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-09-30 0001455684 us-gaap:PerformanceSharesMember 2020-07-01 2020-09-30 0001455684 us-gaap:PerformanceSharesMember 2019-07-01 2019-09-30 0001455684 us-gaap:PerformanceSharesMember 2020-01-01 2020-09-30 0001455684 us-gaap:PerformanceSharesMember 2019-01-01 2019-09-30 0001455684 tpic:ModificationOfEmployeeAndNonEmployeeAwardsStockOptionsMember 2020-01-01 2020-09-30 0001455684 tpic:AssetsUnderFinanceLeaseMember 2020-09-30 0001455684 tpic:AssetsUnderFinanceLeaseMember 2019-12-31 0001455684 us-gaap:InterestRateSwapMember 2018-04-30 0001455684 us-gaap:InterestRateSwapMember 2018-04-01 2018-04-30 0001455684 us-gaap:LondonInterbankOfferedRateLIBORMember us-gaap:InterestRateSwapMember 2018-04-01 2018-04-30 iso4217:MXN 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2020-09-30 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2019-12-31 0001455684 us-gaap:InterestRateSwapMember us-gaap:OtherNoncurrentLiabilitiesMember 2020-09-30 0001455684 us-gaap:InterestRateSwapMember us-gaap:OtherNoncurrentLiabilitiesMember 2019-12-31 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:OtherCurrentAssetsMember 2020-09-30 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:OtherCurrentAssetsMember 2019-12-31 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:AccountsPayableAndAccruedLiabilitiesMember 2019-12-31 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001455684 us-gaap:ForeignExchangeForwardMember us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-09-30 0001455684 srt:MinimumMember us-gaap:InternalRevenueServiceIRSMember 2020-07-01 2020-07-31 0001455684 us-gaap:StockCompensationPlanMember 2020-07-01 2020-09-30 0001455684 us-gaap:StockCompensationPlanMember 2019-07-01 2019-09-30 0001455684 us-gaap:StockCompensationPlanMember 2020-01-01 2020-09-30 0001455684 us-gaap:StockCompensationPlanMember 2019-01-01 2019-09-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-12-31 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2019-12-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-01-01 2020-03-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2020-01-01 2020-03-31 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-01-01 2020-03-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2020-03-31 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-03-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-04-01 2020-06-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-04-01 2020-06-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-06-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2020-06-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-06-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-07-01 2020-09-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2020-07-01 2020-09-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-07-01 2020-09-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2020-09-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2020-09-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2020-09-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2018-12-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-03-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-01-01 2019-03-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-03-31 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-04-01 2019-06-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-04-01 2019-06-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-06-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-07-01 2019-09-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-07-01 2019-09-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2019-07-01 2019-09-30 0001455684 us-gaap:AccumulatedTranslationAdjustmentMember 2019-09-30 0001455684 tpic:AccumulatedInterestRateSwapsMember 2019-09-30 0001455684 tpic:AccumulatedForeignExchangeForwardContractAdjustmentMember 2019-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MinimumMember 2020-07-01 2020-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MinimumMember 2020-01-01 2020-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MinimumMember 2019-07-01 2019-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:SalesRevenueNetMember srt:MinimumMember 2019-01-01 2019-09-30 0001455684 tpic:VestasMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-07-01 2020-09-30 0001455684 tpic:GEWindMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-07-01 2020-09-30 0001455684 tpic:NordexMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-07-01 2020-09-30 0001455684 tpic:VestasMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2019-09-30 0001455684 tpic:GEWindMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2019-09-30 0001455684 tpic:NordexMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-07-01 2019-09-30 0001455684 tpic:VestasMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 0001455684 tpic:GEWindMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 0001455684 tpic:NordexMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2020-01-01 2020-09-30 0001455684 tpic:VestasMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-09-30 0001455684 tpic:GEWindMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-09-30 0001455684 tpic:NordexMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember srt:MinimumMember 2020-01-01 2020-09-30 0001455684 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember srt:MinimumMember 2019-01-01 2019-12-31 0001455684 tpic:VestasMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2020-01-01 2020-09-30 0001455684 tpic:NordexMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2020-01-01 2020-09-30 0001455684 tpic:VestasMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2019-01-01 2019-12-31 0001455684 tpic:NordexMember us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember 2019-01-01 2019-12-31 tpic:Segment 0001455684 country:US 2020-07-01 2020-09-30 0001455684 country:US 2019-07-01 2019-09-30 0001455684 country:US 2020-01-01 2020-09-30 0001455684 country:US 2019-01-01 2019-09-30 0001455684 country:CN 2020-07-01 2020-09-30 0001455684 country:CN 2019-07-01 2019-09-30 0001455684 country:CN 2020-01-01 2020-09-30 0001455684 country:CN 2019-01-01 2019-09-30 0001455684 country:MX 2020-07-01 2020-09-30 0001455684 country:MX 2019-07-01 2019-09-30 0001455684 country:MX 2020-01-01 2020-09-30 0001455684 country:MX 2019-01-01 2019-09-30 0001455684 tpic:TurkeyAndIndiaMember 2020-07-01 2020-09-30 0001455684 tpic:TurkeyAndIndiaMember 2019-07-01 2019-09-30 0001455684 tpic:TurkeyAndIndiaMember 2020-01-01 2020-09-30 0001455684 tpic:TurkeyAndIndiaMember 2019-01-01 2019-09-30 0001455684 tpic:UnitedStatesSegmentMember 2020-09-30 0001455684 tpic:UnitedStatesSegmentMember 2019-12-31 0001455684 tpic:AsiaSegmentMember 2020-09-30 0001455684 tpic:AsiaSegmentMember 2019-12-31 0001455684 tpic:MexicoSegmentMember 2020-09-30 0001455684 tpic:MexicoSegmentMember 2019-12-31 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2020-09-30 0001455684 tpic:EuropeMiddleEastAfricaAndIndiaSegmentMember 2019-12-31 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 September 30, 2020 OR ? TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-37839 [[Image Removed]] TPI Composites, Inc. (Exact name of registrant as specified in its charter) Delaware 20-1590775 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 8501 N. Scottsdale Rd. Gainey Center II, Suite 100 Scottsdale, AZ 85253 (480) 305-8910 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class Trading Symbol(s) 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 October 31, 2020, there were 35,740,796 shares of common stock outstanding. 1 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 5 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 6 Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2020 and 2019 7 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 8 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 10 Notes to Condensed Consolidated Financial Statements (Unaudited) 12 Management’s Discussion and Analysis of Financial Condition and ITEM 2. Results of Operations 25 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 37 ITEM 4. Controls and Procedures 38 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 39 ITEM 1A. Risk Factors 39 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 ITEM 3. Defaults Upon Senior Securities 39 ITEM 4. Mine Safety Disclosures 39 ITEM 5. Other Information 39 ITEM 6. Exhibits 40 SIGNATURES 41 2 -------------------------------------------------------------------------------- SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities law. 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,” “target,” “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: • the potential impact of the Coronavirus on our business and results of operations; • growth of the wind energy market and our addressable market; • 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; • the sufficiency of our cash and cash equivalents to meet our liquidity needs; • our ability to attract and retain customers for our products, and to optimize product pricing; • our ability to effectively manage our growth strategy and future expenses, including our startup and transition costs; • 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 and product recalls; • 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 in wind energy markets; • our ability to successfully open new manufacturing facilities and expand existing facilities on time and on budget; • the impact of the accelerated pace of new product and wind blade model introductions on our business and our results of operations; • our ability to successfully expand our transportation business and execute upon our strategy of entering new markets outside of wind energy; • worldwide economic conditions and their impact on customer demand; • our ability to maintain, protect and enhance our intellectual property; • our ability to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products; • the attraction and retention of qualified employees and key personnel; • our ability to maintain good working relationships with our employees, and avoid labor disruptions, strikes and other disputes with labor unions that represent certain of our employees; • our ability to procure adequate supplies of raw materials and components to fulfill our wind blade volume commitments to our customers; 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 filed with the United States Securities and Exchange Commission (SEC) on March 2, 2020 the principal risks and uncertainties that 3 -------------------------------------------------------------------------------- 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. 4 -------------------------------------------------------------------------------- PART I—FINANCIAL INFORMATION ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2020 2019 (in thousands, except par value data) Assets Current assets: Cash and cash equivalents $ 149,422 $ 70,282 Restricted cash 1,987 992 Accounts receivable 149,985 184,012 Contract assets 211,569 166,515 Prepaid expenses 15,950 10,047 Other current assets 21,794 29,843 Inventories 14,569 6,731 Total current assets 565,276 468,422 Property, plant, and equipment, net 210,024 205,007 Operating lease right of use assets 168,590 122,351 Other noncurrent assets 41,794 30,897 Total assets $ 985,684 $ 826,677 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 310,344 $ 293,104 Accrued warranty 53,596 47,639 Current maturities of long-term debt 35,788 13,501 Current operating lease liabilities 25,569 16,629 Contract liabilities 2,010 3,008 Total current liabilities 427,307 373,881 Long-term debt, net of debt issuance costs and current maturities 201,780 127,888 Noncurrent operating lease liabilities 165,551 113,883 Other noncurrent liabilities 9,594 5,975 Total liabilities 804,232 621,627 Commitments and contingencies (Note 12) Stockholders’ equity: Common shares, $0.01 par value, 100,000 shares authorized, 35,916 shares issued and 35,740 shares outstanding at September 30, 2020 and 100,000 shares authorized, 35,326 shares issued and 35,181 shares outstanding at December 31, 2019 359 353 Paid-in capital 338,355 322,906 Accumulated other comprehensive loss (37,946 ) (23,612 ) Accumulated deficit (114,900 ) (90,689 ) Treasury stock, at cost, 176 shares at September 30, 2020 and 145 shares at December 31, 2019 (4,416 ) (3,908 ) Total stockholders’ equity 181,452 205,050 Total liabilities and stockholders’ equity $ 985,684 $ 826,677 See accompanying notes to unaudited condensed consolidated financial statements. 