UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June 30,~~March 31, ~~2021~~2022

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

Commission File Number 001-37839

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-1590775

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

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 ~~July 30, 2021,~~April 29, 2022, there were ~~37,248,140~~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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	4

	Condensed Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	7

	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2122

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3132

ITEM 4.	Controls and Procedures	3233

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	3334

ITEM 1A.	Risk Factors	3334

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3334

ITEM 3.	Defaults Upon Senior Securities	3334

ITEM 4.	Mine Safety Disclosures	3334

ITEM 5.	Other Information	3334

ITEM 6.	Exhibits	3435

SIGNATURES		3536

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.~~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 discovery of defects in our products and our ability to estimate the future cost of warranty campaigns;~~



~~growth of the wind energy and electric vehicle markets and our addressable markets for our products and services;~~

•

the potential impact of the increasing prevalence of auction-based tenders in the wind energy market and increased competition from solar energy on our gross margins and overall financial performance;

•

our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve or maintain profitability;

•

changes in domestic or international government or regulatory policy, including without limitation, changes in trade ~~policy and a potential extension of the Production Tax Credit in the United States;~~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 ~~take over existing facilities of our customers~~ and expand ~~our~~ 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; 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 February 25, ~~2021~~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.

PART I. FINANCIAL INFORMATION

ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
	(in thousands, except par value data)						(in thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents	$	123,107		$	129,857		$	130,893		$	242,165
Restricted cash		154			339			9,869			10,053
Accounts receivable		147,827			132,768			187,993			157,804
Contract assets		231,780			216,928			206,064			188,323
Prepaid expenses		21,019			29,507			29,654			19,280
Other current assets		20,520			27,921			24,595			22,584
Inventories		13,168			10,839			17,649			11,533
Assets held for sale								8,529			8,529
Total current assets		557,575			548,159			615,246			660,271
Property, plant and equipment, net		205,716			209,001			178,657			169,578
Operating lease right of use assets		148,991			158,827			160,532			137,192
Other noncurrent assets		28,232			40,270			41,753			40,660
Total assets	$	940,514		$	956,257		$	996,188		$	1,007,701

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	310,320		$	295,992		$	316,477		$	336,697
Accrued warranty		47,462			50,852			38,943			42,020
Current maturities of long-term debt		56,137			32,551			46,137			66,438
Current operating lease liabilities		23,100			26,099			22,652			22,681
Contract liabilities		2,258			614			1,274			1,274
Total current liabilities		439,277			406,108			425,483			469,110
Long-term debt, net of current maturities		180,138			184,316			5,573			8,208
Noncurrent operating lease liabilities		152,059			155,925			148,189			146,479
Other noncurrent liabilities		8,143			8,873			10,805			10,978
Total liabilities		779,617			755,222			590,050			634,775
Commitments and contingencies (Note 12)
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, 37,248 shares issued and 37,040 shares outstanding at June 30, 2021 and 100,000 shares authorized, 36,771 shares issued and 36,564 shares outstanding at December 31, 2020		372			368
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		359,527			349,472			440,588			451,440
Accumulated other comprehensive loss		(41,559	)		(32,990	)		(7,932	)		(54,006	)
Accumulated deficit		(151,310	)		(109,716	)		(285,064	)		(269,264	)
Treasury stock, at cost, 208 shares at June 30, 2021 and 207 shares at December 31, 2020		(6,133	)		(6,099	)
Treasury stock, at cost, 266 shares at March 31, 2022 and 239 shares at December 31, 2021								(6,935	)		(6,592	)
Total stockholders’ equity		160,897			201,035			141,032			121,952
Total liabilities and stockholders’ equity	$	940,514		$	956,257		$	996,188		$	1,007,701

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30,						June 30,							March 31,
	2021			2020			2021			2020				2022			2021
	(in thousands, except per share data)												(in thousands, except per share data)
Net sales	$	458,841		$	373,817		$	863,521		$	730,453			$	384,870		$	404,680
Cost of sales		440,416			367,644			823,472			716,119				370,954			383,056
Startup and transition costs		10,099			10,920			24,453			22,954				15,543			14,354
Total cost of goods sold		450,515			378,564			847,925			739,073				386,497			397,410
Gross profit (loss)		8,326			(4,747	)		15,596			(8,620	)			(1,627	)		7,270
General and administrative expenses		6,712			6,887			15,634			16,383				7,860			8,922
Loss on sale of assets and asset impairments		1,451			1,440			2,748			3,358				959			1,297
Restructuring charges, net		2,196			181			2,454			298				2,393			258
Loss from operations		(2,033	)		(13,255	)		(5,240	)		(28,659	)			(12,839	)		(3,207	)
Other income (expense):
Interest expense, net		(2,691	)		(2,545	)		(5,395	)		(4,316	)			(769	)		(2,704	)
Foreign currency loss		(6,504	)		(1,928	)		(10,231	)		(968	)
Foreign currency income (loss)															210			(3,727	)
Miscellaneous income		321			939			1,060			1,634				542			739
Total other expense		(8,874	)		(3,534	)		(14,566	)		(3,650	)			(17	)		(5,692	)
Loss before income taxes		(10,907	)		(16,789	)		(19,806	)		(32,309	)			(12,856	)		(8,899	)
Income tax provision		(28,890	)		(49,312	)		(21,788	)		(34,284	)
Income tax benefit (provision)															(2,944	)		7,102
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)			(15,800	)		(1,797	)
Preferred stock dividends and accretion															(14,132	)		0
Net loss attributable to common stockholders														$	(29,932	)	$	(1,797	)

Weighted-average common shares outstanding:
Basic		36,881			35,299			36,742			35,256				41,899			36,601
Diluted		36,881			35,299			36,742			35,256				41,899			36,601

Net loss per common share:
Basic	$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)		$	(0.71	)	$	(0.05	)
Diluted	$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)		$	(0.71	)	$	(0.05	)

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30,						June 30,							March 31,
	2021			2020			2021			2020				2022			2021
	(in thousands)												(in thousands)
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)		$	(15,800	)	$	(1,797	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(4	)		(2,289	)		(5,295	)		(11,513	)			43,369			(5,291	)
Unrealized gain (loss) on hedging derivatives, net of taxes of $85, $(939), $736 and $1,100, respectively		(239	)		3,549			(3,274	)		(4,120	)
Unrealized gain (loss) on hedging derivatives, net of taxes of $0 and $651, respectively															2,705			(3,035	)
Comprehensive income (loss)	$	(40,040	)	$	(64,841	)	$	(50,163	)	$	(82,226	)		$	30,274		$	(10,123	)

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Six Months Ended June 30, 2021

Accumulated

Common

Paid-in

other comprehensive

Accumulated

Treasury stock,

Total stockholders'

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
)
Share-based compensation expense

—

—

2,494

—

—

—

2,494

Issuances under share-based
compensation plan

149

1

1,235

—

—

—

1,236

Common stock repurchased for treasury

—

—

—

—

—

(34
)

(34
)
Other comprehensive loss

—

—

—

(8,326
)

—

—

(8,326
)
Balance at March 31, 2021

36,920

369

353,201

(41,316
)

(111,513
)

(6,133
)

194,608

Net loss

—

—

—

—

(39,797
)

—

(39,797
)
Share-based compensation expense

—

—

2,836

—

—

—

��
2,836

Issuances under share-based
compensation plan

328

3

3,490

—

—

—

3,493

Other comprehensive loss

—

—

—

(243
)

—

—

(243
)
Balance at June 30, 2021

37,248

$
372

$
359,527

$
(41,559
)

$
(151,310
)

$
(6,133
)

$
160,897


	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

Six Months Ended June 30, 2020

Accumulated

Common

Paid-in

other comprehensive

Accumulated

Treasury 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


	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.

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Cash flows from operating activities:
Net loss	$	(41,594	)	$	(66,593	)	$	(15,800	)	$	(1,797	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		24,110			22,644			11,753			11,609
Loss on sale of assets and asset impairments		2,748			3,358			959			1,297
Restructuring charges, net		2,454			298
Share-based compensation expense		5,324			5,316			3,309			2,399
Amortization of debt issuance costs		228			122			0			114
Deferred income taxes		13,221			28,134			(277	)		(11,574	)
Changes in assets and liabilities:
Accounts receivable		(19,465	)		44,864			(30,670	)		(428	)
Contract assets and liabilities		(16,007	)		(53,089	)		(14,906	)		(132	)
Operating lease right of use assets and operating lease liabilities		2,971			5,749			339			2,376
Inventories		(2,488	)		(5,899	)		(6,027	)		(1,129	)
Prepaid expenses		8,232			(6,272	)		(7,704	)		6,105
Other current assets		7,151			3,396			(1,249	)		8,302
Other noncurrent assets		(1,767	)		(957	)		1,006			(1,526	)
Accounts payable and accrued expenses		15,747			(19,117	)		(19,113	)		(3,466	)
Accrued warranty		(3,390	)		9,133			(3,077	)		(4,896	)
Other noncurrent liabilities		(730	)		1,908			403			(514	)
Net cash used in operating activities		(3,255	)		(27,005	)
Net cash provided by (used in) operating activities								(81,054	)		6,740
Cash flows from investing activities:
Purchases of property, plant and equipment		(27,059	)		(42,030	)		(5,516	)		(18,786	)
Net cash used in investing activities		(27,059	)		(42,030	)		(5,516	)		(18,786	)
Cash flows from financing activities:
Proceeds from revolving and term loans		2,106			80,000
Net repayments of accounts receivable financing		—			(3,829	)
Proceeds from working capital loans		6,383			—			3,967			0
Repayments of working capital loans								(3,951	)		0
Principal repayments of finance leases		(2,803	)		(2,837	)		(1,545	)		(1,406	)
Net proceeds from other debt		13,362			23,788
Debt issuance costs		—			(730	)
Net proceeds from (repayments of) other debt								(21,408	)		18,695
Proceeds from exercise of stock options		4,688			1,371			1			1,216
Repurchase of common stock including shares withheld in lieu of income taxes		(34	)		(508	)		(343	)		(34	)
Net cash provided by financing activities		23,702			97,255
Net cash provided by (used in) financing activities								(23,279	)		18,471
Impact of foreign exchange rates on cash, cash equivalents and restricted cash		(323	)		(2,525	)		(1,607	)		(49	)
Net change in cash, cash equivalents and restricted cash		(6,935	)		25,695			(111,456	)		6,376
Cash, cash equivalents and restricted cash, beginning of year		130,196			71,749			252,218			130,196
Cash, cash equivalents and restricted cash, end of period	$	123,261		$	97,444		$	140,762		$	136,572

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)


	Six Months Ended				Three Months Ended
	June 30,				March 31,
	2021		2020		2022		2021
	(in thousands)				(in thousands)
Supplemental cash flow information:
Cash paid for interest	$	5,255	$	3,976	$	639	$	2,617
Cash paid for income taxes, net of refunds		14,866		7,393		10,828		5,130
Noncash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities		5,384		54,326		8,298		1,245
Property, plant, and equipment obtained in exchange for new finance lease liabilities		136		0
Accrued capital expenditures in accounts payable		3,682		7,970		1,397		6,975
Paid-in-kind preferred stock dividends and accretion						14,132		0


Reconciliation of Cash, Cash Equivalents and Restricted Cash:	June 30,		December 31,		June 30,		December 31,		March 31,		December 31,		March 31,		December 31,
	2021		2020		2020		2019		2022		2021		2021		2020
	(in thousands)								(in thousands)
Cash and cash equivalents	$	123,107	$	129,857	$	96,657	$	70,282	$	130,893	$	242,165	$	136,236	$	129,857
Restricted cash		154		339		312		992		9,869		10,053		336		339
Restricted cash included within other noncurrent assets		0		0		475		475
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	123,261	$	130,196	$	97,444	$	71,749	$	140,762	$	252,218	$	136,572	$	130,196

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Significant Accounting Policies

Functional Currency Change from Turkish Lira to Euro for the Company’s Turkish operations.

Effective January 1, 2022, the functional currency for our operations in Turkey changed from the Turkish Lira to the Euro. Nonmonetary assets and liabilities were remeasured into Euros at the rate in effect on the date of the asset's or liability’s inception and then translated into reporting currency based on the current exchange rate. The monetary assets and liabilities were remeasured into Euros at the rate in effect on the date of change and then translated into reporting currency based on the current exchange rate. The difference between historical basis of nonmonetary assets and liabilities and the new basis of $44.9 million (increase in net assets) was recorded in the currency translation adjustment account. The amount recorded in the currency translation adjustment account for prior periods was not reversed upon the change in functional currency. The majority of the initial impact of the functional currency change was to property, plant and equipment and operating lease right of use assets with offset to the currency translation adjustment account.

