UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

 

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

 

For the quarterly period ended March 31, 20232024

 

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.)

 

3550 NW 49th Street, Miami, Florida33142, USA

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

(Address of principal executive offices)

 

(+57)(605)+1 305 373 4000638 5151

(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 New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒ No ☐

 

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

 

Large accelerated filerAccelerated filer
Non-accelerated filer ☐Smaller reporting company
 Emerging growth company

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No No

 

As of April 28, 2023,May 1, 2024, there were 47,674,77346,996,708 ordinary shares, $0.0001 par value per share, outstanding.

 

 

 

 

 

 

TECNOGLASS INC.

 

FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 20232024

 

TABLE OF CONTENTS

 

 Page
Part I. Financial Information 
 Item 1. Financial Statements (Unaudited)3
 Condensed Consolidated Balance Sheets3
 Condensed Consolidated Statements of Operations and Other Comprehensive Income4
 Condensed Consolidated Statements of Cash Flows5
 Condensed Consolidated Statements of Shareholders’ Equity6
 Notes to Condensed Consolidated Financial Statements7
   
 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations1920
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk2324
   
 Item 4. Controls and Procedures24
Part II. Other Information
Item 1. Legal Proceedings25
   
Item 2. Unregistered Sales of Equity Securities and Use of ProceedsPart II. Other Information25
Item 1. Legal Proceedings26
 Item 6. Exhibits25
SignaturesItem 5. Other Information26
Item 6. Exhibits26
Signatures27

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited).

 

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 March 31, December 31, 
 

2023

  2022 
      

March 31,

2024

  

December 31,

2023

 
ASSETS                
Current assets:                
Cash and cash equivalents $128,538  $103,671  $135,881  $129,508 
Investments  2,140   2,049   2,897   2,907 
Trade accounts receivable, net  167,137   158,397   170,591   166,498 
Due from related parties  772   1,447   1,608   1,387 
Inventories  143,057   124,997   144,212   159,070 
Contract assets – current portion  18,982   12,610   20,982   17,800 
Other current assets  40,364   28,963   73,474   58,590 
Total current assets $500,990  $432,134  $549,645  $535,760 
Long-term assets:                
Property, plant and equipment, net $223,554  $202,865  $329,238  $324,591 
Deferred income taxes  155   558   266   169 
Contract assets – non-current  4,415   8,875   8,169   8,797 
Long-term trade accounts receivable  -   1,225 
Intangible assets  2,614   2,706   3,311   3,475 
Goodwill  23,561   23,561   23,561   23,561 
Long-term investments  59,288   57,839   61,616   60,570 
Other long-term assets  4,880   4,545   5,764   5,794 
Total long-term assets  318,467   302,174   431,925   426,957 
Total assets $819,457  $734,308  $981,570  $962,717 
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current liabilities:                
Short-term debt and current portion of long-term debt $819  $504  $3,338  $7,002 
Trade accounts payable and accrued expenses  86,629   90,186   79,180   82,784 
Due to related parties  5,491   5,323   8,406   7,498 
Dividends payable  4,334   3,622   5,196   4,265 
Contract liability – current portion  58,591   49,601   71,928   72,543 
Other current liabilities  88,394   60,566   67,613   61,794 
Total current liabilities $244,258  $209,802  $235,661  $235,886 
Long-term liabilities:                
Deferred income taxes $5,732  $5,190  $17,695  $15,793 
Contract liability – non-current  11   11   -   14 
Long-term debt  169,076   168,980   154,567   163,004 
Total long-term liabilities  174,819   174,181   172,262   178,811 
Total liabilities $419,077  $383,983  $407,923  $414,697 
SHAREHOLDERS’ EQUITY                
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively $-  $- 
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 47,674,773 and 47,674,773 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively  5   5 
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively $-  $- 
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 46,996,708 and 46,996,708 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively  5   5 
Legal Reserves  1,458   1,458   1,458   1,458 
Additional paid-in capital  219,290   219,290   192,385   192,385 
Retained earnings  278,198   234,254   424,596   400,035 
Accumulated other comprehensive loss  (100,213)  (106,187)  (44,797)  (45,863)
Shareholders’ equity attributable to controlling interest  398,738   348,820 
Shareholders’ equity attributable to non-controlling interest  1,642   1,505 
Total shareholders’ equity  400,380   350,325   573,647   548,020 
Total liabilities and shareholders’ equity $819,457  $734,308  $981,570  $962,717 

 

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

 

3

 

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income

(In thousands, except share and per share data)

(Unaudited)

 

 2023  2022  2024  2023 
 Three months ended  Three months ended 
 March 31,  March 31, 
 2023  2022  2024  2023 
Operating revenues:                
External customers $202,306  $134,022  $192,089  $202,306 
Related parties  333   526   538   333 
Total operating revenues  202,639   134,548   192,627   202,639 
Cost of sales  (94,884)  (74,215)  (117,967)  (94,884)
Gross profit  107,755   60,333   74,660   107,755 
Operating expenses:                
Selling expense  (16,320)  (13,368)  (17,583)  (16,320)
General and administrative expense  (17,755)  (12,999)  (16,055)  (17,755)
Total operating expenses  (34,075)  (26,367)  (33,638)  (34,075)
Operating income  73,680   33,966   41,022   73,680 
Non-operating income, net  1,287   342   1,080   1,287 
Equity method income  1,449   1,580   1,046   1,449 
Foreign currency transactions losses  (1,100)  (2,909)
Foreign currency transactions (loss) gains  (153)  (1,100)
Interest expense and deferred cost of financing  (2,273)  (1,468)  (2,106)  (2,273)
Income before taxes  73,043   31,511   40,889   73,043 
Income tax provision  (24,671)  (10,558)  (11,159)  (24,671)
Net income $48,372  $20,953  $29,730  $48,372 
Income attributable to non-controlling interest  (137)  (100)  -   (137)
Income attributable to parent $48,235  $20,853  $29,730  $48,235 
Comprehensive income:        
Net income $48,372  $20,953 
Foreign currency translation adjustments  7,811   13,635 
Change in fair value of derivative contracts  (1,837)  2,622 
Total comprehensive income (loss) $54,346  $37,210 
Comprehensive income attributable to non-controlling interest  (137)  (100)
Total comprehensive income (loss) attributable to parent $54,209  $37,110 
Basic income per share $1.01  $0.44  $0.63  $1.01 
Diluted income per share $1.01  $0.44  $0.63   1.01 
Basic weighted average common shares outstanding  47,674,773   47,674,773   46,996,708   47,674,773 
Diluted weighted average common shares outstanding  47,674,773   47,674,773   46,996,708   47,674,773 
Other comprehensive income:        
Foreign currency translation adjustments  30   7,811 
Change in fair value of derivative contracts  1,036   (1,837)
Other comprehensive income  1,066   5,974 
Total comprehensive income $30,796  $54,346 
Income attributable to non-controlling interest  -   (137)
Total comprehensive income attributable to parent $30,796  $54,209 

 

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

 

4

 

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 2023  2022  2024  2023 
 Three months ended March 31,  Three months ended March 31, 
 2023  2022  2024  2023 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income $48,372  $20,953  $29,730  $48,372 
Adjustments to reconcile net income to net cash provided by operating activities:                
Allowance for credit losses  914   414   125   914 
Depreciation and amortization  4,767   5,251   6,313   4,767 
Deferred income taxes  156   (1,568)  3,518   156 
Equity method income  (1,449)  (1,580)  (1,046)  (1,449)
Realized gain on derivative instruments  (1,951)  -   -   (1,951)
Deferred cost of financing  312   363   322   312 
Other non-cash adjustments  (16)  5   3   (16)
Unrealized currency translation losses  410   3,205 
Unrealized currency translation (gains) loss  (4,227)  410 
Changes in operating assets and liabilities:                
Trade accounts receivable  (8,644)  6,099   3,840   (8,644)
Inventories  (13,048)  (13,452)  13,737   (13,048)
Prepaid expenses  (864)  507   (300)  (864)
Other assets  (14,338)  (1,841)  (9,250)  (14,338)
Trade accounts payable and accrued expenses  (9,681)  (5,551)  (8,059)  (9,681)
Taxes payable  25,488   11,591   7,068   25,488 
Labor liabilities  (447)  (331)  (1,076)  (447)
Other liabilities  (7)  (1,196)  61   (7)
Contract assets and liabilities  12,425   1,965   (8,029)  12,425 
Related parties  664   2,301   717   664 
CASH PROVIDED BY OPERATING ACTIVITIES $43,063  $27,135  $33,447  $43,063 
                