5 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands, except per share data) Net sales $ 474,113 $ 383,836 $ 1,204,566 $ 1,014,387 Cost of sales 425,064 335,778 1,141,183 904,135 Startup and transition costs 8,576 22,127 31,530 63,206 Total cost of goods sold 433,640 357,905 1,172,713 967,341 Gross profit 40,473 25,931 31,853 47,046 General and administrative expenses 9,263 10,608 25,646 27,801 Realized loss on sale of assets and asset impairments 2,160 3,354 5,518 10,561 Restructuring charges (reversals), net 45 (149 ) 343 3,725 Income from operations 29,005 12,118 346 4,959 Other income (expense): Interest income 15 43 55 125 Interest expense (3,108 ) (2,130 ) (7,464 ) (6,403 ) Realized gain (loss) on foreign currency remeasurement (17,127 ) 3,719 (18,095 ) (1,050 ) Miscellaneous income 1,259 517 2,893 2,235 Total other income (expense) (18,961 ) 2,149 (22,611 ) (5,093 ) Income (loss) before income taxes 10,044 14,267 (22,265 ) (134 ) Income tax benefit (provision) 32,338 (18,838 ) (1,946 ) (14,713 ) Net income (loss) $ 42,382 $ (4,571 ) $ (24,211 ) $ (14,847 ) Weighted-average common shares outstanding: Basic 35,546 35,131 35,354 35,024 Diluted 37,423 35,131 35,354 35,024 Net income (loss) per common share: Basic $ 1.19 $ (0.13 ) $ (0.68 ) $ (0.42 ) Diluted $ 1.13 $ (0.13 ) $ (0.68 ) $ (0.42 ) See accompanying notes to unaudited condensed consolidated financial statements. 6 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Net income (loss) $ 42,382 $ (4,571 ) $ (24,211 ) $ (14,847 ) Other comprehensive income (loss): Foreign currency translation adjustments (1,662 ) (895 ) (13,175 ) (3,765 ) Unrealized gain (loss) on hedging derivatives, net of taxes of $(1,100), $202, $0, and $967, respectively 2,961 (754 ) (1,159 ) (3,635 ) Comprehensive income (loss) $ 43,681 $ (6,220 ) $ (38,545 ) $ (22,247 ) See accompanying notes to unaudited condensed consolidated financial statements. 7 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Nine Months Ended September 30, 2020 Accumulated other Treasury Common Paid-in comprehensive Accumulated stock, Total stockholders' Shares Amount capital loss deficit at cost equity (in thousands) Balance at December 31, 2019 35,326 $ 353 $ 322,906 $ (23,612 ) $ (90,689 ) $ (3,908 ) $ 205,050 Net loss — — — — (492 ) — (492 ) Share-based compensation expense — — 2,970 — — — 2,970 Issuances under share-based compensation plan 109 1 861 — — — 862 Common stock repurchased for treasury — — — — — (459 ) (459 ) Other comprehensive loss — — — (16,893 ) — — (16,893 ) Balance at March 31, 2020 35,435 354 326,737 (40,505 ) (91,181 ) (4,367 ) 191,038 Net loss — — — — (66,101 ) — (66,101 ) Share-based compensation expense — — 2,186 — — — 2,186 Issuances under share-based compensation plan 81 1 510 — — — 511 Common stock repurchased for treasury — — — — — (49 ) (49 ) Other comprehensive income — — — 1,260 — — 1,260 Balance at June 30, 2020 35,516 355 329,433 (39,245 ) (157,282 ) (4,416 ) 128,845 Net income — — — — 42,382 — 42,382 Share-based compensation expense — — 2,434 — — — 2,434 Issuances under share-based compensation plan 395 4 6,488 — — — 6,492 Other comprehensive income — — — 1,299 — — 1,299 Balance at September 30, 2020 35,911 $ 359 $ 338,355 $ (37,946 ) $ (114,900 ) $ (4,416 ) $ 181,452 See accompanying notes to unaudited condensed consolidated financial statements. 8 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY - CONTINUED (Unaudited) Nine Months Ended September 30, 2019 Accumulated other Treasury Common Paid-in comprehensive Accumulated stock, Total stockholders' Shares Amount capital loss deficit at cost equity (in thousands) Balance at December 31, 2018 34,745 $ 347 $ 311,771 $ (14,392 ) $ (74,981 ) $ (1,788 ) $ 220,957 Net loss — — — — (12,104 ) — (12,104 ) Share-based compensation expense — — 821 — — — 821 Issuances under share-based compensation plan 355 4 4,635 — — — 4,639 Common stock repurchased for treasury — — — — — (559 ) (559 ) Other comprehensive loss — — — (477 ) — — (477 ) Balance at March 31, 2019 35,100 351 317,227 (14,869 ) (87,085 ) (2,347 ) 213,277 Net income — — — — 1,828 — 1,828 Share-based compensation expense — — 2,057 — — — 2,057 Issuances under share-based compensation plan 41 — 144 — — — 144 Other comprehensive loss — — — (5,274 ) — — (5,274 ) Balance at June 30, 2019 35,141 351 319,428 (20,143 ) (85,257 ) (2,347 ) 212,032 Net loss — — — — (4,571 ) — (4,571 ) Share-based compensation expense — — 1,905 — — — 1,905 Issuances under share-based compensation plan 158 2 7 — — — 9 Common stock repurchased for treasury — — — — — (1,561 ) (1,561 ) Other comprehensive loss — — — (1,649 ) — — (1,649 ) Balance at September 30, 2019 35,299 $ 353 $ 321,340 $ (21,792 ) $ (89,828 ) $ (3,908 ) $ 206,165 See accompanying notes to unaudited condensed consolidated financial statements. 9 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2020 2019 (in thousands) Cash flows from operating activities: Net loss $ (24,211 ) $ (14,847 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 36,675 27,732 Realized loss on sale of assets and asset impairments 5,518 10,561 Restructuring charges, net 343 3,725 Share-based compensation expense 7,947 4,604 Amortization of debt issuance costs 237 155 Deferred income taxes (9,375 ) 3,296 Changes in assets and liabilities: Accounts receivable 27,723 15,583 Contract assets and liabilities (48,185 ) (55,952 ) Operating lease right of use assets and operating lease liabilities 14,370 3,511 Inventories (7,986 ) (6,044 ) Prepaid expenses (6,066 ) (10,419 ) Other current assets 7,827 (10,296 ) Other noncurrent assets 338 (5,178 ) Accounts payable and accrued expenses 19,167 82,421 Accrued warranty 5,957 11,517 Other noncurrent liabilities 3,586 2,366 Net cash provided by operating activities 33,865 62,735 Cash flows from investing activities: Purchases of property, plant and equipment (53,428 ) (59,092 ) Acquisition of a business — (1,102 ) Net cash used in investing activities (53,428 ) (60,194 ) Cash flows from financing activities: Proceeds from revolving loans 80,000 16,000 Repayments of revolving loans (7,199 ) — Net repayments of accounts receivable financing (3,979 ) (5,415 ) Proceeds from working capital loans — 3,535 Repayments of working capital loans — (2,828 ) Principal repayments of finance leases (4,592 ) (7,621 ) Net proceeds (repayments) of other debt 32,311 (3,919 ) Debt issuance costs (730 ) — Proceeds from exercise of stock options 7,124 4,726 Repurchase of common stock including shares withheld in lieu of income taxes (508 ) (2,120 ) Net cash provided by financing activities 102,427 2,358 Impact of foreign exchange rates on cash, cash equivalents and restricted cash (3,204 ) (115 ) Net change in cash, cash equivalents and restricted cash 79,660 4,784 Cash, cash equivalents and restricted cash, beginning of year 71,749 89,376 Cash, cash equivalents and restricted cash, end of period $ 151,409 $ 94,160 See accompanying notes to unaudited condensed consolidated financial statements. 10 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Unaudited) Nine Months Ended September 30, 2020 2019 (in thousands) Supplemental cash flow information: Cash paid for interest $ 6,871 $ 6,397 Cash paid for income taxes, net of refunds 11,642 15,033 Noncash investing and financing activities: Right of use assets obtained in exchange for new operating lease liabilities 67,705 12,205 Property, plant, and equipment obtained in exchange for new finance lease liabilities 131 5,122 Accrued capital expenditures in accounts payable 7,769 6,594 Reconciliation of Cash, Cash Equivalents and Restricted Cash: September 30, December 31, September 30, December 31, 2020 2019 2019 2018 (in thousands) Condensed Consolidated Balance Sheets Cash and cash equivalents $ 149,422 $ 70,282 $ 92,085 $ 85,346 Restricted cash 1,987 992 1,600 3,555 Restricted cash included within other noncurrent assets — 475 475 475 Condensed Consolidated Statements Of Cash Flows Total cash, cash equivalents and restricted cash $ 151,409 $ 71,749 $ 94,160 $ 89,376 See accompanying notes to unaudited condensed consolidated financial statements. 11 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Basis of Presentation and Recently Issued Accounting Pronouncements 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, 2019 included in our Annual Report on Form 10-K. 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, although we believe the disclosures that are made are adequate to make the information presented herein not misleading. 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 September 30, 2020, and the results of our operations, comprehensive income (loss) and cash flows for the periods presented. Interim results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results to be expected for the full years. 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 Accounting Pronouncements Adopted in 2020 Financial Instruments In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held at each reporting date. This standard was effective for all public business entities for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We adopted this standard on January 1, 2020 and it did not have a material effect on our condensed consolidated financial statements. Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements in Topic 820. This standard was effective for all public business entities for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We adopted this standard on January 1, 2020 and it did not have a material effect on our condensed consolidated financial statements. Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which primarily removes specific exemptions to the general principles in Topic 740 in GAAP and improves the financial statement preparers’ application of income tax-related guidance and simplifies GAAP. We adopted this standard on January 1, 2020 and it did not have a material effect on our condensed consolidated financial statements. 12 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Accounting Pronouncements Not Yet Adopted Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating our contracts and the optional expedients provided by the new standard. Note 2. 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 Significant Accounting Policies – Revenue Recognition, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K. The following tables represents the disaggregation of our net sales revenue by product for each of our reportable segments: Three Months Ended September 30, 2020 U.S. Asia Mexico EMEAI Total (in thousands) Wind blade sales $ 37,272 $ 158,120 $ 153,575 $ 101,168 $ 450,135 Precision molding and assembly systems sales — 4,451 6,090 — 10,541 Transportation sales 6,206 — 801 — 7,007 Other sales 3,321 887 1,097 1,125 6,430 Total net sales $ 46,799 $ 163,458 $ 161,563 $ 102,293 $ 474,113 Three Months Ended September 30, 2019 U.S. Asia Mexico EMEAI Total (in thousands) Wind blade sales $ 25,857 $ 98,406 $ 111,855 $ 116,084 $ 352,202 Precision molding and assembly systems sales 1,479 8,915 4,655 — 15,049 Transportation sales 8,061 — — — 8,061 Other sales 5,246 793 1,180 1,305 8,524 Total net sales $ 40,643 $ 108,114 $ 117,690 $ 117,389 $ 383,836 Nine Months Ended September 30, 2020 U.S. Asia Mexico EMEAI Total (in thousands) Wind blade sales $ 99,514 $ 385,536 $ 346,954 $ 302,531 $ 1,134,535 Precision molding and assembly systems sales — 13,088 11,110 — 24,198 Transportation sales 27,424 — 1,374 — 28,798 Other sales 9,371 1,889 3,795 1,980 17,035 Total net sales $ 136,309 $ 400,513 $ 363,233 $ 304,511 $ 1,204,566 13 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Nine Months Ended September 30, 2019 U.S. Asia Mexico EMEAI Total (in thousands) Wind blade sales $ 84,328 $ 238,947 $ 278,685 $ 328,956 $ 930,916 Precision molding and assembly systems sales 2,845 20,856 15,475 — 39,176 Transportation sales 20,717 — — — 20,717 Other sales 14,239 1,728 3,557 4,054 23,578 Total net sales $ 122,129 $ 261,531 $ 297,717 $ 333,010 $ 1,014,387 Most of our net sales are made directly to our customers, primarily large multi-national wind turbine manufacturers, under our long-term contracts which are typically five years in length. 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 time it takes to produce a single blade is typically between 5 to 7 days. The time it takes to produce a mold is typically between 3 to 6 months. 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. These amounts were historically recorded as customer deposits which usually relate to progress payments received as precision molding and assembly systems were being manufactured. 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, as demonstrated in the table below. Contract assets and contract liabilities consisted of the following: September 30, December 31, 2020 2019 $ Change (in thousands) Gross contract assets $ 214,586 $ 170,973 $ 43,613 Less: reclassification from contract liabilities (3,017 ) (4,458 ) 1,441 Contract assets $ 211,569 $ 166,515 $ 45,054 September 30, December 31, 2020 2019 $ Change (in thousands) Gross contract liabilities $ 5,027 $ 7,466 $ (2,439 ) Less: reclassification to contract assets (3,017 ) (4,458 ) 1,441 Contract liabilities $ 2,010 $ 3,008 $ (998 ) Contract assets increased by $45.1 million from December 31, 2019 to September 30, 2020 due to incremental unbilled production, which includes materials acquired under long-term contracts, during the nine months ended September 30, 2020. Contracts liabilities decreased by $1.0 million from December 31, 2019 to September 30, 2020 due to the revenue earned related to precision molding and assembly systems and wind blades being produced exceeding the amounts billed to customers in the nine months ended September 30, 2020. For the three and nine months ended September 30, 2020, we recognized no revenue and $3.0 million of revenue, respectively, related to precision molding and assembly systems and wind blades, which were included in the corresponding contract liability balance at the beginning of the period. 