UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended March 31, ~~2019~~2020

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

For the transition period from to

Commission file number:001-35436

TECNOGLASS INC.

(Exact Name of Registrant as Specified in Its Charter)

Cayman Islands

98-1271120

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

Avenida Circunvalar a 100 mts de la Via 40, Barrio Las Flores Barranquilla, Colombia

(Address of principal executive offices)

(57)(5) 3734000

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report):

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares		TGLS		The NASDAQ Stock Market LLC

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 ~~past~~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~~requirement for the past 90 days.

Yes [X] 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 [X] 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~~definition of “large accelerated ~~filer,”~~filer”, “accelerated filer,” “smaller reporting ~~company,”~~company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer	[ ]	Accelerated filer	~~[X]~~
			[X]
Non-accelerated filer	[ ]	Smaller reporting company	~~[X]~~
~~(Do not check if smaller reporting company)~~
			[X]
	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 [X]

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

~~Title of each class~~		~~Trading Symbol(s)~~		~~Name of each exchange on which registered~~
~~Ordinary Shares, par value $0.0001 per share~~		~~TGLS~~		~~The NASDAQ Stock Market LLC~~

~~Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 43,631,653~~April 30, 2020, there were46,117,631 ordinary shares, ~~as of March 31, 2019.~~$0.0001 par value per share, outstanding.

TECNOGLASS INC.

FORM 10-Q FOR THE PERIOD ENDED MARCH 31, ~~2019~~2020

TABLE OF CONTENTS

		Page
Part I. Financial Information
	Item 1. Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1821

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	2226

	Item 4. Controls and Procedures	2226

Part II. Other Information
	Item 1. Legal Proceedings	2326

	Item 1A. Risk Factors	26

	Item 6. Exhibits	2328
Signatures		2429

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

March 31, 2019 December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 61,712 $ 33,040
Investments 2,300 1,163
Trade accounts receivable, net 106,188 92,791
Due from related parties 9,496 8,239
Inventories 90,949 91,849
Contract assets – current portion 49,063 46,018
Other current assets 25,455 20,299
Total current assets $ 345,163 $ 293,399

Long term assets:
Property, plant and equipment, net $ 151,979 $ 149,199
Deferred income taxes 3,290 4,770
Contract assets – non-current 8,117 6,986
Intangible Assets 8,368 9,006
Goodwill 23,561 23,561
Other long term assets 2,945 2,853
Total long term assets 198,260 196,375
Total assets $ 543,423 $ 489,774

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 28,048 $ 21,606
Trade accounts payable and accrued expenses 76,102 65,510
Accrued interest expense 3,241 7,567
Due to related parties 1,623 1,500
Dividends payable 923 736
Contract liability – current portion 13,698 16,789
Other current liabilities 14,486 8,887
Total current liabilities $ 138,121 $ 122,595

Long term liabilities:
Deferred income taxes $ 1,219 $ 2,706
Long Term Payable associated to GM&P acquisition 8,500 8,500
Long term payables from related parties 600 600
Contract liability – non-current 703 1,436
Long term debt 219,848 220,709
Total Long Term Liabilities 230,870 233,951
Total liabilities $ 368,991 $ 356,546
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2019 and December 31, 2018 respectively $ - $ -
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 43,631,653 and 38,092,996 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively 4 4
Legal Reserves 1,367 1,367
Additional paid-in capital 195,816 157,604
Retained earnings 11,668 10,439
Accumulated other comprehensive (loss) (35,288 ) (37,058 )
Shareholders’ equity attributable to controlling interest 173,567 132,356
Shareholders’ equity attributable to non-controlling interest 865 872
Total shareholders’ equity 174,432 133,228
Total liabilities and shareholders’ equity $ 543,423 $ 489,774

	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	36,824		$	47,862
Investments		1,604			2,304
Trade accounts receivable, net		104,416			110,558
Due from related parties		8,463			8,057
Inventories		68,341			82,714
Contract assets – current portion		36,689			42,014
Other current assets		27,734			29,340
Total current assets	$	284,071		$	322,849

Long-term assets:
Property, plant and equipment, net	$	128,426		$	154,609
Deferred income taxes		14,573			4,595
Contract assets – non-current		10,743			7,059
Due from related parties - long term		1,423			1,786
Intangible assets		6,098			6,703
Goodwill		23,561			23,561
Long-term investments		45,856			45,596
Other long-term assets		2,611			2,910
Total long-term assets		233.291			246,819
Total assets	$	517.362		$	569,668

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	15,245		$	16,084
Trade accounts payable and accrued expenses		56,962			61,878
Accrued interest expense		3,039			7,645
Due to related parties		3,896			4,415
Dividends payable		1,305			67
Contract liability – current portion		13,957			12,459
Due to equity partners		10,900			10,900
Other current liabilities		14,278			15,563
Total current liabilities	$	119,582		$	129,011

Long-term liabilities:
Deferred income taxes	$	857		$	411
Long-term payable associated to GM&P acquisition		8,500			8,500
Long-term liabilities from related parties		628			622
Contract liability – non-current		148			187
Long-term debt		243,695			243,727
Total long-term liabilities		253,828			253,447
Total liabilities	$	373,410		$	382,458

SHAREHOLDERS’ EQUITY
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2020 and December 31, 2019 respectively	$	-		$	-
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 46,117,631 and 46,117,631 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		5			5
Legal Reserves		1,367			1,367
Additional paid-in capital		208,390			208,283
Retained earnings		(3,897	)		16,213
Accumulated other comprehensive (loss)		(62,617	)		(39,264	)
Shareholders’ equity attributable to controlling interest		143,248			186,604
Shareholders’ equity attributable to non-controlling interest		704			606
Total shareholders’ equity		143,952			187,210
Total liabilities and shareholders’ equity	$	517,362		$	569,668

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income

(In thousands, except share and per share data)

(Unaudited)

Three months ended March 31,
2019 2018
Operating revenues:
External customers $ 104,808 $ 86,207
Related parties 2,360 953
Total operating revenues 107,168 87,160
Cost of sales 75,276 60,412
Gross Profit 31,892 26,748

Operating expenses:
Selling expense (9,562 ) (9,137 )
General and administrative expense (8,094 ) (7,621 )
Total Operating Expenses (17,656 ) (16,758 )

Operating income 14,236 9,990

Non-operating income 275 1,099
Foreign currency transactions gains 3,286 9,973
Loss on extinguishment of debt -
Interest expense and deferred cost of financing (5,587 ) (5,050 )

Income before taxes 12,210 16,012

Income tax provision 4,879 5,393

Net income $ 7,331 $ 10,619

Loss attributable to non-controlling interest 7 72

Income attributable to parent $ 7,338 $ 10,691

Comprehensive income:
Net income $ 7,331 $ 10,619
Foreign currency translation adjustments 1,770 8,701

Total comprehensive income $ 9,101 $ 19,320
Comprehensive loss attributable to non-controlling interest 7 72

Total comprehensive income attributable to parent $ 9,108 $ 19,392

Basic income per share $ 0.19 $ 0.28

Diluted income per share $ 0.18 $ 0.28

Basic weighted average common shares outstanding 38,611,867 37,393,304

Diluted weighted average common shares outstanding 39,882,833 38,112,847

	Three months ended
	March 31,
	2020			2019
Operating revenues:
External customers	$	86,106		$	104,808
Related parties		1,192			2,360
Total operating revenues		87,298			107,168
Cost of sales		56,871			75,276
Gross profit		30,427			31,892

Operating expenses:
Selling expense		(9,668	)		(9,562	)
General and administrative expense		(7,610	)		(8,094	)
Total operating expenses		(17,278	)		(17,656	)

Operating income		13,149			14,236

Non-operating (expenses) income, net		(101	)		275
Equity method income		260			-
Foreign currency transactions (losses) gains		(32,466	)		3,286
Interest expense and deferred cost of financing		(5,643	)		(5,587	)

(Loss) Income before taxes		(24,801	)		12,210

Income tax benefit (provision)		6,133			(4,879	)

Net (loss) income	$	(18,668	)	$	7,331

(Income) Loss attributable to non-controlling interest		(98	)		7

(Loss) Income attributable to parent	$	(18,766	)	$	7,338

Comprehensive income:
Net (loss) income	$	(18,668	)	$	7,331
Foreign currency translation adjustments		(19,288	)		1,770
Change in fair value derivative contracts		(4,065	)		-

Total comprehensive (loss) income	$	(42,021	)	$	9,101
Comprehensive (income) loss attributable to non-controlling interest		(98	)		7

Total comprehensive (loss) income attributable to parent	$	(42,119	)	$	9,108

Basic (loss) income per share	$	(0.40	)	$	0.18

Diluted (loss) income per share	$	(0.40	)	$	0.18

Basic weighted average common shares outstanding		46,117,631			40,295,687

Diluted weighted average common shares outstanding		46,117,631			40,847,547

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

							Three months ended March 31,
	Three months ended March 31,						2020			2019
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,331		$	10,619
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net (loss) income							$	(18,668	)	$	7,331
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Provision for bad debts		153			(169	)		368			153
Provision for obsolete inventory		-			21
Depreciation and amortization		5,841			5,665			5,241			5,841
Deferred income taxes		947			2,781			(9,031	)		947
Director stock compensation		-			71
Equity method income								(260	)		-
Deferred cost of financing								440			393
Other non-cash adjustments		416			349			40			23
Unrealized currency translation losses (gains)								37,533			(1,792	)
Changes in operating assets and liabilities:
Trade accounts receivables		(10,740	)		5,118			664			(14,953	)
Inventories		2,870			(1,061	)		(2,848	)		2,870
Prepaid expenses		(820	)		(82	)		69			(820	)
Other assets		(4,536	)		(2,051	)		(4,940	)		(4,613	)
Trade accounts payable and accrued expenses		2,640			(20,212	)		(6,274	)		8,187
Accrued interest expense		(4,337	)		(4,398	)		(4,546	)		(4,337	)
Taxes payable		4,724			(794	)		3,113			4,724
Labor liabilities		(603	)		(471	)		(1,270	)		(603	)
Contract assets and liabilities								2,352			(7,905	)
Related parties		(831	)		1,130			(1,435	)		(1,075	)
Contract assets and liabilities		(7,955	)		(6,728	)
CASH USED IN OPERATING ACTIVITIES	$	(4,900	)	$	(10,212	)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES							$	548		$	(5,629	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments		346			177			193			295
Purchase of investments		(306	)		(218	)		(137	)		(307	)
Acquisition of property and equipment		(3,701	)		(1,070	)		(6,469	)		(3,701	)
CASH USED IN INVESTING ACTIVITIES	$	(3,661	)	$	(1,111	)	$	(6,413	)	$	(3,713	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt		5,912			2,994
Cash dividend		(760	)		(540	)		-			(760	)
Proceeds from equity offering		33,050			-			-			33,050
Proceeds from debt								14,353			6,693
Repayments of debt		(1,349	)		(2,726	)		(15,073	)		(1,349	)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	$	36,853		$	(272	)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES							$	(720	)	$	37,634

