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06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

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

 

For the quarterly period ended March 31, 2022

OR

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

Commission File Number 001-37839

 

img144850166_0.jpg 

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-1590775

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

8501 N. Scottsdale Rd.

Gainey Center II, Suite 100

Scottsdale, AZ 85253

(480) 305-8910

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

TPIC

NASDAQ Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

 


 

As of April 29, 2022, there were 37,257,924 shares of common stock outstanding.

 

 


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2022 and 2021

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021

 

7

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

 

8

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

10

 

 

 

 

 

ITEM 2.

 

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

 

22

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

 

33

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

 

34

 

 

 

 

 

ITEM 1A.

 

Risk Factors

 

34

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

 

 

 

 

 

ITEM 3.

 

Defaults Upon Senior Securities

 

34

 

 

 

 

 

ITEM 4.

 

Mine Safety Disclosures

 

34

 

 

 

 

 

ITEM 5.

 

Other Information

 

34

 

 

 

 

 

ITEM 6.

 

Exhibits

 

35

 

 

 

 

 

SIGNATURES

 

36

 

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. 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 COVID-19 pandemic on our business and results of operations;
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;
growth of the wind energy market and our addressable market;
our ability to absorb or mitigate the impact of price increases in resin, carbon reinforcements (or fiber), other raw materials and related logistics costs that we use to produce our products;
our ability to procure adequate supplies of raw materials and components in a cost-effective manner to fulfill our volume commitments to our customers;
the potential impact of the increasing prevalence of auction-based tenders in the wind energy market and increased competition from solar energy on our gross margins and overall financial performance;
our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve or maintain profitability;
changes in domestic or international government or regulatory policy, including without limitation, changes in trade policy;
changes in global economic trends and uncertainty, geopolitical risks, and demand or supply disruptions from global events;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to attract and retain customers for our products, and to optimize product pricing;
our ability to effectively manage our growth strategy and future expenses, including our startup and transition costs;
our ability to successfully expand in our existing wind energy markets and into new international wind energy markets, including our ability to expand our field service inspection and repair services business and manufacture wind blades for offshore wind energy projects;
our ability to 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;
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; and
the potential impact of one or more of our customers becoming bankrupt or insolvent, or experiencing other financial problems.

2


 

These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. We have described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on February 25, 2022 the principal risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to update any forward-looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of unanticipated events except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

 

3


 

PART I. FINANCIAL INFORMATION

ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands, except par value data)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

130,893

 

 

$

242,165

 

Restricted cash

 

 

9,869

 

 

 

10,053

 

Accounts receivable

 

 

187,993

 

 

 

157,804

 

Contract assets

 

 

206,064

 

 

 

188,323

 

Prepaid expenses

 

 

29,654

 

 

 

19,280

 

Other current assets

 

 

24,595

 

 

 

22,584

 

Inventories

 

 

17,649

 

 

 

11,533

 

Assets held for sale

 

 

8,529

 

 

 

8,529

 

Total current assets

 

 

615,246

 

 

 

660,271

 

Property, plant and equipment, net

 

 

178,657

 

 

 

169,578

 

Operating lease right of use assets

 

 

160,532

 

 

 

137,192

 

Other noncurrent assets

 

 

41,753

 

 

 

40,660

 

Total assets

 

$

996,188

 

 

$

1,007,701

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

316,477

 

 

$

336,697

 

Accrued warranty

 

 

38,943

 

 

 

42,020

 

Current maturities of long-term debt

 

 

46,137

 

 

 

66,438

 

Current operating lease liabilities

 

 

22,652

 

 

 

22,681

 

Contract liabilities

 

 

1,274

 

 

 

1,274

 

Total current liabilities

 

 

425,483

 

 

 

469,110

 

Long-term debt, net of current maturities

 

 

5,573

 

 

 

8,208

 

Noncurrent operating lease liabilities

 

 

148,189

 

 

 

146,479

 

Other noncurrent liabilities

 

 

10,805

 

 

 

10,978

 

Total liabilities

 

 

590,050

 

 

 

634,775

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Mezzanine equity:

 

 

 

 

 

 

Series A Preferred Stock, $0.01 par value, 400 shares authorized; 350 and 350 shares
   issued and outstanding, respectively at March 31, 2022 and December 31, 2021;
   liquidation preference of $
474,603 at March 31, 2022 and $473,227 at
   December 31, 2021

 

 

265,106

 

 

 

250,974

 

Stockholders’ equity:

 

 

 

 

 

 

Common shares, $0.01 par value, 100,000 shares authorized, 37,524 shares issued
   and
37,258 shares outstanding at March 31, 2022 and 100,000 shares authorized,
   
37,419 shares issued and 37,180 shares outstanding at December 31, 2021

 

 

375

 

 

 

374

 

Paid-in capital

 

 

440,588

 

 

 

451,440

 

Accumulated other comprehensive loss

 

 

(7,932

)

 

 

(54,006

)

Accumulated deficit

 

 

(285,064

)

 

 

(269,264

)

Treasury stock, at cost, 266 shares at March 31, 2022 and 239 shares at
   December 31, 2021

 

 

(6,935

)

 

 

(6,592

)

Total stockholders’ equity

 

 

141,032

 

 

 

121,952

 

Total liabilities and stockholders’ equity

 