14 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 September 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $3.8 billion. We estimate that we will recognize these remaining performance obligations as revenue as follows: $ % of Total (in thousands) Year Ending December 31, Remainder of 2020 $ 448,348 11.9 % 2021 1,609,674 42.5 % 2022 1,095,947 29.0 % 2023 554,245 14.6 % 2024 75,954 2.0 % Total remaining performance obligations $ 3,784,168 100.0 % The transaction price allocated to the remaining performance obligations excludes approximately $178.0 million of variable consideration over the contractual guaranteed minimum volume obligations under current contracts with customers which has been constrained primarily due to uncertainty associated with production volume during the remaining term of the agreements. We estimate the constraint will be resolved in subsequent periods when our customers provide additional information relevant to forecasted future production. For the three and nine months ended September 30, 2020, net revenue recognized from our performance obligations satisfied in previous periods increased by $14.8 million and $15.4 million, respectively, as compared to decreases of $3.5 million and $16.0 million, respectively, in the same periods of 2019. The current year increase primarily related to changes in certain of our estimated total contract values and related direct costs to complete the performance obligations. Note 3. 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. The COVID-19 pandemic adversely impacted our operations and results of operations for the nine months ended September 30, 2020 due to reduced production levels at a majority of our manufacturing facilities primarily during the first and second quarters of 2020 as a result of certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. By the end of the second quarter of 2020, most of our manufacturing facilities had returned to operating at or near normal production levels. For the third quarter of 2020, the COVID-19 pandemic did not have a material adverse impact on our operations and results of operations. However, several of our manufacturing facilities are operating in regions with high levels of reported COVID-19 positive cases. As such, we may be required to reinstate temporary production suspensions or volume reductions at these manufacturing facilities or at our other manufacturing facilities to the extent there is a resurgence of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. We maintain our U.S. cash in bank deposit and money market 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 2020 and 2019. U.S. money market accounts are not guaranteed by the FDIC. At September 30, 2020 and December 31, 2019, we had $76.0 million and $45.8 million, respectively, of cash in bank deposit and money market accounts in U.S. banks, which was in excess of FDIC limits. We have not experienced losses in any such accounts. We also maintain cash in bank deposit accounts outside the U.S. with no insurance. At September 30, 2020, this included $47.2 million in China, $18.8 million in Turkey, $6.2 million in India, $1.0 million in Mexico and $0.2 million in other countries. We have 15 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) not experienced losses in these accounts. In addition, at September 30, 2020, we had short-term deposits in interest bearing accounts of $1.7 million in the U.S., and $0.3 million in China, which are reported as restricted cash in our condensed consolidated balance sheets. Note 4. Accrued Warranty We provide a limited warranty for our wind blades and related precision molding and assembly systems, including materials and workmanship, with terms and conditions that vary depending on the product sold, generally for periods that range from two to five years. We also provide a limited warranty for our transportation products, including materials and workmanship, with terms and conditions that vary depending on the product sold, generally for a period of approximately two years. Warranty expense is recorded based upon estimates of future repairs using a probability-based methodology that considers previous warranty claims, identified quality issues and industry practices. Once the warranty period has expired, any remaining unused warranty accrual for the specific products is generally reversed against the current year warranty expense amount. As of September 30, 2020, a change in the estimated warranty accrual rate of 1% across all products would change the warranty accrual by approximately $39.5 million. The warranty accrual activity for the periods noted consisted of the following: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Warranty accrual at beginning of period $ 56,772 $ 42,834 $ 47,639 $ 36,765 Accrual during the period 5,963 7,390 14,337 18,413 Cost of warranty services provided during the period (10,895 ) 36 (19,377 ) (2,409 ) Changes in estimate for pre-existing warranties, including expirations during the period 1,756 (1,978 ) 10,997 (4,487 ) Warranty accrual at end of period $ 53,596 $ 48,282 $ 53,596 $ 48,282 Note 5. Long-Term Debt, Net of Debt Issuance Costs and Current Maturities Long-term debt, net of debt issuance costs and current maturities, consisted of the following: September 30, December 31, 2020 2019 (in thousands) Senior revolving loan—U.S. $ 185,215 $ 112,414 Accounts receivable financing—EMEAI — 3,805 Unsecured financing—EMEAI 34,743 — Equipment financing—EMEAI 5,165 7,903 Equipment finance lease—U.S. 147 288 Equipment finance lease—EMEAI 4,488 5,732 Equipment finance lease—Mexico 8,975 11,919 Total debt - principal 238,733 142,061 Less: Debt issuance costs (1,165 ) (672 ) Total debt, net of debt issuance costs 237,568 141,389 Less: Current maturities of long-term debt (35,788 ) (13,501 ) Long-term debt, net of debt issuance costs and current maturities $ 201,780 $ 127,888 Senior Revolving Loan - U.S.: In February 2020, we entered into an Incremental Facility Agreement with the current lenders to our Credit Agreement and an additional lender, pursuant to which the aggregate principal amount of our revolving credit facility under the Credit Agreement was 16 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) increased from $150.0 million to $205.0 million. All borrowings and amounts outstanding under the Credit Agreement are scheduled to mature in April 2023. In June 2020, we entered into an amendment to our Credit Agreement which made certain adjustments to one of the financial covenants, added new covenants related to minimum liquidity and mandatory repayment triggers, provided for certain modifications to the affirmative and negative covenants and changed the interest rate during the Adjustment Period (as defined in the Credit Agreement) to a LIBOR floor of 0.75% plus a margin of 3.0% per annum. The interest rate following the end of the Adjustment Period would be equal to a LIBOR floor of 0.75% plus a margin ranging between 1.75% to 2.50% per annum. All other material terms and conditions of the Credit Agreement remained the same. Unsecured Financing - EMEAI: In the fourth quarter of 2019, we entered into a credit agreement with a Turkish financial institution to provide up to 100.0 million Turkish Lira (approximately $12.8 million as of September 30, 2020) of unsecured financing. Interest accrues at a fixed rate of 2.0% and is payable at the end of the term when the loan is repaid. The credit agreement does not have an expiration date, however the limits are reviewed in January of each year to establish available capacity. As of September 30, 2020, there was $3.5 million outstanding under this agreement. The amount outstanding was repaid in October 2020. No amounts were outstanding under this credit agreement as of December 31, 2019. In the first quarter of 2020, we entered into a credit agreement, as amended, with a Turkish financial institution to provide up to $18.0 million of unsecured financing. Interest accrues at a fixed rate of 2.4% and is payable quarterly. The maturity date for amounts currently outstanding is March 2023. The credit agreement does not have an expiration date, however the limits are reviewed in December of each year to establish available capacity. As of September 30, 2020, there was $14.7 million outstanding under this credit agreement. In the first quarter of 2020, we entered into a credit agreement with a Turkish financial institution to provide up to 5.0 million Euro (approximately $5.9 million as of September 30, 2020) of unsecured financing. Interest accrues at a fixed rate of 5.0% and is payable at the end of the term when the loan is repaid. The credit agreement does not have an expiration date, however the limits are reviewed in February of each year to establish available capacity. As of September 30, 2020, there were no amounts outstanding under this credit agreement. In the second and third quarters of 2020, we amended an existing credit agreement with a Turkish financial institution to provide up to 31.0 million Euro (approximately $36.3 million as of September 30, 2020) of financing of which 11.0 million Euro (approximately $12.9 million as of September 30, 2020) is comprised of unsecured financing, letters of credit and other non-cash items and 20.0 million Euro (approximately $23.4 million as of September 30, 2020) related to an unsecured revolving credit facility. Interest on the 11.0 million Euro facility was determined based upon the term of the loan utilizing the one-month Euro Interbank Offered Rate (EURIBOR) plus 1.50% (1.50%) and was fully paid on the loan origination date. Interest on the 20.0 million Euro facility accrues at a fixed rate of 4.75% and is payable at the end of the term when the loan is repaid. The maturity date for amounts currently outstanding under the 11.0 million Euro facility is April 2021. The facilities do not have an expiration date, however the limits are reviewed in July of each year to establish available capacity. As of September 30, 2020, there was approximately 9.1 million Euro, or $10.7 million, outstanding under the 11.0 million Euro facility and none outstanding under the 20.0 million Euro facility. In the third quarter of 2020, we amended an existing credit agreement with a Turkish financial institution to provide up to $21.0 million of unsecured financing. Interest on the unsecured financing accrues at a fixed rate of 3.0% and is payable at the end of the term when the loan is repaid. The maturity date for amounts currently outstanding is February 2021. The unsecured financing agreement does not have an expiration date, however the limits are reviewed in September of each year to establish available capacity. As of September 30, 2020, there was $5.8 million outstanding under the credit agreement. Note 6. Share-Based Compensation Plans During the nine months ended September 30, 2020, we issued to certain employees and non-employee directors an aggregate of 461,732 timed-based restricted stock units (RSUs), 122,752 performance-based restricted stock units (PSUs) that vest upon achievement of a cumulative, three-year Adjusted EBITDA target measured from January 1, 2020 through December 31, 2022, and 198,826 PSUs that vest upon achievement of certain stock price hurdles for the period of the grant date through December 31, 2022. All of the time-based RSUs vest on the third anniversary date of the grant date. Each of the time-based and performance-based awards are subject to the recipient’s continued service with us, the terms and conditions of the 2015 Plan and the applicable award agreement. 17 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In addition, during the nine months ended September 30, 2020, we issued 261,181 stock options to certain employees and non-employee directors. The share-based compensation expense recognized in the condensed consolidated statements of operations was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Cost of goods sold $ 479 $ (35 ) $ 1,115 $ 313 General and administrative expenses 2,152 1,717 6,832 4,291 Total share-based compensation expense $ 2,631 $ 1,682 $ 7,947 $ 4,604 The share-based compensation expense recognized by award type was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) RSUs $ 1,262 $ 869 $ 3,399 $ 2,800 Stock options 700 225 2,952 955 PSUs 669 588 1,596 849 Total share-based compensation expense $ 2,631 $ 1,682 $ 7,947 $ 4,604 Included in total share-based compensation expense for the nine months ended September 30, 2020 is $1.7 million of compensation expense associated with the modification of certain employee and non-employee awards during the nine month period. The modifications primarily provided for the extension of the post termination exercise period of outstanding stock options, resulting in a one-time charge in the nine months ended September 30, 2020. Note 7. 