Effect of exchange rate changes on cash and cash equivalents	$	380		$	1,277		$	(4,453	)	$	380

NET INCREASE (DECREASE) IN CASH		28,672			(10,318	)
NET (DECREASE) INCREASE IN CASH								(11,038	)		28,672
CASH - Beginning of period		33,040			40,923			47,862			33,040
CASH - End of period	$	61,712		$	30,605		$	36,824		$	61,712

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	9,230		$	8,910		$	9,282		$	9,230
Income Tax	$	1,840		$	4,258		$	1,986		$	1,840

NON-CASH INVESTING AND FINANCING ACTIVITES:
Assets acquired under credit or debt	$	1,468		$	314		$	991		$	1,468

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Amounts in thousands, except share and per share data)

(Unaudited)

Ordinary Shares,
$0.0001
Par Value
Additional Paid in Legal Retained Accumulated Other Comprehensive Total Shareholders’ Non-Controlling Total Shareholders’ Equity and Non-Controlling
Shares Amount Capital Reserve Earnings Loss Equity Interest Interest
Balance at December 31, 2018 38,092,996 4 157,604 1,367 10,439 (37,058 ) 132,356 872 133,228

Issuance of common stock 5,000,000 - 33,050 - - - 33,050 - 33,050

Stock dividend 538,657 - 5,162 - (6,109 ) - (947 ) - (947 )

Foreign currency translation - - - - - 1,770 1,770 - 1,770

Net income - - - - 7,338 - 7,338 (7 ) 7,331

Balance at March 31, 2019 43,631,653 4 195,816 1,367 11,668 (35,288 ) 173,567 865 174,432

	Ordinary Shares, $0.0001 Par Value				Additional Paid in		Legal		Retained			Accumulated Other Comprehensive			Total Shareholders’			Non-Controlling		Total Shareholders’ Equity and Non-Controlling
	Shares		Amount		Capital		Reserve		Earnings			Loss			Equity			Interest		Interest
Balance at December 31, 2019		46,117,631		5		208,283		1,367		16,213			(39,264	)		186,604			606		187,210

Cash dividend		-		-		107		-		(1,344	)		-			(1,237	)		-		(1,237	)

Derivative financial insttruments		-		-		-		-		-			(4,065	)		(4,065	)		-		(4,065	)

Foreign currency translation		-		-		-		-		-			(19,288	)		(19,288	)		-		(19,288	)

Net income		-		-		-		-		(18,766	)		-			(18,766	)		98		(18,668	)

Balance at March 31, 2020		46,117,631		5		208,390		1,367		(3,897	)		(62,617	)		143,248			704		143,952

	Ordinary Shares, $0.0001 Par Value				Additional Paid in		Legal		Retained			Accumulated Other Comprehensive			Total Shareholders’			Non-Controlling			Total Shareholders’ Equity and Non-Controlling			Ordinary Shares, $0.0001 Par Value				Additional Paid in		Legal		Retained			Accumulated Other Comprehensive			Total Shareholders’			Non-Controlling			Total Shareholders’ Equity and Non-Controlling
	Shares		Amount		Capital		Reserve		Earnings			Loss			Equity			Interest			Interest			Shares		Amount		Capital		Reserve		Earnings			Loss			Equity			Interest			Interest
Balance at December 31, 2017		34,836,575		3		125,317		1,367		22,212			(28,651	)		120,248			1,417			121,665
Balance at December 31, 2018																									38,092,996		4		157,604		1,367		10,439			(37,058	)		132,356			872			133,228

Issuance of common stock		4,564		-		34		-		-			-			34			-			34			5,000,000		-		33,050		-		-			-			33,050			-			33,050

Adoption of ASC 606		-		-		-		-		(187	)		-			(187	)		-			(187	)

Stock dividend		499,080		1		4,128		-		(4,947	)		-			(818	)		-			(818	)		538,657		-		5,162		-		(6,109	)		-			(947	)		-			(947	)

Foreign currency translation		-		-		-		-		-			8,701			8,701			-			8,701			-		-		-		-		-			1,770			1,770			-			1,770

Net income		-		-		-		-		10,691			-			10,691			(72	)		10,619			-		-		-		-		7,338			-			7,338			(7	)		7,331

Balance at March 31, 2018		35,340,219		4		129,479		1,367		27,769			(19,950	)		138,669			1,345			140,014
Balance at March 31, 2019																									43,631,653		4		195,816		1,367		11,668			(35,288	)		173,567			865			174,432

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

(Unaudited)

Note 1. General

Business Description

Tecnoglass Inc., a Cayman Islands exempted company (the “Company”, “Tecnoglass,” “TGI,” “we, “ “us” or “our”) manufactures hi-specification, architectural glass and windows for the global residential and commercial construction industries. Currently the Company offers design, production, marketing, and installation of architectural systems for buildings of high, medium and low elevation size. Products include windows and doors in glass and aluminum, office partitions and interior divisions, floating facades and commercial window showcases. The Company ~~sells~~exports most of its production to foreign countries, selling to customers in North, Central and South ~~America, and exports most of its production to foreign countries.~~America.

The Company manufactures both glass and aluminum products. Its glass products include tempered glass, laminated glass, thermo-acoustic glass, curved glass, silk-screened glass, acoustic glass and digital print glass. Its Alutions plant produces mill finished, anodized, painted aluminum profiles and rods, tubes, bars and plates. Alutions’ operations include extrusion, smelting, painting and anodizing processes, and exporting, importing and marketing aluminum products.

The Company also designs, manufactures, markets and installs architectural systems for high, medium and low-rise construction, glass and aluminum windows and doors, office dividers and interiors, floating facades and commercial display windows.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting purposes. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by US GAAP.

The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Actual results may differ from these estimates under different assumptions and conditions. Estimates inherent in the preparation of these unaudited condensed consolidated financial statements relate to the collectability of account receivables, the valuation of inventories, estimated earnings on uncompleted contracts, useful lives and potential impairment of long-lived assets. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially. These financial statements reflect all adjustments that in the opinion of management are necessary for a fair statement of the financial position, results of operations and cash flows for the period presented, and are of a normal, recurring nature.

The Company has one operating segment, Architectural Glass and Windows, which is also its reporting segment, comprising the design, manufacturing, distribution, marketing and installation of high-specification architectural glass and window product sold to the construction industry.

Principles of Consolidation

These unaudited condensed consolidated financial statements consolidate TGI, its subsidiaries Tecnoglass S.A.S (“TG”), C.I. Energía Solar S.A.S E.S. Windows (“ES”) ~~and~~, ES Windows LLC (“ESW LLC”), Tecnoglass LLC (“Tecno LLC”), Tecno RE LLC (“Tecno RE”), ~~Giovanni Monti and Partners~~GM&P Consulting and Glazing Contractors (“GM&P”) ~~and~~, Componenti USA LLC (“Componenti”) and ES Metals SAS (“ES Metals”), which are entities in which we have a controlling financial interest because we hold a majority voting interest. To determine if we hold a controlling financial interest in an entity, we first evaluate if we are required to apply the variable interest entity (“VIE”) model to the entity, otherwise the entity is evaluated under the voting interest model. All significant intercompany accounts and transactions are eliminated in consolidation, including unrealized intercompany profits and losses. The equity method of accounting is used for investments in affiliates and other joint ventures over which the Company has significant influence but does not have effective control.

~~Non-controlling interest~~

~~When the Company owns a majority of a subsidiary’s stock, the Company includes in its condensed consolidated~~Derivative Financial Statements the non-controlling interest in the subsidiary. The non-controlling interest in the Condensed Consolidated Statements of Operations and Other Comprehensive Income is equal to the non-controlling proportionate share of the subsidiary’s net income and, as included in Shareholders’ Equity on the Consolidated Balance Sheet, is equal to the non-controlling proportionate share of the subsidiary’s net assets.

~~Foreign Currency Translation~~

The unaudited condensed consolidated financial statements are presented in U.S. Dollars, the reporting currency. Some of our foreign subsidiaries’ local currency is the Colombian Peso, which is also their functional currency as determined by the analysis of markets, costs and expenses, assets, liabilities, financing and cash flow indicators. As such, our subsidiaries’ assets and liabilities are translated at the exchange rate in effect at the balance sheet date, with equity being translated at the historical rates. Revenues and expenses of our foreign subsidiaries are translated at the average exchange rates for the period. The resulting cumulative foreign currency translation adjustments from this process are included as a component of accumulated other comprehensive income (loss). Therefore, the U.S. Dollar value of these items in our financial statements fluctuates from period to period.

Also, exchange gains and losses arising from transactions denominated in a currency other than the functional currency are included in the Condensed Consolidated Statement of Operations as foreign exchange gains and losses.

~~Shipping and Handling Costs~~Instruments

The Company ~~classifies amounts billed to customers related to shipping~~recognizes all derivative financial instruments as either assets or liabilities at fair value on the consolidated balance sheet. The unrealized gains or losses arising from changes in fair value of derivative instruments that are designated and ~~handling~~qualify as ~~product revenues. The Company records and presents shipping and handling costs~~cash flow hedges, are recorded in ~~selling expenses. Shipping and handling costs for~~ the ~~three months ended March 31, 2019 and 2018 were $4,312 and $4,732, respectively.~~consolidated statement of comprehensive income. Amounts in accumulated other comprehensive loss on the consolidated balance sheet are reclassified into the consolidated statement of income in the same period or periods during which the hedged transactions are settled.

~~Dividends Payable~~Impairment

We review goodwill and long-lived assets for impairment each year on December 31^st or more frequently when events or significant changes in circumstances indicate that the carrying value may not be recoverable. The novel coronavirus global outbreak and its associated economic impact, including a significant decrease in the market price of our ordinary shares, is considered a triggering event requiring us to reassess our goodwill and long-lived asset valuations, as well as assumptions of future income from underlying assets. To the extent the impact of the pandemic depends on future developments which are highly uncertain we will continue to evaluate in future periods whether these assumptions are reasonable and will update the forecasts and impairment analysis as appropriate.

Based on our analysis as of March 31, 2020 we concluded that no impairment needs to be recorded to our goodwill using the market approach as the market capitalization of our company, ~~accounts~~which has a single reporting unit, exceeds the book value of shareholders equity.

