UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

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

For the quarterly period ended ~~September~~June 30, ~~2017~~2021

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

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

Commission File Number 001-37839

TPI Composites, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-1590775

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

8501 N. Scottsdale Rd.

Gainey Center II, Suite 100

Scottsdale, AZ85253

~~(480)~~ (480) 305-8910

(Address, including zip code, and telephone number,

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	TPIC	NASDAQ Global Market

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes☒ No ☐

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


Large accelerated filer	☐☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
~~Non-accelerated filer~~	☒ ~~(Do not check if a smaller reporting company)~~	~~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 ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act ☒☐

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

As of ~~November 3, 2017,~~July 30, 2021, there were ~~34,010,015~~37,248,140 shares of common stock outstanding.

TPI COMPOSITES, INC. AND SUBSIDIARIES

INDEX


		Page

PART I. FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020	14

	Condensed Consolidated ~~Income~~ Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020	25

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020	36

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

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020	48

	Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (Unaudited)	510

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1621

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3231

ITEM 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	33

ITEM 1A.	Risk Factors	33

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3433

ITEM 3.	Defaults Upon Senior Securities	3433

ITEM 4.	Mine Safety Disclosures	3433

ITEM 5.	Other Information	3433

ITEM 6.	Exhibits	3534

SIGNATURES		3635

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities ~~laws.~~law. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:



the potential impact of the COVID-19 pandemic on our business and results of operations;



competition from other wind blade and wind blade turbine manufacturers;



our ability to procure adequate supplies of raw materials and components in a cost-effective manner to fulfill our volume commitments to our customers;



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



growth of the wind energy ~~market~~and electric vehicle markets and our addressable ~~market;~~

markets for our products and services;



the potential impact of ~~General Electric’s acquisition~~the increasing prevalence of ~~LM Wind Power upon~~auction-based tenders in the wind energy market and increased competition from solar energy on our ~~business;~~

gross margins and overall financial performance;



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



changes in domestic or international government or regulatory policy, including without limitation, changes in trade policy and a potential extension of the Production Tax Credit in the United States;



the sufficiency of our cash and cash equivalents to meet our liquidity needs;



our ability to attract and retain customers for our products, and to optimize product pricing;



~~competition from other wind blade and wind blade turbine manufacturers;~~

~~the discovery of defects in our products;~~

~~our ability to successfully expand in our existing markets and into new international markets;~~

~~worldwide economic conditions and their impact on customer demand;~~

our ability to effectively manage our growth strategy and future ~~expenses;~~

expenses, including our startup and transition costs;



our ability to successfully expand in our existing wind energy markets and into new international wind energy markets, including our ability to expand our field service inspection and repair services business and manufacture wind blades for offshore wind energy projects;



our ability to successfully open new manufacturing facilities, take over existing facilities of our customers and expand our existing facilities on time and on budget;



the impact of the accelerated pace of new product and wind blade model introductions on our business and our results of operations;



our ability to successfully expand our transportation business and execute upon our strategy of entering new markets outside of wind energy;



worldwide economic conditions and their impact on customer demand;



our ability to maintain, protect and enhance our intellectual property;



our ability to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products;



the attraction and retention of qualified employees and key personnel; ~~and~~



~~changes in domestic~~our ability to maintain good working relationships with our employees, and avoid labor disruptions, strikes and other disputes with labor unions that represent certain of our employees; and



the potential impact of one or ~~international government~~more of our customers becoming bankrupt or ~~regulatory policy, including without limitation, changes in tax policy.~~

insolvent, or experiencing other financial problems.

These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or

implied by these forward-looking statements. We have described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on ~~March 17, 2017 (the Annual Report on Form 10-K) and in subsequent periodic and current reports filed with the SEC~~February 25, 2021 the principal risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.