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of investments  (134)  (1,136)  (306)  (134)
Acquisition of property and equipment  (15,554)  (9,258)  (9,886)  (15,554)
CASH USED IN INVESTING ACTIVITIES $(15,688) $(10,394) $(10,192) $(15,688)
                
CASH FLOWS FROM FINANCING ACTIVITIES                
Cash dividend  (3,579)  (3,099)  (4,239)  (3,579)
Proceeds from debt  292   93   2,766   292 
Repayments of debt  -   (15,312)  (15,213)  - 
CASH USED IN FINANCING ACTIVITIES $(3,287) $(18,318) $(16,686) $(3,287)
                
Effect of exchange rate changes on cash and cash equivalents $778  $997  $(196) $778 
                
NET INCREASE IN CASH  24,866   (580)  6,373   24,866 
CASH - Beginning of period  103,672   85,011   129,508   103,672 
CASH - End of period $128,538  $84,431  $135,881  $128,538 
                
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                
Cash paid during the period for:                
Interest $2,717  $1,139  $2,827  $2,717 
Income Tax $26,342  $2,927  $14,094  $26,342 
                
NON-CASH INVESTING AND FINANCING ACTIVITES:        
NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Assets acquired under credit or debt $4,790  $2,678  $1,305  $4,790 

 

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

 

5

 

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

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

(Unaudited)

  Shares  Amount  Capital  Reserve  Earnings  Loss  Equity  Interest  Interest 
  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, 2022  47,674,773   5   219,290   1,458   234,254   (106,187)  348,820   1,505   350,325 
                                     
Dividend  -   -   -   -   (4,291)  -   (4,291)  -   (4,291)
                                     
Derivative financial instruments  -   -   -   -   -   (1,837)  (1,837)  -   (1,837)
                                     
Foreign currency translation  -   -   -   -   -   7,811   7,811   -   7,811 
                                     
Net income  -   -   -   -   48,235   -   48,235   137   48,372 
                                     
Balance at March 31, 2023  47,674,773   5   219,290   1,458   278,198   (100,213)  398,738   1,642   400,380 

(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, 2021  47,674,773   5   219,290   2,273   91,045   (68,751)  243,862   836   244,698 
Beginning balance, value  47,674,773   5   219,290   2,273   91,045   (68,751)  243,862   836   244,698 
                                     
Dividend  -   -   -   -   (3,099)  -   (3,099)  -   (3,099)
                                     
Derivative financial instruments  -   -   -   -   -   2,622   2,622   -   2,622 
                                     
Foreign currency translation  -   -   -   -   -   13,635   13,635   -   13,635 
                                     
Net income  -   -   -   -   20,853   -   20,853   100   20,953 
                                     
Balance at March 31, 2022  47,674,773   5   219,290   2,273   108,799   (52,494)  277,873   936   278,809 
Ending balance, value  47,674,773   5   219,290   2,273   108,799   (52,494)  277,873   936   278,809 
  Shares  Amount  Capital  Reserve  Earnings  Loss  Equity  Interest  Interest 
  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, 2023  46,996,708   5   192,385   1,458   400,035   (45,863)  548,020        -   548,020 
                                     
Dividend (0.11 per share)  -   -   -   -   (5,169)  -   (5,169)  -   (5,169)
                                     
Derivative financial instruments  -   -   -   -   -   1,036   1,036   -   1,036 
                                     
Foreign currency translation  -   -   -   -   -   30   30   -   30 
                                     
Net income  -   -   -   -   29,730   -   29,730   -   29,730 
                                     
Balance at March 31, 2024  46,996,708   5   192,385   1,458   424,596   (44,797)  573,647   -   573,647 

  Shares  Amount  Capital  Reserve  Earnings  Loss  Equity  Interest  Interest 
  

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, 2022  47,674,773   5   219,290   1,458   234,254   (106,187)  348,820   1,505   350,325 
                                     
Dividend (0.09 per share)  -   -   -   -   (4,291)  -   (4,291)  -   (4,291)
                                     
Derivative financial instruments  -   -   -   -   -   (1,837)  (1,837)  -   (1,837)
                                     
Foreign currency translation  -   -   -   -   -   7,811   7,811   -   7,811 
                                     
Net income  -   -   -   -   48,235   -   48,235   137   48,372 
                                     
Balance at March 31, 2023  47,674,773   5   219,290   1,458   278,198   (100,213)  398,738   1,642   400,380 

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

 

6

 

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, aluminum, and aluminum,vinyl, office partitions and interior divisions, floating facades and commercial window showcases. The Company exports most of its products to foreign countries, sellingsells to customers in North, Central and South America.America, and exports more than 95% of its production to foreign countries.

 

The Company manufactures both glass, aluminum, and aluminumvinyl 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. Alution’sAlutions’ operations include extrusion, smelting, painting and anodizing processes, and exporting, importing and marketing aluminum products. Its newly installed vinyl assembling lines manufacture and distributes cutting-edge vinyl windows for new and existing customers.

 

The Company also designs, manufactures, markets and installs architectural systems for high, medium and low-rise construction, glass, aluminum and aluminumvinyl 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, 2022.2023. The year-end condensed balance sheet data was derived from the audited financial statements in the Annual Report on Form 10-K 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 utilized 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 products sold to the construction industry.

 

7

 

 

Principles of Consolidation

 

These unaudited condensed consolidated financial statements consolidate TGI and its subsidiaries Tecnoglass S.A.S (“TG”), C.I. Energía Solar S.A.S E.S. Windows (“ES”), ES Windows LLC (“ESW LLC”), Tecnoglass LLC (“Tecno LLC”), Tecno RE LLC (“Tecno RE”), GM&P Consulting and Glazing Contractors (“GM&P”), Componenti USA LLC, ES Metals SAS (“ES Metals”), and Ventanas Solar S.A (“VS”), 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 and if we are not, 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.

 

TGI and certain wholly owned subsidiaries with functional currency different than the U.S. dollar have long-term intercompany loan balances denominated in foreign currencies that are remeasured at the exchange rate in effect at the balance sheet date. Such loan balances are not expected to be settled in the foreseeable future. Any gains and losses relating to these loans are included in the accumulated other comprehensive income (loss), which is reflected as a separate component of shareholders’ equity.

 

Derivative Financial Instruments

The Company recognizes all derivative financial instruments as either assets or liabilities at fair value on the condensed consolidated balance sheet. The unrealized gains or losses arising from changes in fair value of derivative instruments that are designated and qualify as cash flow hedges, are recorded in the condensed consolidated statement of comprehensive income. Amounts in accumulated other comprehensive loss on the condensed consolidated balance sheet are reclassified into the condensed consolidated statement of income in the same period or periods during which the hedged transactions are settled.

8

Recently Issued Accounting Pronouncements

 

In March 2020,November 2023, the FASB issued ASU 2020-04, “Reference Rate Reform2023-07, “Segment Reporting (Topic 848)280): FacilitationImprovements to Reportable Segment Disclosures”. Investors, lenders, creditors, and other allocators of the Effects of Reference Rate Reform on Financial Reporting”.capital (collectively, “investors”) have observed that segment information is critically important in understanding a public entity’s different business activities. That information enables investors to better understand an entity’s overall performance and assists in assessing potential future cash flows. The amendments in this Update provide optional expedientsare effective for fiscal years beginning after December 15, 2023, and exceptions for contracts, hedging relationshipsinterim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The Board is issuing the amendments in this Update to enhance the transparency and decision usefulness of income tax disclosures. Investors, lenders, creditors, and other transactions affected by referenceallocators of capital (collectively, “investors”) indicated that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate reform if certain criteria are met.and prospects for future cash flows. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities. While investors find these disclosures helpful, they suggested possible enhancements to better (1) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. The amendments in this Update apply onlyaddress investor requests for more transparency about income tax information through improvements to contracts, hedging relationshipsincome tax disclosures primarily related to the rate reconciliation and income taxes paid information. This Update also includes certain other transactions that referenceamendments to improve the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued becauseeffectiveness of reference rate reform.income tax disclosures. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, exceptin this Update are effective for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 which deferred the effective date of Topic 848. As a result, this standard is effectiveannual periods beginning after December 15, 2024.2024, with early adoption permitted, and should be applied on a prospective basis. The Company’s outstanding debt, which bears interest basedCompany is currently evaluating the potential effect of this ASU on LIBOR, contains provisions for transitioning into a benchmark reference rate prior to the discontinuation of LIBOR in 2023. Our interest rate swap derivative contract will be adjusted accordingly.its consolidated financial statements.