While the change of the functional currency was based on a factual assessment, the determination of the date of the change required management’s judgement given the change in the primary economic and business environment in which we operate have evolved over time. When we established our Turkish operations in 2012 and 2013, the Turkish government had a goal of significantly increasing renewable energy being generated and utilized within Turkey by year 2023. During 2014-2017, wind energy being generated and utilized in Turkey increased and management observed that progress was being made towards the Turkish government's goal. In 2018 and 2019, the Turkish government introduced tenders to spur domestic renewable energy generation and utilization in Turkey. However, as of year-end 2020, Turkish domestic renewable energy being generated and utilized was significantly less than originally forecasted by the Turkish government. As of 2021, there were no significant wind turbine installations under the tenders awarded by the Turkish government in 2018 and 2019. Based on recent and anticipated annual domestic renewable energy demand it is unlikely for the local energy generation to reach the Turkish government's goals for 2023. Additionally, in recent years sales to the eurozone have increased and the Company is focused on meeting the export demands of the region. Based on the analysis of the domestic renewable energy demand through 2021 and anticipated future demand, management concluded that Turkish domestic sales will not grow as previously envisioned and most of the future growth will continue to be predominately export sales to the eurozone, which are primarily denominated in Euros.

Management re-evaluated all indicators established in ASC Topic 830, "Foreign Currency Matters", to determine the functional currency of our Turkish operations. Such indicators include i) cash flow, ii) sales price, iii) sales market, iv) expense, v) financing and vi) intercompany transactions and arrangements. At the time of the assessment adopted on January 1, 2022, (i) approximately 80% of our sales in Turkey are denominated in Euros and the rest are in USD, (ii) a majority of expenses are denominated in Euros, (iii) all debt and lease obligations are denominated in Euro, (iv) a majority of the cash balances are denominated in Euros and (v) a majority of the intercompany balances are denominated in Euros. When considering all relevant facts together along with managements’ long-term plan for our Turkey operations, management concluded that the Euros best reflects the currency of the primary economic environment in which we currently operate. As a result, the Company adopted the Euro as the functional currency of our Turkish operations effective January 1, 2022 on a prospective basis.

Note 1.2. 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, ~~2020~~2021 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 ~~June 30, 2021,~~March 31, 2022, and the results of our operations, comprehensive income (loss) and cash flows for the periods presented. Interim results for the three ~~and six~~ months ended ~~June 30, 2021 and 2020~~March 31, 2022 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.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

Accounting Pronouncements

~~Recently Adopted Accounting Pronouncements~~

~~Convertible Instruments~~

~~In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. This ASU removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. This ASU also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method.

This ASU is effective for all public business entities (other than smaller reporting companies) for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be ~~adopted~~ ~~on either a fully retrospective or modified retrospective basis. An entity should adopt the guidance at the beginning of its annual fiscal year. We adopted this standard on~~ ~~January 1, 2021~~ ~~on a modified retrospective basis and it~~ ~~did not have a material effect~~ ~~on our condensed consolidated financial statements.~~

Recently Issued Accounting Pronouncements

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, which 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. This ASU only applies to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. This ASU is effective for all entities beginning on March 12, 2020 and entities may elect to apply the ASU prospectively through December 31, 2022. The FASB later issued ASU 2021-01, Reference Rate

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Reform (Topic 848): Scope, to clarify the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848. We are currently evaluating the impact this guidance may have on our condensed consolidated financial statements and related disclosures.

Note 2.3. Revenue From Contracts with Customers

For a detailed discussion of our revenue recognition policy, refer to the discussion in Note 1, Summary of Operations and Summary of Significant Accounting Policies – (c) Revenue Recognition, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K.

The following tables represents the disaggregation of our net sales revenue by product for each of our reportable segments:


	Three Months Ended June 30, 2021												Three Months Ended March 31, 2022
	U.S.		Asia		Mexico		EMEA		India		Total		U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)												(in thousands)
Wind blade sales	$	39,427	$	82,491	$	131,188	$	103,201	$	62,397	$	418,704	$	0	$	36,399	$	129,606	$	146,849	$	41,727	$	354,581
Precision molding and assembly systems sales		0		7,634		5,969		0		0		13,603		0		3,859		147		0		0		4,006
Transportation sales		12,227		0		2,688		0		0		14,915		12,857		0		0		0		0		12,857
Field service, inspection and repair services sales														8,601		968		0		281		0		9,850
Other sales		5,107		981		3,325		2,149		57		11,619		99		120		643		2,555		159		3,576
Total net sales	$	56,761	$	91,106	$	143,170	$	105,350	$	62,454	$	458,841	$	21,557	$	41,346	$	130,396	$	149,685	$	41,886	$	384,870

Three Months Ended June 30, 2020

U.S.

Asia

Mexico

EMEA

India

Total

(in thousands)

Wind blade sales

$
26,309

$
141,540

$
78,193

$
87,162

$
14,859

$
348,063

Precision molding and
assembly systems sales

0

3,576

3,318

0

0

6,894

Transportation sales

14,539

0

363

0

0

14,902

Other sales

1,231

802

1,546

379

0

3,958

Total net sales

$
42,079

$
145,918

$
83,420

$
87,541

$
14,859

$
373,817

Six Months Ended June 30, 2021

U.S.

Asia

Mexico

EMEA

India

Total

(in thousands)

Wind blade sales

$
79,054

$
154,994

$
239,630

$
214,228

$
109,977

$
797,883

Precision molding and
assembly systems sales

0

11,598

10,932

0

0

22,530

Transportation sales

18,651

0

4,395

0

0

23,046

Other sales

8,342

1,442

6,672

3,488

118

20,062

Total net sales

$
106,047

$
168,034

$
261,629

$
217,716

$
110,095

$
863,521


	Six Months Ended June 30, 2020												Three Months Ended March 31, 2021
	U.S.		Asia		Mexico		EMEA		India		Total		U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)												(in thousands)
Wind blade sales	$	62,242	$	227,416	$	193,379	$	175,643	$	25,720	$	684,400	$	39,627	$	72,503	$	108,442	$	111,027	$	47,580	$	379,179
Precision molding and assembly systems sales		0		8,637		5,020		0		0		13,657		0		3,964		4,963		0		0		8,927
Transportation sales		21,218		0		573		0		0		21,791		8,131		0		0		0		0		8,131
Field service, inspection and repair services sales														2,994		308		0		1,013		0		4,315
Other sales		6,050		1,002		2,698		855		0		10,605		241		153		3,347		326		61		4,128
Total net sales	$	89,510	$	237,055	$	201,670	$	176,498	$	25,720	$	730,453	$	50,993	$	76,928	$	116,752	$	112,366	$	47,641	$	404,680

~~For a further discussion regarding our operating segments, see Note 14,~~ ~~Segment Reporting. The geography of Europe, the Middle East and Africa comprises the EMEA segment.~~

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For a further discussion regarding our operating segments, see Note 16, Segment Reporting. The geographic regions of Europe, the Middle East and Africa comprises the EMEA segment.

Contract Assets and Liabilities

Contract assets consist of the amount of revenue recognized over time for performance obligations in production where control has transferred to the customer but the contract does not yet allow for the customer to be billed. Typically, customers are billed when the product finishes production and meets the technical specifications contained in the contract. The majority of the contract asset balance relates to materials procured based on customer specifications. The contract assets are recorded as current assets in the condensed consolidated balance sheets. Contract liabilities consist of advance payments in excess of revenue earned. These amounts primarily represent progress payments received as precision molding and assembly systems are 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.

Contract assets and contract liabilities consisted of the following:


	June 30,			December 31,					March 31,			December 31,
	2021			2020			$ Change		2022			2021			$ Change
	(in thousands)								(in thousands)
Gross contract assets	$	234,045		$	223,428		$	10,617	$	208,010		$	196,659		$	11,351
Less: reclassification from contract liabilities		(2,265	)		(6,500	)		4,235		(1,946	)		(8,336	)		6,390
Contract assets	$	231,780		$	216,928		$	14,852	$	206,064		$	188,323		$	17,741


	June 30,			December 31,						March 31,			December 31,
	2021			2020			$ Change			2022			2021			$ Change
	(in thousands)									(in thousands)
Gross contract liabilities	$	4,523		$	7,114		$	(2,591	)	$	3,220		$	9,610		$	(6,390	)
Less: reclassification to contract assets		(2,265	)		(6,500	)		4,235			(1,946	)		(8,336	)		6,390
Contract liabilities	$	2,258		$	614		$	1,644		$	1,274		$	1,274		$	0

Contract assets increased by $~~14.9~~17.7 million from December 31, ~~2020~~2021 to ~~June 30, 2021~~March 31, 2022 due to an increase in customer specific material purchases and incremental unbilled production during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. Contracts liabilities, ~~increased by $1.6~~ ~~million~~net of the amounts reclassed to contract assets, remained consistent from December 31, ~~2020~~2021 to ~~June 30, 2021 primarily due to amounts billed to a customer in advance of the production of precision molding and assembly systems during the six months ended June 30, 2021.~~March 31, 2022.

For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, we recognized $~~0.1~~1.3 million ~~and $0.1~~ ~~million, respectively,~~ of revenue related to precision molding and assembly systems and wind blades, which was included in the corresponding contract liability balance at the beginning of the period.

Performance Obligations

Remaining performance obligations represent the transaction price for which work has not been performed and excludes any unexercised contract options. The transaction price includes estimated variable consideration as determined based on the estimated production output within the range of the contractual guaranteed minimum volume obligations and production capacity.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of ~~June 30, 2021,~~March 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $~~3.2~~2.5 billion. We estimate that we will recognize the remaining performance obligations as revenue as follows:

$

% of Total

(in thousands)

Year Ending December 31,

Remainder of 2021

$
874,559

27.3

%
2022

1,492,816

46.7

2023

712,885

22.3

2024

118,962

3.7

Total remaining performance obligations

$
3,199,222

100.0

%

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	$		% of Total
	(in thousands)
Year Ending December 31,
Remainder of 2022	$	1,262,407		51.3	%
2023		1,019,335		41.4
2024		180,761		7.3
Total remaining performance obligations	$	2,462,503		100	%

For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, net revenue recognized from our performance obligations satisfied in previous ~~periods~~period decreased by $~~4.0~~6.6 million, ~~and $12.5~~ ~~million, respectively,~~ as compared to ~~increases~~decreases of $~~5.8~~8.5 million, ~~and $0.6~~ ~~million, respectively,~~ in the same ~~periods~~period in ~~2020.~~2021. The current year decreases primarily relates to changes in certain of our estimated total contract values and related direct costs to complete the performance obligations.

Note 3.4. Significant Risks and Uncertainties

Our revenues and receivables are earned from a small number of customers. As such, our production levels are dependent on these customers’ orders. See Note ~~13,~~15, Concentration of Customers.

We may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences 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, our global~~

The after-effects of the pandemic continue to evolve and affect supply chain ~~may~~performance and underlying assumptions in ~~the future be adversely affected if the COVID-19 pandemic persists.~~

~~In 2021, there have been~~various ways – specifically with volatility in commodity and logistics costs. There were both significant price increases and supply constraints during the three months ended March 31, 2022, as compared to the same period in 2021 with respect to resin and carbon fiber, which are key raw materials that we use to manufacture our products, as well as increases in logistics costs to obtain raw materials. We expect ~~that the price of resin and~~ carbon fiber and related product supply will remain ~~at elevated levels for the remainder~~constrained. Production of ~~2021. Approximately~~ 55%carbon products is very energy intensive and although we are able to pass on a majority of ~~the resin and resin systems we use are purchased under contracts either controlled or borne by~~ 2 ofcost increases onto our customers, ~~and therefore these customers receive/bear~~ ~~100~~%rising energy costs could continue to adversely impact cost of ~~any increase in resin prices. With respect to our other customer supply agreements, our customers typically bear~~ 70~~% of any raw material price increases.~~materials. If the supply of resin feedstocks and carbon fiber continue to be constrained and the prices for these raw materials remain elevated for an extended period of time, such ~~shortages~~constraints and elevated price levels could ~~impact our ability to meet our customers’ forecasted demand for our products for the remainder of 2021 and~~ have a further material adverse impact on our results of operations.

Although we believe that the onshore wind market will continue to grow over the long term, the expiration of the United States Production Tax Credit (PTC) at the end of 2021 and the lack of new policy or legislation has created uncertainty in the near term. We are monitoring legislative and regulatory policy proposals to extend or expand tax credits and other programs in the United States to promote wind energy.