Based on our analysis as of March 31, 2020 we concluded that no impairment needs to be recorded to our long-lived assets as their carrying value are below their realizable values based on projected future cashflows estimated with assumptions deemed reasonable by management based on information currently available. The Company continuously monitors for ~~its dividend declared as a liability under ASC 480 - Distinguishing Liabilities from Equity since~~events and circumstances that could negatively impact the shareholder have the option to elect cash or stock and reclassifies from dividend payable to additional paid-in capital when shareholders elect a stock dividend instead of cash. The dividend payable is not subject to re-measurement at each balance sheet date since the dividend is a fixed monetary amount known at inception and thus no changekey assumptions in determining fair value, ~~adjustment is necessary.~~including long-term revenue growth projections, profitability, discount rates, recent market valuations from transactions by comparable companies, volatility in the Company's market capitalization, and general industry, market and macro-economic conditions.

Recently Issued Accounting Pronouncements

~~In November 2018, the FASB issued ASU 2018-19 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”).~~ In June 2016, FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326). This ASU represents a significant change in the allowance for credit losses accounting model by requiring immediate recognition of management’s estimates of current expected credit losses. Under the prior model, losses were recognized only as they were incurred, which FASB has noted delayed recognition of expected losses that might not yet have met the threshold of being probable. The new model is applicable to all financial instruments that are not accounted for at fair value through net income, thereby bringing consistency in accounting treatment across different types of financial instruments and requiring consideration of a broader range of variables when forming loss estimates. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, (with early application permitted). The FASB issued ASU 2019-10 and ASU 2019-11 during the fourth quarter of 2019 that will postpone the effective date to the year beginning after December 15, 2022. In February 2020, the FASB issued ASU 2020-02 “Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842), which amends SEC Staff Accounting Bulletin No. 119 (SAB119) which contains interpretative guidance from the SEC aligned to the FASB’s ASC 326. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

~~New Accounting Standards Implemented~~

In ~~February 2016,~~March 2020, the FASB issued ASU ~~2016-02 “Leases~~2020-04, “Reference Rate Reform (Topic ~~842)” (“ASU 2016-02”)~~8485): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. The ~~FASB issued ASU 2016-02~~amendments in this Update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to ~~increase transparency~~contracts, hedging relationships, and ~~comparability among organizations~~other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by ~~recognizing lease assets~~the amendments do not apply to contract modifications made and ~~lease liabilities on~~hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the ~~balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize~~end of the hedging relationship. The amendments in ~~the statement of financial position a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset~~this Update is effective for the ~~lease term. ASU 2016-02 retains a distinction between finance leases (i.e. capital leases under current GAAP) and operating leases.~~Company on December 31, 2022 with early adoption permitted. The ~~classification criteria for distinguishing between finance leases and operating leases will be substantially similar to~~Company is currently evaluating the ~~classification criteria for distinguishing between capital leases and operating leases under current GAAP. The amendments~~potential effect of this ASU ~~are effective for reporting periods beginning after December 15, 2018, which for the Company is the fiscal year beginning January 1, 2019.~~on its consolidated financial statements.

~~The Company did not adjust the comparative periods presented as the FASB provided entities the option to instead apply the provisions~~Note 3. – Revised Presentation of ~~the new leases guidance using the modified retrospective application approach.The new standard provided a number of optional practical expedients in transition. We elected the ‘package of practical expedients’, which allowed the company to not reassess our prior conclusions about lease identification, lease classification and direct costs.~~The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualified, primarily for certain equipment leases that are month-to-month leases. This means, for those leases, we did not recognize right-of-use assets or lease liabilities. We also elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets.

We have identified and analyzed our lease portfolio and evaluated the new reporting and disclosure requirements of the new guidance, and our lease-related processes and internal controls. The adoption of this standard had no material impact to the Company’s financial statements, as, under prior guidance, we had recognized capital leases which correspond to the right-of-use asset and lease liability described under the new guidance. This standard does not have a significant impact on our liquidity or on our debt covenant compliance under our current agreements.

As of January 1, 2019, the Company had $378 finance lease right-of-use assets related to computing equipment and a lease liability for $380 on its Condensed Consolidated Balance Sheet. As of March 31, 2019, the Company had $379 finance lease right-of-use assets related to computing equipment and a lease liability for $344 on its Condensed Consolidated Balance Sheet. The lease agreements include terms to extend the lease, however the Company does not intend to extend its current leases. The weighted average remaining lease term approximate nine months. The right-of-use assets are depreciated and interest expense from the lease liability is recorded on our Condensed Consolidated Statement of ~~Operations.~~

Cash Flows

~~Additionally,~~The Consolidated Statement of Cashflows for the three months ended March 31, 2019 has been revised to correct errors in the classification of the impact of unrealized foreign currency transaction gains and losses resulting from the remeasurement of our monetary assets and liabilities denominated in any currency other than the functional currency. The Company assessed the materiality of the misstatement and concluded it was not material to any previously reported quarterly or annual period financial statements.

Unrealized foreign currency transaction gains and losses, which include currency translation differences on monetary items that form part of investing or financing activities, such as long-term loans, are presented as a reconciling item from net income to cashflow from operating activities in the Consolidated Statement of Cashflows as of March 31, 2020 and 2019 contained herein,. The effect of exchange rate changes on cash and cash equivalents denominated in currencies other than the reporting currency has been and continues to be presented in a separate line item as part of the reconciliation of the change in cash equivalents during the period.

The revisions to the Consolidated Statement of Cashflows as of March 31, 2019, which had no effect on the net change in cash and cash equivalents, are summarized in the following table:

	Three months ended March 31, 2019
	As previously reported			Revision adjustment			As revised

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(4,900	)	$	(729	)	$	(5,629	)
CASH USED IN INVESTING ACTIVITIES		(3,661	)		(52	)		(3,713	)
CASH PROVIDED BY FINANCING ACTIVITIES		36,853			781			37,634
Effect of exchange rate changes on cash and cash equivalents	$	380		$	-		$	380

NET INCREASE (DECREASE) IN CASH		28,672			-			28,672
CASH - Beginning of period		33,040			-			33,040
CASH - End of period	$	61,712		$	-		$	61,712

Note 4. – Long-term Investments

Saint-Gobain Joint Venture

On May 3, 2019, we consummated the joint venture agreement acquiring a 25.8% minority ownership interest in Vidrio Andino with a cash payment of $34.1 million, and the land still to be contributed as of the end of first half of 2020 . As of that date, the Company ~~had~~recorded the investment within Long-term assets on the Company’s Consolidated Balance Sheet for $45.0 million and a ~~commitment~~liability for ~~$201 under operating leases related~~$10.9 million within current liabilities on the Company’s Consolidated Balance to ~~short term apartment leases, installation equipment and computing equipment which expire during~~be settled with the ~~current year that~~contribution of the aforementioned piece of land. Since the date of the acquisition, we have ~~not been capitalized due to their short term. Rental expense from these leases is~~ recognized the proportional share of Vidrio Andino’s net income using the equity method on ~~our Condensed~~the Consolidated Statement of Operations and Other Comprehensive Income as ~~incurred.~~the Company is deemed to have significant influence, but does not have effective control of Vidrio Andino.

~~Leases Accounting Policy~~Establishment of a new subsidiary

~~We determine if an arrangement is~~In January 2019 we established E.S. Windows California, LLC., a ~~lease at inception. We include finance lease right-of-use assets~~wholly-owned U.S. entity to serve as ~~part~~a distributor of ~~property and equipment and~~our products in certain jurisdictions within the ~~lease liability~~U.S. markets.

In April 2019, ESMetals, a Colombian entity in which the Company has 70% equity interest began operations. ESMetals serves as a metalwork contractor to supply the Company with steel accessories used in the assembly of certain architectural systems as part of our ~~current portion~~vertical integration strategy. When the company owns a majority (but less than 100%) of ~~long-term debt~~a subsidiary’s stock, the Company includes in its Consolidated Financial Statements the non-controlling interest in the subsidiary. The non-controlling interest in the Consolidated Statements of Operations and ~~long-term debt~~Other Comprehensive Income is equal to the non-controlling interests’ proportionate share of the subsidiary’s net income and, as included in Shareholders’ Equity on ~~our Condensed~~the Consolidated Balance ~~Sheet. Leases considered short-term are not capitalized, given our election not~~Sheet, is equal to ~~recognize right-of-use assets and lease liabilities arising from short-term leases, but instead considered operating leases~~the non-controlling interests’ proportionate share of the subsidiary’s net assets. In determining the fair value, we used the income approach and the ~~resulting rental expense is recognized on our Condensed Consolidated Statement of Operations as incurred.~~market approach which was performed by third party valuation specialists under management.

Finance lease right-of-use assets and lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments, which was 7.5% as of March 31, 2019. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Note 3.5. - Inventories, net

Inventories are comprised of the following:	March 31, 2019			December 31, 2018
							March 31, 2020			December 31, 2019
Raw materials	$	48,357		$	43,744		$	37,166		$	44,175
Work in process		30,025			25,957			19,392			24,262
Finished goods		4,541			14,251			4,529			5,203
Stores and spares		7,583			7,437			6,734			8,130
Packing material		525			540			570			981
		91,031			91,929			68,391			82,751
Less: Inventory allowance		(82	)		(80	)		(50	)		(37	)
	$	90,949		$	91,849		$	68,341		$	82,714

Note 4.6. – Revenues, Contract Assets and Contract Liabilities

Disaggregation of Total Net Sales

The Company disaggregates its sales with customers by revenue recognition method for its only segment, as the Company believes these factors affect the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows.

Three months endedMarch 31,

2019 2018
Fixed price contracts $ 42,176 $ 42,216
Product sales 64,992 44,944
Total Revenues $ 107,168 $ 87,160

	Three months ended
	March 31,
	2020		2019
Fixed price contracts	$	25,027	$	42,176
Product sales		62,271		64,992
Total Revenues	$	87,298	$	107,168

The following table presents geographical information about revenues.

					Three months ended
	Three months endedMarch 31,				March 31,
	2019		2018		2020		2019
Colombia	$	12,959	$	21,824	$	6,472	$	12,959
United States		92,062		62,993		78,798		92,062
Panama		763		814		680		763
Other		1,384		1,529		1,348		1,384
Total Revenues	$	107,168	$	87,160	$	87,298	$	107,168

Contract Assets and Liabilities

Contract assets represent accumulated incurred costs and earned profits on contracts with customers that have been recorded as sales, but have not been billed to customers and are classified as current and a portion of the amounts billed on certain fixed price contracts that are withheld by the customer as a retainage until a final good receipt of the complete project to the customers satisfaction. Contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue, and represent amounts received in excess of sales recognized on contracts. The Company classifies advance payments and billings in excess of costs incurred as current, and deferred revenue as current or non-current based on the expected timing of sales recognition. Contract assets and contract liabilities are determined on a contract by contract basis at the end of each reporting period. The non-current portion of contract liabilities is included in other liabilities in the Company’s consolidated balance sheets.