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

PART ~~I—FINANCI~~ALI. FINANCIAL INFORMATION

ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Condensed Consolidated Balance Sheets~~CONDENSED CONSOLIDATED BALANCE SHEETS

~~(In thousands, except par value data)~~(Unaudited)


	September 30,			December 31,			June 30,			December 31,
	2017			2016			2021			2020
	(Unaudited)						(in thousands, except par value data)
Assets
Current assets:
Cash and cash equivalents	$	139,065		$	119,066		$	123,107		$	129,857
Restricted cash		3,802			2,259			154			339
Accounts receivable (Note 3)		134,458			67,842
Accounts receivable								147,827			132,768
Contract assets								231,780			216,928
Prepaid expenses								21,019			29,507
Other current assets								20,520			27,921
Inventories		60,593			53,095			13,168			10,839
Inventories held for customer orders		69,788			52,308
Prepaid expenses and other current assets		29,776			30,657
Total current assets		437,482			325,227			557,575			548,159
Property, plant, and equipment, net		119,635			91,166
Property, plant and equipment, net								205,716			209,001
Operating lease right of use assets								148,991			158,827
Other noncurrent assets		19,244			20,813			28,232			40,270
Total assets	$	576,361		$	437,206		$	940,514		$	956,257
Liabilities and Shareholders’ Equity

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	160,858		$	112,281		$	310,320		$	295,992
Accrued warranty		28,150			19,912			47,462			50,852
Deferred revenue (Note 3)		87,294			69,568
Customer deposits and customer advances		10,409			1,390
Current maturities of long-term debt		44,498			33,403			56,137			32,551
Current operating lease liabilities								23,100			26,099
Contract liabilities								2,258			614
Total current liabilities		331,209			236,554			439,277			406,108
Long-term debt, net of debt issuance costs and current maturities		89,139			89,752
Long-term debt, net of current maturities								180,138			184,316
Noncurrent operating lease liabilities								152,059			155,925
Other noncurrent liabilities		4,245			4,393			8,143			8,873
Total liabilities		424,593			330,699			779,617			755,222
Commitments and contingencies (Note 10)
Shareholders’ equity: (Note 3)
Preferred shares, $0.01 par value, 5,500 shares authorized, no shares issued or outstanding at September 30, 2017 and December 31, 2016		—			—
Common shares, $0.01 par value, 100,000 shares authorized and 34,046 shares issued and 33,994 shares outstanding at September 30, 2017 and 100,000 shares authorized and 33,737 shares issued and outstanding at December 31, 2016		340			337
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common shares, $0.01 par value, 100,000 shares authorized, 37,248 shares issued and 37,040 shares outstanding at June 30, 2021 and 100,000 shares authorized, 36,771 shares issued and 36,564 shares outstanding at December 31, 2020								372			368
Paid-in capital		299,532			292,833			359,527			349,472
Accumulated other comprehensive loss		(1,054	)		(3,862	)		(41,559	)		(32,990	)
Accumulated deficit		(146,087	)		(182,801	)		(151,310	)		(109,716	)
Treasury stock, at cost, 52 shares at September 30, 2017		(963	)		—
Total shareholders’ equity		151,768			106,507
Total liabilities and shareholders’ equity	$	576,361		$	437,206
Treasury stock, at cost, 208 shares at June 30, 2021 and 207 shares at December 31, 2020								(6,133	)		(6,099	)
Total stockholders’ equity								160,897			201,035
Total liabilities and stockholders’ equity							$	940,514		$	956,257

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Condensed Consolidated Income Statements~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