We maintain our ~~U.S.~~United States (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 ~~2021~~2022 and ~~2020.~~2021. U.S. money market accounts are not guaranteed by the FDIC. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had $~~55.2~~112.6 million and $~~68.9~~165.4 million, respectively, of cash in bank deposit and money market accounts in ~~high quality~~ U.S. banks, which ~~was~~were 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 ~~June 30, 2021,~~March 31, 2022, this included $~~58.7~~10.6 million in China, $~~5.1~~3.0 million in Turkey, $~~2.3~~2.4 million in India, $1.8 million in Mexico $~~1.5~~ ~~million in India~~ and $~~0.3~~0.5 million in other countries. As of December 31, ~~2020,~~2021, this included $~~47.4~~25.9 million in China, $~~6.0~~42.6 million in Turkey, $~~5.0~~5.7 million in India, $2.1 million in Mexico and $0.5 million in other countries. We have not experienced losses in these accounts. In addition, at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had short-term deposits in interest bearing accounts in ~~China~~the U.S. of $~~0.2~~9.9 million and $~~0.3~~10.1 million, respectively, which are reported as restricted cash in our condensed consolidated balance sheets.

Certain of our debt agreements are either tied to LIBOR or the Euro Interbank Offered Rate (EURIBOR) and certain of them have associated interest rate hedges. Due to the relatively low LIBOR and EURIBOR rates in effect as of June 30, 2021, a TPI COMPOSITES, INC. AND SUBSIDIARIES

10NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~% change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or cash flows.~~ (Unaudited)

Note 4.5. Accrued Warranty

The warranty accrual activity for the periods noted consisted of the following:


	Three Months Ended						Six Months Ended							Three Months Ended
	June 30,						June 30,							March 31,
	2021			2020			2021			2020				2022			2021
	(in thousands)												(in thousands)
Warranty accrual at beginning of period	$	45,956		$	51,528		$	50,852		$	47,639			$	42,020		$	50,852
Accrual during the period		5,400			4,509			10,247			8,374				3,066			4,847
Cost of warranty services provided during the period		(3,781	)		(5,267	)		(11,352	)		(8,482	)			(8,314	)		(7,571	)
Changes in estimate for pre-existing warranties, including expirations during the period		(113	)		6,002			(2,285	)		9,241				2,171			(2,172	)
Warranty accrual at end of period	$	47,462		$	56,772		$	47,462		$	56,772			$	38,943		$	45,956

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 5.6. Long-Term Debt, Net of Current Maturities

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


	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Senior revolving loan—U.S.	$	171,154		$	171,154
Unsecured financing—EMEA		45,913			30,040		$	27,146		$	48,444
Equipment financing—EMEA		2,101			4,335
Secured and unsecured working capital—India		6,383			0			10,285			10,269
Unsecured term loan—India		2,106			0			8,109			8,109
Equipment finance lease—Mexico		6,261			8,038			4,686			5,821
Equipment finance lease—EMEA		3,012			4,119			1,402			1,884
Other equipment finance leases		168			232			82			119
Total debt—principal		237,098			217,918			51,710			74,646
Less: Debt issuance costs		(823	)		(1,051	)
Total debt, net of debt issuance costs		236,275			216,867
Less: Current maturities of long-term debt		(56,137	)		(32,551	)		(46,137	)		(66,438	)
Long-term debt, net of debt issuance costs and current maturities	$	180,138		$	184,316
Long-term debt, net of current maturities							$	5,573		$	8,208

Note 6.7. Share-Based Compensation Plans

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, we issued to certain employees ~~and non-employee directors~~ an aggregate of ~~168,993~~764,318 timed-based restricted stock units (RSUs), ~~58,396~~37,065 performance-based restricted stock units (PSUs) that vest upon achievement of ~~a cumulative, three-year Adjusted EBITDA target~~annual, adjusted Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) targets measured from January 1, ~~2021~~2022 through December 31, ~~2023, and~~2024, ~~79,784~~111,193 PSUs that vest upon achievement of certain stock price hurdles for the period of the grant date through December 31, ~~2023. All~~2024, and 49,781 PSUs that vest upon achievement of certain strategic targets measured from January 12, 2022 through January 12, 2032. 167,507 of the time-based RSUs vest on the third anniversary date of the grant ~~date.~~date, 413,467 of the time-based RSUs vest 50% on the first and second anniversary of the grant date, respectively and 183,344 of the time-based RSUs vest 25% on the first, second, third and fourth anniversary of the grant date, respectively. Each of the time-based and performance-based awards are subject to the recipient’s continued service with us, the terms and conditions of our stock option and incentive plan and the applicable award agreement.

The share-based compensation expense recognized in the condensed consolidated statements of operations was as follows:

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(in thousands)

Cost of goods sold

$
1,129

$
465

$
1,332

$
636

General and administrative expenses

1,796

1,909

3,992

4,680

Total share-based compensation expense

$
2,925

$
2,374

$
5,324

$
5,316

~~The share-based compensation expense recognized by award type was as follows:~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(in thousands)

RSUs

$
1,772

$
1,181

$
3,027

$
2,137

Stock options

573

599

1,191

2,252

PSUs

580

594

1,106

927

Total share-based compensation expense

$
2,925

$
2,374

$
5,324

$
5,316


	Three Months Ended
	March 31,
	2022		2021
	(in thousands)
Cost of goods sold	$	889	$	203
General and administrative expenses		2,420		2,196
Total share-based compensation expense	$	3,309	$	2,399

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The share-based compensation expense recognized by award type was as follows:


	Three Months Ended
	March 31,
	2022		2021
	(in thousands)
RSUs	$	2,819	$	1,255
Stock options		164		618
PSUs		326		526
Total share-based compensation expense	$	3,309	$	2,399

Note 7.8. Leases

We have operating and finance leases for our manufacturing facilities, warehouses, offices, automobiles and certain of our machinery and equipment. Our leases have remaining lease terms of between 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				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2021		2020		2021		2020		2022		2021
	(in thousands)								(in thousands)
Total operating lease cost	$	9,645	$	9,148	$	19,361	$	17,719	$	11,216	$	9,716

Finance lease cost
Amortization of assets under finance leases	$	906	$	1,413	$	1,806	$	2,960	$	1,037	$	900
Interest on finance leases		169		256		358		535		110		189
Total finance lease cost	$	1,075	$	1,669	$	2,164	$	3,495	$	1,147	$	1,089

Total lease assets and liabilities were as follows:


	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Operating Leases
Operating lease right of use assets	$	148,991		$	158,827		$	160,532		$	137,192

Current operating lease liabilities	$	23,100		$	26,099		$	22,652		$	22,681
Noncurrent operating lease liabilities		152,059			155,925			148,189			146,479
Total operating lease liabilities	$	175,159		$	182,024		$	170,841		$	169,160

Finance Leases
Property, plant and equipment, gross	$	27,069		$	28,462		$	36,606		$	26,405
Less: accumulated depreciation		(13,341	)		(12,461	)		(21,343	)		(13,782	)
Total property, plant and equipment, net	$	13,728		$	16,001		$	15,263		$	12,623

Current maturities of long-term debt	$	6,104		$	6,018		$	4,300		$	5,435
Long-term debt, net of debt issuance costs and current maturities		3,337			6,371			1,870			2,389
Total finance lease liabilities	$	9,441		$	12,389		$	6,170		$	7,824

Future minimum lease payments under noncancelable leases as of ~~June 30, 2021~~March 31, 2022 were as follows:

Operating

Finance

Leases

Leases

(in thousands)

Year Ending December 31,

Remainder of 2021

$
18,046

$
2,955

2022

33,175

5,824

2023

31,374

904

2024

27,381

254

2025

27,076

37

Thereafter

100,393

7

Total future minimum lease payments

237,445

9,981

Less: interest

(62,286
)

(540
)
Total lease liabilities

$
175,159

$
9,441

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Operating			Finance
	Leases			Leases
	(in thousands)
Year Ending December 31,
Remainder of 2022	$	26,248		$	4,182
2023		33,124			1,344
2024		29,006			711
2025		28,546			379
2026		28,879			7
Thereafter		83,486			0
Total future minimum lease payments		229,289			6,623
Less: interest		(58,448	)		(453	)
Total lease liabilities	$	170,841		$	6,170

Supplemental cash flow information related to leases was as follows:


	Six Months Ended				Three Months Ended
	June 30,				March 31,
	2021		2020		2022		2021
	(in thousands)				(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18,297	$	14,651	$	8,965	$	9,250
Operating cash flows from finance leases		358		535		110		189
Financing cash flows from finance leases		2,803		2,837		1,545		1,406

Other information related to leases was as follows:


	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
Weighted-Average Remaining Lease Term (In Years):
Operating leases		7.3			7.7			7.1			7.0
Finance leases		1.8			2.2			1.8			1.9

Weighted-Average Discount Rate:
Operating leases		8.0	%		7.9	%		8.1	%		8.0	%
Finance leases		6.3	%		6.4	%		5.7	%		5.8	%

As of ~~June 30, 2021,~~March 31, 2022, there were 0 material additional leases related to our manufacturing facilities, warehouses, offices, automobiles or our machinery and equipment which have not yet commenced.

Note 8.9. Financial Instruments

~~Interest Rate Swap~~

We use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with our U.S. senior revolving credit agreement (the Credit Agreement). We do not use such swap contracts for speculative or trading purposes.

~~As of June 30, 2021,~~ 0 interest rate swaps originally designated for hedge accounting were de-designated or terminated. No ineffectiveness on our interest rate swaps was recognized as of June 30, 2021, and none is anticipated over the remaining term of the agreement.

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. We do not use such forward contracts for speculative or trading purposes.

Mexican Peso

All of our remaining outstanding foreign exchange forward contracts (excluding those with call options) expired during the three months ended March 31, 2021. As of December 31, 2020, the notional values associated with our foreign exchange forward contracts qualifying as cash flow hedges were approximately ~~0.3~~ ~~billion Mexican Pesos (approximately $14.0~~ ~~million).~~

With regards to our foreign exchange call option contracts, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, $~~0.7~~0.6 million and $~~1.4~~0.7 million ~~respectively,~~ of premium amortization was recorded through cost of sales within our condensed consolidated statements of ~~operations.~~operations, respectively. The net income (loss) recognized in accumulated other comprehensive loss in our condensed consolidated statements of

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

changes in stockholders’ equity for our foreign exchange call option contracts is expected to be recognized in cost of sales in our condensed consolidated statements of operations during the next nine months.

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the notional values associated with our foreign exchange call option contracts qualifying as cash flow hedges were approximately ~~1.6~~1.1 billion Mexican Pesos (approximately $$52.4~~79.7~~million) and approximately 0.4 billion Mexican Pesos (approximately $~~17.3~~20.2 million), respectively.

Chinese Renminbi

With regards to our foreign exchange forward contracts, for which hedge accounting does not apply, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, $~~0.5~~0.0 million and $~~0.6~~0.1 million ~~respectively,~~ in gains were recorded through foreign currency ~~loss~~income (loss) within our condensed consolidated statements of ~~operations.~~operations, respectively.

India Rupee

With regards to ~~our foreign exchange forward contracts and~~ our foreign exchange call option contracts, for which hedge accounting does not apply, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, $~~0.5~~0.1 million and $~~1.2~~0.7 million ~~respectively,~~ in gains were recorded through foreign currency ~~loss~~income (loss) within our condensed consolidated statements of ~~operations.~~operations, respectively. Additionally, with regards to our foreign exchange call option contracts, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, $~~0.3~~0.6 million and $~~0.3~~0.0 million ~~respectively,~~ of premium amortization was recorded as losses through foreign currency ~~loss~~income (loss) within our condensed consolidated statements of ~~operations.~~operations, respectively.