 

8

Note 3. - Inventories, net

Schedule of Inventories 

 

March 31,

2023

  

December 31,

2022

  

March 31,

2024

 

December 31,

2023

 
Raw materials $101,067  $93,360  $91,937  $100,828 
Work in process  15,937   9,875   20,108   19,738 
Finished goods  8,185   6,409   4,753   9,941 
Spares and accessories  16,641   13,902   26,194   27,057 
Packing material  1,335   1,563   1,424   1,715 
Total Inventories, gross  143,165   125,109   144,416   159,279 
Less: Inventory allowance  (108)  (112)  (204)  (209)
Total inventories, net $143,057  $124,997  $144,212  $159,070 

 

Note 4. – Revenues, Trade Accounts Receivable, Contract Assets and Contract Liabilities

 

Disaggregation of Total Net Sales

 

The Company disaggregates its sales with customers by the 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.

Schedule of Disaggregation by Revenue

 2023  2022  2024  2023 
 Three months ended  Three months ended 
 March 31,  March 31, 
 2023  2022  2024  2023 
Fixed price contracts $29,093  $18,851  $32,632  $29,093 
Product sales  173,546   115,697   159,995   173,546 
Total Revenues $202,639  $134,548  $192,627  $202,639 

 

The following table presents geographical information about revenues:revenues.

Schedule of Geographic Information

 2024  2023 
 Three months ended  

Three months ended

 
 March 31,  March 31, 
 2023  2022  2024  2023 
Colombia $5,740  $4,025  $5,239  $5,740 
United States  194,839   126,984   184,003   194,839 
Panama  270   799   94   270 
Other  1,790   2,740   3,291   1,790 
Total Revenues $202,639  $134,548  $192,627  $202,639 

The following table presents revenues breakdown by market.

Schedule of Revenues Breakdown by Market

  2024  2023 
  Three months ended 
  March 31, 
  2024  2023 
Residential $73,154  $83,595 
Commercial  119,473   119,044 
Total Revenues $192,627  $202,639 

9

 

Trade Accounts Receivable

 

In the ordinary course of business, we extend credit to customers on a generally non-collateralized basis. The Company maintains an allowance for expected credit losses which is based on management’s assessments of the amount which may become uncollectible in the future and is determined through consideration of our write-off history, specific identification of uncollectible accounts based in part on the customer’s past due balance (based on contractual terms), and consideration of prevailing economic and industry conditions. Uncollectible accounts are written off after repeated attempts to collect from the customer have been unsuccessful.

9

Trade accounts receivable consist of the following:

Schedule of Trade Accounts Receivable

  2023  2022
 

March 31,

2023

 

December 31,

2022

  

March 31,

2024

 

December 31,

2023

 
Trade accounts receivable  167,818   158,974   172,993   168,778 
Less: Allowance for credit losses  (681)  (577)  (2,402)  (2,280)
Total $167,137  $158,397  $170,591  $166,498 

 

The changes in the allowance for credit losses for the three months ended March 31, 2023,2024, are:

Schedule of Changes in Allowance for Doubtful Accounts Receivable 

 

Three months ended

March 31, 2023

  

Three months

ended

March 31,

2024

 
Balance at beginning of period $577  $2,280 
Provisions for credit losses  914   125 
Deductions and write-offs, net of foreign currency adjustment  (810)  (3)
Balance at end of period $681  $2,402 

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. In addition, 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 is delivered 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 long-term liabilities in the Company’s condensed consolidated balance sheets.

 

10

 

 

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

Schedule of Contract Assets and Liabilities

 March 31, 2023  December 31, 2022  

March 31,

2024

 

December 31,

2023

 
Contract assets — current $18,982  $12,610  $20,982  $17,800 
Contract assets — non-current  4,415   8,875   8,169   8,797 
Contract liabilities — current  (58,591)  (49,601)  (71,928)  (72,543)
Contract liabilities — non-current  (11)  (11)  -   (14)
Net contract assets $(35,205) $(28,127)
Net contract liability $(42,777) $(45,960)

 

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

 

 March 31, 2023  December 31, 2022  

March 31,

2024

 

December 31,

2023

 
Unbilled contract receivables, gross $6,448  $5,738  $4,669  $4,501 
Retainage  16,949   15,747   24,482   22,096 
Total contract assets  23,397   21,485   29,151   26,597 
Less: current portion  18,982   12,610   20,982   17,800 
Contract Assets – non-current $4,415  $8,875  $8,169  $8,797 

 

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

 March 31, 2023  December 31, 2022  

March 31,

2024

 

December 31,

2023

 
Billings in excess of costs $18,292   14,724  $36,127   35,949 
Advances from customers on uncompleted contracts  40,310   34,888   35,801   36,608 
Total contract liabilities  58,602   49,612   71,928   72,557 
Less: current portion  58,591   49,601   71,928   72,543 
Contract liabilities – non-current $11   11  $-   14 

 

During the three months ended March 31, 2024, the Company recognized $6,732 of sales related to its contract liabilities on January 1, 2024. During the three months ended March 31, 2023, the Company recognized $2,945 of sales related to its contract liabilities on January 1, 2023. During the three months ended March 31, 2022, the Company recognized $2,082 of sales related to its contract liabilities on January 1, 2022.

 

Remaining Performance Obligations

 

As of March 31, 2023,2024, the Company had $499.1438.2 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, Letters of Intent or written mandates, 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 $358.1123.5 million are expected to be recognized during the year ending December 31, 2023,2024, $114.6296.1 million during the year ending December 31, 20242025, and $26.5135.0 million during the year ending December 31, 2025.2026.

 

11

 

 

Note 5. 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 glass in Florida. Intangibles assets also include the intangibles acquired during the acquisition of GM&P.

Schedule of Finite-Lived Intangible Assets, Net

  March 31, 2023 
  Gross  Acc. Amort.  Net 
Notice of Acceptances (NOAs), product designs and other intellectual property  10,281   (7,667)  2,614 
  March 31, 2024 
  Gross  Acc. Amort.  Net 
Notice of Acceptances (NOAs), product designs and other intellectual property  12,171   (8,860)  3,311 

 

  December 31, 2022 
  Gross  Acc. Amort.  Net 
Trade Names $980  $(980) $- 
Notice of Acceptances (NOAs), product designs and other intellectual property  9,987   (7,281)  2,706 
Non-compete Agreement  165   (165)  - 
Customer Relationships  4,140   (4,140)  - 
Total $15,272  $(12,566) $2,706 
  December 31, 2023 
  Gross  Acc. Amort.  Net 
Notice of Acceptances (NOAs), product designs and other intellectual property  12,231   (8,756)  3,475 

 

The weighted average amortization period is5 4.7 years.

 

During the three months ended March 31, 2023,2024, the amortization expense amounted to $322342, and was included within the general and administration expenses in our unaudited Condensed Consolidated Statement of Operations. Similarly, during the three months ended March 31, 2022,2023, the amortization expense amounted to $475322.

 

The estimated aggregate amortization expense for each of the five succeeding years as of March 31, 2023,2024, is as follows:

Schedule of Finite Lived Intangible Assets Future Amortization Expense

Year ending (in thousands)  (in thousands) 
2023 $793 
2024  722  $902 
2025  416   632 
2026  320   522 
2027  253   460 
2028  353 
Thereafter  110   442 
Total $2,614  $3,311 

 

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Note 6. Supplier Finance Program

 

Tecnoglass Inc. has established payment terms to suppliers for the purchase of goods and services, which normally range between 30 and 60 days. In the normal course of business, suppliers may require liquidity and manage, through third parties, the advanced payment of invoices. The Company allows its suppliers the option to make payments in advance of an invoice due date, through a third-party finance provider or intermediary, with the purpose of allowing suppliers to obtain the required liquidity. For these purposes, suppliers present to the CompanyTecnoglass the third-party finance provider or intermediary with whom they will carry out the finance program and establish an agreement, through which the invoices will be paid by the third-party finance provider or intermediary once the CompanyTecnoglass has confirmed the invoices areas valid. Once the Company confirms the invoices are valid, the third-party finance provider or intermediary proceeds with the payment to the supplier. Subsequently, the CompanyTecnoglass pays the invoices for goods or services to the third-party finance provider or intermediary selected by the supplier. Payment times do not vary from those initially agreed with the supplier, as stated in the invoices factored by the supplier (i.e. between 30 and 60 days). Pursuant to the supplier finance program,programs, the Company has not been required to pledge any assets as security nor to provide any guarantee to third-party finance provider or intermediary.