$

996,188

 

 

$

1,007,701

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

(in thousands, except per share data)

 

Net sales

 

$

384,870

 

 

$

404,680

 

Cost of sales

 

 

370,954

 

 

 

383,056

 

Startup and transition costs

 

 

15,543

 

 

 

14,354

 

Total cost of goods sold

 

 

386,497

 

 

 

397,410

 

Gross profit (loss)

 

 

(1,627

)

 

 

7,270

 

General and administrative expenses

 

 

7,860

 

 

 

8,922

 

Loss on sale of assets and asset impairments

 

 

959

 

 

 

1,297

 

Restructuring charges, net

 

 

2,393

 

 

 

258

 

Loss from operations

 

 

(12,839

)

 

 

(3,207

)

Other income (expense):

 

 

 

 

 

 

Interest expense, net

 

 

(769

)

 

 

(2,704

)

Foreign currency income (loss)

 

 

210

 

 

 

(3,727

)

Miscellaneous income

 

 

542

 

 

 

739

 

Total other expense

 

 

(17

)

 

 

(5,692

)

Loss before income taxes

 

 

(12,856

)

 

 

(8,899

)

Income tax benefit (provision)

 

 

(2,944

)

 

 

7,102

 

Net loss

 

 

(15,800

)

 

 

(1,797

)

Preferred stock dividends and accretion

 

 

(14,132

)

 

 

 

Net loss attributable to common stockholders

 

$

(29,932

)

 

$

(1,797

)

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

41,899

 

 

 

36,601

 

Diluted

 

 

41,899

 

 

 

36,601

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(0.71

)

 

$

(0.05

)

Diluted

 

$

(0.71

)

 

$

(0.05

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

(in thousands)

 

Net loss

 

$

(15,800

)

 

$

(1,797

)

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

43,369

 

 

 

(5,291

)

Unrealized gain (loss) on hedging derivatives, net of taxes of
  $
0 and $651, respectively

 

 

2,705

 

 

 

(3,035

)

Comprehensive income (loss)

 

$

30,274

 

 

$

(10,123

)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

 

Common

 

 

Paid-in

 

 

other comprehensive

 

 

Accumulated

 

 

Treasury stock,

 

 

Total stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

at cost

 

 

equity

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at
   December 31, 2021

 

 

350

 

 

$

250,974

 

 

 

 

37,418

 

 

$

374

 

 

$

451,440

 

 

$

(54,006

)

 

$

(269,264

)

 

$

(6,592

)

 

$

121,952

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,800

)

 

 

 

 

 

(15,800

)

Preferred stock
   dividends

 

 

 

 

 

9,605

 

 

 

 

 

 

 

 

 

 

(9,605

)

 

 

 

 

 

 

 

 

 

 

 

(9,605

)

Other comprehensive
   income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,074

 

 

 

 

 

 

 

 

 

46,074

 

Common stock
   repurchased
   for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(343

)

 

 

(343

)

Issuances under
   share-based
   compensation plan

 

 

 

 

 

 

 

 

 

106

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Share-based
   compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,279

 

 

 

 

 

 

 

 

 

 

 

 

3,279

 

Accretion of Series A
   Preferred Stock

 

 

 

 

 

4,527

 

 

 

 

 

 

 

 

 

 

(4,527

)

 

 

 

 

 

 

 

 

 

 

 

(4,527

)

Balance at
   March 31, 2022

 

 

350

 

 

 

265,106

 

 

 

 

37,524

 

 

 

375

 

 

 

440,587

 

 

 

(7,932

)

 

 

(285,064

)

 

 

(6,935

)

 

 

141,032

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Series A Preferred Stock

 

 

 

Common

 

 

Paid-in

 

 

other comprehensive

 

 

Accumulated

 

 

Treasury stock,

 

 

Total stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

loss

 

 

deficit

 

 

at cost

 

 

equity

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at
   December 31, 2020

 

 

 

 

$

 

 

 

 

36,771

 

 

$

368

 

 

$

349,472

 

 

$

(32,990

)

 

$

(109,716

)

 

$

(6,099

)

 

$

201,035

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,797

)

 

 

 

 

 

(1,797

)

Other comprehensive
   loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,326

)

 

 

 

 

 

 

 

 

(8,326

)

Common stock
   repurchased
   for treasury

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

(34

)

Issuances under
   share-based
   compensation plan

 

 

 

 

 

 

 

 

 

149

 

 

 

1

 

 

 

1,235

 

 

 

 

 

 

 

 

 

 

 

 

1,236

 

Share-based
   compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,494

 

 

 

 

 

 

 

 

 

 

 

 

2,494

 

Balance at
   March 31, 2021

 

 

 

 

 

 

 

 

 

36,920

 

 

 

369

 

 

 

353,201

 

 

 

(41,316

)

 

 

(111,513

)

 

 

(6,133

)

 

 

194,608

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7


 

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(15,800

)

 

$

(1,797

)

Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

11,753

 

 

 

11,609

 

Loss on sale of assets and asset impairments

 

 

959

 

 

 

1,297

 

Share-based compensation expense

 

 

3,309

 

 

 

2,399

 

Amortization of debt issuance costs

 

 

 

 

 

114

 

Deferred income taxes

 

 

(277

)

 

 

(11,574

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(30,670

)

 

 

(