The fair values and location of our financial instruments in our condensed consolidated balance sheets were as follows:


	Condensed Consolidated	June 30,		December 31,		Condensed Consolidated	March 31,		December 31,
Financial Instrument	Balance Sheet Line Item	2021		2020		Balance Sheet Line Item	2022		2021
		(in thousands)					(in thousands)
Foreign exchange forward contracts	Other current assets	$	1,706	$	5,832	Other current assets	$	3,912	$	1,580
Foreign exchange forward contracts	Accounts payable and accrued expenses		1,218		2,096	Accounts payable and accrued expenses		0		1,052
Interest rate swap	Other noncurrent liabilities		3,365		4,414

The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations:


Accumulated	Condensed Consolidated	Three Months Ended					Six Months Ended					Condensed Consolidated	Three Months Ended
Other Comprehensive	Statement of Operations	June 30,					June 30,					Statement of Operations	March 31,
Loss Component	Line Item	2021			2020		2021			2020		Line Item	2022			2021
		(in thousands)											(in thousands)
Foreign exchange forward contracts	Cost of sales	$	(1,035	)	$	2,738	$	(3,037	)	$	2,516	Cost of sales	$	(640	)	$	(2,002	)

Note 9.10. Restructuring Charges, Net

The following is a summary of our restructuring charges, net for the period presented:


	Three Months Ended March 31, 2022
	U.S.		Asia		Mexico		Total
	(in thousands)
Severance	$	44	$	1,553	$	266	$	1,863
Other restructuring costs		147		383		0		530
Total restructuring charges, net	$	191	$	1,936	$	266	$	2,393

For the three months ended March 31, 2021, we incurred $0.3 million in restructuring charges related to our Asia segment.

The following is a summary of our restructuring liability activity for the periods presented:

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	U.S.			Asia			Mexico			Total
	(in thousands)
Balance at December 31, 2021	$	2,638		$	8,145		$	2,161		$	12,944
Restructuring charges, net		191			1,936			266			2,393
Payments		(1,920	)		(4,675	)		(415	)		(7,010	)
Balance at March 31, 2022	$	909		$	5,406		$	2,012		$	8,327

Note 11. Income Taxes

~~The~~For the three months ended March 31, 2022, we reported an income tax ~~provisions for~~provision of $2.9 million as compared to an income tax benefit of $7.1 million in the ~~three and six months ended June 30, 2021 were lower than for the corresponding periods in 2020~~comparative prior year period. This increase resulted primarily ~~due to~~from the change in the mix of earnings of foreign jurisdictions and ~~U.S. tax on foreign earnings~~an increase in ~~the comparable periods, partially offset by the recording of a full~~ U.S. valuation allowance ~~during the three months ended June 30, 2021~~ and ~~an increase in our~~ uncertain tax positions ~~for the three and six months ended June 30, 2021 as~~ compared to the same ~~periods~~period in ~~2020.~~2021.

No changes in tax law occurred during the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, which had 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.

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note ~~10.~~12. Net Income (Loss) Per Common Share

The following table sets forth the computation of basic and diluted net income (loss) per common share:


	Three Months Ended
	March 31,
	2022			2021
	(in thousands, except per share data)
Numerator:
Net loss	$	(15,800	)	$	(1,797	)
Preferred stock dividends and accretion		(14,132	)		0
Net loss attributable to common stockholders	$	(29,932	)	$	(1,797	)

Denominator:
Basic weighted-average shares outstanding		41,899			36,601
Effect of dilutive awards		0			0
Diluted weighted-average shares outstanding		41,899			36,601

Basic net income (loss) per common share	$	(0.71	)	$	(0.05	)
Diluted net income (loss) per common share	$	(0.71	)	$	(0.05	)

Potentially dilutive shares excluded from the calculation due to net losses in the period		474			2,040
Anti dilutive share-based compensation awards that would be excluded from the calculation if income was reported in the period		429			0

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

(in thousands, except per share data)

Numerator:

Net Loss

$
(39,797
)

$
(66,101
)

$
(41,594
)

$
(66,593
)

Denominator:

Basic weighted-average shares outstanding

36,881

35,299

36,742

35,256

Effect of dilutive awards

0

0

0

0

Diluted weighted-average shares outstanding

36,881

35,299

36,742

35,256

Basic net loss per common share

$
(1.08
)

$
(1.87
)

$
(1.13
)

$
(1.89
)
Diluted net loss per common share

$
(1.08
)

$
(1.87
)

$
(1.13
)

$
(1.89
)

Potentially dilutive shares excluded from the calculation
  due to net losses in the period

1,607

1,154

1,864

1,117

Anti dilutive share-based compensation awards excluded
  from the calculation

0

6

0

55

Performance-based restricted stock units excluded from
  the calculation because the performance conditions had
  not been met

196

98

196

98

For the three months ended March 31, 2022, the weighted average number of common shares outstanding during the period includes 4,666,667 of outstanding, fully vested warrants that are exercisable for $0.01 per warrant.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~11.~~13. Stockholders’ Equity

Accumulated Other Comprehensive Loss

The following tables presents the changes in accumulated other comprehensive loss (AOCL) by component:


	Six Months Ended June 30, 2021												Three Months Ended March 31, 2022
	Foreign						Foreign						Foreign					Foreign
	currency						exchange						currency					exchange
	translation			Interest rate			forward			Total			translation			Interest rate		forward			Total
	adjustments			swap			contracts			AOCL			adjustments			swap		contracts			AOCL
	(in thousands)												(in thousands)
Balance at December 31, 2020	$	(30,111	)	$	(3,443	)	$	564		$	(32,990	)
Balance at December 31, 2021													$	(48,530	)	$	0	$	(5,476	)	$	(54,006	)
Other comprehensive income (loss) before reclassifications		(5,291	)		597			(2,281	)		(6,975	)		43,369			0		3,345			46,714
Amounts reclassified from AOCL		0			0			(2,002	)		(2,002	)		—			0		(640	)		(640	)
Net tax effect		0			(139	)		790			651			—			0		—			—
Net current period other comprehensive income (loss)		(5,291	)		458			(3,493	)		(8,326	)		43,369			0		2,705			46,074
Balance at March 31, 2021		(35,402	)		(2,985	)		(2,929	)		(41,316	)
Other comprehensive income (loss) before reclassifications		(4	)		452			259			707
Amounts reclassified from AOCL		0			0			(1,035	)		(1,035	)
Net tax effect		0			(105	)		190			85
Net current period other comprehensive income (loss)		(4	)		347			(586	)		(243	)
Balance at June 30, 2021	$	(35,406	)	$	(2,638	)	$	(3,515	)	$	(41,559	)
Balance at March 31, 2022														(5,161	)		0		(2,771	)		(7,932	)

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	Six Months Ended June 30, 2020												Three Months Ended March 31, 2021
	Foreign						Foreign						Foreign						Foreign
	currency						exchange						currency						exchange
	translation			Interest rate			forward			Total			translation			Interest rate			forward			Total
	adjustments			swap			contracts			AOCL			adjustments			swap			contracts			AOCL
	(in thousands)												(in thousands)
Balance at December 31, 2019	$	(22,012	)	$	(2,145	)	$	545		$	(23,612	)
Balance at December 31, 2020													$	(30,111	)	$	(3,443	)	$	564		$	(32,990	)
Other comprehensive income (loss) before reclassifications		(9,223	)		(2,550	)		(6,936	)		(18,709	)		(5,291	)		597			(2,281	)		(6,975	)
Amounts reclassified from AOCL		0			0			(222	)		(222	)		—			—			(2,002	)		(2,002	)
Net tax effect		0			535			1,503			2,038			—			(139	)		790			651
Net current period other comprehensive income (loss)		(9,223	)		(2,015	)		(5,655	)		(16,893	)		(5,291	)		458			(3,493	)		(8,326	)
Balance at March 31, 2020		(31,235	)		(4,160	)		(5,110	)		(40,505	)
Other comprehensive income (loss) before reclassifications		(2,290	)		0			1,750			(540	)
Amounts reclassified from AOCL		0			0			2,738			2,738
Net tax effect		0			0			(938	)		(938	)
Net current period other comprehensive income (loss)		(2,290	)		0			3,550			1,260
Balance at June 30, 2020	$	(33,525	)	$	(4,160	)	$	(1,560	)	$	(39,245	)
Balance at March 31, 2021														(35,402	)		(2,985	)		(2,929	)		(41,316	)

Note ~~12.~~14. Commitments and Contingencies

Legal Proceedings

From time to time, we are party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which may not be covered by insurance. Upon resolution of any pending legal matters, we may incur charges in excess of presently established reserves. Our management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.

In January 2021, we received a complaint that was filed by the administrator for the Senvion GmbH (Senvion) insolvency estate in German insolvency court. The complaint asserts voidance against us in the aggregate amount of $13.3 million. The alleged voidance claims relate to payments that Senvion made to us for wind blades that we produced prior to Senvion filing for insolvency protection. We filed a response to these alleged voidance claims in August 2021 and filed a supplemental response in April 2022. We believe we have meritorious defenses to the alleged voidance claims. Due to the early stage of this claim, we have determined that the ultimate outcome cannot be estimated at this time.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~13.~~15. Concentration of Customers

Net sales from certain customers (in thousands) in excess of 10 percent of our total consolidated net sales are as follows:


	Three Months Ended											Six Months Ended										Three Months Ended
	June 30,											June 30,										March 31,
	2021						2020					2021					2020					2022					2021
Customer	Net sales			% of Total			Net sales		% of Total			Net sales		% of Total			Net sales		% of Total			Net sales		% of Total			Net sales		% of Total
Vestas	$	208,787			45.5	%	$	193,426		51.7	%	$	378,005		43.8	%	$	350,838		48.0	%	$	164,966		42.9	%	$	169,218		41.8	%
Nordex																							117,293		30.5			76,543		18.9
GE		105,937	��		23.1	%		71,176		19.0	%		210,789		24.4	%		171,308		23.5	%		57,620		15.0			104,852		25.9
Nordex		81,505			17.8	%		62,258		16.7	%		158,048		18.3	%		115,515		15.8	%

Trade accounts receivable from certain customers in excess of 10 percent of our total consolidated trade accounts receivable are as follows:


	June 30,			December 31,			March 31,			December 31,
	2021			2020			2022			2021
Customer	% of Total			% of Total			% of Total			% of Total
Nordex		36.5	%		40.8	%		56.3	%		61.5	%
Vestas		32.9	%		35.0	%		17.8			10.7
Siemens Gamesa		10.8	%		5.9	%
Enercon								11.0			14.7

Note ~~14.~~16. Segment Reporting

Our operating segments are defined geographically into 5 geographic operating segments—(1) the ~~United States (U.S.)~~U.S., (2) Asia, (3) Mexico, (4) EMEA and (5) India. For a detailed discussion of our operating segments, refer to the discussion in Note ~~19,~~21, Segment Reporting, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K.

~~All of our~~Our U.S. and India segments operate in U.S. dollars. Our Mexico and Asia segments operate in their local currency ~~except for the Mexico~~ and ~~Asia segments, which both~~ include a U.S. parent company ~~and India and Switzerland, which operate~~that operates in ~~the~~ U.S. ~~dollar.~~dollars. Our EMEA segment operates in Euros, effective January 1, 2022. Prior to this, our EMEA segment operated in Turkish Lira.

1920

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables set forth certain information regarding each of our segments:


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2021			2020			2021			2020			2022			2021
	(in thousands)												(in thousands)
Net sales by segment:
U.S.	$	56,761		$	42,079		$	106,047		$	89,510		$	21,557		$	50,993
Asia		91,106			145,918			168,034			237,055			41,346			76,928
Mexico		143,170			83,420			261,629			201,670			130,396			116,752
EMEA		105,350			87,541			217,716			176,498			149,685			112,366
India		62,454			14,859			110,095			25,720			41,886			47,641
Total net sales	$	458,841		$	373,817		$	863,521		$	730,453		$	384,870		$	404,680

Net sales by geographic location (1):
United States	$	56,761		$	42,079		$	106,047		$	89,510		$	21,557		$	50,993
China		91,106			145,918			168,034			237,055			41,346			76,928
Mexico		143,170			83,420			261,629			201,670			130,396			116,752
Turkey		105,350			87,541			217,716			176,498			149,685			112,366
India		62,454			14,859			110,095			25,720			41,886			47,641
Total net sales	$	458,841		$	373,817		$	863,521		$	730,453		$	384,870		$	404,680

Income (loss) from operations:
U.S. (2)	$	148		$	(12,045	)	$	(11,472	)	$	(27,631	)	$	(6,534	)	$	(9,913	)
Asia		8,105			18,492			10,814			23,564			(6,109	)		2,709
Mexico		(25,256	)		(11,324	)		(29,280	)		(13,092	)		(23,704	)		(5,731	)
EMEA		10,782			(1,145	)		20,570			1,519			23,617			9,788
India		4,188			(7,233	)		4,128			(13,019	)		(109	)		(60	)
Total loss from operations	$	(2,033	)	$	(13,255	)	$	(5,240	)	$	(28,659	)	$	(12,839	)	$	(3,207	)


	June 30,		December 31,		March 31,		December 31,
	2021		2020		2022		2021
	(in thousands)				(in thousands)
Property, plant and equipment, net:
U.S.	$	33,246	$	31,811	$	24,293	$	25,522
Asia (China)		41,143		46,075		25,552		26,965
Mexico		78,839		78,813		67,663		71,208
EMEA (Turkey)		22,154		28,312		29,397		14,413
India		30,334		23,990		31,752		31,470
Total property, plant and equipment, net	$	205,716	$	209,001	$	178,657	$	169,578

(1) Net sales 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 $~~6.7~~7.9 million and $~~6.9~~8.9 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $15.6~~ ~~million and $16.4~~ ~~million for the six months ended June 30, 2021 and 2020,~~ respectively.