 

As of March 31, 2023,2024, the obligations outstanding related to the supplier finance program amountamounted to $2,3351,190, recorded as current liabilities, compared to $2,722 outstanding as of December 31, 2023; with $2,186898 classified as Trade“Trade accounts payable and accrued expensesexpenses”, compared to $2,330, as of December 31, 2023, and $149292 classified as Due“Due to related parties.parties”, compared to $392 as of December 31, 2023.

 

Note 7. Debt

 

The Company’s debt is comprised of the following:

 

Schedule of Long Term Debt

 March 31, 2023  December 31, 2022  

March 31,

2024

 

December 31,

2023

 
Revolving lines of credit $620  $329  $736  $525 
Finance lease  387   395   284   327 
Other current debt  2,386   - 
Senior Secured Credit Facility  172,500   172,500   157,500   172,500 
Less: Deferred cost of financing  (3,612)  (3,740)  (3,001)  (3,346)
Total obligations under borrowing arrangements  169,895   169,484   157,905   170,006 
Less: Current portion of long-term debt and other current borrowings  819   504   3,338   7,002 
Long-term debt $169,076  $168,980  $154,567  $163,004 

 

In November 2021, the Company amended its Senior Secured Credit Facility to (i) increase the borrowing capacity under its committed line of credit from $50 million to $150 million, (ii) reduce its borrowing costs by an approximate 130 basis points and (iii) extend the initial maturity date by one year to the end of 2026.2026. Borrowings under the credit facility now bear interest at a rate of LIBOR with no floor plus a spread of 1.50%, based on the Company’s net leverage ratio, compared to a prior rate of LIBOR with a floor of 0.75% plus a spread of 2.50%, resulting on total annual savings of approximately $15 million at current levels of outstanding borrowings, since entering into our inaugural US Bank syndicated facility in October of 2020. The effective interest rate for this credit facility including deferred issuance costs is 7.427.71%. In relation to this transaction, the Company accounted for costs related to fees paid of $1,496. This was accounted for as a debt modification and $1,346 of fees paid to banks were capitalized as deferred cost of financing and $150 paid to third parties recorded as an operating expense on the consolidated statements of operations for the year ended December 31, 2021. In March 2022,Beginning on July 1, 2023, the interest rate on this credit facility was updated to SOFR plus the same spread of 1.5%. On January 2024, we voluntarily prepaid $15 million of capital to this credit facility which has decreased our net leverage ratio and triggered a step down in the applicable interest rate spread to 1.5%. Additionally, on September 30, 2022, we voluntarily prepaid $10.0 million of the term loan and $6.7 million under the revolving line of credit which remains fully unused as of March 31, 2023.

 

Maturities of long-term debt and other current borrowings are as follows as of March 31, 2023:2024:

 

Schedule of Maturities of Long Term Debt

        
2024 $819  $3,338 
2025  10,137   10,068 
2026  15,051   147,500 
2027  147,500 
2028  - 
Total $173,507  $160,906 

 

The Company’s loans have maturities ranging from a fewseveral weeks to 54 years. Our credit facilities bear a weighted average interest rate of 6.636.98% as of March 31, 2023. When considering the effect of our interest rate swap contracts that hedge $125 million of our outstanding debt through November 2026 (further described below in Note 8), the net average interest rate applicable to our credit facilities as of March 31, 2023 is 4.30%.2024.

 

13

 

Note 8. Hedging Activity and Fair Value Measurements

 

Hedging Activity

 

During the quarter ended March 31, 2022, we entered into several interest rate swap contracts to hedge the interest rate fluctuations related to our outstanding debt. The effective date of the contracts arecontract is December 31, 2022 and, thus, we shall have payment dates each quarter, commencing March, 31 2023. During the quarter ended December 31, 2022, we entered into several foreign currency non-delivery forward 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 LIBOR and Colombian Peso denominated costs and expenses, respectively.

 

In determining fair value, weWe 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.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.

 

Due to the Libor discontinuance, on June 21, 2023, the Company amended the Interest Rate Swap contract from Libor 1 Month plus spread to SOFR 3 Months plus spread. The settlements of the instruments remain under the existing conditions; however, the fixed leg goes from 1.93% to 1.87%. Regarding the conditions of our outstanding debt, only Libor was replaced by SOFR, maintaining the other initial conditions.

As of March 31, 2023,2024, the fair value of our interest rate swap and foreign currency non-delivery forward contracts was in a net asset position of $9.47.5 million. We had 1512 outstanding interest rate swap contracts to hedge $125 million related to our outstanding debt through November 2026 and 2 non-delivery forward contracts to exchange $15 million U.S. Dollars to Colombian Pesos through April 2023.2026. 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, 2023.2024.

 

We assess the effectiveness of our interest rate swap and foreign currency non-delivery forward contracts by comparing the change in the fair value of the interest rate swap and foreign currency non-delivery forward contracts to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our interest rate swap and foreign currency non-delivery forward contracts is reported as a component of accumulated other comprehensive income 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 gains, net, recognized in the “accumulated other comprehensive income” line item in the accompanying consolidated balance sheet as of March 31, 20232024, that we expect will be reclassified to earnings within the next twelve months, is $3.53.7 million.

 

The fair value of our interest rate swap hedges that areis classified in the accompanying consolidated balance sheets, as of March 31, 2023 are2024, as follows:

 

Schedule of Fair Value of Foreign Currency Hedges

  Derivative Assets   Derivative Liabilities 
  March 31, 2023   March 31, 2023 
Derivatives designated as hedging instruments under Subtopic 815-20: Balance Sheet Location Fair Value   Balance Sheet Location Fair Value 
            
Derivative instruments:             
Interest rate swap contracts and foreign currency non-delivery forwards Other current assets $9,357   Accrued liabilities $- 
Total derivative instruments Total derivative assets $9,357   Total derivative liabilities $- 

  Derivative Assets  Derivative Liabilities
  March 31, 2024  March 31, 2024
Derivatives designated as hedging instruments under
Subtopic 815-20:
 Balance Sheet
Location
 Fair Value  Balance Sheet
Location
 Fair Value 
           
Derivative instruments:            
Interest rate swap contracts Other current assets $7,489  Accrued liabilities $    - 
Total derivative instruments Total derivative assets $7,489  Total derivative liabilities $- 

 

The ending accumulated balance for the interest rate swap contracts included in accumulated other comprehensive income was $7,3507,489 as of March 31, 2023.31,2024.

 

The following table presents the gains (losses) on derivative financial instruments, and their classifications within the accompanying consolidated financial statements, for the quarter ended March 31, 2023:2024:

 Schedule of Gains (Losses) on Derivative Financial Instruments quarter ended

  Derivatives in Cash Flow Hedging Relationships 
  Amount of Gain or (Loss) Recognized in OCI (Loss) on Derivatives  Location of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income Amount of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income 
  Three Months Ended    Three Months Ended 
  March 31,  March 31,    March 31,  March 31, 
  2023  2022    2023  2022 
                   
Interest rate swap contracts and foreign currency non-delivery forwards contracts $7,350  $  2,622  Interest expense and operating income $ 3,193  $ - 
  Derivatives in Cash Flow Hedging Relationships 
  Amount of Gain or (Loss) Recognized in OCI (Loss) on Derivatives  Location of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income Amount of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income 
  Three Months Ended    Three Months Ended 
  March 31,  March 31,    March 31,  March 31, 
  2024  2023    2024  2023 
                   
Interest Rate Swap and foreign currency non-delivery forwards Contracts $1,036  $(1,837) Interest expense and operating income $1,099  $3,193 

14

 

 

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.