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 one and 15 years, some of which may include options to extend the leases up to five years. The components of lease cost were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Total operating lease cost $ 9,546 $ 7,893 $ 27,265 $ 23,830 Finance lease cost Amortization of assets under finance leases $ 1,529 $ 1,749 $ 4,489 $ 4,970 Interest on finance leases 240 323 775 1,119 Total finance lease cost $ 1,769 $ 2,072 $ 5,264 $ 6,089 18 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Total lease liabilities as of September 30, 2020 were as follows: Operating Finance Leases Leases (in thousands) Current operating lease liabilities $ 25,569 $ — Current maturities of long-term debt — 5,855 Noncurrent operating lease liabilities 165,551 — Long-term debt, net of debt issuance costs and current maturities — 7,755 Total lease liabilities $ 191,120 $ 13,610 As of September 30, 2020, the cost and accumulated depreciation of property, plant and equipment that we are leasing under finance lease arrangements were $42.7 million and $20.4 million, respectively. As of December 31, 2019, the cost and accumulated depreciation of property, plant and equipment that we are leasing under finance lease arrangements were $45.0 million and $17.0 million, respectively. Future minimum lease payments under noncancelable leases as of September 30, 2020 were as follows: Operating Finance Leases Leases (in thousands) Year Ending December 31, Remainder of 2020 $ 8,413 $ 1,317 2021 35,295 6,544 2022 32,796 5,763 2023 31,010 865 2024 27,787 222 Thereafter 130,592 7 Total future minimum lease payments 265,893 14,718 Less: interest (74,773 ) (1,108 ) Total lease liabilities $ 191,120 $ 13,610 Other information related to leases was as follows: Nine Months Ended September 30, 2020 2019 (in thousands) Supplemental Cash Flow Information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 22,308 $ 22,977 Operating cash flows from finance leases 775 1,119 Financing cash flows from finance leases 4,592 7,621 Right of use assets obtained in exchange for new lease obligations: Operating leases 67,705 12,205 Finance leases 131 5,122 19 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, December 31, 2020 2019 Weighted-Average Remaining Lease Term (In Years): Operating leases 7.9 7.6 Finance leases 2.5 3.2 Weighted-Average Discount Rate: Operating leases 7.9 % 7.5 % Finance leases 6.4 % 6.4 % As of September 30, 2020, there were no additional leases related to new manufacturing facilities that have not yet commenced. Note 8. Financial Instruments Interest Rate Swap We use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with our credit agreement (the Credit Agreement) that we entered into in April 2018. We do not use such swap contracts for speculative or trading purposes. To partially offset the variability of future interest payments on the Credit Agreement arising from changes in LIBOR, in April 2018, we entered into an interest rate swap agreement with a financial institution for a notional amount of $75.0 million with an expiration date of April 2023. This interest rate swap effectively hedges $75.0 million of the future variable rate LIBOR interest expense converting it to a fixed rate interest expense. The derivative instrument qualified for accounting as a cash flow hedge in accordance with FASB Accounting Standard Codification (ASC) Topic 815, Derivatives and Hedging, and we designated it as such. Foreign Exchange Forward Contracts We use foreign exchange forward contracts to mitigate our exposure to fluctuations in exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact. In September 2019, we entered into the first of these foreign exchange forward contracts. We do not use such forward contracts for speculative or trading purposes. We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. As of September 30, 2020, these foreign exchange forward contracts hedge our forecasted cash flows for periods up to six months. These foreign exchange forward contracts qualified for accounting as cash flow hedges in accordance with ASC Topic 815, and we designated them as such. All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. For a detailed discussion of the fair value hierarchy, refer to the discussion in Note 1, Summary of Operations and Significant Accounting Policies – Fair Value of Financial Instruments, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K. As of September 30, 2020 and December 31, 2019, the notional values associated with our foreign exchange forward contracts qualifying as cash flow hedges were 0.8 billion Mexican Pesos (approximately $32.2 million) and 1.1 billion Mexican Pesos (approximately $54.8 million), respectively. The fair values and location of financial instruments in our condensed consolidated balance sheets were as follows: Condensed Consolidated September 30, December 31, Financial Instrument Balance Sheet Line Item 2020 2019 (in thousands) Interest rate swap Other noncurrent liabilities 4,882 2,723 Foreign exchange forward contracts Other current assets 1,696 820 Foreign exchange forward contracts Accounts payable and accrued expenses — 124 20 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For cash flow hedges, the gain or loss is reported as a component of accumulated other comprehensive loss in our condensed consolidated statements of changes in stockholders’ equity and reclassified into earnings in our condensed consolidated statements of operations in the same period or periods during which the hedged transaction affects earnings. The net income (loss) recognized in accumulated other comprehensive loss in our condensed consolidated statements of changes in stockholders’ equity for our foreign exchange forward contracts is expected to be recognized in Cost of Sales in our condensed consolidated statements of operations during the next six months. The gain or loss on our interest rate swap is recorded in accumulated other comprehensive loss and subsequently reclassified into Interest Expense in our condensed consolidated statements of operations in the period in which the hedged transaction affects earnings. As of September 30, 2020, no interest rate swaps originally designated for hedge accounting were de-designated or terminated. No ineffectiveness on our interest rate swaps was recognized as of September 30, 2020, and none is anticipated over the term of the agreement. The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations: Condensed Three Months Ended Nine Months Ended Comprehensive Income Consolidated Statement September 30, September 30, (Loss) Component of Operations Line Item 2020 2019 2020 2019 (in thousands) Foreign exchange forward contracts Cost of sales $ 1,546 $ — $ 4,062 $ — Note 9. Income Taxes Income taxes for the three and nine months ended September 30, 2020 were lower than for the corresponding periods ended September 30, 2019 primarily due to the impact of a change in the forecasted annual effective tax rates and the earnings mix by jurisdiction in 2020 as compared to 2019. The forecasted effective tax rate for the current year differs from the U.S. statutory income tax rate primarily due to earnings in foreign jurisdictions with income tax rates that exceed the U.S. statutory income tax rate, losses incurred by an entity in a tax-free zone, and the establishment of a full valuation allowance on U.S. deferred items. The Internal Revenue Service (IRS) issued final regulations in July 2020 to clarify Global Intangible Low Tax Income (GILTI) under the Tax Cuts and Jobs Act allowing us to make an annual election to exclude GILTI of our foreign subsidiaries with an effective tax rate greater than 90% of the U.S. corporate rate. The impact for this change in legislation was offset by the establishment of a full valuation allowance in the U.S. during the quarter. No additional changes in tax law occurred during the quarter which have a material impact on our income tax provision. We do not record a deferred tax liability related to unremitted foreign earnings as we maintain our assertion to indefinitely reinvest our unremitted foreign earnings. Note 10. Net Income (Loss) Per Common Share Calculation Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during a period. Diluted net income per common share is computed by giving effect to all potentially dilutive securities, unless there is a net loss for the period and/or performance-based awards which are not included until performance conditions are met. In computing diluted net income per common share, we use the treasury stock method. The table below reflects the 21 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) calculation of the weighted-average number of common shares outstanding, using the treasury stock method, used in computing basic and diluted net income (loss) per common share: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Basic weighted-average shares outstanding 35,546 35,131 35,354 35,024 Effect of dilutive awards 1,877 — — — Diluted weighted-average shares outstanding 37,423 35,131 35,354 35,024 Since there were net losses for the nine months ended September 30, 2020, approximately 1,400,000 potentially dilutive shares were excluded from the calculation. Additionally, since there were net losses for the three and nine months ended September 30, 2019, approximately 980,000 and 1,304,000 potentially dilutive shares were excluded from the calculation. In addition, the table below summarizes the approximate number of share-based compensation awards which were excluded from the computation of net income (loss) per common share because their effect would be anti-dilutive: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Anti-dilutive shares 1,000 27,000 33,000 14,000 Note 11. Stockholders’ Equity Accumulated Other Comprehensive Loss The following tables presents the changes in accumulated other comprehensive loss (AOCL) by component: Nine Months Ended September 30, 2020 Foreign Foreign currency exchange translation Interest rate forward Total adjustments swap contracts AOCL (in thousands) Balance at December 31, 2019 $ (22,012 ) $ (2,145 ) $ 545 $ (23,612 ) Other comprehensive income (loss) before reclassifications (9,223 ) (2,550 ) (6,936 ) (18,709 ) Amounts reclassified from AOCL — — (222 ) (222 ) Net tax effect — 535 1,503 2,038 Net current period other comprehensive income (loss) (9,223 ) (2,015 ) (5,655 ) (16,893 ) Balance at March 31, 2020 (31,235 ) (4,160 ) (5,110 ) (40,505 ) Other comprehensive income (loss) before reclassifications (2,290 ) — 1,750 (540 ) Amounts reclassified from AOCL — — 2,738 2,738 Net tax effect — — (938 ) (938 ) Net current period other comprehensive income (loss) (2,290 ) — 3,550 1,260 Balance at June 30, 2020 (33,525 ) (4,160 ) (1,560 ) (39,245 ) Other comprehensive income (loss) before reclassifications (1,662 ) 391 2,124 853 Amounts reclassified from AOCL — — 1,546 1,546 Net tax effect — (535 ) (565 ) (1,100 ) Net current period other comprehensive income (loss) (1,662 ) (144 ) 3,105 1,299 Balance at September 30, 2020 $ (35,187 ) $ (4,304 ) $ 1,545 $ (37,946 ) 22 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Nine Months Ended September 30, 2019 Foreign Foreign currency exchange translation Interest rate forward Total adjustments swap contracts AOCL (in thousands) Balance at December 31, 2018 $ (14,986 ) $ 594 $ — $ (14,392 ) Other comprehensive income (loss) before reclassifications 1,333 (2,291 ) — (958 ) Amounts reclassified from AOCL — — — — Net tax effect — 481 — 481 Net current period other comprehensive income (loss) 1,333 (1,810 ) — (477 ) Balance at March 31, 2019 (13,653 ) (1,216 ) — (14,869 ) Other comprehensive income (loss) before reclassifications (4,203 ) (1,355 ) — (5,558 ) Amounts reclassified from AOCL — — — — Net tax effect — 284 — 284 Net current period other comprehensive income (loss) (4,203 ) (1,071 ) — (5,274 ) Balance at June 30, 2019 (17,856 ) (2,287 ) — (20,143 ) Other comprehensive income (loss) before reclassifications (895 ) (395 ) (561 ) (1,851 ) Amounts reclassified from AOCL — — — — Net tax effect — 84 118 202 Net current period other comprehensive income (loss) (895 ) (311 ) (443 ) (1,649 ) Balance at September 30, 2019 $ (18,751 ) $ (2,598 ) $ (443 ) $ (21,792 ) 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 are covered by insurance. Upon resolution of any pending legal matters, we may incur charges in excess of presently established reserves or our insurance policy limits. 