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 the heading “Risk Factors.”

OVERVIEW

Our Company

We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We deliver high-quality, cost-effective composite solutions through long term relationships with leading original equipment manufacturers (OEM) in the wind ~~and transportation markets.~~market. We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators, and supply high strength, lightweight and durable composite products to the transportation market. 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.~~Germany and a service facility in Spain.

Our business operations are defined geographically into five geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico, (4) Europe, the Middle East and Africa (EMEA) and (5) India. See Note ~~14,~~16, 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 did not materially adversely affect our business and operations during~~

During the three ~~and six~~ months ended ~~June 30, 2021.~~ March 31, 2022, there have been both price increases and supply constraints as compared to the same period in 2021, for key raw materials that we use to manufacture our products, as well as increases in logistics costs to obtain raw materials. Carbon fiber prices have increased primarily due to the cost of raw material inputs as well as increased global demand for carbon fiber across multiple industries. We expect that the price of resin and carbon fiber will remain at elevated levels for the remainder of 2022 and into 2023. Approximately 60% of the resin and resin systems, and approximately 90% of carbon fiber we use is purchased under contracts either controlled or borne by two of our customers, and therefore these customers receive/bear 100% of any decrease or increase in resin prices. With respect to our other customer supply agreements, our customers typically receive/bear 70% of any raw material price decreases or increases. If the supply of resin feedstocks and carbon fiber continue to be constrained for an extended period of time, such shortages could impact our ability to meet our customers’ forecasted demand for our products for the remainder of 2022 and 2023 and could have a material adverse impact on our results of operations for the remainder of 2022 and 2023.

Although all of our manufacturing facilities currently are operating atwithout any COVID-19 impacts or ~~near normal production levels,~~restrictions, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences 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. For example, India and Turkey recently experienced significant increases in positive COVID-19 cases although these resurgences did not have a material impact on our operations during the three months ended June 30, 2021. In addition, although we currently have not experienced any significant disruptions inHowever, our global supply chain ~~due to~~was adversely affected by the COVID-19 pandemic in 2021 and our global supply chain may ~~in the future~~continue to be adversely affected if the COVID-19 pandemic persists. In addition, certain of our customers source the purchase of certain key raw materials and components, including resin and carbon. In 2021, these customers had challenges procuring adequate supplies of resin and carbon fiber, which had an adverse impact on our production volumes and results of operations and could adversely impact our business in 2022 if such challenges persist.

We expect decreased demand for our wind blades from our customers during the remainder of ~~2021, in particular during the fourth quarter.~~2022 and 2023. We believe this decrease in demand is ~~short term and~~ due to the continued global renewable energy regulatory and policy uncertainty and the raw material and logistics cost increases mentioned ~~below. The result is an expected adverse impact to our Adjusted EBITDA in 2021 of approximately $28 million.~~above. We believe that ~~general optimism~~uncertainty around potential legislation in the U.S. to extend the Production Tax Credit (PTC) on a long-term basis is causing developers to ~~reevaluate~~delay project timelines in anticipation of being able to build projects at higher PTC levels ~~once the expected~~if such extensions are ~~in place and therefore are not purchasing wind blades or turbines to satisfy current PTC safe harbor requirements.~~implemented.

In 2021, there have been both significant price increases and supply constraints with respect to resin and carbon fiber, which are key raw materials that we use to manufacture our products, as well as increases in logistics costs to obtain raw materials. The resin price increases and supply constraints are due to a multitude of factors, including the extreme cold weather in Texas in February 2021, fires at resin manufacturing facilities in China and unplanned maintenance outages at resin manufacturing facilities in Europe. Carbon fiber prices have increased primarily due to the cost of raw material inputs as well as increased global demand for carbon fiber across multiple industries. These raw material price increases adversely affected our results of operations by approximately $4.4 million for both the three and six months ended June 30, 2021. We expect that the price of resin and carbon fiber will remain at elevated levels for the remainder of 2021. Approximately 55% of the resin and resin systems we use are purchased under contracts either controlled or borne by two of our customers and therefore these customers receive/bear 100% of any increase in resin prices. With respect to our other customer supply agreements, our customers typically bear 70% of any raw material price increases. After taking into account our contractual share of any price increases for resin and carbon fiber, we estimate that the impact of these raw materials price increases, together with increased logistics costs, will adversely impact our results of operations by approximately $20 million for 2021. If the supply of resin feedstocks and carbon fiber continue to be constrained for an extended period of time, such shortages could impact our ability to meet our customers’ forecasted demand for our products for the remainder of 2021 and have a further material adverse impact on our results of operations for the remainder of 2021.

We are forecasting to incur a total of ~~between $22 million and $37~~approximately $3.1 million of restructuring charges associated with our global footprint alignment and consolidation in ~~2021 and~~ 2022 relating to our China and North America operations. Between $15 million and $22 million of the total is forecasted to be incurred in 2021, with the remainder in 2022. We are forecasting that between 20% to 30% of the restructuring charges will be non-cash.

~~In July 2021, we commenced supplying wind blades~~22

Effective January 1, 2022, the functional currency for our operations in Turkey changed from Turkish Lira to ~~one of our customers at~~Euros. The Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 830 (ASC 830), “Foreign Currency Matters,” requires a ~~manufacturing facility~~change in ~~Matamoros, Mexico pursuant~~functional currency to a 3-year supply agreement. In connection with the supply agreement, we will, among other things, (1) operate the manufacturing facility, and (2) utilize our workforce, procure raw materials and manufacture blades for the customer. The customer will resume management and operationbe reported as of the ~~wind blade manufacturing facility~~date it is determined there has been a change, and it is generally accepted practice that the change is made at the ~~end~~start of the ~~3-year term if~~most recent period that approximates the ~~supply agreement is~~date of the change.

While the change of the functional currency was based on a factual assessment, the determination of the date of the change required management’s judgement given the change over time in the primary economic and business environment in which we operate.

Based on the analysis of the Turkish domestic renewable energy demand through 2021 and anticipated future demand, management concluded that Turkish domestic sales will not ~~extended~~grow as previously envisioned and wemost of the future growth will ~~cease~~continue to ~~operate and supply blades from~~be predominately export sales to the ~~customer’s manufacturing facility.~~eurozone, which are primarily denominated in Euros. See Footnote 1, Significant Accounting Policies, for more details.

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

For a detailed discussion of our key financial measures and our key operating metrics, refer to the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics Used By Management To Measure Performance” included in Part II, Item 7 of our Annual Report on Form 10-K.

KEY FINANCIAL MEASURES


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2021			2020			2021			2020			2022			2021
	(in thousands)												(in thousands)
Net sales	$	458,841		$	373,817		$	863,521		$	730,453		$	384,870		$	404,680
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)		(15,800	)		(1,797	)
EBITDA (1)	$	4,285		$	(2,628	)	$	9,699		$	(5,349	)		(334	)		5,414
Adjusted EBITDA (1)	$	17,361		$	3,295		$	30,456		$	4,591			6,117			13,095
Capital expenditures							$	27,059		$	42,030			5,516			18,786
Free cash flow (1)							$	(30,314	)	$	(69,035	)		(86,570	)		(12,046	)

June 30,

December 31,

2021

2020

(in thousands)

Total debt, net of debt issuance costs

$
236,275

$
216,867

Net debt (1)

$
(113,991
)

$
(88,061
)


	March 31,		December 31,
	2022		2021
	(in thousands)
Total debt	$	51,710	$	74,646
Net cash		79,183		167,519

(1)

See below for a reconciliation of EBITDA, adjusted EBITDA, free cash flow and net ~~debt~~cash to net ~~income (loss), net income (loss),~~loss attributable to common stockholders, net cash provided by (used in) operating activities and ~~total debt, net of debt issuance costs,~~cash and cash equivalents, respectively, the most directly comparable financial measures calculated and presented in accordance with GAAP.

2223

The following tables reconcile our non-GAAP key financial measures to the most directly comparable GAAP measures:

EBITDA and adjusted EBITDA are reconciled as follows:


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2021			2020			2021			2020			2022			2021
	(in thousands)												(in thousands)
Net loss attributable to common stockholders													$	(29,932	)	$	(1,797	)
Preferred stock dividends and accretion														14,132			—
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)		(15,800	)		(1,797	)
Adjustments:
Depreciation and amortization		12,501			11,616			24,110			22,644			11,753			11,609
Interest expense, net		2,691			2,545			5,395			4,316			769			2,704
Income tax provision		28,890			49,312			21,788			34,284
Income tax provision (benefit)														2,944			(7,102	)
EBITDA		4,285			(2,628	)		9,699			(5,349	)		(334	)		5,414
Share-based compensation expense		2,925			2,374			5,324			5,316			3,309			2,399
Foreign currency loss		6,504			1,928			10,231			968
Foreign currency loss (income)														(210	)		3,727
Loss on sale of assets and asset impairments		1,451			1,440			2,748			3,358			959			1,297
Restructuring charges, net		2,196			181			2,454			298			2,393			258
Adjusted EBITDA	$	17,361		$	3,295		$	30,456		$	4,591		$	6,117		$	13,095

Free cash flow is reconciled as follows:


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Net cash used in operating activities	$	(3,255	)	$	(27,005	)
Net cash provided by operating activities							$	(81,054	)	$	6,740
Less capital expenditures		(27,059	)		(42,030	)		(5,516	)		(18,786	)
Free cash flow	$	(30,314	)	$	(69,035	)	$	(86,570	)	$	(12,046	)

Net ~~debt~~cash is reconciled as follows:

June 30,

December 31,

2021

2020

(in thousands)

Cash and cash equivalents

$
123,107

$
129,857

Less total debt, net of debt issuance costs

(236,275
)

(216,867
)
Less debt issuance costs

(823
)

(1,051
)
Net debt

$
(113,991
)

$
(88,061
)


	March 31,			December 31,
	2022			2021
	(in thousands)
Cash and cash equivalents	$	130,893		$	242,165
Less total debt		(51,710	)		(74,646	)
Net cash	$	79,183		$	167,519

KEY OPERATING METRICS


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2021			2020			2021			2020			2022			2021
Sets		843			788			1,657			1,519			602			814
Estimated megawatts		3,303			2,655			6,375			4,984			2,644			3,072
Utilization		82	%		70	%		80	%		70	%		65	%		77	%
Dedicated manufacturing lines		50			52			50			52			43			50
Manufacturing lines installed		51			54			52			54			43			52

2324

RESULTS OF OPERATIONS

The following table summarizes our operating results as a percentage of net sales for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ that have been derived from our condensed consolidated statements of operations:


	Three Months Ended								Six Months Ended								Three Months Ended
	June 30,								June 30,								March 31,
	2021				2020				2021				2020				2022			2021
Net sales		100.0		%		100.0		%		100.0		%		100.0		%		100	%		100	%
Cost of sales		96.0				98.4				95.4				98.0				96.4			94.7
Startup and transition costs		2.2				2.9				2.8				3.2				4.0			3.5
Total cost of goods sold		98.2				101.3				98.2				101.2				100.4			98.2
Gross profit (loss)		1.8				(1.3	)			1.8				(1.2	)			(0.4	)		1.8
General and administrative expenses		1.5				1.8				1.8				2.2				2.0			2.2
Loss on sale of assets and asset impairments		0.3				0.4				0.3				0.5				0.3			0.3
Restructuring charges, net		0.5				0.1				0.3				0.0				0.6			0.1
Loss from operations		(0.5	)			(3.6	)			(0.6	)			(3.9	)			(3.3	)		(0.8	)
Total other expense		(1.9	)			(0.9	)			(1.7	)			(0.5	)			0.0			(1.4	)
Loss before income taxes		(2.4	)			(4.5	)			(2.3	)			(4.4	)			(3.3	)		(2.2	)
Income tax provision		(6.3	)			(13.2	)			(2.5	)			(4.7	)
Income tax benefit (provision)																		(0.8	)		1.8
Net loss		(8.7	)	%		(17.7	)	%		(4.8	)	%		(9.1	)	%		(4.1	%)		(0.4	%)