 

The fair values of derivatives used to manage interest rate risks are based on LIBORSOFR rates and interest rate swap curves. Measurement of our derivative assets and liabilities is considered a level 2 measurement. To carry out the swap valuation, the definition of the fixed leg (obligation) and variable leg (right) is used. Once the projected flows are obtained in both fixed and variable rates, the regression analysis is performed for prospective effectiveness test. The projection curve contains the forward interest rates to project flows at a variable rate and the discount curve contains the interest rates to discount future flows, using the one-month USD Libor curve.

 

As of March 31, 2023,2024, financial instruments carried at amortized cost that do not approximate fair value consist of long-term debt. See Note 7 – Debt. The fair value of long-term debt was calculated based on an analysis of future cash flows discounted at current market rates, which are level 2 inputs.

 

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

 

Summary of Fair Value and Carrying Amounts of Long Term Debt

 

March 31, 2023

  December 31, 2022  

March 31,

2024

 

December 31,

2023

 
Fair Value  170,215   172,408   155,366   166,041 
Carrying Value  169,076   168,980   154,567   163,004 

 

15

 

Note 9. Income Taxes

 

The Company files income tax returns for TG, ES and ES Metals in the Republic of Colombia. GM&P, Componenti and ESW LLC are U.S. entities based in Florida subject to U.S. federal and state income taxes. The Company, which is a Cayman Islands exempted company,Tecnoglass 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:

 

Schedule of Components of Income Tax Expense (Benefit)

  2023  2022 
  Three months ended March 31, 
  2023  2022 
Current income tax        
United States $(3,464) $(1,102)
Colombia  (21,048)  (11,015)
Panama  (3)  (9)
Total current income tax  (24,515)  (12,126)
Deferred income Tax        
United States  (284)  120 
Colombia  128   1,448 
         
Total deferred income tax  (156)  1,568 
Total income tax provision $(24,671) $(10,558)
         
Effective tax rate  33.8%  33.5%

  2024  2023 
  

Three months ended

March 31,

 
  2024  2023 
Current income tax        
United States $(3,832) $(3,464)
Colombia  (3,808)  (21,048)
Panama  (1)  (3)
Total current income tax  (7,641)  (24,515)
         
Deferred income Tax        
United States  (1,178)  (284)
Colombia  (2,340)  128 
Total deferred income tax  (3,518)  (156)
Total income provision $(11,159) $(24,671)
         
Effective tax rate  27.3%  33.8%

 

The weighted average statutoryeffective income tax rate for 2024 and 2023, was 27.3%, and 33.8%, respectively. The effective income tax rate of 27.3% during the three months ended March 31, 2023 and 2022 of 33.8% and 33.5%, respectively, approximate2024, is below the statutory rate.rate as the Colombian subsidiaries which bear a higher corporate income tax rate recorded a proportionally lower share of the consolidated income.

 

Note 10. Related Parties

 

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

 

Schedule of Related Parties

  

March 31,

2023

  

December 31,

2022

 
Due from related parties:        
Alutrafic Led SAS  290   249 
Studio Avanti SAS  236   113 
Due from other related parties  247   1,085 
Total due from related parties $773  $1,447 
         
Due to related parties:        
Vidrio Andino  4,826   4,853 
Due to other related parties  664   470 
Total due to related parties $5,491  $5,323 

  

March 31,

2024

  

December 31,

2023

 
Due from related parties:        
Studio Avanti SAS  548   460 
Alutrafic Led SAS  276   322 
Prisma Glass LLC  142   281 
Due from other related parties  642   324 
Total due from related parties $1,608  $1,387 
         
Due to related parties:        
Vidrio Andino  4,746   3,927 
Incantesimo SAS  2,500   2,500 
Due to other related parties  1,160   1,071 
Total due to related parties $8,406  $7,498 

 

Schedule of Sale to Related Parties

 2023  2022  2024  2023 
 Three months ended March 31,  

Three months ended

March 31,

 
 2023  2022  2024  2023 
Sales to related parties:                
Studio Avanti SAS  196   156 
Prisma-Glass SAS  193   - 
Alutrafic Led SAS  173   300   139   173 
Studio Avanti SAS  156   168 
Sales to other related parties  4   58   10   4 
Sales to related parties $333  $526  $538  $333 

 

16

 

A Construir SA

On a recurring basis, we have engaged A Construir S.A., a heavy construction company operating in Barranquilla, Colombia, to carry out construction related to our ongoing capital expenditures at our production facilities in Colombia. Affiliates of Jose Daes and Christian Daes, the company’s CEO and COO, respectively, had an ownership stake in A Construir through June 1, 2022. We purchased $3,280 during the three months ended March 31, 2023 from A Construir S.A. for construction and facilities which have been capitalized on the Company’s balance sheet as property, plant and equipment. Given that A Construir is no longer considered a related party, amounts since June 1, 2022, are not reflected as balances due from and due to related parties on the face of the Consolidated Balance Sheet nor the summary table above as of March 31, 2023 and December 31, 2022.

 

Alutrafic Led SAS

 

In the ordinary course of business, we sell products to Alutrafic Led SAS (“Alutrafic”), a fabricator of electrical lighting equipment. Affiliates of Jose Daes and Christian Daes, the Company’s Chief Executive Officer and Chief Operating Officer, respectively, have an ownership stake in Alutrafic. During the three months ended March 31, 2023,2024, we sold $173139, compared to $300173 during the three months ended March 31, 2022.2023. Additionally, we had outstanding accounts receivable from Alutrafic of $290276 and $249322 as of March 31, 2023,2024, and December 31, 2022,2023, respectively.

Fundacion Tecnoglass-ESWindows

Fundacion Tecnoglass-ESWindows is a non-profit organization set up by the Company to carry out social causes in the communities around where we operate. We made charitable contributions during the three months ended March 31, 2024 of $749, compared to $664 during the three months ended March 31, 2023.

Incantesimo SAS

On November 10, 2023, we acquired the 30% equity interest in ESMetals previously not owned by us for an aggregate of $5,500 from Incantesimo SAS, a Colombia domiciled company of which the primary beneficiary is Carlos Peña, who holds a senior management position at the Company. The Company paid $3,000 during November and December 2023, and $2,500 remain outstanding as of March 31, 2024, [(which amount was paid on April 10, 2024)].

Prisma-Glass LLC

In the ordinary course of business, we sell products to Prisma-Glass LLC a distributer and installer of architectural systems in Florida that. is owned and controlled by family members of Christian Daes. We sold $193 to Prisma-Glass LLC during the three months ended March 31, 2024, and had outstanding accounts receivable of $142 as of March 31, 2024.

 

Santa Maria del Mar SAS

 

In the ordinary course of business, we purchase fuel for use at our manufacturing facilities from Estación Santa Maria del Mar SAS, a gas station located in the vicinity of our manufacturing campus which is owned by affiliates of Jose Daes and Christian Daes. During the three months ended March 31, 2023,2024, we purchased $236151 of fuel,, compared to $244236 purchased during the three months ended March 31, 2022.

Fundacion Tecnoglass-ESWindows

Fundacion Tecnoglass-ESWindows is a non-profit organization set up by the Company to carry out social causes in the communities around where we operate. We made charitable contributions during the three months ended March 31, 2023 of $664, compared to $356 during the three months ended March 31, 2022.2023.

 

Studio Avanti SAS

 

In the ordinary course of business, we sell products to Studio Avanti SAS (“Avanti”), a distributer and installer of architectural systems in Colombia. Avanti is owned and controlled by Alberto Velilla, who is director of Energy Holding Corporation, the controlling shareholder of the Company. As of March 31, 20232024, and December 31, 2022,2023, the Company had outstanding accounts receivable from Avanti of $236548 and $113460, respectively. During the three months ended March 31, 2023,2024, we sold $156196 of products to Studio Avanti, compared to $168156 during the three months ended March 31, 2022, respectively.2023.

 

Vidrio Andino Joint Venture

 

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 acquired a 25.8% minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain. The purchase price for our interest in Vidrio Andino was $45,00045, million, of which $34,10034.1 million was paid in cash and $10,90010.9 million paid through the contribution of land on December 9, 2020. On October 28, 2020, we acquired said land from a related party and paid for it with the issuance of an aggregate of 1,557,142 ordinary shares of the Company, valued at $7.00 per share, which represented an approximate 33% premium based on the closing stock price as of October 27, 2020.

 

The land will serve the purpose of developing a second float glass plant nearby our existing manufacturing facilities which we expect will carry significant efficiencies for us once it becomes operative, 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 $12,50012.5 million if needed (based on debt availability as a first option).