The table below presents the components of net contract assets (liabilities).

	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Contract assets — current	$	49,063		$	46,018		$	36,689		$	42,014
Contract assets — non-current		8,117			6,986			10,743			7,059
Contract liabilities — current		(13,698	)		(16,789	)		(13,957	)		(12,459	)
Contract liabilities — non-current		(703	)		(1,436	)		(148	)		(187	)
Net contract assets (liabilities)	$	42,779		$	34,779
Net contract assets							$	33,327		$	36,427

The components of contract assets are presented in the table below.

	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Unbilled contract receivables, gross	$	25,625	$	21,703	$	21,584	$	20,729
Retainage		31,555		31,301		25,848		28,344
Total contract assets		57,180		53,004		47,432		49,073
Less: current portion		49,063		46,018		36,689		42,014
Contract Assets – non-current	$	8,117	$	6,986	$	10,743	$	7,059

The components of contract liabilities are presented in the table below.

	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Billings in excess of costs	$	3,250		4,393	$	1,599		2,077
Advances from customers on uncompleted contracts		11,151		13,832		12,506		10,569
Total contract liabilties		14,401		18,225		14,105		12,646
Less: current portion		13,698		16,789		13,957		12,459
Contract liabilities – non-current	$	703		1,436	$	148		187

During the three months ended March 31, 2020, the Company recognized $1,279 of sales related to its contract liabilities at January 1, 2020. During the three months ended March 31, 2019, the Company recognized $2,282 of sales related to its contract liabilities at January 1, 2019. ~~During the three months ended March 31, 2018, the Company recognized $3,392 of sales related to its contract liabilities at January 1, 2018.~~

1113

Remaining Performance Obligations

As of March 31, ~~2019,~~2020, the Company had ~~$279.4~~$302.4 million of remaining performance obligations, which represents the transaction price of firm orders minus sales recognized from inception to date. Remaining performance obligations exclude unexercised contract options, verbal commitments and potential orders under basic ordering agreements. The Company expects to recognize 100% of sales relating to existing performance obligations within three years, of which ~~$217.3~~$227.4 million are expected to be recognized during the year ~~ended~~ending December 31, ~~2019, and $62.1~~2020, $74.7 million during the year ~~ended~~ending December 31, ~~2020.~~2021.

Note 5.7. Intangible Assets

Intangible assets include Miami-Dade County Notices of Acceptances (NOA’s), which are certificates issued for approved products and required to market ~~hurricane- resistant~~hurricane-resistant glass in Florida. Also, it includes the intangibles acquired from the acquisition of GM&P.

March 31, 2019
Gross Acc. Amort. Net
Trade Names $ 980 $ (408 ) $ 572
Notice of Acceptances (NOAs), product designs and other intellectual property 10,985 (5,577 ) 5,408
Non-compete Agreement 165 (69 ) 96
Contract Backlog 3,090 (3,090 )
Customer Relationships 4,140 (1,848 ) 2,292
Total $ 19,360 $ (10,992 ) $ 8,368

	March 31, 2020
	Gross		Acc. Amort.			Net
Trade Names	$	980	$	(604	)	$	376
Notice of Acceptances (NOAs), product designs and other intellectual property		8,760		(4,519	)		4,241
Non-compete Agreement		165		(102	)		63
Customer Relationships		4,140		(2,722	)		1,418
Total	$	14,045	$	(7,947	)	$	6,098

	December 31, 2018							December 31, 2019
	Gross		Acc. Amort.			Net		Gross		Acc. Amort.			Net
Trade Names	$	980	$	(359	)	$	621	$	980	$	(555	)	$	425
Notice of Acceptances (NOAs), product designs and other intellectual property		10,881		(5,373	)		5,508		8,903		(4,323	)		4,580
Non-compete Agreement		165		(60	)		105		165		(94	)		71
Contract Backlog		3,090		(2,832	)		258		3,090		(3,090	)		-
Customer Relationships		4,140		(1,626	)		2,514		4,140		(2,513	)		1,627
Total	$	19,256	$	(10,250	)	$	9,006	$	17,278	$	(10,575	)	$	6,703

The weighted average amortization period is ~~4.9~~5.4 years.

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the amortization expense amounted to ~~$1,211and $885,~~$550 and $1,211, respectively, and was included within the general and administration expenses in our Condensed Consolidated Statement of Operations.

The estimated aggregate amortization expense for each of the five succeeding years as of March 31, ~~2019~~2020 is as follows:

Year ending	(in thousands)		(in thousands)
2019	$	1,775
2020		2,202	$	1,361
2021		2,172		2,013
2022		1,291		1,148
2023		720		826
2024				565
Thereafter		208		185
	$	8,368	$	6,098

Note 6.8. Debt

The Company’s debt is comprised of the following:

	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Revolving lines of credit	$	25,601		$	19,146		$	21,351		$	17,455
Finance lease		344			380			430			493
Unsecured senior note		210,000			210,000			210,000			210,000
Other loans		16,698			17,804			14,779			15,578
Syndicated loan								14,999			19,999
Less: Deferred cost of financing		(4,746	)		(5,015	)		(2,619	)		(3,714	)
Total obligations under borrowing arrangements		247,896			242,315			258,940			259,811
Less: Current portion of long-term debt and other current borrowings		28,048			21,606			15,245			16,084
Long-term debt	$	219,848		$	220,709		$	243,695		$	243,727

As of March 31, ~~2019,~~2020 and December 31, ~~2018,~~2019, the Company had ~~$246,917~~$258,105 and ~~$224,041~~$259,574 of debt denominated in US Dollars with the remaining amounts denominated in Colombian Pesos.

The Company had ~~$5,122~~$6,455 and ~~$5,038~~$6,979 of property, plant and equipment pledged as collateral for various lines of credit as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

On May 2, 2019, the Company closed a $30 million five-year term debt facility with Banco de Crédito del Perú and Banco Sabadell which bears interest at Libor +2.95%. Proceeds from this long-term debt facility were used towards refinancing short-term debt and partially supporting expected capital expenditure needs for capacity expansion and the automatization of some of our processes. This facility also contains a covenant requiring that the company maintain certain leverage and fixed charge coverage ratios measured biannually at December and June, with which the Company is in compliance .

As of March 31, ~~2019,~~2020, the Company was obligated under various ~~capital~~finance leases under which the aggregate present value of the minimum lease payments amounted to ~~$344. Differences between capital~~$430 and $493 as of March 31, 2020 and December 31, 2019, respectively. In line with this, the Company recorded right-of-use assets related to computing equipment for $217 and $378 as of March 31, 2020 and December 31, 2019, respectively. The lease ~~obligations~~agreements include terms to extend the lease, however the Company does not intend to extend its current leases. The weighted average remaining lease term approximates 2.1 years. The right-of-use assets are depreciated and interest expense from the ~~value~~lease liability are recorded on our Condensed Consolidated Statement of ~~property, plant~~Operations.

Additionally, as of March 31, 2020, the Company had a commitment for $17 under operating leases related to short term apartment leases, installation equipment and computing equipment ~~under capital lease arises~~which expire during the current year that have not been capitalized due to their short-term nature. Rental expense from ~~differences between the maturities of capital lease obligations and the useful lives of the underlying assets.~~these leases is recognized on our Condensed Consolidated Income Statement as incurred.

Maturities of long-term debt and other current borrowings are as follows as of March 31, ~~2019:~~2020:

2019	$	28,048
2020		2,432
2021		2,412	$	15,278
2022		212,411		216,506
2023		2,368		9,337
2024				12,493
2025				5,332
Thereafter		4,971		2,613
Total	$	252,642	$	261,559

The Company’s loans have maturities ranging from a few weeks to 1110 years. Our credit facilities bear interest at a weighted average of rate ~~of 7.51%~~7.24%.

Note 7. 9. Hedging Activity and Fair Value Measurements

Hedging Activity

During the quarter ended September 30, 2019 we entered into several foreign currency non-delivery forward and collar contracts to hedge the fluctuations in the exchange rate between the Colombian Peso and the U.S. Dollar. Our contracts are designated as cash flow hedges since they are highly effective in offsetting changes in the cash flows attributable to forecasted Colombian Peso denominated costs and expenses.

Guidance under the Financial Instruments Topic 825 of the Codification requires us to record our hedge contracts at fair value and consider our credit risk for contracts in a liability position, and our counter-party’s credit risk for contracts in an asset position, in determining fair value. We assess our counter-party’s risk of non-performance when measuring the fair value of financial instruments in an asset position by evaluating their financial position, including cash on hand, as well as their credit ratings.

As of March 31, 2020, the fair value of foreign currency non-delivery forward and collar contracts was in a net liability position of $5,228. We had 34 outstanding forward and collar contracts to exchange 48 million U.S. Dollars to Colombian Pesos through February 2021. We assessed the risk of non-performance of the Company to these contracts and determined it was insignificant and, therefore, did not record any adjustment to fair value as of March 31, 2020.

We assess the effectiveness of our foreign currency non-delivery forward and collar contracts by comparing the change in the fair value of the forward contract to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our foreign currency non-delivery forward and collar contracts is reported as a component of accumulated other comprehensive loss and is reclassified into earnings in the same line item in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of losses, net, recognized in the “accumulated other comprehensive loss” line item in the accompanying condensed consolidated balance sheet as of March 31, 2020, that we expect will be reclassified to earnings within the next twelve months, is $5,228.

The fair value of our foreign currency hedges classified in the accompanying consolidated balance sheets as of March 31, 2020, are as follows:

Derivative Assets

Derivative Liabilities

March 31, 2020

Derivatives designated as hedging instruments under Subtopic 815-20:

Balance Sheet Location

Fair
Value

Balance Sheet Location

Fair Value

Derivative instruments:

Non-Delivery forward and collar contracts

Other current assets

Accrued liabilities

(5,228

)

Total derivative instruments

Total derivative assets

Total derivative liabilities

(5,228

)

The fair value of our foreign currency hedges classified in the accompanying consolidated balance sheets as of December 31, 2019, are as follows:

Derivative Assets

Derivative Liabilities

December 31, 2019

Derivatives designated as hedging instruments under Subtopic 815-20:

Balance Sheet Location

Fair
Value

Balance Sheet Location

Fair Value

Derivative instruments:

Non-Delivery forward and collar contracts

Other current assets

749

Accrued liabilities

Total derivative instruments

Total derivative assets

749

Total derivative liabilities

The ending accumulated balance for the foreign currency non-delivery forward and collar contracts included in accumulated other comprehensive losses, net of tax, was $3,556 as of March 31, 2020, comprised of a derivative loss of $5,228 and an associated net tax benefit of $1,672.