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. Note 13. Concentration of Customers Revenues from certain customers (in thousands) in excess of 10 percent of our total consolidated revenues are as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Customer Revenues % of Total Revenues % of Total Revenues % of Total Revenues % of Total Vestas $ 240,710 50.8 % $ 176,018 45.9 % $ 591,548 49.1 % $ 446,733 44.0 % GE 124,523 26.3 % 96,312 25.1 % 295,831 24.6 % 272,859 26.9 % Nordex 53,182 11.2 % 61,514 16.0 % 168,697 14.0 % 170,044 16.8 % Trade accounts receivable from certain customers in excess of 10 percent of our total consolidated trade accounts receivable are as follows: September 30, December 31, 2020 2019 Customer % of Total % of Total Vestas 41.3 % 41.9 % Nordex 32.4 % 31.3 % 23 -------------------------------------------------------------------------------- TPI COMPOSITES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 14. Segment Reporting Our operating segments are defined geographically into four geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico and (4) Europe, the Middle East, Africa and India (EMEAI). For a detailed discussion of our operating segments, refer to the discussion in Note 1, Summary of Operations and Significant Accounting Policies – Basis of Presentation, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K. Financial results are aggregated into these four reportable segments based on quantitative thresholds. All of our segments operate in their local currency, however a portion of the revenue attributable to our Asia and Mexico segments is derived in U.S. dollars because certain of our domestic subsidiaries are the contracting parties to the associated customer supply agreements. The following tables set forth certain information regarding each of our segments: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Revenues by segment: U.S. $ 46,799 $ 40,643 $ 136,309 $ 122,129 Asia 163,458 108,114 400,513 261,531 Mexico 161,563 117,690 363,233 297,717 EMEAI 102,293 117,389 304,511 333,010 Total revenues $ 474,113 $ 383,836 $ 1,204,566 $ 1,014,387 Revenues by geographic location (1): U.S. $ 46,799 $ 40,643 $ 136,309 $ 122,129 China 163,458 108,114 400,513 261,531 Mexico 161,563 117,690 363,233 297,717 Turkey and India 102,293 117,389 304,511 333,010 Total revenues $ 474,113 $ 383,836 $ 1,204,566 $ 1,014,387 Income (loss) from operations: U.S. (2) $ (6,360 ) $ (17,510 ) $ (33,991 ) $ (54,235 ) Asia 25,779 13,448 49,343 4,779 Mexico 11,986 (4,954 ) (1,106 ) (1,258 ) EMEAI (2,400 ) 21,134 (13,900 ) 55,673 Total income from operations $ 29,005 $ 12,118 $ 346 $ 4,959 September 30, December 31, 2020 2019 (in thousands) Property, plant and equipment, net: U.S. $ 32,088 $ 36,410 Asia (China) 48,276 50,603 Mexico 80,601 81,654 EMEAI (Turkey and India) 49,059 36,340 Total property, plant and equipment, net $ 210,024 $ 205,007 (1) Revenues are attributable to countries based on the location where the product is manufactured or the services are performed. (2) The losses from operations in our U.S. segment includes corporate general and administrative costs of $9.3 million and $10.6 million for the three months ended September 30, 2020 and 2019, respectively, and $25.6 million and $27.8 million for the nine months ended September 30, 2020 and 2019, respectively. 24 -------------------------------------------------------------------------------- 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 (Form 10-Q). Some of the information contained in this discussion and analysis or set forth elsewhere in this 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 Form 10-Q or in our previously filed Annual Report on Form 10-K, particularly those under “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 in the wind and transportation markets. We are headquartered in Scottsdale, Arizona and operate factories throughout the U.S., China, Mexico, Turkey, and India. We operate additional engineering development centers in Denmark and Germany. Our business operations are defined geographically into four geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico and (4) Europe, the Middle East, Africa and India (EMEAI). See Note 14, Segment Reporting, to our condensed consolidated financial statements for more details about our operating segments. KEY TRENDS AND RECENT DEVELOPMENTS AFFECTING OUR BUSINESS The COVID-19 pandemic adversely impacted our operations and results of operations for the nine months ended September 30, 2020 due to reduced production levels at our manufacturing facilities primarily during the first and second quarters of 2020 as a result of certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. By the end of the second quarter of 2020, most of our manufacturing facilities had returned to operating at or near normal production levels. For the third quarter of 2020, the COVID-19 pandemic did not have a material adverse impact on our operations and results of operations. Several of our manufacturing facilities are operating in regions with high levels of reported COVID-19 positive cases. As such, we may be required to reinstate temporary production suspensions or volume reductions at these manufacturing facilities or at our other manufacturing facilities to the extent there is a resurgence of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. We continue to manage our liquidity to ensure our long-term viability until the COVID-19 pandemic abates. During the nine months ended September 30, 2020, we had net borrowings of $72.8 million under our Credit Agreement. In addition, during the nine months ended September 30, 2020, we entered into or amended four unsecured credit agreements with four Turkish financial institutions resulting in net borrowings of $31.2 million and current availability of $44.0 million. For the three and nine months ended September 30, 2020, we estimate that our net sales were adversely impacted by approximately $8 million and $142 million, based upon 13 and 342 wind blade sets which we had forecasted to produce in those periods under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. For the three and nine months ended September 30, 2020 we estimate that our net income and net loss was adversely impacted by approximately $2 million, net of taxes, and $21 million, net of taxes, based upon the forecasted gross margin on the forecasted wind blade sets which we were planning to produce in those periods but were unable to do so as a result of the COVID-19 pandemic. In addition, for the three and nine months ended September 30, 2020, we incurred approximately $4 million, net of taxes, and $11 million, net of taxes, of COVID-19 related costs associated with the health and safety of our associates and non-productive labor. For the three and nine months ended September 30, 2020, we estimate that our Adjusted EBITDA was adversely impacted by approximately $8 million and $55 million, respectively, based upon the forecasted Adjusted EBITDA margin on the forecasted wind blade sets which we were planning to produce in those periods but were unable to do so as a result of the COVID-19 pandemic and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE For a detailed discussion of our key financial and 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. 25 -------------------------------------------------------------------------------- KEY FINANCIAL METRICS Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Net sales $ 474,113 $ 383,836 $ 1,204,566 $ 1,014,387 Net income (loss) $ 42,382 $ (4,571 ) $ (24,211 ) $ (14,847 ) EBITDA (1) $ 27,168 $ 26,302 $ 21,819 $ 33,876 Adjusted EBITDA (1) $ 49,131 $ 27,470 $ 53,722 $ 53,816 Capital expenditures $ 53,428 $ 59,092 Free cash flow (1) $ (19,563 ) $ 3,643 September 30, December 31, 2020 2019 (in thousands) Total debt, net of debt issuance costs $ 237,568 $ 141,389 Net debt (1) $ (89,311 ) $ (71,779 ) (1) See below for a reconciliation of EBITDA, adjusted EBITDA, free cash flow and net debt to net income (loss), net income (loss), net cash provided by (used in) operating activities and total debt, net of debt issuance costs, respectively, the most directly comparable financial measures calculated and presented in accordance with GAAP. 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in thousands) Net income (loss) $ 42,382 $ (4,571 ) $ (24,211 ) $ (14,847 ) Adjustments: Depreciation and amortization 14,031 9,948 36,675 27,732 Interest expense (net of interest income) 3,093 2,087 7,409 6,278 Income tax provision (benefit) (32,338 ) 18,838 1,946 14,713 EBITDA 27,168 26,302 21,819 33,876 Share-based compensation expense 2,631 1,682 7,947 4,604 Realized gain (loss) on foreign currency remeasurement 17,127 (3,719 ) 18,095 1,050 Realized loss on sale of assets and asset impairments 2,160 3,354 5,518 10,561 Restructuring charges (reversals), net 45 (149 ) 343 3,725 Adjusted EBITDA $ 49,131 $ 27,470 $ 53,722 $ 53,816 Free cash flow is reconciled as follows: Nine Months Ended September 30, 2020 2019 (in thousands) Net cash provided by operating activities $ 33,865 $ 62,735 Less capital expenditures (53,428 ) (59,092 ) Free cash flow $ (19,563 ) $ 3,643 26 -------------------------------------------------------------------------------- Net debt is reconciled as follows: September 30, December 31, 2020 2019 (in thousands) Cash and cash equivalents $ 149,422 $ 70,282 Less total debt, net of debt issuance costs (237,568 ) (141,389 ) Less debt issuance costs (1,165 ) (672 ) Net debt $ (89,311 ) $ (71,779 ) KEY OPERATING METRICS Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Sets 1,038 858 2,556 2,236 Estimated megawatts 3,576 2,491 8,555 6,381 Utilization 93 % 88 % 78 % 74 % Dedicated manufacturing lines 55 52 55 54 Manufacturing lines installed 54 48 54 48 Results of Operations The following table summarizes our condensed consolidated statements of operations as a percentage of net sales for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of sales 89.7 87.5 94.8 89.1 Startup and transition costs 1.8 5.7 2.6 6.3 Total cost of goods sold 91.5 93.2 97.4 95.4 Gross profit 8.5 6.8 2.6 4.6 General and administrative expenses 2.0 2.8 2.1 2.7 Realized loss on sale of assets and asset impairments 0.4 0.9 0.5 1.0 Restructuring charges (reversals), net 0.0 (0.1 ) 0.0 0.4 Income from operations 6.1 3.2 0.0 0.5 Total other income (expense) (4.0 ) 0.5 (1.9 ) (0.5 ) Income (loss) before income taxes 2.1 3.7 (1.9 ) 0.0 Income tax benefit (provision) 6.8 (4.9 ) (0.1 ) (1.5 ) Net income (loss) 8.9 % (1.2 ) % (2.0 ) % (1.5 ) % 27 -------------------------------------------------------------------------------- Net sales Consolidated discussion The following table summarizes our net sales by product for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Wind blade sales $ 450,135 $ 352,202 $ 97,933 27.8 % $ 1,134,535 $ 930,916 $ 203,619 21.9 % Precision molding and assembly systems sales 10,541 15,049 (4,508 ) -30.0 % 24,198 39,176 (14,978 ) -38.2 % Transportation sales 7,007 8,061 (1,054 ) -13.1 % 28,798 20,717 8,081 39.0 % Other sales 6,430 8,524 (2,094 ) -24.6 % 17,035 23,578 (6,543 ) -27.8 % Total net sales $ 474,113 $ 383,836 $ 90,277 23.5 % $ 1,204,566 $ 1,014,387 $ 190,179 18.7 % The increase in the net sales of wind blades was primarily driven by a 20% increase in the number of wind blades produced during the three months ended September 30, 2020 compared to the same period in 2019 as a result of increased production at our China, Mexico, Iowa and India facilities. This increase was also due to a higher average sales price due to the mix of wind blade models produced during the three months ended September 30, 2020 compared to the same period in 2019. Net sales from the manufacturing of precision molding and assembly systems during the three months ended September 30, 2020 decreased by $4.5 million as compared to the same period in 2019. Additionally, there was a $3.1 million decrease in transportation and other sales during the three months ended September 30, 2020 as compared to the same period in 2019. The fluctuating U.S. dollar against the Euro in our Turkey operations and the Chinese Renminbi in our China operations had a favorable impact of 0.7% on consolidated net sales for the three months ended September 30, 2020 as compared to the same period in 2019. Although our net sales increased for the three months ended September 30, 2020 compared to the same period in 2019, we estimate that our net sales were adversely impacted by approximately $8 million, based upon 13 wind blade sets, which we had forecasted to produce in the period under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. The increase in the net sales of wind blades was primarily driven by a 14% increase in the number of wind blades produced during the nine months ended September 30, 2020 compared to the same period in 2019 as a result of increased production at our China, Mexico, Iowa and India facilities. The increase was also due to a higher average sales price due to the mix of wind blade models produced during the nine months ended September 30, 2020 compared to the same period in 2019. Net sales from the manufacturing of precision molding and assembly systems during the nine months ended September 30, 2020 decreased by $15.0 million as compared to the same period in 2019. Additionally, there was a $1.5 million increase in transportation and other sales during the nine months ended September 30, 2020 as compared to the same period in 2019. The fluctuating U.S. dollar against the Euro in our Turkey operations and the Chinese Renminbi in our China operations had an unfavorable impact of 0.1% on consolidated net sales for the nine months ended September 30, 2020 as compared to 2019. Although our net sales increased for the nine months ended September 30, 2020 compared to the same periods in 2019, we estimate that our net sales were adversely impacted by approximately $142 million, based upon 342 wind blade sets, which we had forecasted to produce at our Mexico, China, Iowa, Turkey and India manufacturing facilities in the periods under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. The COVID-19 pandemic required these manufacturing facilities to either temporarily suspend production or operate at reduced