 

17

In the ordinary course of business, we purchased $6,3456,881 and $5,093of materials from Vidrio Andino during the three months ended March 31, 2023, and 2022, respectively.2024, compared to $6,345, during the three months ended March 31, 2023. We also had outstanding payables to Vidrio Andino of $4,8264,746 and $4,8533,927 as of March 31, 20232024, and December 31, 2022,2023, respectively. We recorded equity method income of $1,448 and $1,5801,046 on our Consolidated Statement of Operations during the three months ended March 31, 2023 and 2022, respectively.2024, compared to $1,449 recorded during the three months ended March 31, 2023.

17

 

Zofracosta SA

 

We have an investment in Zofracosta SA, a real estate holding company and operator of a tax-free zone located in the vicinity of the proposed glass plant being built through our Vidrio Andino joint venture, recorded at $657792 and $632796 as of March 31, 20232024, and December 31, 2022,2023, respectively. Affiliates of Jose Daes and Christian Daes have a majority ownership stake in Zofracosta SA.

 

Note 11. Shareholders’ Equity

 

Dividends

 

InOn February 2023,29, 2024, the Company declared a regular quarterly dividend of $0.090.11 per share, or $0.360.44 per share on an annualized basis. The dividend was paid on April 28, 202330, 2024, to shareholders of record as of the close of business on March 31, 2023.29, 2024.

 

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, 20232024, and 2022:2023:

 

Schedule of Earnings Per Share, Basic and Diluted

  2024  2023 
  

Three months ended

March 31,

 
  2024  2023 
Numerator for basic and diluted earnings per share        
Net income attributable to parent $29,730  $48,235 
         
Denominator        
Denominator for basic earnings per ordinary share - weighted average shares outstanding  46,996,708   47,674,773 
Effect of dilutive securities and stock dividend  -   - 
Denominator for diluted earnings per ordinary share - weighted average shares outstanding  46,996,708   47,674,773 
Basic earnings per ordinary share $0.63  $1.01 
Diluted earnings per ordinary share $0.63  $1.01 

  2023  2022 
  Three months ended 
  March 31, 
  2023  2022 
Numerator for basic and diluted earnings per shares        
Net Income $48,372  $20,953 
         
Denominator        
Denominator for basic earnings per ordinary share - weighted average shares outstanding  47,674,773   47,674,773 
Effect of dilutive securities and stock dividend  -   - 
Denominator for diluted earnings per ordinary share - weighted average shares outstanding  47,674,773   47,674,773 
Basic earnings per ordinary share $1.01  $0.44 
Diluted earnings per ordinary share $1.01  $0.44 
18

 

Note 12. Commitments and Contingencies

 

Commitments

 

As of March 31, 2023,2024, the Company had an outstanding obligationobligations to purchase an aggregate of at least $72,17259,314 of certain raw materials from a specific supplier before November 30, 2030.2030, and an aggregate of at least $10,035 of certain raw materials from a specific supplier through 2028.

 

On May 3, 2019, we consummated a joint venture agreement with Saint-Gobain whereby we acquired a 25.8% minority ownership interest in Vidrio Andino. The purchase price for our interest in Vidrio Andino was $45,00045, million, of which $34,10034.1 million was paid in cash and $10,90010.9 million was contributed through a parcel of land to be used for the building of a second factory. On October 28, 2020, the land was paid for through the issuance of an aggregate of 1,557,142 ordinary shares of the Company, at $7.00 per share, which represented an approximate 33% premium based on the Company´s share price as of October 27, 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 $12,50012.5 million to be paid if needed (based on debt availability as a first option).

 

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;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 13. Subsequent Events

On April 4, 2023 we entered into a settlement agreement related to a completed project.. The conditions were determined to have existed as of the date of the balance sheet and therefore were recorded the related expenses as an accounts payable on the balance sheet as of March 31, 2023 and as an operating expense during the three months ended March 31, 2023.

1819

 

 

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., 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, supplierexperienced and installerhighly skilled in the vertical integration of architectural glass manufacturing, distribution, and professional fitting. Our expertise extends to the production of top-quality windows, as well as the supply of aluminum, vinyl, and associated aluminum products for the globalother components. Our dedicated and knowledgeable team serves a diverse range of commercial and residential construction markets.projects worldwide, guaranteeing outstanding products and seamless installation services. With a focus on innovation, combined with providing highly specified products with the highest quality standards at competitive prices, we have earned #1 spot in the Forbe’s list of America’s 100 most successful small-cap companies for 2024, and developed a leadership position in each of our core markets. In the United States, which is our largest market, we were ranked as the third largest glass fabricator serving the United States in 20222023 by Glass Magazine. In addition, we believe we are the leading glass transformation company in Colombia. 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 haveWith over 40 years of experience in architectural glass and aluminum profile structure assembly. We transform a variety ofassembly, we specialize in transforming various glass products, includingproducts. Our offerings include tempered safety glass, double thermo-acoustic glass, and laminated glass. Our wide range of finished glass products are installedutilized in a wide variety ofdiverse buildings across a number of different applications, includingfor floating facades, curtain walls, windows, doors, handrails, andas well as interior and bathroom spatial dividers. We also produceIn addition to glass, we manufacture aluminum and vinyl products such as profiles, rods, bars, plates, and other hardware used in the manufacturing of windows.specifically designed for window manufacturing.

 

Our products are manufactured in a 4.15.6 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 One Thousand Museum100 Hood Park Drive (Boston), 601 West 29th St (New York). Norwegian Cruise Line Terminal B (Miami), Paramount Miami Worldcenter (Miami), Hub50House (Boston), Via 57 West (New York), Ae’oOne65 Main (Cambridge), AE’O Tower (Honolulu), Salesforce Tower (San Francisco), Trump Plaza (Panama), and Departmental Legislative Assembly (Bolivia)One Thousand Museum (Miami). 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 acquisitions that have affordedallowed us incrementaladded control over our supply chain while maintaining efficient lead times.allowed for further vertical integration of our business and will act as a platform for our future expansion in the 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. In March 2017, we completed the acquisition of GM&P, a consulting and glazing installation business that was previously our largest installation customer.

 

1920

 

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 production chain, while securing ample glass supply for our expected production needs. Additionally, in April 2019, we acquired a 70% equity interest in ESMetals, which has been consolidated in our financial statements since. In November 2023, we acquired the remaining 30% equity interest in ESMetals. ESMetals is a Colombian entity that serves as a metalwork contractor to supply us with steel accessories used in the 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. Since 2017,We also launched a residential window offering which, we have been expandingbelieve, will help us expand our presence in U.S. residential markets which went from less than 5% of our sales to nearly 45% of our revenues for the full year 2022.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, and our efficient lead times given our vertical integration, will allow us to generate further growth in the future.

 

Our company hasWe have focused on ensuringworking with The Power of Quality, always making sure that our vision of sustainability is immersed into every aspect of our business, including social, environmental, economic and governance variables, (ESG), that help us make decisions and create value for our stakeholders. We carry out a series of initiatives based on our global sustainability strategy, which is supported on three fundamental pillars: promoting an ethical and responsible continuous growth, leading eco-efficiency and innovation, and empowering our environment. As part of this strategy we have voluntarily adhered to UN Global Compact Principles since 2017. In 2021,2017 and in pursuit of our cooperation with the attainment of the Sustainable Development Goals, or SDGs we joined in 2021 a program to dynamize, strengthen and make visible the management of greenhouse gas emissions as a carbon neutral strategy set out by the Colombian government byfor 2050.

 

RESULTS OF OPERATIONS

 

  Three months ended 
  March 31, 
  2023  2022 
Operating Revenues $202,639  $134,548 
Cost of sales  (94,884)  (74,215)
Gross profit  107,755   60,333 
Operating expenses  (34,075)  (26,367)
Operating income  73,680   33,966 
Non-operating income, net  1,287   342 
Equity method income  1,449   1,580 
Foreign currency transactions losses  (1,100)  (2,909)
Interest Expense and deferred cost of financing  (2,273)  (1,468)
Income tax provision  (24,671)  (10,558)
Net income  48,372   20,953 
Income attributable to non-controlling interest  (137)  (100)
Income attributable to parent $48,235  $20,853 

  

Three months ended

March 31,

 
  2024  2023 
Operating Revenues $192,627  $202,639 
Cost of sales  (117,967)  (94,884)
Gross profit  74,660   107,755 
Operating expenses  (33,638)  (34,075)
Operating income  41,022   73,680 
Non-operating income and expenses, net  1,080   1,287 
Equity method income  1,046   1,449 
Foreign currency transactions losses  (153)  (1,100)
Interest Expense and deferred cost of financing  (2,106)  (2,273)
Income tax provision  (11,159)  (24,671)
Net income  29,730   48,372 
Income attributable to non-controlling interest  -   (137)
Income attributable to parent $29,730  $48,235 

 

Comparison of quarterly periods ended March 31, 20232024, and 20222023

 

Revenues

 

The Company’s operatingOperating revenues increased $68.1 million or 50.6%, from $134.5 million for the quarter ended March 31, 2022 to $202.6 million for the quarter ended March 31, 2023.