Net sales

Consolidated discussion

The following table summarizes our net sales by product/service for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended									Six Months Ended									Three Months Ended
	June 30,				Change					June 30,				Change					March 31,				Change
	2021		2020		$		%			2021		2020		$		%			2022		2021		$			%
	(in thousands)									(in thousands)									(in thousands)
Wind blade sales	$	418,704	$	348,063	$	70,641		20.3	%	$	797,883	$	684,400	$	113,483		16.6	%	$	354,581	$	379,179	$	(24,598	)		(6.5	)%
Precision molding and assembly systems sales		13,603		6,894		6,709		97.3	%		22,530		13,657		8,873		65.0	%		4,006		8,927		(4,921	)		(55.1	)
Transportation sales		14,915		14,902		13		0.1	%		23,046		21,791		1,255		5.8	%		12,857		8,131		4,726			58.1
Field service, inspection and repair services sales																				9,850		4,315		5,535			128.3
Other sales		11,619		3,958		7,661		193.6	%		20,062		10,605		9,457		89.2	%		3,576		4,128		(552	)		(13.4	)
Total net sales	$	458,841	$	373,817	$	85,024		22.7	%	$	863,521	$	730,453	$	133,068		18.2	%	$	384,870	$	404,680	$	(19,810	)		(4.9	)%

The ~~increase~~decrease in net sales of wind blades during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily driven by a ~~7% and 9% increase~~26% decrease in the number of wind blades produced ~~respectively, primarily as~~due to a ~~result~~reduction in manufacturing lines and transitions of ~~increased production at our Mexico, India, Turkey~~existing lines and ~~Iowa facilities. The increase was also due to~~currency fluctuations, which were partially offset by a higher average sales price due to the mix of wind blade models ~~produced~~produced. Net sales from the manufacturing of precision molding and assembly systems decreased during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021 primarily due to a decrease in volume. Additionally, there was an increase in our field service, inspection and ~~foreign currency fluctuations. Additionally, when comparing our net~~repair service sales during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, as compared to the same period in 2021, ~~against~~due to an increase in demand for such services. Transportation sales increased during the ~~comparable prior year periods, our net sales were negatively impacted by~~three months ended March 31, 2022, as compared to the ~~removal~~same period in 2021, due to an increase in volume of five contracted manufacturing lines that expired in China at the end of 2020, which was partially offset by the adverse impact that the COVID-19 pandemic had on our net sales in the prior year periods. Finally, the net sales increases in both periods were partially offset by a decrease in the year over year number of wind blades still in the production process at the end of the periods.transportation products. The fluctuating U.S. dollar against the Euro in our operations in Turkey ~~operations~~ and the Chinese Renminbi in our China operations had ~~a favorable~~an unfavorable impact of ~~1.8% and 1.7%~~2.2% on consolidated net sales for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, as compared to the ~~2020 periods.~~2021 period.

2425

Segment discussion

The following table summarizes our net sales by our five geographic operating segments for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

$

%

2021

2020

$

%

(in thousands)

(in thousands)

U.S.

$
56,761

$
42,079

$
14,682

34.9
%

$
106,047

$
89,510

$
16,537

18.5
%
Asia

91,106

145,918

(54,812
)

-37.6
%

168,034

237,055

(69,021
)

-29.1
%
Mexico

143,170

83,420

59,750

71.6
%

261,629

201,670

59,959

29.7
%
EMEA

105,350

87,541

17,809

20.3
%

217,716

176,498

41,218

23.4
%
India

62,454

14,859

47,595

NM

110,095

25,720

84,375

NM

Total net sales

$
458,841

$
373,817

$
85,024

22.7
%

$
863,521

$
730,453

$
133,068

18.2
%

~~NM - not meaningful~~


	Three Months Ended
	March 31,				Change
	2022		2021		$			%
	(in thousands)
U.S.	$	21,557	$	50,993	$	(29,436	)		(57.7	)%
Asia		41,346		76,928		(35,582	)		(46.3	)
Mexico		130,396		116,752		13,644			11.7
EMEA		149,685		112,366		37,319			33.2
India		41,886		47,641		(5,755	)		(12.1	)
Total net sales	$	384,870	$	404,680	$	(19,810	)		(4.9	)%

U.S. Segment

The following table summarizes our net sales by product/service for the U.S. segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended										Six Months Ended										Three Months Ended
	June 30,				Change						June 30,				Change						March 31,				Change
	2021		2020		$			%			2021		2020		$			%			2022		2021		$			%
	(in thousands)										(in thousands)										(in thousands)
Wind blade sales	$	39,427	$	26,309	$	13,118			49.9	%	$	79,054	$	62,242	$	16,812			27.0	%	$	—	$	39,627	$	(39,627	)	NM
Transportation sales		12,227		14,539		(2,312	)		-15.9	%		18,651		21,218		(2,567	)		-12.1	%		12,857		8,131		4,726			58.1	%
Field service, inspection and repair services sales																						8,601		2,994		5,607			187.3
Other sales		5,107		1,231		3,876		NM				8,342		6,050		2,292			37.9	%		99		241		(142	)		(58.9	)
Total net sales	$	56,761	$	42,079	$	14,682			34.9	%	$	106,047	$	89,510	$	16,537			18.5	%	$	21,557	$	50,993	$	(29,436	)		(57.7	)%

NM - not meaningful

The ~~increase~~decrease in the U.S. segment’s net sales of wind blades during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was due to the shutdown of production at our Newton, Iowa manufacturing facility at the end of the fourth quarter of 2021. The increase in the U.S. segment's field service, inspection and repair services sales was primarily due to ~~a 35%~~increases in overall volume and ~~17%~~demand for such services during the three months ended March 31, 2022, as compared to the same period in 2021. Transportation sales increased during the three months ended March 31, 2022, as compared to the same period in 2021, due to an increase in ~~the number~~volume of wind blades produced, respectively, primarily due to the adverse impact of the COVID-19 pandemic in the prior year periods, as well as a higher average sales price of wind blade models produced in the two comparative periods.transportation products.

Asia Segment

The following table summarizes our net sales by product/service for the Asia segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended										Six Months Ended										Three Months Ended
	June 30,				Change						June 30,				Change						March 31,				Change
	2021		2020		$			%			2021		2020		$			%			2022		2021		$			%
	(in thousands)										(in thousands)										(in thousands)
Wind blade sales	$	82,491	$	141,540	$	(59,049	)		-41.7	%	$	154,994	$	227,416	$	(72,422	)		-31.8	%	$	36,399	$	72,503	$	(36,104	)		(49.8	)%
Precision molding and assembly systems sales		7,634		3,576		4,058			113.5	%		11,598		8,637		2,961			34.3	%		3,859		3,964		(105	)		(2.6	)
Field service, inspection and repair services sales																						968		308		660		NM
Other sales		981		802		179			22.3	%		1,442		1,002		440			43.9	%		120		153		(33	)		(21.6	)
Total net sales	$	91,106	$	145,918	$	(54,812	)		-37.6	%	$	168,034	$	237,055	$	(69,021	)		-29.1	%	$	41,346	$	76,928	$	(35,582	)		(46.3	)%

The decrease in the Asia segment’s net sales of wind blades during the three months ended ~~June 30, 2021~~March 31, 2022, as compared to the same period in ~~2020~~2021, was primarily due to a ~~52%~~70% decrease in the number of wind blades produced, ~~primarily~~ due to ~~the removal~~a reduction of ~~five~~ contracted manufacturing lines ~~that expired~~ in China atand the ~~end~~startup of ~~2020.~~additional lines in 2022. The net sales decrease during the three months ended ~~June 30, 2021~~

March 31, 2022 was partially offset by 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. Additionally, for the three months ended June 30, 2021, there was an increase in the period over period number of wind blades still in the production process at the end of the period. The fluctuating U.S. dollar against the Chinese Renminbi in our China operations had a favorable impact of 0.1% on consolidated net sales for the three months ended June 30, 2021 as compared to the 2020 period.

The decrease in the Asia segment’s net sales of wind blades during the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to a 35% decrease in the number of wind blades produced, primarily due to the removal of five contracted manufacturing lines that expired in China at the end of 2020, partially offset by the adverse impact that the COVID-19 pandemic had on our net sales in the prior year period. In addition, for the six months ended June 30, 2021, there was a decrease in the period over period number of wind blades still in the production process at the end of the period. The sales decreases during the six months ended June 30, 2021 was partially offset by 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. The fluctuating U.S. dollar against the Chinese Renminbi in our China operations had a favorable impact of 0.2% on consolidated net sales for the six months ended June 30, 2021 as compared to the 2020 period.

Mexico Segment

The following table summarizes our net sales by product/service for the Mexico segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended									Six Months Ended									Three Months Ended
	June 30,				Change					June 30,				Change					March 31,				Change
	2021		2020		$		%			2021		2020		$		%			2022		2021		$			%
	(in thousands)									(in thousands)									(in thousands)
Wind blade sales	$	131,188	$	78,193	$	52,995		67.8	%	$	239,630	$	193,379	$	46,251		23.9	%	$	129,606	$	108,442	$	21,164			19.5	%
Precision molding and assembly systems sales		5,969		3,318		2,651		79.9	%		10,932		5,020		5,912		117.8	%		147		4,963		(4,816	)		(97.0	)
Transportation sales		2,688		363		2,325	NM				4,395		573		3,822	NM
Other sales		3,325		1,546		1,779		115.1	%		6,672		2,698		3,974		147.3	%		643		3,347		(2,704	)		(80.8	)
Total net sales	$	143,170	$	83,420	$	59,750		71.6	%	$	261,629	$	201,670	$	59,959		29.7	%	$	130,396	$	116,752	$	13,644			11.7	%

The increase in the Mexico segment’s net sales of wind blades during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020 reflects a 76% and 24% net increase in overall wind blade volume, respectively,~~2021, is primarily due to the ~~adverse impact~~commencement of ~~the COVID-19 pandemic~~production at our second manufacturing facility in ~~the prior year periods, as well as~~Matamoros, Mexico that we took over from Nordex in July 2021, and also reflects an increase in the average sales price of wind blades due to the mix of wind blades produced in the two comparative periods. The increase in net sales of wind blades was partially offset by the stop of production in one of our Juarez, Mexico facilities at the end of the fourth quarter of 2021.

EMEA Segment

The following table summarizes our net sales by product/service for the EMEA segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended									Six Months Ended									Three Months Ended
	June 30,				Change					June 30,				Change					March 31,				Change
	2021		2020		$		%			2021		2020		$		%			2022		2021		$			%
	(in thousands)									(in thousands)									(in thousands)
Wind blade sales	$	103,201	$	87,162	$	16,039		18.4	%	$	214,228	$	175,643	$	38,585		22.0	%	$	146,849	$	111,027	$	35,822			32.3	%
Field service, inspection and repair services sales																				281		1,013		(732	)		(72.3	)
Other sales		2,149		379		1,770	NM				3,488		855		2,633	NM				2,555		326		2,229		NM
Total net sales	$	105,350	$	87,541	$	17,809		20.3	%	$	217,716	$	176,498	$	41,218		23.4	%	$	149,685	$	112,366	$	37,319			33.2	%

The increase in the EMEA segment’s net sales of wind blades during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same periods in ~~2020~~2021, was primarily driven by a ~~19% and 14%~~23% increase in wind blade production at our two Turkey plants, ~~respectively, primarily due to transitions and the adverse impact of the COVID-19 pandemic in the prior year,~~ as well as an increase in the average sales price of wind blades produced in the two comparative ~~periods and foreign currency fluctuations. The~~periods. These net sales increases ~~for three months ended June 30, 2021~~ were partially offset by ~~a decrease in the year over year number of wind blades still in the production process at the end of the period.~~currency fluctuations. The fluctuating U.S. dollar relative to the Euro had ~~a favorable~~an unfavorable impact of ~~7.9% and 6.5%~~5.6% on net sales during the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, as compared to the ~~2020 periods.~~2021 period.