production levels primarily during the first and second quarters of 2020 as a result of certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. Segment discussion The following table summarizes our net sales by our four geographic operating segments for the three and nine months ended September 30, 2020 and 2019 : Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) U.S. $ 46,799 $ 40,643 $ 6,156 15.1 % $ 136,309 $ 122,129 $ 14,180 11.6 % Asia 163,458 108,114 55,344 51.2 % 400,513 261,531 138,982 53.1 % Mexico 161,563 117,690 43,873 37.3 % 363,233 297,717 65,516 22.0 % EMEAI 102,293 117,389 (15,096 ) -12.9 % 304,511 333,010 (28,499 ) -8.6 % Total net sales $ 474,113 $ 383,836 $ 90,277 23.5 % $ 1,204,566 $ 1,014,387 $ 190,179 18.7 % 28 -------------------------------------------------------------------------------- U.S. Segment The following table summarizes our net sales by product for the U.S. segment for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Wind blade sales $ 37,272 $ 25,857 $ 11,415 44.1 % $ 99,514 $ 84,328 $ 15,186 18.0 % Precision molding and assembly systems sales — 1,479 (1,479 ) NM — 2,845 (2,845 ) NM Transportation sales 6,206 8,061 (1,855 ) -23.0 % 27,424 20,717 6,707 32.4 % Other sales 3,321 5,246 (1,925 ) -36.7 % 9,371 14,239 (4,868 ) -34.2 % Total net sales $ 46,799 $ 40,643 $ 6,156 15.1 % $ 136,309 $ 122,129 $ 14,180 11.6 % NM - not meaningful The increase in the U.S. segment’s net sales of wind blades was primarily due to a higher average sales price due to the mix of wind blade models produced in the two comparative periods as well as a 57% increase in the number of wind blades produced in the three months ended September 30, 2020 as compared to the same period in 2019. Net sales from the manufacturing of precision molding and assembly systems during the three months ended September 30, 2020 decreased by $1.5 million as compared to the same period in 2019. Additionally, there was a $3.8 million decrease in transportation and other sales during the three months ended September 30, 2020 as compared to the same period in 2019. The increase in the U.S. segment’s net sales of wind blades was primarily due to a higher average sales price due to the mix of wind blade models produced in the two comparative periods as well as a 17% increase in the number of wind blades produced in the nine months ended September 30, 2020 as compared to the same period in 2019. Although our U.S. net sales increased for the nine months ended September 30, 2020 compared to the same period in 2019, our U.S. net sales were adversely impacted due to reduced production levels at our U.S. manufacturing facilities due to the COVID-19 pandemic primarily during the second quarter of 2020. Net sales from the manufacturing of precision molding and assembly systems during the nine months ended September 30, 2020 decreased by $2.8 million as compared to the same period in 2019. Additionally, there was a $1.8 million increase in transportation and other sales during the nine months ended September 30, 2020 as compared to the same period in 2019. Asia Segment The following table summarizes our net sales by product for the Asia segment for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Wind blade sales $ 158,120 $ 98,406 $ 59,714 60.7 % $ 385,536 $ 238,947 $ 146,589 61.3 % Precision molding and assembly systems sales 4,451 8,915 (4,464 ) -50.1 % 13,088 20,856 (7,768 ) -37.2 % Other sales 887 793 94 11.9 % 1,889 1,728 161 9.3 % Total net sales $ 163,458 $ 108,114 $ 55,344 51.2 % $ 400,513 $ 261,531 $ 138,982 53.1 % The increase in the Asia segment’s net sales of wind blades reflects a 32% net increase in overall wind blade volume and an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. Net sales from the manufacturing of precision molding and assembly systems decreased by $4.5 million during the three months ended September 30, 2020 as compared to the same period in 2019. The increase in the Asia segment’s net sales of wind blades was primarily due to a 37% net increase in the number of wind blades produced in the nine months ended September 30, 2020 as compared to the same period in 2019 and an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. Although our Asia net sales increased for the nine months ended September 30, 2020 compared to the same period in 2019, our Asia net sales were adversely impacted due to reduced production levels at our Asia manufacturing facilities due to the COVID-19 pandemic primarily during the first quarter of 2020. Net sales from the manufacturing of precision molding and assembly systems decreased by $7.8 million during the 2020 period as compared to the same period in 2019. 29 -------------------------------------------------------------------------------- Mexico Segment The following table summarizes our net sales by product for the Mexico segment for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Wind blade sales $ 153,575 $ 111,855 $ 41,720 37.3 % $ 346,954 $ 278,685 $ 68,269 24.5 % Precision molding and assembly systems sales 6,090 4,655 1,435 30.8 % 11,110 15,475 (4,365 ) -28.2 % Transportation sales 801 — 801 NM 1,374 — 1,374 NM Other sales 1,097 1,180 (83 ) -7.0 % 3,795 3,557 238 6.7 % Total net sales $ 161,563 $ 117,690 $ 43,873 37.3 % $ 363,233 $ 297,717 $ 65,516 22.0 % The increase in the Mexico segment’s net sales of wind blades reflects a 26% increase in overall wind blade volume and an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. Net sales from the manufacturing of precision molding and assembly systems during the three months ended September 30, 2020 increased by $1.4 million as compared to the same period in 2019. The increase in the Mexico segment’s net sales of wind blades reflects a 17% net increase in overall wind blade volume, an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods and the Matamoros strike in 2019. Although our Mexico net sales increased for the nine months ended September 30, 2020 compared to the same period in 2019, our Mexico net sales were adversely impacted due to reduced production levels at our Mexico manufacturing facilities due to the COVID-19 pandemic primarily during the second quarter of 2020. Net sales from the manufacturing of precision molding and assembly systems during the nine months ended September 30, 2020 decreased by $4.4 million as compared to the same period in 2019. EMEAI Segment The following table summarizes our net sales by product for the EMEAI segment for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Wind blade sales $ 101,168 $ 116,084 $ (14,916 ) -12.8 % $ 302,531 $ 328,956 $ (26,425 ) -8.0 % Other sales 1,125 1,305 (180 ) -13.8 % 1,980 4,054 (2,074 ) -51.2 % Total net sales $ 102,293 $ 117,389 $ (15,096 ) -12.9 % $ 304,511 $ 333,010 $ (28,499 ) -8.6 % The decrease in the EMEAI segment’s net sales of wind blades was driven by a 10% net decrease in wind blade volume primarily at our two Turkey manufacturing facilities due to transitions and a decrease in the year over year number of wind blades still in the production process at the end of the period. The decrease was partially offset by an increase in the average sales price of wind blades in the comparative periods and foreign currency fluctuations. The fluctuating U.S. dollar relative to the Euro had a favorable impact of 3.2% on net sales during the three months ended September 30, 2020 as compared to 2019. The decrease in the EMEAI segment’s net sales of wind blades was driven by a 14% net decrease in wind blade production primarily at our two Turkey manufacturing facilities due to transitions and reduced production levels at these manufacturing facilities due to the COVID-19 pandemic primarily during the second quarter of 2020. The decrease was partially offset by an increase in the average sales price of wind blades delivered in the comparative periods and an increase in the year over year number of wind blades still in the production process at the end of the period. The fluctuating U.S. dollar relative to the Euro had an unfavorable impact of 0.2% on net sales during the nine months ended September 30, 2020 as compared to the 2019 period. 30 -------------------------------------------------------------------------------- Total cost of goods sold The following table summarizes our total cost of goods sold for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Cost of sales $ 425,064 $ 335,778 $ 89,286 26.6 % $ 1,141,183 $ 904,135 $ 237,048 26.2 % Startup and transition costs 8,576 22,127 (13,551 ) -61.2 % 31,530 63,206 (31,676 ) -50.1 % Total cost of goods sold $ 433,640 $ 357,905 $ 75,735 21.2 % $ 1,172,713 $ 967,341 $ 205,372 21.2 % % of net sales 91.5 % 93.2 % -1.7 % 97.4 % 95.4 % 2.0 % Total cost of goods sold for the three months ended September 30, 2020 was $433.6 million and included $5.2 million related to lines in startup and $3.4 million of transition costs related to lines in transition during the quarter. This compares to total cost of goods sold for the three months ended September 30, 2019 of $357.9 million and included $13.1 million related to lines in startup and $9.0 million of transition costs related to lines in transition during the quarter. Total cost of goods sold as a percentage of net sales decreased by approximately 2% during the three months ended September 30, 2020 as compared to the same period in 2019, driven primarily by the decrease in direct materials, the impact of savings in raw material costs, the decrease in startup and transition costs, and foreign currency fluctuations. The fluctuating U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso had a favorable impact of 1.1% on consolidated cost of goods sold for the three months ended September 30, 2020 as compared to the same period in 2019. Total cost of goods sold for the nine months ended September 30, 2020 was $1,172.7 million and included $19.9 million related to lines in startup and $11.6 million of transition costs related to the lines in transition during the period. This compares to total cost of goods sold for the nine months ended September 30, 2019 of $967.3 million and included $43.9 million related to lines in startup and $19.3 million of transition costs related to lines in transition during the period. Cost of goods sold as a percentage of net sales increased by approximately 2% during the nine months ended September 30, 2020 as compared to the same period in 2019, driven primarily by the increase in warranty costs primarily relating to a remediation campaign for a specific wind blade model for one of our customers, and COVID-19 related costs associated with the health and safety of our associates and non-productive labor, partially offset by a decrease in startup and transition costs, the impact of savings in raw material costs and foreign currency fluctuations. The fluctuating U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso had a favorable impact of 2.0% on consolidated cost of goods sold for the nine months ended September 30, 2020 as compared to 2019. General and administrative expenses The following table summarizes our general and administrative expenses for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) General and administrative expenses $ 9,263 $ 10,608 $ (1,345 ) -12.7 % $ 25,646 $ 27,801 $ (2,155 ) -7.8 % % of net sales 2.0 % 2.8 % -0.8 % 2.1 % 2.7 % -0.6 % The decrease in general and administrative expenses as a percentage of net sales in both periods of 2020 as compared to the same periods in 2019 was primarily driven by lower travel and training costs due to the COVID-19 pandemic. 31 -------------------------------------------------------------------------------- Realized loss on sale of assets and asset impairments The following table summarizes our realized loss on sale of assets and asset impairments for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Realized loss on sale of assets and asset impairments $ 2,160 $ 3,354 $ (1,194 ) -35.6 % $ 5,518 $ 10,561 $ (5,043 ) -47.8 % % of net sales 0.5 % 0.9 % -0.4 % 0.5 % 1.0 % -0.5 % The decrease in the realized loss on sale of assets and asset impairments for the three months ended September 30, 2020 was primarily the result of lower realized losses on the sale of receivables under supply chain financing arrangements with our customers in the current year period due to decreasing interest rates as compared to the equivalent prior year period. The decrease in the realized loss on sale of assets and asset impairments for the nine months ended September 30, 2020 was primarily due to $5.0 million of realized losses on the sale of assets at our corporate and manufacturing facilities in the 2019 period as compared to $0.8 million of such losses in the 2020 period, as well as the result of lower realized losses on the sale of receivables under supply chain financing arrangements with our customers in the current year period due to decreasing interest rates as compared to the equivalent prior year period. Restructuring charges (reversals), net Restructuring charges for the three months ended September 30, 2020 totaled $0.1 million compared to a reversal of $0.1 million for the same period in 2019. The 2019 reversal related to the wind down of our Fall River, Massachusetts facility. Restructuring charges for the nine months ended September 30, 2020 totaled $0.3 million compared to $3.7 million for the same period in 2019. The 2019 restructuring costs primarily related to the closing and moving of our Taicang City, China tooling facility to our Taicang Port, China facility. 