The following table presents the gains (losses) on derivative financial instruments, and their classifications within the accompanying condensed consolidated financial statements, for the three months ended March 31, 2020 and 2019:

	Derivatives in Cash Flow Hedging Relationships
	Amount of Gain or (Loss)					Location of Gain or (Loss) Reclassified from Accumulated	Amount of Gain or (Loss) Reclassified from
	Recognized in OCI (Loss) on					OCI (Loss) into	Accumulated
	Derivatives					Income	OCI (Loss) into Income
	Three Months Ended						Three Months Ended
	March 31,			March 31,			March 31,		March 31,
	2020			2019			2020		2019

Non-delivery Forwards and Collar Contracts	$	(5,228	)	$	-	Operating Revenues	$	677	$	-

Fair Value Measurements

The Company accounts for financial assets and liabilities in accordance with accounting standards that define fair value and establish a framework for measuring fair value. The hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and advances from customers approximate their fair value due to their relatively short-term maturities. The Company bases its fair value estimate for long term debt obligations on its internal valuation that all debt is floating rate debt based on current interest rates in Colombia.

As of March 31, ~~2019,~~2020, financial instruments carried at amortized cost that do not approximate fair value consist of long-term debt. See Note 68 - Debt. The fair value of long-term debt was calculated based on an analysis of future cash flows discounted with our average cost of debt which is based on market rates, which are level 2 inputs.

The following table summarizes the fair value and carrying amounts of our long-term debt:

March 31, 2019 December 31, 2018
Fair Value 235,592 234.163
Carrying Value 219,589 220.709

	March 31, 2020		December 31, 2019
Fair Value		210,857		259,814
Carrying Value		243,695		243,727

Note 8.10. Income Taxes

The Company files income tax returns for TG, ES and ES Metals in the Republic of Colombia. On December 28, 2018, a tax reform was implemented in Colombia which decreased the corporate income tax rate to 33% for fiscal year 2019, 32% for fiscal year 2020, 31% for fiscal year 2021 and 30% for fiscal year 2022, in comparison with a tax rate of 37% for 2018.

GM&P, Componenti and ESW LLC are U.S. entities based in Florida subject to U.S. federal and state income taxes. The estimated combined state and federal income tax rate is estimated at a rate of 26.5% based on the recently enacted U.S. Tax Reform. Tecnoglass Inc. as well as all the other subsidiaries in the Cayman Islands do not currently have any tax obligations.

The components of income tax expense are as follows:

	Three months ended March 31,						Three months ended March 31,
	2019			2018			2020			2019
Current income tax
United States	$	512		$	407		$	(151	)	$	(512	)
Colombia		3,420			2,205			(2,747	)		(3,420	)
		3,932			2,612			(2,898	)		(3,932	)
Deferred income Tax
United States		(169	)		169			(319	)		169
Colombia		1,116			2,612			9,350			(1,116	)
		947			2,781			9,031			(947	)
Total income tax provision	$	4,879		$	5,393
Total income tax benefit (provision)							$	6,133		$	(4.879	)

Effective tax rate		40.0	%		33.7	%		25	%		40	%

The weighted average statutory income tax rate for the three months ended March 31, 2020 and 2019 was 31% and 33%, respectively. The effective income tax rate of 25% as of March 31, 2020 reflects 4.2 percentage point favorable impact of unrealized foreign currency transaction losses related remeasurement of to long-term liabilities of our Colombian subsidiaries which are expected to be realized at a later year in which a lower income tax rate is expected to apply.

Note 9.11. Related Parties

The following is a summary of assets, liabilities, and income and expense transactions with all related parties, shareholders, directors and managers:

Three months ended March 31,
2019 2018
Sales to related parties $ 2,360 $ 953

Fees paid to directors and officers $ 809 $ 827
Payments to other related parties $ 926 $ 988

	Three months ended March 31,
	2020		2019
Sales to related parties	$	1,192	$	2,360

Fees paid to directors and officers	$	961	$	809
Payments to other related parties	$	814	$	926

	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Current Assets:
Due from VS	$	6,592	$	6,229	$	5,102	$	4,203
Due from other related parties		2,904		2,010		3,361		3,854
	$	9,496	$	8,239	$	8,463	$	8,057

Long Term due from VS						1,423		1,786

Liabilities:
Due to related parties – current	$	1,621	$	1,500
Due to related parties – long term	$	600	$	600
Due to related parties - current					$	3,896	$	4,415
Due to related parties - Non current					$	628	$	622

The Company also has a note payable which matures in 2022 related to the acquisition GM&P for $8,500 due to the former owner who holds shares of the Company and a management position within the Company.

~~Ventanas~~Ventana Solar S.A. (“VS”), a Panama Sociedad anónima,is an importer and installer of the Company’s products in Panama. Family members of the Company’s CEO and COO and other related parties own 100% of the equity in VS. The Company’s sales to VS for the three months ended March 31, 2020 and 2019 were $643 and ~~2018 were~~ $670, ~~and $626,~~ respectively.

Payments to other related parties during the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 include the following:

Three months ended March 31,
2019 2018
Charitable contributions $ 427 $ 285
Sales commissions $ 476 $ 494

	Three months ended March 31,
	2020		2019
Charitable contributions	$	349	$	427
Sales commissions	$	259	$	476

Charitable contributions are donations made to the Company’s foundation, Fundación Tecnoglass-ESW.

Note ~~10.~~12. Shareholders’ Equity

Dividends

~~The~~On March 2, 2020, the Company ~~originally authorized the payment of four~~declared a regular quarterly ~~dividends to holders~~dividend of ~~ordinary shares at a quarterly rate of $0.125~~$0.0275 per share, or ~~$0.50~~$0.11 per share on an ~~annual~~annualized basis, ~~with~~for the first quarter of 2020. The quarterly dividend ~~being~~will be paid in cash on ~~November 1, 2016. The dividends are~~April 30, 2020 to shareholders of record as of the close of business on March 31, 2020. Prior to this, the Company paid $0.14 per share on a quarterly basis, payable in cash or ordinary shares, to be chosen at the option of ~~the~~ holders of ordinary shares. On May 11, 2017, the Company announced that commencing with the declared quarterly dividend for the third quarter of 2017 through any future dividends to be declared and paid through the second quarter of 2018, a 12% increase to $0.14 per share, or $0.56 per share on an annual basis would apply.

~~As a result, the Company has declared dividends for $6,108 as of March 31, 2019 and recorded a dividend payable amounting to $923 as of March 31, 2019. The Company issued 538,657~~ shares ~~for the share dividends resulting in $5,163 being credited to Capital and paid $760 in cash~~ during ~~the three months ended March 31, 2019.~~

~~The Company analyzed the accounting guidance under ASC 505 and determined that this guidance is not applicable since the dividend are shares of the same class in which each shareholder is given~~ an election to receive cash or shares. As such, the Company analyzed the dividend under ASC 480 — Distinguishing Liabilities from Equity and concluded that the dividend should be accounted for as a liability since the dividend is a fixed monetary amount known at inception. A reclassification from dividend payable to additional paid-in capital was done for the stocks dividend elections.

Dividend declarations and the establishment of future record and payment dates are subject to the Board of Directors’ continuing determination that the dividend policy is in the best interests of the Company and its shareholders. The dividend policy may be changed or cancelled at the discretion of the Board of Directors at any time.period.

Follow-on Equity Offering

On March 25, 2019, the Company closed an underwritten follow-on public offering of 5,000,000 ordinary shares at a price to the public of $7.00 per share. As a result of this offering, the ~~company~~Company received a net amount of $33,050 after deducting underwriting and other related fees, which were credited to share capital and additional paid in capital.

~~In addition, Tecnoglass~~ Additionally, the Company granted the underwriters a 30-day option to purchase up to an additional 750,000 ordinary shares at the public offering price, less the underwriting ~~discount. Subsequently,~~discount, which option was exercised on April 3, 2019 ~~the underwriters exercised their options~~with respect to ~~issue~~ 551,423 ordinary ~~shares which are not reflected on the Company’s consolidated balance sheet as of March 31, 2019 but are considered in the calculation of diluted earnings per share, as discussed below.~~shares.

Proceeds from the offering were subsequently used to complete athe joint venture transaction ~~by which the Company will own a minority stake~~with Saint-Gobain discussed in ~~Vidrio Andino Holding, a subsidiary of Compagnie de~~“Note 4. Long-term Investments – Saint-Gobain ~~S.A.(“Saint-Gobain”), a global construction materials conglomerate based out of Courbevoie, France. This transaction is further discussed below in Note 11. Commitments and Contingenies.~~Joint Venture.”

1619

Earnings per Share

The following table sets forth the computation of the basic and diluted earnings per share for the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:

Three months ended March 31,
2019 2018
Numerator for basic and diluted earnings per shares
Net Income $ 7,331 $ 10,619

Denominator
Denominator for basic earnings per ordinary share - weighted average shares outstanding 38,611,867 37,393,304
Effect of dilutive securities and stock dividend 1,270,966 719,543
Denominator for diluted earnings per ordinary share - weighted average shares outstanding 39,882,833 38,112,847
Basic earnings per ordinary share $ 0.19 $ 0.28
Diluted earnings per ordinary share $ 0.18 $ 0.28

	Three months ended March 31,
	2020			2019
Numerator for basic and diluted earnings per shares
Net Income (loss)	$	(18,668	)	$	7,331

Denominator
Denominator for basic earnings per ordinary share - weighted average shares outstanding		46,117,631			40,295,687
Effect of dilutive securities and stock dividend		-			551,860
Denominator for diluted earnings per ordinary share - weighted average shares outstanding		46,117,631			40,847,547
Basic earnings (loss) per ordinary share	$	(0.40	)	$	0.18
Diluted earnings (loss) per ordinary share	$	(0.40	)	$	0.18

The effect of dilutive securities as of March 31, 2019 includes ~~719,543 shares for~~the effect of 551,423 shares potentially issued in relation to the ~~dividends declared as well as 551,423 ordinary shares issued on April 3, 2019 in connection with~~underwriters option of the ~~underwriters’ options discussed~~follow-on equity offering described above.

Note ~~11.~~13. Commitments and Contingencies

Commitments

As of March 31, ~~2019,~~2020, the Company ~~has~~had an outstanding obligation to purchase an aggregate of at least ~~$27,937~~$17,111 of certain raw materials from a specific supplier before May 2026.