India Segment

The following table summarizes our net sales by product/service for the India segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended							Six Months Ended							Three Months Ended
	June 30,				Change			June 30,				Change			March 31,				Change
	2021		2020		$		%	2021		2020		$		%	2022		2021		$			%
	(in thousands)							(in thousands)							(in thousands)
Wind blade sales	$	62,397	$	14,859	$	47,538	NM	$	109,977	$	25,720	$	84,257	NM	$	41,727	$	47,580	$	(5,853	)		(12.3	)%
Other sales		57		—		57	NM		118		—		118	NM		159		61		98			160.7
Total net sales	$	62,454	$	14,859	$	47,595	NM	$	110,095	$	25,720	$	84,375	NM	$	41,886	$	47,641	$	(5,755	)		(12.1	)%

The ~~increase~~decrease in the India segment’s net sales of wind blades during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same period in ~~2020~~2021, was primarily driven by a 26% decrease in wind blade production for the ~~commencement of production in 2020,~~period and the ~~ramp up~~transition of ~~such production~~two of our

manufacturing lines from one type of wind blade to a new type of wind blade during the first quarter of 2022. The decrease in ~~2021.~~net sales of wind blades was partially offset by an increase in the average sales price of wind blades in the two comparative periods.

Total cost of goods sold

The following table summarizes our total cost of goods sold for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended												Six Months Ended												Three Months Ended
	June 30,						Change						June 30,						Change						March 31,						Change
	2021			2020			$			%			2021			2020			$			%			2022			2021			$			%
	(in thousands)												(in thousands)												(in thousands)
Cost of sales	$	440,416		$	367,644		$	72,772			19.8	%	$	823,472		$	716,119		$	107,353			15.0	%	$	370,954		$	383,056		$	(12,102	)		(3.2	)%
Startup costs		4,504			6,897			(2,393	)		-34.7	%		9,056			14,753			(5,697	)		-38.6	%		5,467			4,552			915			20.1
Transition costs		5,595			4,023			1,572			39.1	%		15,397			8,201			7,196			87.7	%		10,076			9,802			274			2.8
Total startup and transition costs		10,099			10,920			(821	)		-7.5	%		24,453			22,954			1,499			6.5	%		15,543			14,354			1,189			8.3
Total cost of goods sold	$	450,515		$	378,564		$	71,951			19.0	%	$	847,925		$	739,073		$	108,852			14.7	%	$	386,497		$	397,410		$	(10,913	)		(2.7	)
% of net sales		98.2	%		101.3	%					-3.1	%		98.2	%		101.2	%					-3.0	%		100.4	%		98.2	%					2.2	%

Total cost of goods sold as a percentage of net sales ~~decreased~~increased by approximately ~~three~~two percentage points during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020,~~2021, primarily driven ~~primarily by a decrease in warranty costs and direct labor costs, partially offset~~ by an increase in direct material costs and foreign currency fluctuations. The fluctuating U.S. dollar against the Euro, ~~Turkish Lira,~~ Chinese Renminbi and Mexican Peso had an unfavorable impact of ~~2.2% and 1.7%~~2.8% on consolidated cost of goods sold for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022 as compared to the ~~2020 periods.~~2021 period. Included in the cost of sales for the three months ended March 31, 2022, is approximately $7.1 million in non-restructuring related operating costs that were associated with certain manufacturing facilities in Newton, Iowa; Dafeng, China; and Juarez, Mexico, where production has stopped.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended												Six Months Ended												Three Months Ended
	June 30,						Change						June 30,						Change						March 31,				Change
	2021			2020			$			%			2021			2020			$			%			2022		2021		$			%
	(in thousands)												(in thousands)												(in thousands)
General and administrative expenses	$	6,712		$	6,887		$	(175	)		-2.5	%	$	15,634		$	16,383		$	(749	)		-4.6	%	$	7,860	$	8,922	$	(1,062	)		(11.9	)%
% of net sales		1.5	%		1.8	%					-0.3	%		1.8	%		2.2	%					-0.4	%		2.0		2.2					(0.2	)

The ~~decreases~~decrease in general and administrative expenses as a percentage of net sales for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020 were~~2021, was primarily driven by reduced compensation costs, consulting costs, supplies and our overall continued focus on reducing costs.

Restructuring costs, net

The following table summarizes our loss on sale of assets and asset impairments for the three months ended March 31, 2022 and 2021:


	Three Months Ended
	March 31,				Change
	2022		2021		$		%
	(in thousands)
Restructuring charges, net	$	2,393	$	258	$	2,135	NM
% of net sales		0.6		0.1				0.5

The ~~increases~~increase in restructuring costs, net for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020 were~~2021, was associated with the optimization of our global footprint, comprised of ~~$2.2~~$1.9 million ~~and $2.5 million, respectively,~~ of severance benefits to terminated ~~employees. All severance benefits were paid to~~employees primarily as a result of the ~~terminated employees by the end~~closure of ~~July 2021.~~our Newton, Iowa; Dafeng, China and Taicang, China manufacturing facilities.

2728

Income (loss) from operations

Segment discussion

The following table summarizes our income (loss) from operations by our five geographic operating segments for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended												Six Months Ended												Three Months Ended
	June 30,						Change						June 30,						Change						March 31,						Change
	2021			2020			$			%			2021			2020			$			%			2022			2021			$			%
	(in thousands)												(in thousands)												(in thousands)
U.S.	$	148		$	(12,045	)	$	12,193			101.2	%	$	(11,472	)	$	(27,631	)	$	16,159			58.5	%	$	(6,534	)	$	(9,913	)	$	3,379			34.1	%
Asia		8,105			18,492			(10,387	)		-56.2	%		10,814			23,564			(12,750	)		-54.1	%		(6,109	)		2,709			(8,818	)	NM
Mexico		(25,256	)		(11,324	)		(13,932	)		-123.0	%		(29,280	)		(13,092	)		(16,188	)		-123.6	%		(23,704	)		(5,731	)		(17,973	)	NM
EMEA		10,782			(1,145	)		11,927		NM				20,570			1,519			19,051		NM				23,617			9,788			13,829			141.3
India		4,188			(7,233	)		11,421			157.9	%		4,128			(13,019	)		17,147			131.7	%		(109	)		(60	)		(49	)	NM
Total loss from operations	$	(2,033	)	$	(13,255	)	$	11,222			84.7	%	$	(5,240	)	$	(28,659	)	$	23,419			81.7	%	$	(12,839	)	$	(3,207	)	$	(9,632	)	NM
% of net sales		-0.4	%		-3.5	%					3.1	%		-0.6	%		-3.9	%					3.3	%		-3.3	%		-0.8	%					(2.5	)%

U.S. Segment

The ~~decrease~~increase in the loss from operations in the U.S. segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily due to the ~~increase~~decrease in wind blade volume ~~an increase in~~due to the ~~average sales price~~shutdown of ~~wind blades and a decrease in direct labor costs, partially offset by an increase in direct material costs~~production at our Newton, Iowa ~~blade~~manufacturing facility.

Asia Segment

The decrease in the income from operations in the Asia segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily due to the decrease in the net sales of wind blades, restructuring charges incurred at our Taicang City and Dafeng manufacturing facilities and foreign currency ~~fluctuations, partially offset by an increase in the average sales price of wind blades. In addition, for the six months ended June 30, 2021, there was a decrease in startup and transition costs.~~fluctuations. The fluctuating U.S. dollar against the Chinese Renminbi had an unfavorable impact of ~~6.7% and 6.5%~~1.1% on cost of goods sold for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, respectively, as compared to the ~~2020 periods.~~2021 period.

Mexico Segment

The increase in the loss from operations in the Mexico segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily due to ~~an increase in~~ direct material ~~costs~~ and startup and transition costs ~~partially offset by~~related to the ~~increase~~Matamoros, Mexico facility that we took over from Nordex in July 2021, and a decrease in wind blade volume, ~~and~~partially offset by an increase in the average sales price of wind ~~blades. In addition, for the three and six months ended June 30, 2021, there was an increase and a decrease, respectively, in warranty costs~~blades as compared to the ~~2020 periods.~~2021 period. The fluctuating U.S. dollar relative to the Mexican Peso had ~~an unfavorable~~a favorable impact of ~~2.1% and 1.1%~~0.2% on cost of goods sold for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, respectively, as compared to the ~~2020 periods.~~2021 period.

EMEA Segment

The increase in the income from operations in the EMEA segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily driven by increased wind blade production at our two Turkey manufacturing facilities, an increase in the average sales price of wind blades produced and ~~a decrease in warranty costs. In addition, for the three months ended June 30, 2021, there was~~ a decrease in startup and transition costs, ~~as compared to the 2020 period. Additionally, for the six months ended June 30, 2021, there was~~partially offset by an increase in direct material costs as compared to the ~~2020~~2021 period. The fluctuating U.S. dollar relative to the ~~Turkish Lira and~~ Euro had an unfavorable impact of ~~1.1% and 0.4%~~8.5% on cost of goods sold for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, respectively, as compared to the ~~2020 periods.~~2021 period.

India Segment

The increase in the ~~income~~loss from operations in the India segment for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020~~2021, was primarily driven by a decrease in volume due to the ~~commencement~~transition of ~~production in 2020,~~two of our manufacturing lines from one type of wind blade to a new type of wind blade and the ~~ramp up~~continued expansion of ~~such production~~our India manufacturing facility, resulting in ~~2021.~~an increase in manufacturing overhead costs. The increase in net loss was partially offset by an increase in the average sales price of wind blades.

2829

Other income (expense)

The following table summarizes our total other income (expense) for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended												Six Months Ended												Three Months Ended
	June 30,						Change						June 30,						Change						March 31,						Change
	2021			2020			$			%			2021			2020			$			%			2022			2021			$			%
	(in thousands)												(in thousands)												(in thousands)
Interest expense, net	$	(2,691	)	$	(2,545	)	$	(146	)		-5.7	%	$	(5,395	)	$	(4,316	)	$	(1,079	)		-25.0	%	$	(769	)	$	(2,704	)	$	1,935			71.6	%
Foreign currency loss		(6,504	)		(1,928	)		(4,576	)	NM				(10,231	)		(968	)		(9,263	)	NM
Foreign currency income (loss)																										210			(3,727	)		3,937			105.6
Miscellaneous income		321			939			(618	)		-65.8	%		1,060			1,634			(574	)		-35.1	%		542			739			(197	)		(26.7	)
Total other expense	$	(8,874	)	$	(3,534	)	$	(5,340	)		-151.1	%	$	(14,566	)	$	(3,650	)	$	(10,916	)	NM
Total other income (expense)																									$	(17	)	$	(5,692	)	$	5,675			99.7	%

The ~~increase~~decrease in the total other expense for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022, as compared to the same ~~periods~~period in ~~2020 were~~2021, was primarily due to ~~an increase~~a decrease in the foreign currency loss ~~primarily~~ due to ~~net Euro liability exposure against~~the change in functional currency at our Turkey subsidiaries from the Turkish Lira to the Euro, as well as a decrease in interest expense due to the repayment of the outstanding senior revolving credit facility in the ~~current year periods as compared to the same periods in 2020.~~prior year.

Income taxes

The following table summarizes our income taxes for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three Months Ended											Six Months Ended											Three Months Ended
	June 30,						Change					June 30,						Change					March 31,						Change
	2021			2020			$		%			2021			2020			$		%			2022			2021			$			%
	(in thousands)											(in thousands)											(in thousands)
Income tax provision	$	(28,890	)	$	(49,312	)	$	20,422		41.4	%	$	(21,788	)	$	(34,284	)	$	12,496		36.4	%
Income tax benefit (provision)																							$	(2,944	)	$	7,102		$	(10,046	)		(141.5	)%
Effective tax rate		-264.9	%		-293.7	%							-110.0	%		-106.1	%							-22.9	%		79.8	%

See Note 9,11, Income Taxes, to our condensed consolidated financial statements for more details about our income taxes for the three ~~and six~~ months ended ~~June 30, 2021 and 2020.~~March 31, 2022.

~~Net loss~~

~~The following table summarizes our net loss for the three and six months ended June 30, 2021 and 2020:~~

Three Months Ended

Six Months Ended

June 30,

Change

June 30,

Change

2021

2020

$

%

2021

2020

$

%

(in thousands)

(in thousands)

Net loss

$
(39,797
)

$
(66,101
)

$
26,304

39.8
%

$
(41,594
)

$
(66,593
)

$
24,999

37.5
%

The decrease in the net loss for the three and six months ended June 30, 2021 as compared to the same periods in 2020 was primarily due to the reasons set forth above. The diluted net loss per share was $1.08 for the three months ended June 30, 2021, compared to a diluted net loss per share of $1.87 for the three months ended June 30, 2020. The diluted net loss per share was $1.13 for the six months ended June 30, 2021, compared to a diluted net loss per share of $1.89 for the six months ended June 30, 2020.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the uncertainty relating to: (i) the 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 have and will continue to manage our liquidity to ensure our long-term viability until the COVID-19 pandemic abates.