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 nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) U.S. $ (6,360 ) $ (17,510 ) $ 11,150 63.7 % $ (33,991 ) $ (54,235 ) $ 20,244 37.3 % Asia 25,779 13,448 12,331 91.7 % 49,343 4,779 44,564 NM Mexico 11,986 (4,954 ) 16,940 NM (1,106 ) (1,258 ) 152 12.1 % EMEAI (2,400 ) 21,134 (23,534 ) -111.4 % (13,900 ) 55,673 (69,573 ) -125.0 % Total income from operations $ 29,005 $ 12,118 $ 16,887 139.4 % $ 346 $ 4,959 $ (4,613 ) -93.0 % % of net sales 6.1 % 3.2 % 2.9 % 0.0 % 0.5 % -0.5 % U.S. Segment The decrease in the loss from operations in the U.S. segment for the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the decreased costs related to the shutdown of our Newton, Iowa transportation facility, the decrease in transition costs at our Newton, Iowa blade facility, a decrease in direct material costs, and the increase in wind blade volume and increase in the average sales price of wind blades noted above. The decrease in the loss from operations in the U.S. segment for the nine months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the decreased costs related to the shutdown of our Newton, Iowa transportation facility and the decrease in transition costs at our Newton, Iowa blade facility, the increase in wind blade volume and increase in the average sales 32 -------------------------------------------------------------------------------- price of wind blades noted above, partially offset by increased direct material and direct labor costs and at our Newton, Iowa blade facility. Although our U.S. loss from operations decreased for the nine months ended September 30, 2020 compared to the same period in 2019, our income from operations for the nine months ended September 30, 2020 was adversely impacted due to reduced production levels at our U.S. blade manufacturing facility due to the COVID-19 pandemic during the second quarter of 2020 and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. Asia Segment The increase in the income from operations in the Asia segment for the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the net increase in overall wind blade volume, an increase in the average sales price of wind blades noted above, a decrease in startup and transition costs, and lower direct labor costs, partially offset by increased direct material costs due to a change in the mix of wind blade models produced in the two periods. The fluctuating U.S. dollar against the Chinese Renminbi had an unfavorable impact of 1.3% on cost of goods sold for the three months ended September 30, 2020 as compared to the same period in 2019. The increase in the income from operations in the Asia segment for the nine months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the net increase in overall wind blade volume, an increase in the average sales price of wind blades noted above, a decrease in the startup and transition costs, foreign currency fluctuations and lower direct labor costs. The fluctuating U.S. dollar against the Chinese Renminbi had a favorable impact of 1.2% on cost of goods sold for the nine months ended September 30, 2020 as compared to the 2019 period. Although our Asia income from operations increased for the nine months ended September 30, 2020 compared to the same period in 2019, our income from operations was adversely impacted due to reduced production levels at our Asia manufacturing facilities due to the COVID-19 pandemic during the first quarter of 2020 and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. Mexico Segment The increase in the income from operations in the Mexico segment for the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the net increase in overall wind blade volume, an increase in the average sales price of wind blades noted above, a decrease in the startup and transition costs, foreign currency fluctuations, savings in raw material costs and lower direct labor costs. The fluctuating U.S. dollar relative to the Mexican Peso had a favorable impact of 2.0% on cost of goods sold for the three months ended September 30, 2020 as compared to 2019. The slight decrease in the loss from operations in the Mexico segment for the nine months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the overall increase in wind blade volume, an increase in the average sales price of wind blades noted above, decreased startup and transition costs, foreign currency fluctuations as well as from savings in raw material costs. These increases were mostly offset by the reduced production levels at our Mexico manufacturing facilities due to the COVID-19 pandemic during the second quarter of 2020 and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. The fluctuating U.S. dollar relative to the Mexican Peso had a favorable impact of 2.1% on cost of goods sold for the nine months ended September 30, 2020 as compared to 2019. EMEAI Segment The increase in the loss from operations in the EMEAI segment for the three months ended September 30, 2020 as compared to the same period in 2019 was primarily driven by the decreased wind blade production at our two Turkey manufacturing facilities, increased transition costs at one of our Turkey manufacturing facilities, and increased startup costs at our India manufacturing facility, partially offset by favorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had a favorable impact of 3.4% on cost of goods sold for the three months ended September 30, 2020 as compared to 2019. The increase in the loss from operations in the EMEAI segment for the nine months ended September 30, 2020 as compared to the same period in 2019 was primarily driven by increased warranty costs, decreased wind blade production at our two Turkey manufacturing facilities due to the COVID-19 pandemic during the second quarter of 2020 and COVID-19 related costs associated with the health and safety of our associates and non-productive labor, the increased startup costs at our India manufacturing facility and transition costs at one of our Turkey manufacturing facilities, partially offset by favorable foreign currency fluctuations. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had a favorable impact of 3.5% on cost of goods sold for the nine months ended September 30, 2020 as compared to 2019. 33 -------------------------------------------------------------------------------- Other income (expense) The following table summarizes our total other income (expense) for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Interest income $ 15 $ 43 $ (28 ) -65.1 % $ 55 $ 125 $ (70 ) -56.0 % Interest expense (3,108 ) (2,130 ) (978 ) -45.9 % (7,464 ) (6,403 ) (1,061 ) -16.6 % Realized gain (loss) on foreign currency remeasurement (17,127 ) 3,719 (20,846 ) NM (18,095 ) (1,050 ) (17,045 ) NM Miscellaneous income 1,259 517 742 143.5 % 2,893 2,235 658 29.4 % Total other income (expense) $ (18,961 ) $ 2,149 $ (21,110 ) NM $ (22,611 ) $ (5,093 ) $ (17,518 ) NM The increase in the total other expense in both periods of 2020 was primarily due to increases in realized losses on foreign currency remeasurement primarily due to net Euro liability exposure against the Turkish Lira in the current year periods as compared to the same periods in 2019. Income taxes The following table summarizes our income taxes for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Income tax benefit (provision) $ 32,338 $ (18,838 ) $ 51,176 NM $ (1,946 ) $ (14,713 ) $ 12,767 86.8 % Effective tax rate 322.0 % -132.0 % 8.7 % NM The decrease in the provision during the three and nine months ended September 30, 2020 was primarily due to the impact of a change in the forecasted annual effective tax rates and the earnings mix by jurisdiction in 2020 as compared to 2019. The forecasted effective tax rate for the current year differs from the U.S. statutory income tax rate primarily due to earnings in foreign jurisdictions with income tax rates that exceed the U.S. statutory income tax rate, losses incurred by an entity in a tax-free zone, and the establishment of a full valuation allowance on U.S. deferred items. Net income (loss) The following table summarizes our net income (loss) for the three and nine months ended September 30, 2020 and 2019: Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 $ % 2020 2019 $ % (in thousands) (in thousands) Net income (loss) $ 42,382 $ (4,571 ) $ 46,953 NM $ (24,211 ) $ (14,847 ) $ (9,364 ) -63.1 % The increase in the net income for the three months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the reasons set forth above. In addition, we estimate that our net income during the three months ended September 30, 2020 was adversely impacted by approximately $2 million, net of taxes based upon the forecasted gross margin on the wind blade sets we had forecasted to produce in the period under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. In addition, during the period we incurred $4 million, net of taxes, of COVID-19 related costs associated with the health and safety of our associates and non-productive labor. The diluted net income per share was $1.13 for the three months ended September 30, 2020, compared to a diluted net loss per share of $0.13 for the three months ended September 30, 2019. 34 -------------------------------------------------------------------------------- The increase in the net loss for the nine months ended September 30, 2020 as compared to the same period in 2019 was primarily due to the reasons set forth above. In addition, we estimate that our net loss during the nine months ended September 30, 2020 was adversely impacted by approximately $21 million, net of taxes, based upon the forecasted gross margin on the wind blade sets we had forecasted to produce at our Mexico, China, Iowa, Turkey and India manufacturing facilities in the period under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. The COVID-19 pandemic required these manufacturing facilities to either temporarily suspend production or operate at reduced production levels due primarily to certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. In addition, during the period we incurred $11 million, net of taxes, of COVID-19 related costs associated with the health and safety of our associates and non-productive labor. The diluted net loss per share was $0.68 for the nine months ended September 30, 2020, compared to a diluted net loss per share of $0.42 for the nine months ended September 30, 2019. Liquidity and Capital Resources As a result of the uncertainty relating to: (i) the rapidly evolving nature, magnitude and duration of the COVID-19 pandemic, (ii) the variety of measures implemented by governments around the world to address its effects and (iii) the impact on our manufacturing operations, we are managing our liquidity to ensure our long-term viability until the COVID-19 pandemic abates. During the nine months ended September 30, 2020, we had net borrowings of $72.8 million under our Credit Agreement. In addition, during the nine months ended September 30, 2020, we entered into or amended four unsecured credit agreements with four Turkish financial institutions resulting in net borrowings of $31.2 million and current availability of $44.0 million. Our primary needs for liquidity have been, and in the future will continue to be, capital expenditures, new facility startup costs, the impact of transitions, working capital, debt service costs and warranty costs. 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 from proceeds received from the issuance of stock. We had net borrowings under our financing arrangements of $96.5 million for the nine months ended September 30, 2020 as compared to net repayments under our financing arrangements of $0.2 million in the comparable period of 2019. As of September 30, 2020 and December 31, 2019, we had $238.7 million and $142.1 million in outstanding indebtedness, excluding debt issuance costs, respectively. As of September 30, 2020, we had an aggregate of $88.0 million of remaining capacity and $71.4 million of remaining availability under our various credit facilities. Working capital requirements have increased as a result of our overall growth and the need to fund higher accounts receivable and inventory levels as our business volumes have increased. 