~~Saint-Gobain Joint Venture~~

On January 11, 2019, we entered into a joint venture agreement with Saint-Gobain, a world leader in the production of float glass, a key component of our manufacturing process, whereby we will acquire an approximate 25% minority ownership interest in Vidrio Andino Holdings S.A.S, a Colombia-based subsidiary of Saint-Gobain. The purchase price for our interest in this entity is $45 million, of which $34.1 are payable in cash, and $10.9 million are payable with piece of land near our existing facility in Barranquilla ..The land will be contributed on our behalf by our Chief Executive Officer and Chief Operating Officer, José M. Daes and Christian T. Daes in exchange for cash or shares of the Company and will serve the purpose of developing a second float glass plant nearby our existing manufacturing facilities which we expect to carry significant efficiencies for us once it becomes operative. Vidrio Andino’s float glass plant located in the outskirts of Bogota, Colombia, had been one of our main suppliers of raw glass. We believe this transaction will solidify our vertical integration strategy by acquiring an interest in the first stage of our production chain, while securing ample glass supply for our expected production needs. On May 3, 2019, we consummated the joint venture agreement ~~and paid $34.1 million to acquire an approximate 25%~~with Saint-Gobain whereby we acquired a 25.8% minority ownership interest in Vidrio Andino. The purchase price for our interest in Vidrio Andino ~~Holdings~~was $45 million, of which $34.1 million was paid in cash and $10.9 million to be paid through the contribution of land to be contributed on our behalf by a related party owned by members of our Chief Executive Officer by the end of the first half of 2020. The joint venture agreement includes plans to build a new plant in Galapa, Colombia that will be located approximately 20 miles from our primary manufacturing facility, in which we will also have a 25.8% interest. The new plant will be funded with proceeds from the original cash contribution made by the Company, operating cashflows from the Bogota plant, debt incurred at the joint venture level that will not consolidate into the Company and an additional contribution by us of approximately $12.5 million to be paid between 2020 and 2021 if needed (based on debt availability).

General Legal Matters

From time to time, the Company is involved in legal matters arising in the regular course of business. Some disputes are derived directly from our construction projects, related to supply and installation, and even though deemed ordinary, they may involve significant monetary damages. We are also subject to other type of litigations arising from employment practices, worker’s compensation, automobile claims and general liability. It is very difficult to predict precisely what the outcome of these litigations might be. However, with the information at our disposition as this time, there are no indications that such claims will result in a material adverse effect on the business, financial condition or results of operations of the Company.

Note ~~12.~~14. Subsequent Events

~~On May 2, 2019,~~In April 2020, the ~~Company closed~~company took $9.2 million from non-committed lines of credit as a $30 million five-year term facility with Banco de Crédito del Perú and Banco Sabadell which bears interest at Libor +2.95%. Proceeds from this long-term debt facility towards refinancing short-term debt and partially supporting expected Capex needs for capacity expansion andpreventive measure to secure incremental liquidity in light of the ~~automatization of some of our processes.~~coronavirus outbreak.

Management concluded that no additional subsequent events required disclosure other than those disclosed in these financial statements.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us” or “our” are to Tecnoglass Inc. (formerly Andina Acquisition Corporation), except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.

Overview

We are a vertically-integrated manufacturer, supplier and installer of architectural glass, windows and associated aluminum products for the global commercial and residential construction markets. With a focus on innovation, combined with providing highly specified products with the highest quality standards at competitive prices, we have developed a leadership position in each of our core markets. In the United States, which is our largest market, we were ranked as the second largest glass ~~and metal~~ fabricator in ~~2018~~2019 by Glass Magazine. In addition, we believe we are the leading glass transformation company in Colombia. Based on our analysis of third-party industry sources we had an estimated market share of over ~~45%~~49% of the Colombian market in ~~2017.~~2018. Our customers, which include developers, general contractors or installers for hotels, office buildings, shopping centers, airports, universities, hospitals and multi-family and residential buildings, look to us as a value-added partner based on our product development capabilities, our high-quality products and our unwavering commitment to exceptional service.

We have more than 30 years of experience in architectural glass and aluminum profile structure assembly, we transform a variety of glass products, including tempered safety, double thermo-acoustic and laminated glass. Our finished glass products are installed in a wide variety of buildings across a number of different applications, including floating facades, curtain walls, windows, doors, handrails, interior and bathroom spatial dividers. We also produce aluminum products such as profiles, rods, bars, plates and other hardware used in the manufacturing of windows.

Our products are manufactured in a 2.7 million square foot, state-of-the-art manufacturing complex in Barranquilla, Colombia that provides easy access to North, Central and South America, the Caribbean and the Pacific. Our products can be found on some of the most distinctive buildings in these regions including El Dorado Airport (Bogota), 50 United Nations Plaza (New York), Trump Plaza (Panama), Icon Bay (Miami), and Salesforce Tower (San Francisco). Our track record of successfully delivering high profile projects has earned us an increasing number of opportunities across the United States, evidenced by our expanding backlog and overall revenue growth.

Our structural competitive advantage is underpinned by our low-cost manufacturing footprint, vertically integrated business model and geographic location. Our integrated facilities in Colombia and distribution and services operations in Florida provide us with a significant cost advantage in both manufacturing and distribution, and we continue to invest in these operations to expand our operational capabilities. Our lower cost manufacturing footprint allows us to offer competitive prices for our customers, while also providing innovative, high quality and high value-added products, together with consistent and reliable service. We have historically generated high margin organic growth based on our position as a value-added solutions provider for our customers.

We have a strong presence in the Florida market, which represents a substantial portion of our revenue stream and backlog. Our success in Florida has primarily been achieved through sustained organic growth, with further penetration now taking place into other highly populated areas of the United States. As part of our strategy to become a fully vertically integrated company, we have supplemented our organic growth with some ~~recent~~ acquisitions that have allowed us added control over our supply ~~chain. Most recently,~~chain allowed for further vertical integration of our business and will act as a platform for our future expansion in ~~March 2017, we completed~~ the ~~acquisition of GM&P, a consulting and glazing installation business that was previously our largest installation customer.~~United States. In 2016, we completed the acquisition of ESW, which gave us control over the distribution of products into the United States from our manufacturing facilities in Colombia. ~~These acquisitions allowed for further~~In March 2017, we completed the acquisition of GM&P, a consulting and glazing installation business that was previously our largest installation customer.

On May 3, 2019, we consummated the joint venture agreement with Saint-Gobain, acquiring a 25.8% minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain, solidifying our vertical integration strategy by acquiring an interest in the first stage of our ~~business and will act~~production chain, while securing ample glass supply for our expected production needs. Additionally, in April 2019, ESMetals, a Colombian entity in which the Company has 70% equity interest began operations. ESMetals serves as a ~~platform for our future expansion~~metalwork contractor to supply the Company with steel accessories used in the ~~United States.~~assembly of certain architectural systems as part of our vertical integration strategy.

The continued diversification of the group’s presence and product portfolio is a core component of our strategy. In particular, we are actively seeking to expand our presence in United States outside of Florida. We also launched a residential windows offering which, we believe, will help us expand our presence in the United States and generate additional organic growth. We believe that the quality of our products, coupled with our ability to price competitively given our structural advantages on cost, will allow us to generate further growth in the future.

On March 24, 2020, Colombia went into a mandatory lockdown as a result of the novel coronavirus outbreak. As a result, the Company temporarily suspended production at its facilities in Colombia through April 13, 2020 during the initial phase of the nationwide shelter-in-place order. While the shelter-in-place order was subsequently extended to May 25, 2020, the Company resumed full operations at its facilities on April 14, 2020 given its exempted designation as a supplier of critical products to essential business sectors such as infrastructure and construction. At the same time as most of our customers in the United States and Colombia are resuming their activities. During the period that production was suspended, vacation days were used to retain eligible employees and the Company used the time to implement broad safety measures before returning to normal operations.

The Company entered the pandemic with a strong financial position along with the flexibility required to support its global operations during this volatile period. As of March 31, 2020, we had had cash of $36.8 million plus an additional $66.4 million of availability under its existing lines of credit, providing sufficient access to capital. In addition, the Company has implemented strict cost controls, reduced operating expenses and limited all non-critical capital expenditures beyond the completion of initiatives started in 2019. The Company anticipates that working capital will be a net benefit to cash flow for the full year 2020.

RESULTS OF OPERATIONS

	Three Months Ended March 31,						Three months ended March 31,
	2019			2018			2020			2019
Operating Revenues	$	107,168		$	87,160		$	87,298		$	107,168
Cost of sales		75,276			60,412			56,871			75,276
Gross profit		31,892			26,748			30,427			31,892
Operating expenses		(17,656	)		(16,758	)		(17,278	)		(17,656	)
Operating income		14,236			9,990			13,149			14,236
Non-operating income		275			1,099
Foreign currency transactions gains		3,286			9,973
Non-operating income and expenses, net								(101	)		275
Foreign currency transactions (losses) gains								(32,466	)		3,286
Equity method income								260			-
Interest Expense and deferred cost of financing		(5,587	)		(5,050	)		(5,643	)		(5,587	)
Income tax provision		(4,879	)		(5,393	)
Net income		7,331			10,619
Income attributable to non-controlling interest		7			72
Net income attributable to parent	$	7,338		$	10,691
Income tax benefit (provision)								6,133			(4,879	)
Net (loss) income								(18,668	)		7,331
(Income) Loss attributable to non-controlling interest								(98	)		7
(Loss) Income attributable to parent							$	(18,766	)	$	7,338

Comparison of quarterly periods ended March 31, ~~2019~~2020 and ~~2018~~2019

Revenues

The Company’s operating revenues ~~increased $20.0~~decreased $19.9 million or ~~23.0%~~18.5% from ~~$87.2~~$107.2 million to ~~record $107.2~~$87.3 million for the quarter ended March 31, ~~2019~~2020 compared with the ~~quarterly period~~quarter ended March 31, ~~2018.~~2019.

~~The increase was driven by sales~~Sales in the U.S. markets ~~which increased $29.1~~decreased $13.3 million or ~~46.1%~~14.4% in the first quarter of ~~2019~~2020 to $78.8 million compared towith $92.1 during the same period of ~~2018. A portion~~2019. The decrease resulted from having a lesser amount of production days given scheduled maintenance at the beginning of the ~~Company’s~~period and the aforementioned mandatory lockdown at the end of March. Additionally, there was a lesser amount of installation work given the schedule of project completion at the beginning of the year. This was partially offset by an increase in residential market sales, ~~growth in the American market have been driven by~~which increased $1.5 million, or 12% year-over-year as a result of our ~~Elite~~established relationships with dealers and ~~Prestige lines aimed towards residential markets, in which we did not actively participate prior to 2018.~~good reception of our products among end customers. U.S. revenues ~~contributed~~continue to represent the majority of our sales, at 90% and 86% ~~and 72%~~ of total sales during the first quarter of 2020 and 2019, ~~and 2018, respectively; the increase in U.S revenues is aligned with our strategy to penetrate new geographical and end markets.~~respectively.