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, raw materials purchases, working capital, debt service costs, warranty costs and restructuring costs associated with the optimization of our global footprint. Our capital expenditures have been primarily related to machinery and equipment at our new facilities and expansion and improvements at our existing facilities. 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 ~~proceeds~~repayments under our financing arrangements of ~~$19.0~~$22.9 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 as compared to net proceeds under our financing arrangements of ~~$97.1~~$17.3 million in the comparable period of ~~2020.~~2021. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~$237.1~~$51.7 million and ~~$217.9~~$74.6 million in outstanding indebtedness, ~~excluding debt issuance costs,~~ respectively. As of ~~June 30, 2021,~~

March 31, 2022, we had an aggregate of ~~$115.9~~$107.5 million of remaining capacity for cash and ~~$91.1~~non-cash financing, including $84.3 million of remaining availability for cash borrowing under our various credit facilities. ~~Working capital requirements have increased as a result~~In addition, we also may elect, at our option through November 2023, to require the holders of our ~~overall growth~~Series A Preferred Stock to purchase an additional $50.0 million of Series A Preferred Stock on the same terms and conditions as the ~~need to fund higher accounts receivable and inventory levels as our business volumes have increased, as well as increased raw material costs primarily related to resin, carbon fiber and logistics.~~initial issuance of the Series A Preferred Stock. Based upon current and anticipated levels of operations, we believe that cash on hand, available credit facilities, and cash flows 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 ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had unrestricted cash, cash equivalents and short-term investments totaling ~~$123.1~~$130.9 million and ~~$129.9~~$242.2 million, respectively. The ~~June 30, 2021~~March 31, 2022 balance includes ~~$67.9~~$18.3 million of cash located outside of the United States, including ~~$58.7~~$10.6 million in China, ~~$5.1~~$3.0 million in Turkey, ~~$2.3~~$2.4 million in India, $1.8 million in Mexico ~~$1.5 million in India,~~ and ~~$0.3~~$0.5 million in other countries.

Our ability to repatriate funds from China 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 China, including retained earnings as determined under Chinese-statutory accounting requirements. Until 50% ($~~26.6~~26.7 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020)~~2021) of registered capital is contributed to a surplus reserve, our China 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 China operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the amount of the surplus reserve fund was ~~$9.4 million and $7.0 million, respectively.~~$10.0 million. In July 2021, China paid a dividend of approximately $19.5 million, net of withholding taxes, to our subsidiary in Switzerland.

Financing Facilities

Our total principal amount of debt outstanding as of ~~June 30, 2021~~March 31, 2022 was ~~$237.1~~$51.7 million, including our ~~Credit Agreement,~~ secured and unsecured financing, working capital and term loan agreements and equipment finance leases. See Note 5,6, Long-Term Debt, Net of Current Maturities, to our condensed consolidated financial statements for more details on our debt balances.

Cash Flow Discussion

The following table summarizes our key cash flow activity for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Six Months Ended									Three Months Ended
	June 30,									March 31,
	2021			2020			$ Change			2022			2021			$ Change
	(in thousands)									(in thousands)
Net cash used in operating activities	$	(3,255	)	$	(27,005	)	$	23,750
Net cash provided by (used in) operating activities										$	(81,054	)	$	6,740		$	(87,794	)
Net cash used in investing activities		(27,059	)		(42,030	)		14,971			(5,516	)		(18,786	)		13,270
Net cash provided by financing activities		23,702			97,255			(73,553	)
Net cash provided by (used in) financing activities											(23,279	)		18,471			(41,750	)
Impact of foreign exchange rates on cash, cash equivalents and restricted cash		(323	)		(2,525	)		2,202			(1,607	)		(49	)		(1,558	)
Net change in cash, cash equivalents and restricted cash	$	(6,935	)	$	25,695		$	(32,630	)	$	(111,456	)	$	6,376		$	(117,832	)

Operating Cash Flows

Net cash ~~used in~~provided by operating activities decreased by ~~$23.8~~$87.8 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, as compared to the same period in ~~2020~~2021, primarily as a result of ~~higher~~an increase in our operating ~~results~~loss, an increase in accounts receivable due to delayed payments from a customer, and ~~favorable working capital usage.~~a decrease in accounts payable. In addition, the decrease in net cash provided by operating activities for the three months ended March 31, 2022, as compared to the same period in 2021, is due to an increase in contract assets, which was the result of increased procurement of customer specific materials in order to minimize the risk of potential production disruptions that may occur give the recent COVID-19 impacts in China and geopolitical uncertainties with the ongoing Russia and Ukraine war.

Investing Cash Flows

Net cash used in investing activities decreased by ~~$15.0~~$13.3 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, as compared to the same period in ~~2020~~2021, as a result of a decrease in capital expenditures.

We anticipate fiscal year ~~2021~~2022 capital expenditures of ~~between $55 million to $65~~approximately $30 million and we estimate that the cost that we will incur after ~~June 30, 2021~~March 31, 2022 to complete our current projects in process will be approximately ~~$8.5~~$6.9 million. We have used, and will

continue to use, cash flows from operations, the proceeds received from our credit facilities and the proceeds received from the issuance of stock for major projects currently being undertaken, which include ~~new~~the expansion of our manufacturing ~~facilities~~facility in Chennai, India and the continued investment in our existing Tukey, Mexico, China and U.S. facilities.

Financing Cash Flows

Net cash provided by financing activities decreased by ~~$73.6~~$41.8 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022, as compared to the same period in ~~2020~~2021, primarily as a result of ~~decreased net borrowings on our revolving loans.~~

~~OFF-BALANCE SHEET TRANSACTIONS~~increased repayments of outstanding borrowings.

We are not presently involved in any off-balance sheet arrangements, including transactions with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity or capital resources, other than our accounts receivable assignment agreements described below. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes.

Our segments enter into accounts receivable assignment agreements with various financial institutions. Under these agreements, the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to our segment’s customers at an agreed-upon discount rate.

The following table summarizes certain key details of each of the accounts receivable assignment agreements in place as of ~~June 30, 2021:~~March 31, 2022:


Year Of Initial Agreement	Segment(s) Related To	Current Annual ~~Interest~~Discount Rate
2014	Mexico	LIBOR plus 0.75%
2018	Mexico	LIBOR plus 1.25%
2018	EMEA	EURIBOR plus 0.75%
2019	Asia and Mexico	LIBOR plus 1.00%
2019	Asia	Fixed rate of 3.85%
2020	EMEA	EURIBOR plus 1.95%
2020	India	LIBOR plus 1.00%
2020	U.S.	LIBOR plus 1.25%
2021	Mexico	LIBOR plus 1.25%

As the receivables are purchased by the financial institutions under the agreements noted above, the receivables are removed from our condensed consolidated balance sheet. During the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, $360.8~~$220.1 million and ~~$235.7~~$294.1 million ~~respectively, and during the six months ended June 30, 2021 and 2020, $654.9 million and $459.9 million, respectively,~~ of receivables were sold under the accounts receivable assignment agreements described above.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1,2, Basis of Presentation, under the heading “Accounting Pronouncements” to our condensed consolidated financial statements for a discussion of recent accounting pronouncements.

~~CONTRACTUAL OBLIGATIONS~~

During the six months ended June 30, 2021, 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.

Foreign Currency Exchange Rate 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~~functional currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant ~~domestic~~functional currency and then translated into U.S. dollars for inclusion in our condensed consolidated financial statements. In recent years, exchange rates between these foreign currencies and the U.S. dollar have fluctuated significantly and may do so in the future. A hypothetical change of 10% in the exchange rates for the countries above would have resulted in a change to income from operations of approximately ~~$15.7~~$19.9 million for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

Commodity Price Risk. We are subject to commodity price risk under agreements for the supply of our raw materials. We have not hedged our commodity price exposure. We generally lock in pricing for most of our key raw materials for 12 months which protects us from price increases within that period, which we believe helps to mitigate the impact of raw material price increases. As many of

our raw material supply agreements have meet or release clauses, if raw materials prices decrease, we are able to benefit from the reductions in price.

Resin, ~~and~~ resin systems, and carbon fiber are the primary commodities for which we do not have fixed pricing. Approximately ~~55%~~60% of the resin and resin systems, and approximately 90% of the carbon fiber, we use ~~are~~is purchased under contracts either controlled or borne by two of our customers and therefore they receive/bear 100% of any ~~increase~~decrease or ~~decrease~~increase in resin and carbon fiber costs further limiting our exposure to price fluctuations.

~~Prior to taking~~Taking into account ~~any~~the contractual obligations of our customers to share with us the cost savings or increases resulting from a change in the current forecasted price of resin, ~~and~~ resin systems, and carbon fiber we believe that a 10% change in the current forecasted price of resin, ~~and~~ resin systems, and carbon fiber for the customers in which we are exposed to fluctuating prices would have ~~had~~ an impact to income from operations of approximately ~~$11.8~~$5.0 million for the full year ~~2021. Under~~2022. With respect to our other customer supply agreements, our customers typically ~~receive~~receive/bear 70% of the cost savings or increases resulting from a change in the price of resin, resin systems, and ~~resin systems.~~ carbon fiber.

Interest Rate Risk. As of June 30, 2021, our Credit Agreement includes interest on the unhedged principal amount of $96.2 million which is tied to the London Interbank Offered Rate (LIBOR), our India segment has two credit agreements outstanding which are tied to LIBOR, and our EMEA segment has one general credit agreement outstanding which is tied to the Euro Interbank Offered Rate (EURIBOR). For a discussion of the interest rate swap arrangement we entered into related to our Credit Agreement, see Note 13, ~~Financial Instruments~~, to the notes to the consolidated financial statements within our 2020 Annual Report on Form 10-K. The India credit agreements had secured and unsecured working capital financing of $6.4 million and unsecured term loan financing of $2.1 million outstanding as of June 30, 2021. The two EMEA credit agreements had unsecured financing of $5.9 million and financing of capital expenditures of $2.1 million outstanding as of June 30, 2021. Our Credit Agreement, the two India credit agreements, and the one EMEA general credit agreement are the only variable rate debt agreements that we had outstanding as of June 30, 2021 asMarch 31, 2022, all remaining ~~working capital loans,~~ secured and unsecured financing and finance 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 June 30, 2021, 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 Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim 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 Interim Chief Financial Officer, evaluated the design and operating effectiveness as of ~~June 30, 2021~~March 31, 2022 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 Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2021.~~March 31, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~June 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3233

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

See Note ~~12,~~14, 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 during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 were not materially adversely affected by the COVID-19 pandemic however we cannot estimate the duration of the COVID-19 pandemic and our business may be adversely affected in the future if the COVID-19 pandemic persists.

The COVID-19 pandemic did not materially adversely affect our ~~business and~~manufacturing operations during the ~~six~~three months ended ~~June~~March 31, 2022. However, our manufacturing facility in Yangzhou, China was shut down for approximately three weeks during the three months ended September 30, 2021 due to an outbreak of positive COVID-19 cases in Yangzhou City, which had an adverse impact on our results of operations for the three months ended September 30, 2021. Although all of our manufacturing facilities currently are operating at or near normal production levels, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences 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. For example, India and Turkey recently experienced significant increases in positive COVID-19 cases although these resurgences did not have a material impact on our operations during the six months ended June 30, 2021. In addition, although we are not currently experiencing any significant disruptions inHowever, our global supply chain ~~due to~~has been adversely affected by the COVID-19 pandemic in 2022 and our global supply chain may ~~in the future~~continue to 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.~~


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
January (January 1 - January 31)		—	$	—		—		—
February (February 1 - February 28)		—		—		—		—
March (March 1 - March 31)		26,923		12.73		—		—
Total		26,923	12.73			—		—

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.

3334

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.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Filed herewith.

** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

3435

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: ~~August~~May 5, ~~2021~~2022	By:	/s/ Adan Gossar
		Adan Gossar
		Interim Chief ~~Accounting~~Financial Officer
		(Principal ~~Accounting~~Financial Officer)

3536


	Three Months Ended June 30, 2020
	U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)
Wind blade sales	$	26,309	$	141,540	$	78,193	$	87,162	$	14,859	$	348,063
Precision molding and assembly systems sales		0		3,576		3,318		0		0		6,894
Transportation sales		14,539		0		363		0		0		14,902
Other sales		1,231		802		1,546		379		0		3,958
Total net sales	$	42,079	$	145,918	$	83,420	$	87,541	$	14,859	$	373,817