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. At September 30, 2020 and December 31, 2019, we had unrestricted cash, cash equivalents and short-term investments totaling $149.4 million and $70.3 million, respectively. The September 30, 2020 balance includes $73.4 million of cash located outside of the United States, including $47.2 million in China, $18.8 million in Turkey, $6.2 million in India, $1.0 million in Mexico and $0.2 million in other countries. In February 2020, we entered into an Incremental Facility Agreement with the current lenders to our Credit Agreement and an additional lender, pursuant to which the aggregate principal amount of our revolving credit facility under the Credit Agreement was increased from $150.0 million to $205.0 million. Our ability to repatriate funds from China to the United States is subject to a number of restrictions imposed by the Chinese government. We repatriate funds through several technology license and corporate/administrative service agreements. We are compensated quarterly based on agreed upon royalty rates for such intellectual property licenses and quarterly fees for those services. Certain of our subsidiaries are limited in their ability to declare dividends without first meeting statutory restrictions of the People’s Republic of China, including retained earnings as determined under Chinese-statutory accounting requirements. Until 50% ($26.5 million as of December 31, 2019) of registered capital is contributed to a surplus reserve, our Chinese operations can only pay dividends equal to 90% of after-tax profits (10% must be contributed to the surplus reserve). Once the surplus reserve fund requirement is met, our Chinese operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. At December 31, 2019, the amount of the surplus reserve fund was $6.6 million. 35 -------------------------------------------------------------------------------- Cash Flow Discussion The following table summarizes our key cash flow activity for the nine months ended September 30, 2020 and 2019: Nine Months Ended September 30, 2020 2019 $ Change (in thousands) Net cash provided by operating activities $ 33,865 $ 62,735 $ (28,870 ) Net cash used in investing activities (53,428 ) (60,194 ) 6,766 Net cash provided by financing activities 102,427 2,358 100,069 Operating Cash Flows Net cash provided by operating activities decreased by $28.9 million for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily as a result of lower operating results and certain changes in our working capital. Investing Cash Flows Net cash used in investing activities decreased by $6.8 million for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily as a result of a decrease in capital expenditures. We anticipate fiscal year 2020 capital expenditures of between $80 million to $90 million and we estimate that the cost that we will incur after September 30, 2020 to complete our current projects in process will be approximately $13.0 million. We are deferring non-critical capital expenditures in light of the COVID-19 uncertainty. We have used, and will continue to use, cash flows from operations, the proceeds received from our credit facilities for major projects currently being undertaken, which include new manufacturing facilities in Chennai, India, the continued investment in our existing Tukey, Mexico, China and U.S. facilities as well as in our pilot line in Warren, Rhode Island. Financing Cash Flows Net cash provided by financing activities increased by $100.1 million for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily as a result of increased net borrowings on our revolving loans and other growth-related debt. Financing Facilities Our total principal amount of debt outstanding as of September 30, 2020 was $238.7 million, including our Credit Agreement, unsecured financing agreements and equipment finance leases. See Note 5, Long-Term Debt, Net of Debt Issuance Costs and Current Maturities, to our condensed consolidated financial statements for a discussion of our debt balances. Off-Balance Sheet Transactions 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 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 segment’s customers at an agreed-upon discount rate. 36 -------------------------------------------------------------------------------- The following table summarizes certain key details of each of the accounts receivable assignment agreements in place as of September 30, 2020: Year Of Initial Agreement Segment(s) Related To Current Discount Rate 2014 Mexico LIBOR plus 0.75% 2018 U.S and Mexico LIBOR plus 1.25% 2018 EMEAI EURIBOR plus 0.75% 2019 Asia and Mexico LIBOR plus 1.00% 2019 Asia LIBOR plus 1.00% 2019 Asia Fixed rate of 3.85% 2020 EMEAI EURIBOR plus 1.95% As the receivables are purchased by the financial institutions under the agreements noted above, the receivables were removed from our balance sheet. During the three and nine months ended September 30, 2020, $343.0 million and $802.9 million of receivables were sold under the accounts receivable assignment agreements described above, respectively. Critical Accounting Policies and Estimates There have been no other significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K. Recent Accounting Pronouncements See Note 1, Recently Issued Accounting Pronouncements, to our condensed consolidated financial statements for a discussion of recent accounting pronouncements. Contractual Obligations During the nine months ended September 30, 2020, there have been no material changes to the contractual obligations reported in our Annual Report on Form 10-K, other than in the ordinary course of business. 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. We currently do not hedge our exposure to these risks. Foreign Currency Risk. We conduct international operations in China, Mexico, Turkey and India. 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 local 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 domestic 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 $33.6 million for the nine months ended September 30, 2020. 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 our key raw materials for 12 months which protects us from price increases within that period. As many of our raw material supply agreements have meet or release clauses, if raw materials prices go down, we are able to benefit from the reductions in price. We believe that this adequately protects us from increases in raw material prices and also enables us to take full advantage of decreases. Resin and resin systems are the primary commodities for which we do not have fixed pricing. Approximately 40% of the resin and resin systems we use are purchased under contracts controlled by one of our customers and therefore they receive/bear 100% of any increase or decrease in resin costs further limiting our exposure to price fluctuations. We believe that a 10% change in the price of resin and resin systems for the customers in which we are exposed to fluctuating prices would have had an impact to income from operations of approximately $7.7 million for the nine months ended September 30, 2020. Furthermore, this amount does not include the portion of any increase or decrease that would be shared with our customers under our long-term supply agreements, which is generally 70%. 37 -------------------------------------------------------------------------------- In late 2019, worldwide demand for balsa wood increased as a result of shortages of other types of core materials. In addition, our supply chain for balsa wood, which is primarily sourced from Ecuador, has been further stressed due to the COVID-19 pandemic. As a result of this increased demand and supply chain disruption, we currently do not have fixed pricing for a portion of our contracts and purchases orders for balsa wood for the remainder of 2020. We believe that a 10% change in the price of balsa wood would have had an impact to income from operations of approximately $6.1 million for the nine months ended September 30, 2020. Interest Rate Risk. As of September 30, 2020, our EMEAI segment has one general credit agreement, as amended, with a Turkish financial institution which is tied to EURIBOR. This agreement had collateralized financing of capital expenditures and unsecured financing outstanding as of September 30, 2020 totaling $15.8 million. In addition, as of September 30, 2020, our Credit Agreement includes interest on the unhedged principal amount of $110.2 million which is tied to LIBOR. The EMEAI financings and the Credit Agreement noted above are the only variable rate debt that we had outstanding as of September 30, 2020 as all remaining working capital loans, accounts receivable financing, unsecured financing and capital lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates. Due to the relatively low LIBOR and EURIBOR rates in effect as of September 30, 2020, a 10% change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or cash flows. 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 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 September 30, 2020 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 September 30, 2020. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 38 -------------------------------------------------------------------------------- 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 Except as noted below, there have been no material changes to the Risk Factors (Part I, Item 1A) in our Annual Report on Form 10-K, which could materially affect our business, financial condition, and/or future results. Our business, operations and financial condition for the nine months ended September 30, 2020 have been adversely affected by the COVID-19 pandemic and we cannot estimate the duration and magnitude of the COVID-19 pandemic on our business, operations and financial condition at this time. The COVID-19 pandemic has adversely affected our business and operations for the nine months ended September 30, 2020. During the first quarter of 2020, our China manufacturing facilities were adversely impacted by the COVID-19 pandemic in the form of reduced production levels and COVID-19 related costs associated with the health and safety of our associates and non-productive labor. During the second quarter of 2020, all of our manufacturing facilities with the exception of our China manufacturing facilities and our Rhode Island manufacturing facility were required to temporarily suspend production or operate at reduced production levels due primarily to certain applicable government-mandated stay at home orders in response to the COVID-19 pandemic, demands from certain of our labor unions to suspend or reduce production and general safety concerns of our associates. By the end of the second quarter of 2020, most of our manufacturing facilities had returned to operating at or near normal production levels. However, several of our manufacturing facilities are operating in regions with high levels of reported COVID-19 positive cases. As such, we may be required to reinstate temporary production suspensions or volume reductions at these manufacturing facilities or at our other manufacturing facilities to the extent there is a resurgence of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. In addition, although we currently have not experienced any significant disruptions in our global supply chain due to the COVID-19 pandemic, our global supply chain may in the future be adversely affected if the COVID-19 pandemic persists. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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. 39 -------------------------------------------------------------------------------- Item 6. Exhibits Exhibit Number Exhibit Description 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.SCH Inline XBRL Taxonomy Extension Schema Document (filed herewith) 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) 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. 40 -------------------------------------------------------------------------------- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: November 5, 2020 By: /s/ Adan Gossar Adan Gossar Chief Accounting Officer (Principal Accounting Officer) 41 EX-31.1 2 tpic-ex311_7.htm EX-31.1 Exhibit 31.1 CERTIFICATION I, William E. Siwek, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TPI Composites, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: November 5, 2020 By: /s/ William E. Siwek William E. Siwek Chief Executive Officer (Principal Executive Officer) EX-31.2 3 tpic-ex312_8.htm EX-31.2 Exhibit 31.2 CERTIFICATION I, Bryan Schumaker, certify that: 1. I have reviewed this quarterly report on Form 10-Q of TPI Composites, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: November 5, 2020 By: /s/ Bryan Schumaker Bryan Schumaker Chief Financial Officer (Principal Financial Officer) EX-32.1 4 tpic-ex321_9.htm EX-32.1 Exhibit 32.1 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 I, William E. Siwek, Chief Executive Officer of TPI Composites, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the report on Form 10-Q of TPI Composites, Inc. for the three months ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)); and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of TPI Composites, Inc. Date: November 5, 2020 By: /s/ William E. Siwek William E. Siwek Chief Executive Officer (Principal Executive Officer) EX-32.2 5 tpic-ex322_6.htm EX-32.2 Exhibit 32.2 Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 I, Bryan Schumaker, Chief Financial Officer of TPI Composites, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the report on Form 10-Q of TPI Composites, Inc. for the three months ended September 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)); and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of TPI Composites, Inc. Date: November 5, 2020 By: /s/ Bryan Schumaker Bryan Schumaker Chief Financial Officer (Principal Financial Officer)