Strong sales during the first quarter of 2023 were driven by strong U.S. residential and commercial market activity, where sales increased $67.9 million, or 53.4%, from $127.0 million in 2022 to $194.8 million in 2023. U.S. commercial market sales increased $43.8 million, or 65.0%, from $67.4 million in 2022 to $111.2 million in 2023 as we continue to execute on our growing backlog. Single family residential market sales increased $24.0 million, or 40.1%, from $59.6 million in 2022 to $83.6 million in 2023, and accounted for 41.3% of total sales during the quarter ended March 31, 2023. Sales2024, was $192.6 million, compared to Latin-American markets, including Colombia, increased $0.2$202.6 million during the quarter ended March 31, 2023, a decrease of $10.0 million or 3.1%4.9%, from $7.6year over year. The decrease was driven by seasonally slow single family residential revenues, down $10.4 million, in 2022or 12.5% year over year, impacted by high interest and mortgage rates. Despite the aforementioned higher rates, the commercial market actually grew slightly year over year as the Company continues to $7.8 million in 2023.execute on its growing backlog.

 

20

Gross profit

 

Gross profit increased by $47.4during the three months ended March 31, 2024, was $74.7 million, a decrease of $33.1 million, or 78.6%30.7%, to $107.7from $107.8 million during the three months ended March 31, 2023, compared with $60.3 million2023. The gross profit margin during the three months ended March 31, 2022. This resulted in gross profit margin reaching2024, of 38.8% was down from 53.2% during the first quarter of 2023, up from 44.8% during the first quarter of 2022. The 840-basis point improvement in gross margin is mainly attributableprimarily related to operating leverage on higher sales, favorable product pricing dynamics, ongoing efficiency efforts, and favorable foreign exchange rates resulting from a depreciation17.8% appreciation of the Colombian Peso.Peso impacting our costs denominated in Colombian Pesos against our predominantly US Dollar revenue stream, accounting for an estimated 308-basis points year over year decrease on margin. Additionally, this unfavorable FX dynamic impacted inventories that were recorded into the balance sheet at a weaker Peso and then accounted for under raw material costs at a much stronger Peso, translating into more US Dollars at the time the revenues are recognized. This effect contributed to a 197-basis point decrease year-over-year when assessing the same effect during the comparable period. Finally, margins were impacted by our revenue mix which included more installation and stand-alone product sales during the current period. Installation revenues increased to 16.9% of total revenue, compared with 14.4% during the prior year quarter, and stand-alone architectural glass and frames sales increased to 10.9% of total sales, in comparison with 8.3%, as a result of recent manufacturing capacity expansion unlocking the opportunity to sell stand-alone product.

 

Expenses

 

Operating expenses increased $7.7decreased $0.4 million, or 29.2%1.3%, from $26.4$34.1 million to $34.1$33.6 million for the quarters ended March 31, 20222023, and 2023,2024, respectively. The increase was mainly driven by by higher incremental administrative cost to ramp up our geographical expansion, which include $2.7decrease resulted primarily from $0.8 million higher personnel expense, $1.9 million, or 27.4%, increasedecrease in shipping expense as a result of a higher sales volume and a higher mix of sales going into the more atomized US residential market, along with other increased selling expenses,Accounts receivable provision partially offset by $1.5 million decrease in services. Additionally, duringmostly flat operating expenses, despite the period ended March 31, 2023, we recorded a settlement payment associated with a dispute related to a completed project.unfavorable pressure on Colombian Peso denominated cost, as the peso strengthened 17.8% year over year.

21

 

Non-operating income and expenses, net

 

During the three months ended March 31, 20232024, and 2022,2023, the Company recorded non-operating income of $1.3$1.1 million and $0.3$1.3 million, respectively. Non-operating income is comprised primarily of credit card charges made to customers for processing payments,interest income from rental properties and gains on sale of scrap materialsshort term investments, 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 three months ended March 31, 2023,2024, the Company recorded a non-operating loss of $1.1$0.2 million associated with foreign currency transactions compared to a net non-operating loss of $2.9$1.1 million during the three months ended March 31, 2022.2023.

 

Interest Expense and deferred cost of financing

 

Interest expense and deferred cost of financing increased $0.8decreased $0.2 million, or 54.8%7.3%, to $2.3$2.1 million during the quarter ended March 31, 2023,2024, as the Company voluntarily prepaid $15 million to reduce its debt balance and benefited from $1.5 million during the quarter ended March 31, 2022, ashaving a resultfavorable interest rate hedge in place for approximately 75% of increasing floating interest rates, despite a lower debt balance.its outstanding debt.

 

Income Taxes

 

During the quarters ended March 31, 2023 and 2022, the Company recorded anThe effective income tax provision of $24.7 millionrate for 2024 and $10.6 million, respectively, reflecting an2023, was 27.3% and 33.8%, respectively. The effective income tax rate of 33.8% and 33.5%, respectively, which approximate27.3% during the three months ended March 31, 2024, is below the statutory rate.rate as the Colombian subsidiaries which bear a higher corporate income tax rate recorded a proportionally lower share of the consolidated income.

 

As a result of the foregoing, the Company recorded net income for the three months ended March 31, 20232024, of $48.4$29.7 million compared to net income of $21.0$48.4 million for the three months ended March 31, 2022.2023.

 

21

Liquidity

 

As of March 31, 20232024 and December 31, 2022,2023, we had cash and cash equivalents of approximately $128.5$135.9 million and $103.7$129.5 million, respectively. Additionally, we currently have approximately $170$170.0 million available under our committeddifferent lines of credit.

 

We anticipate that working capitalthe Company will continue be a net benefit to cash flow forgenerate positive cashflow from operating activities through, at least twelve months from the full year ending December 31, 2023,date of this report, which we believe, in addition to our current liquidity position, provides ample flexibility to service our obligations through the next twelve months. We expect our cashflow from operations to present a seasonality effect given the timing of income tax payments in the main jurisdictions where we operate.

22

 

Capital Resources

 

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 threeThree months ended March 31, 20232024 and 2022,2023, we made investments primarily in building and construction and machinery and equipment in the amounts of $20.3$11.2 million and $11.9$20.3 million, respectively. These investments across our vertically-integrated operations include further automating our glass and window assembly production lines, adding glass production lines, and expanding our aluminum facilities, among other initiativesputting new vinyl windows lines to generate high-returns.penetrate this new product segment and purchasing land to grow beyond current installed capacity. The Company estimates that current manufacturing operating capacity has reached approximately $1.2 billion which does not account for incremental installation revenue capacity. Additionally, the Company expects the resulting increase in output to improve efficiency throughout its operations while reducing material waste and overall lead times.

 

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 acquired a 25.8% minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain. The purchase price for our interest in Vidrio Andino was $45 million, of which $34.1 million was paid in cash and $10.9 million to be paid through the contribution of land once a complete assessment of the project timing is completed based on the overall market conditions as they relate to the ongoing COVID-19 pandemic. On October 28, 2020, the land was paid for through the issuance of an aggregate of 1,557,142 ordinary shares of the Company, at $7.00 per share, which represented an approximate 33% premium based on last sale price as of October 27, 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 toward the end of the two-year construction period, if needed (based on debt availability as a first option).