~~This growth more than offset a slowdown of sales in the~~

Colombian market ~~which went~~sales were also down $6.5 million, or 50.1% year-over-year from ~~$21.8~~$13.0 million to ~~$13.0~~$6.5 million in the first quarter of ~~2018~~2019 and ~~2019, respectively. The Colombian market decrease was mostly related to a decrease in~~2020, respectively, reflecting slow construction activity ~~after~~in this market with a ~~couple~~stop of ~~years of slower economic~~ activity ~~which we expect to undergo a slow recovery~~given the coronavirus pandemic in the ~~near~~middle of March 2020. Our sales to other territories in Latin America remained stable and ~~mid-term future.~~continue to represent approximately 2% of our total sales.

Gross profit

Gross profit ~~increased $5.1~~decreased $1.5 million, or ~~19.2%~~4.6% to ~~$31.9~~$30.4 million during the three months ended March 31, ~~2019,~~2020, compared with ~~$26.7~~$31.9 million during the same period of ~~2018.~~2019. Gross profit margins ~~decreased slightly~~increased to 34.9% during the first quarter of 2020, from 29.8% during the first quarter of 2019 ~~from 30.7%~~as a result of increased raw material efficiency and a $1.7 million year-over-year decrease in labor cost related to the streamlining of our operative processes during 2019, alongside with favorable foreign exchange rates positively impacting the cost of the majority of our workforce based in Colombia, as the Colombian peso depreciated 13% between the first quarter of ~~2018.~~2019 and 2020. The ~~margin compression was mainly~~decrease in labor cost as of the quarter ended March 31, 2020 does not include layoffs or furloughs related to the ~~mix of business with a larger portion of revenues being derived from installation work, which carries a lower gross profit margin as a whole.~~current coronavirus pandemic.

Expenses

Operating expenses ~~increased $0.9~~decreased $0.4 million, or ~~5.4%~~2.1%, from ~~$16.8~~$17.7 million to ~~$17.7~~$17.3 million for the quarters ended March 31, ~~2018~~2019 and ~~2019,~~2020, respectively. ~~This was primarily related to an increase of $0.4 million higher sales commissions related to a higher overall amount of sales during~~The decrease has been the ~~quarter, especially related to sales~~result of our ~~Elite~~efforts to enhance our lean administrative structure paired with favorable exchange rates as a significant portion of our general and Prestige product lines aimed towards residential U.S. markets. The U.S. aluminum and steel tariff implemented in May of 2018 resulted in an expense of $0.3 million related to the importation of aluminum products manufactured in Colombia, which are being passed on to our clients through our sales prices. Additionally, the Company recorded an increase in other smaller items of administrative expenses are denominated in COP. Sales commissions, which ~~offset~~is a ~~decrease~~highly variable expense in ~~shipping expense of~~nature, increased $0.4 million despite ~~higher~~the decrease in sales ~~through~~because of a lag that is generated because we pay commissions when we collect payment from our ~~efforts for efficient logistics favoring maritime freights and minimizing costlier land transportation.~~customers as opposed to the time of invoicing.

Non-operating ~~Income~~income and expenses, net

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company recorded net a non-operating expense of $0.1 million and non-operating income of $0.3 ~~million and $1.1~~ million, respectively. Non-operating income is comprised primarily of income from rental properties and gains on sale of scrap ~~materials.~~materials as well as non-operating expenses related to certain charitable contributions outside of the Company’s direct sphere of influence.

Foreign currency transaction gains and losses

During the quarter ended March 31, ~~2019,~~2020, the Company recorded a non-cash ~~gain~~loss of ~~$3.3~~$32.5 million associated towith foreign currency transactions. Most of this impact is associated towith the remeasurement of a net liability position of ~~$148.5~~$109.6 million U.S. dollar denominated monetary assets and liabilities held by the Company’s subsidiaries with the Colombian peso as their functional currency ~~during a period in which~~while the Colombian peso ~~appreciated 2%.~~depreciated by 24% during the quarter. Comparatively, the Company recorded a net gain of ~~$10.0~~$3.3 million during the three months ended March 31, ~~2018~~2019 while the Colombian peso appreciated 4%2.3% during the quarter.

Interest Expense

Interest expense ~~was $5.6~~and deferred cost of financing remained relatively stable at $5.7 million and ~~$5.1~~$5.6 million during the quarters ended March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~The 10.6% increase~~This reflects an improvement in ~~interest expense is~~our overall cost of financing as out total indebtedness increased $11.0 million, or 4.5% between both periods.

Income Taxes

During the quarter ended March 31, 2020, the Company recorded an income tax benefit of $6.1 million related to a ~~proportional increase~~net loss before tax, largely associated with the large loss on foreign currency transactions during the period. Conversely, the Company recorded an income tax provision of ~~9.9% in~~$4.9 million during the ~~Company’s total debt at~~quarter ended March 31, ~~2019 compared with March 31, 2018 to support its ongoing growth.~~2020

As a result of the foregoing, the Company recorded a net ~~income~~loss for the three months ended March 31, ~~2019~~2020 of ~~$7.3~~$18.7 million compared to ~~$10.6~~net income of $7.3 million in the three months ended March 31, ~~2018.~~2019.

Liquidity

As of March 31, ~~2019,~~2020, and December 31, ~~2018,~~2019, we had cash and cash equivalents of approximately ~~$61.7~~$36.8 million and ~~$33.0~~$47.9 million, respectively. During the quarter ended March 31, 2019, the main source of cash was an underwritten follow-on public offering of 5,000,000 ordinary shares at a price to the public of $7.00 per share. As a result of this offering, the company received a net amount of $33,050 after deducting underwriting and other related fees. Other sources of cash were cash available at the beginning of period and cash proceeds from debt. A discussion of our cash flows is included below in the sub-section headed “Cash Flow from Operations, Investing and Financing Activities” under the Results of Operations section of this management discussion and analysis.

As of March 31, ~~2019,~~2020, the Company had ~~$12.9~~$66.4 million of borrowings available under several committed and uncommitted facilities with relationship banks. The Company examines its ~~bank facilities~~capital/debt profile from time to time and evaluates overall market conditions to assess if it is opportunistic to repurchase debt or shares in the open market when conditions are favorable to the company and its stakeholders. The Company will base its decisions on factors such as ~~most~~pricing, liquidity projections, general economic and market conditions, and other considerations, as determined by management.

We are actively focusing on expanding banking relationships to further diversify our sources of funding and optimize our cost of capital given the restrictions that some entities may have in lending in an efficient matter as a result of the outstanding balances under such lines were fully repaid with the Senior Notes issued on January 2017. Additionally, on May 2, 2019, the Company closed a $30 million long-term facility with two of its relationship banks with the proceeds going toward refinancing short-term debt and partially supporting expected Capex needs for capacity expansion and the automatization of some of our processes. Including this subsequent long-term facility,coronavirus pandemic. In April 2020, the company ~~would have had $42.9~~took $9.2 million ~~available under bank facilities~~from non-committed lines of credit as a preventive measure to secure incremental liquidity in light of ~~March 31, 2019 on~~the coronavirus outbreak. We anticipate that working capital will be a ~~pro-forma basis.~~net benefit to cash flow for the full year 2020, which in addition to our current liquidity position, is sufficient to serve our obligations through the next twelve months.

Capital Resources

~~On January 11,~~We transform glass and aluminum into high specification architectural glass and custom-made aluminum profiles which require significant investments in state-of-the-art technology. During the quarter ended March 31, 2020 and 2019, we ~~entered into~~made investments primarily in building and construction, and machinery and equipment in the amounts of $7.5 million, and $5.2 million, respectively.

In 2019, we carried out enhancements at our glass and aluminum facilities to increase production capacity and automate operations. The Company completed this aluminum capacity expansion in July 2019 and implemented its glass transformation process automation initiative in January 2020. Additionally, it is completing the set up and testing phase of its automated warehousing systems, with the funding being executed since the end of 2018. The Company expects to continue funding the approximate $1.7 million remaining capital investments of this initiative with cash on hand.

On May 3, 2019, we consummated a joint venture agreement with Saint-Gobain, a world leader in the production of float glass, a key component of our manufacturing process, whereby we ~~will acquire an approximate 25%~~acquired a 25.8% minority ownership interest in Vidrio Andino, ~~Holdings S.A.S,~~ a Colombia-based subsidiary of Saint-Gobain. The purchase price for our interest in ~~this entity is~~Vidrio Andino was $45 million, of which $34.1 million was paid in cash and ~~land worth~~ $10.9 million ~~near our facility in Barranquilla, which will~~to be paid through the contribution of land to be contributed on our behalf by a related party owned by members of our Chief Executive ~~Officer and Chief Operating Officer, José M. Daes and Christian T. Daes with a third-party valuation to be conducted. Vidrio Andino’s float glass plant located in~~Officer’s family by the ~~outskirts~~end of ~~Bogota, Colombia, had been one of our main suppliers of raw glass. We believe this transaction will solidify our vertical integration strategy by acquiring an interest in~~ the first ~~stage~~half of ~~our production chain, while securing ample glass supply for our expected production needs.~~

~~Additionally, the~~2020. The joint venture agreement includes plans to build a new plant in Galapa, Colombia that will be located approximately 20 miles from our primary manufacturing facility, in which we will also have a ~~25%~~25.8% interest. The new plant will be funded with proceeds from the original cash contribution made by the Company, operating cashflows from the Bogota plant, debt incurred at the joint venture level that will not consolidate into the Company and an additional contribution by us of approximately $12.5 million to be paid between 2020 and 2021. Under the joint venture agreement, Saint Gobain will retain a majority ownership position and will have control over the operations of both plants and as such, the transaction will be accounted for under the equity method. The acquisition was consummated2021 if needed (based on ~~May 3 2019.~~debt availability).

The Company recently initiated enhancements at its glass and aluminum facilities to increase production capacity and automate operations. The Company anticipates that these high return investments will speed up production processes in response to strong customer demand, especially for aluminum products. The Company expects to improve efficiency in its glass production by automating certain processes to increase capacity on the transformed glass tempering lines by approximately 2.5 times, while reducing material waste and overall lead times. In its aluminum operations, the Company intends to benefit from a 25% increase in capacity and favorable operating leverage with the addition of an aluminum furnace and a new extrusion line, along with working capital improvements through the automation of warehousing systems. The Company is on track to complete its aluminum capacity expansion by the third quarter of the year and the full implementation of its automation initiatives by the end of 2019, with a total anticipated investment of approximately $20 million. The Company expects to continue funding these capital investments, with cash on hand and existing lines of credit.

Cash Flow from Operations, Investing and Financing Activities

	Three months ended March,						Three months ended March 31,
	2019			2018			2020			2019
Cash Flow used in by Operating Activities	$	(4,900	)	$	(10,212	)
Cash Flow used in Investing Activities		(3,661	)		(1,111	)
Cash Flow from Financing Activities		36,853			(272	)
Cash Flow provided by (used in) Operating Activities							$	548		$	(5,629	)
Cash Flow (used in) Investing Activities								(6,413	)		(3,713	)
Cash Flow (used in) provided by Financing Activities								(720	)		37,634
Effect of exchange rates on cash and cash equivalents		380			1,277			(4,453	)		380
Cash Balance - Beginning of Period		33,040			40,923			47,862			33,040
Cash Balance - End of Period	$	61,712		$	30,605		$	36,824		$	61,712

During the three months ended March 31, ~~2019 and 2018, cash used in~~2020, operating activities ~~decreased $5.3~~generated $0.5 million ~~to $4.9 million from $10.2 million, respectively. Operating activities~~and used cash to provide for the working capital required during the period including a higher amount of receivables associated with the Company´s ongoing revenue growth and incremental contract assets and liabilities to support 23% year-over-year sales growth.

~~Trade accounts receivable used $10.7~~$5.6 million during the ~~three-month period~~three months ended March 31, 2019. Despite the nominal amount of receivables has increased during the quarter relative to fiscal year end, Days Sales Outstanding ratio remained relatively flat, decreasing by one day to 89 days as of March 31,2020 and 2019, ~~compared to 90 days at fiscal year end. Comparably, trade accounts receivable generated $5.1 million during the first quarter of 2018 which was a period of much more tempered growth.~~

Contract assets and liabilities used $8.0 million, as per industry common practice, retainage receivables associated with installation work, are built up throughout the life of a project and released upon completion. Comparably, contract assets and liabilities used $6.7 million duringrespectively. For the quarter ended March 31, ~~2018.~~2020 we have modified the way we present the impact of foreign currency transactions on our Statement of Cash Flows as there has been volatility and significant fluctuations in the exchange rates between the U.S. Dollar and the Colombian Peso, which is the functional currency of our subsidiaries that carry most of our operations.

Prior to March 31, 2020, the impact of unrealized foreign currency transaction gains and losses resulting from the remeasurement of our monetary assets and liabilities denominated in any currency other than the functional currency have been included within the individual line item affected within cashflows from operating activities, investing activities or financing activities, as appropriate. As of March 31, 2020, unrealized foreign currency transaction gains and losses, which include currency translation differences on monetary items that form part of investing or financing activities, such as long-term loans, are presented as a reconciling item from net income to cashflow from operating activities. While during prior periods, unrealized currency translation differences on monetary items that form part of operating activities, such as trade accounts receivables and payables, were presented within each line item, we are now presenting them within the reconciliation of net income to cashflow from operations, so as to better present the economic reality of the cashflows during the period. As a result of this, we have revised the cash flows for the three months ended March 31, 2019 and are currently reporting a use of $5.6 million, compared with an originally reported use of $4.9 million.

The ~~Company~~main use of cash in operating activities during the three months ended March 31, 2020 were trade account payable which used ~~$3.7~~$6.3 million as we made anticipated payments to some of our smaller suppliers to help them with the impact of the Coronavirus, and accrued interest expense which used $4.5 million due to the seasonality of our interest payments, most of which are paid bi-annually in January and September.

We used $6.4 million and ~~$1.1~~$3.7 million in investing activities during the three months ended March 31, 2020 and 2019, respectively. The main use of cash in investing activities during the three months ended March 31, 2020 was related to scheduled maintenance Capex and ~~2018. The company paid $3.7~~the completion of our previously announced expansion and automation initiatives that are now mostly completed. We used $6.5 million ~~to acquire~~for the acquisition or property ~~plant~~ and ~~equipment, which in combination with $1.5 million~~equipment. Including assets acquired under credit, ~~amount to~~ total ~~Capital Expenditures of $5.2~~capital expenditures during the period were $7.5 million.

Financing activities used $0.7 million as ~~part of our high return investment plan further described above in the Capital Resources section.~~

~~The main source of cash~~we made some repayments on maturing debt. In contrast, during the ~~quarter~~three months ended March 31, 2019, ~~was from Financing Activities, which~~financing activities generated ~~$36.9 million. On March 25, 2019, the Company closed~~$37.6 million as a result of an underwritten follow-on public offering of 5,000,000 ordinary shares, ~~at a price to~~not including the public of $7.00 per share. As a result of this offering, the company received a net amount of $33,050 after deducting underwriting and other related fees, which were credited to share capital and additional paid in capital. Additionally, the Company generatedunderwriters’ over-allotment option, for net proceeds of ~~debt for $4.6~~$33.1 million ~~comprised~~which closed in March 2019.

During the quarter ended March 31, 2020 the main source of ~~short term borrowing to satisfy~~cash was the ~~working capital required to support~~cash balance available at the ~~eight quarter with consecutive quarter-over-quarter sales growth.~~beginning of period, which decreased $11.0 million, including the impact of unfavorable changes in exchange rates during the three months ended March 31, 2020, which resulted in a decrease of $4.5 million on our ending cash balance.

Off-Balance Sheet Arrangements

None

Item 3. Quantitative and Qualitative Disclosures about Market Risk

None

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We performed an evaluation required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of Tecnoglass, Inc.´s design and operating effectiveness of the internal controls over financial reporting as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that ~~due to~~our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the ~~material weakness described on our Annual Report on form 10-K for the year ended December 31, 2018, our internal controls over financial reporting~~Securities Exchange Act of 1934, as amended, were ~~not~~ effective as of March 31, 2019. Notwithstanding the material weakness in our internal control over financial reporting referenced above, we believe the consolidated financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles in the United States of America for each of the periods presented herein.

We identified and disclosed a material weakness in the accounting for income taxes as of December 31, 2018 and had started to design and implement certain remediating controls gradually. We intend to continue our remediation plan to address the material weakness.

We currently plan to have our enhanced review procedures and documentation standards in place and operating in the first half of 2019. Our main objective is to remediate this material weakness by the end of fiscal year 2019,2020, in order to ~~have enough opportunities to conclude, through our testing,~~provide reasonable assurance that the ~~enhanced monitoring~~information disclosed in our reports is recorded, processed, summarized, and ~~control activities are operating effectively~~reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as ~~of year-end.~~appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

For the quarter ended March 31, ~~2019,~~2020, there ~~have~~has been no ~~changes~~change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

General Legal Matters

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While management believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 except as follows:

Risks Related to the Novel Coronavirus Outbreak

We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of coronavirus disease 2019 (“COVID-19”). In recent weeks, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted.

Since the outbreak of the COVID-19 situation in December 2019, we strictly adhered to mandates and other guidance from local governments and global health authorities. Effective March 24, 2020, the Colombian government issued a nationwide order to, among other actions, close certain non-essential business activities through April 13, 2020 in response to the rapid spread of COVID-19 to many parts of the world. This order was later extended through April 27, 2020 and subsequently through May 11, 2020. Certain industry exemptions to Colombia’s nationwide work stoppage provide for the continuation of some operations at our facilities in Barranquilla, as well as our Vidrio Andino joint venture. Our operations in Colombia resumed in the third week of April 2020.

In recent months, the Company has proactively implemented business continuity measures across its vertically integrated plant network to build the critical inventory to support its customers. During this time, the Company will continue to ship finished inventory of windows, architectural glass and aluminum products that are considered essential to customers’ active construction projects.

Most of Tecnoglass’ U.S. and Latin American customers remain operational with many construction projects typically considered by jurisdictions to be essential business activities. However, given the unprecedented nature of the COVID-19 pandemic, which is now impacting all aspects of business in every U.S. State and Latin American country, demand in all served markets slowed down in March 2020. The Company will continue to monitor and adjust plans for its business as the situation evolves.

As of March 31, 2020, Tecnoglass had total liquidity of $103.3 million, including cash of $36.9 million and $66.4 million of availability under various committed and uncommitted lines of credit, ensuring sufficient access to capital. If necessary, the Company may significantly reduce its variable costs if production has to be scaled down as a result of market conditions, and has implemented budget cuts and stricter controls on working capital to preserve cash.

We may be adversely affected by any disruption in our information technology systems. Our operations are dependent upon our information technology systems, which encompass all of our major business functions.

Increased global information technology security requirements, vulnerabilities, threats and a rise in sophisticated and targeted cybercrime pose a risk to the security of our systems, our information networks, and to the confidentiality, availability and integrity of our data, as well as to the functionality of our manufacturing process. Introduced or increased risk associated with remote work transition pose threats to workforce disruption, cybersecurity attacks and dissemination of sensitive personal data or proprietary confidential information to our business. A disruption in our information technology systems for any prolonged period could result in delays in executing certain production activities, logging and processing operational and financial data, communication with employees and third parties or fulfilling customer orders resulting in potential liability or reputational damage or otherwise adversely affect our financial results. We employ a number of measures to prevent, detect and mitigate these threats, which include employee education, password encryption, frequent password change events, firewall detection systems, anti-virus software in-place and frequent backups; however, there is no guarantee such efforts will be successful in preventing a cyber-attack.

We have transitioned for the first time a significant subset of our employee population to a remote work environment, in accordance with national government efforts to mitigate the spread of COVID-19. This transition allowed us to adequately maintain operations in our financial information systems and meant no significant changes to our internal control over financial reporting and disclosure control and procedures, enabled by our continuity plan adequate implementation which did not present any material incidents, challenges, expenditures or constraints. However, this transition may introduce and exacerbate certain risks to our business, including an increased demand for information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of personal data or proprietary or confidential information about us, our members or related third parties.

Item 6. Exhibits

Exhibit No.		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		Certification of Chief Executive Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Financial statements from the Quarterly Report on Form 10-Q of Tecnoglass Inc. for the quarter ended March 31, ~~2019,~~2020, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Unaudited Condensed Consolidated Financial Statements, as blocks of text and in detail.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TECNOGLASS INC.

	By:	/s/ Jose M. Daes
		Jose M. Daes
		Chief Executive Officer
		(Principal executive officer)

	By:	/s/ Santiago Giraldo
		Santiago Giraldo
		Chief Financial Officer
		(Principal financial and accounting officer)

Date: May ~~9, 2019~~11, 2020