Cash Flow from Operations, Investing and Financing Activities

 

 Three months ended March 31,  

Three months ended

March 31,

 
 2023  2022  2024  2023 
Cash Flow provided by Operating Activities $43,063  $27,135  $33,447  $43,063 
Cash Flow used in Investing Activities  (15,688)  (10,394)  (10,192)  (15,688)
Cash Flow used in Financing Activities  (3,287)  (18,318)  (16,686)  (3,287)
Effect of exchange rates on cash and cash equivalents  778   997   (196)  778 
Cash Balance - Beginning of Period  103,672   85,011   129,508   103,672 
Cash Balance - End of Period $128,538  $84,431  $135,881  $128,538 

 

During the three months ended March 31, 20232024, and 2022,2023, operating activities generated approximately $43.1$33.4 million and $27.1$43.1 million, respectively. The positive cashflow from operations during the first three months of 2023 has been related to a much higher profitability year over year, enhanced working capital efforts, reduced interest expense and a more favorable mix of revenues in the single-family residential space which carries a shorter cash cycle and no retainage.

The main sourcesources of operating cash during the three months ended March 31, 20232024, were taxes payable, whichdriven by an improvement in working capital associated with inventories and trade accounts receivable. Inventories generated $25.5$13.7 million, relatedmostly due to higher income tax provision as a result of several record-breaking quarters, compared with $11.6 millionfaster raw material and Finished goods turnover during the three months ended March 31, 2022. Contract assets and liabilities generated $12.42024, as main projects are being executed; compared to a net use of $13.0 million during the three months ended March 31, 2023, resulting fromas we procured materials to meet our growing operations. In addition, Trade Accounts receivable generated $3.8 million, compared with a combinationuse of a decrease in retainage as several jobs in the US were finalized, a reduction of unbilled receivables tied to our advance on projects currently in execution, and increase advances received from customers. Comparatively, contract assets and liabilities generated $2.0$8.6 million during the three months ended March 31, 2022.2023. The largest use of cash in operating activities were other assets, comprised primarily of prepaid taxes, which used $9.2 million during the three months ended March 31, 2024, resulting from a higher taxable income year over year for fiscal year that will be paid in 2024; and trade accounts payable which used an additional $8.0 million. Comparatively, other assets used $14.3 million during the three months ended March 31, 2023, compared with $1.8 millionand Trade accounts receivable used during the three months ended March 31, 2022, comprised primarily of prepaid value added taxes of Colombian operations. Inventories used $13.1 million and $13.5 million during the three months ended March 31, 2023 and 2022, respectively, as we procure materials to meet our growing operations.$9.7 million.

 

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We used $15.7$10.2 million and $10.4$15.7 million in investing activities during the three months ended March 31, 20232024, and 2022,2023, respectively. The main use of cash in investing activities during the three months ended March 31, 2023, was2024, related to the automation of our architectural system assembly processes further described above in the “Capital Resources” section. During the three months ended March 31, 2023,2024, we paid $15.6$9.9 million to acquire property plant and equipment, which in combination with $4.8$1.3 million acquired under credit or debt, amount to total capital expenditures of $20.3$11.2 million. During the three months ended March 31, 2022,2023, we used $9.2$15.5 million for the acquisition of property and equipment. Including assets acquired with debt or supplier credit, total capital expenditures during the period were $11.9$20.3 million.

 

Financing activities used $3.3$16.7 million and $18.3$3.3 million during the three months ended March 31, 20232024 and 2022,2023, respectively. We paid $3.6$4.2 million and $3.1$3.6 million of dividends to holders of our ordinary shares during the threeThree months ended March 31,2024 and 2023, and 2022, respectively. DuringAdditionally, during the three months ended March 31, 2022,2024, we voluntarily prepaid $15used $15.2 million to repay debt from our Senior Secured Line of capital to our credit facility which has decreased our net leverage ratio and triggered a step down in the applicable interest rate spread to 1.5% and later prepaid an additional $6.7 million under our revolving line of credit and $10 million under our term loan on September 30, 2022 with cash on hand.Credit.

 

Off-Balance Sheet Arrangements

 

None

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to ongoing market risk related to changes in interest rates, foreign currency exchange rates and commodity market prices.

 

A rise in interest rates could negatively affect the cost of financing for a significant portion of our debt with variable interest rates. If interest rates were to increase over the next 12 months by 100 basis points, net earnings would decrease by approximately $0.5$0.3 million based the current composition of our indebtedness. This market risk exposure is net of the effect from interest rate hedging derivative financial instruments further described in the footnotes to the financial statements.

 

We are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. Some of our subsidiaries’ operations are based in Colombia, and primarily transact business in local currency. Approximately 3% of our consolidated revenues and 36%24% of our costs and expenses are denominatedeffectively incurred in Colombian pesos, thereby mitigating some of the risk associated with changes in foreign exchange rates. This portion of costs and expenses denominated in Colombian Peso excludes certain items which are transacted in Colombia using Colombian Peso but are priced in U.S. Dollars or are otherwise indexed to U.S. Dollar rates. However, as our costs and expenses in Colombian Pesos exceed, their monetary assets, a 5% appreciation of the Colombian Peso relative to the US Dollar would result in our quarter revenues increasing by $0.3 million and our costs and expenses increasing by approximately $2.8$2.2 million, resulting in a $2.5$1.9 million decrease to net earnings based on results for the three months ended March 31, 2023.2024.

 

Similarly, a significant portion of the monetary assets and liabilities of these subsidiaries are generally denominated in US Dollars, while their functional currency is the Colombian peso, thereby resulting in gains or losses from remeasurement of assets and liabilities using the end of period spot exchange rate. These subsidiaries have both monetary assets and monetary liabilities denominated in US Dollars, thereby mitigating some of the risk associated with changes in foreign exchange rate. Furthermore, we record a portion of the non-cash foreign currency transaction gains and losses from remeasurement of certain intercompany loans as other comprehensive income. Net of this, the Colombian subsidiaries’ US Dollar denominated monetary assetsliabilities exceed their monetary liabilitiesassets by $5.5$29.4 million, such that a 1% devaluation of the Colombian peso will result in a loss of less than $0.1$0.3 million recorded in the Company’s Consolidated Statement of Operations as of March 31, 2023.2024.

 

Additionally, the results of the foreign subsidiaries must be translated into US Dollar,Dollars, our reporting currency, in the Company’s consolidated financial statements. The currency translation of the financial statements using different exchange rates, as appropriate, for different parts of the financial statements generates a translation adjustment, which is recorded within other comprehensive income on the Company’s Consolidated Statement of Comprehensive Income and Consolidated Balance Sheet.

 

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We are also subject to market risk exposure related to volatility in the prices of aluminum, one of the principal raw materials used for our manufacturing. The commodities markets, which include the aluminum industry, are highly cyclical in nature, and as a result, prices can be volatile. Commodity costs are influenced by numerous factors beyond our control, including general economic conditions, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Our selling prices are also impacted by changes in commodity costs base our pricing of aluminum products based on the quoted price on the London Metals Exchange plus a manufacturing premium with the intention of aligning cost of our raw materials with selling prices to attempt to pass commodity price changes through to our customers.

 

We cannot accurately estimate the impact a one percent change in the commodity costs of would have on our results of operation, as the change in commodity costs would both impact the cost to purchase materials and our selling prices. The impact to our results of operations depends on the conditions of the market for our products, which could impact our ability to pass commodities costs to our customers.

 

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 our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, were effective as of March 31, 2023,2024, in order to provide reasonable assurance that the information disclosed in our reports is recorded, processed, summarized, and 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 appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

For the quarter ended March 31, 2023,2024, there has been no 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.

 

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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 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 5. Other Information

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Share repurchase activity duringDuring the three months ended March 31, 2023 was2024, no director or officer adopted or terminated any (i) “Rule 10b5-1 trading arrangement,” as follows:defined in Item 408(a) of Regulation S-K intending to satisfy the affirmative defense conditions of Rule 10b5–1(c) or (ii) “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K.

Periods Total Number of Shares Purchased  Average Price Paid Per Share  Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs  Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) 
January 1, 2023, to January 31, 2023                
Open market and privately negotiated purchases             
                 
February 1, 2023 to February 28, 2023                
Open market and privately negotiated purchases             
                 
March 1, 2023, to March 31, 2023                
Open market and privately negotiated purchases  100  $40   0     
                 
Total  100  $40   0  $50,000,000 

(1)On November 3, 2022, the Board of Directors authorized the purchase of up to $50 million of the Company’s common shares. As of March 31, 2023, the Company had not made any purchases under the program. The program does not obligate the Company to acquire a minimum amount of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.

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, 2023,2024, 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 Inline XBRL Instance Document
   
101.SCH Inline XBRL Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
  ��
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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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 8, 20239, 2024  

 

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