~~(In thousands, except per share data)~~(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended						Six Months Ended
	2017			2016			2017			2016			June 30,						June 30,
	(Unaudited)												2021			2020			2021			2020
Net sales (Note 3)	$	243,354		$	198,938		$	683,142		$	569,303
													(in thousands, except per share data)
Net sales													$	458,841		$	373,817		$	863,521		$	730,453
Cost of sales		198,141			171,648			568,659			499,896			440,416			367,644			823,472			716,119
Startup and transition costs		12,352			5,088			29,051			11,449			10,099			10,920			24,453			22,954
Total cost of goods sold		210,493			176,736			597,710			511,345			450,515			378,564			847,925			739,073
Gross profit		32,861			22,202			85,432			57,958
Gross profit (loss)														8,326			(4,747	)		15,596			(8,620	)
General and administrative expenses		9,315			14,065			28,373			24,154			6,712			6,887			15,634			16,383
Income from operations		23,546			8,137			57,059			33,804
Loss on sale of assets and asset impairments														1,451			1,440			2,748			3,358
Restructuring charges, net														2,196			181			2,454			298
Loss from operations														(2,033	)		(13,255	)		(5,240	)		(28,659	)
Other income (expense):
Interest income		48			27			78			76
Interest expense		(3,254	)		(4,663	)		(9,215	)		(12,709	)
Realized gain (loss) on foreign currency remeasurement		39			(243	)		(2,575	)		(700	)
Miscellaneous income (expense)		390			(152	)		968			192
Interest expense, net														(2,691	)		(2,545	)		(5,395	)		(4,316	)
Foreign currency loss														(6,504	)		(1,928	)		(10,231	)		(968	)
Miscellaneous income														321			939			1,060			1,634
Total other expense		(2,777	)		(5,031	)		(10,744	)		(13,141	)		(8,874	)		(3,534	)		(14,566	)		(3,650	)
Income before income taxes		20,769			3,106			46,315			20,663
Loss before income taxes														(10,907	)		(16,789	)		(19,806	)		(32,309	)
Income tax provision		(371	)		(309	)		(8,514	)		(4,565	)		(28,890	)		(49,312	)		(21,788	)		(34,284	)
Net income		20,398			2,797			37,801			16,098
Net income attributable to preferred shareholders		—			596			—			5,471
Net income attributable to common shareholders	$	20,398		$	2,201		$	37,801		$	10,627
Net loss													$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)

Weighted-average common shares outstanding:
Basic		33,891			27,284			33,789			12,042			36,881			35,299			36,742			35,256
Diluted		35,015			27,375			34,748			12,133			36,881			35,299			36,742			35,256
Net income per common share:

Net loss per common share:
Basic	$	0.60		$	0.08		$	1.12		$	0.88		$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)
Diluted	$	0.58		$	0.08		$	1.09		$	0.88		$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Condensed Consolidated Statements of Comprehensive Income~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

~~(In thousands)~~(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Unaudited)

Net income

$
20,398

$
2,797

$
37,801

$
16,098

Other comprehensive income:

Foreign currency translation adjustments

1,231

(344
)

2,808

(1,169
)
Comprehensive income

$
21,629

$
2,453

$
40,609

$
14,929


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

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Condensed Consolidated Statements of Cash Flows~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

~~(In thousands)~~(Unaudited)

Nine Months Ended

September 30,

2017

2016

(Unaudited)

Cash flows from operating activities:

Net income

$
37,801

$
16,098

Adjustments to reconcile net income to net cash provided by
operating activities:

Depreciation and amortization

13,622

9,703

Share-based compensation expense

4,794

8,117

Amortization of debt issuance costs

430

1,273

Amortization of debt discount

—

3,018

Changes in assets and liabilities:

Accounts receivable

(66,438
)

(27,237
)
Inventories

(24,979
)

(6,592
)
Prepaid expenses and other current assets

881

4,922

Other noncurrent assets

3,067

(6,900
)
Accounts payable and accrued expenses

47,498

6,339

Accrued warranty

8,238

17,461

Customer deposits

9,019

4,870

Deferred revenue

17,726

(3,571
)
Other noncurrent liabilities

(136
)

475

Net cash provided by operating activities

51,523

27,976

Cash flows from investing activities:

Purchase of property and equipment

(35,312
)

(18,917
)
Net cash used in investing activities

(35,312
)

(18,917
)
Cash flows from financing activities:

Proceeds from issuance of common stock in initial public offering,
net of underwriters discount and offering costs

—

67,199

Repayments of term loan

(2,812
)

(617
)
Net proceeds from (repayments of) accounts receivable financing

8,196

(6,050
)
Net repayments of working capital loans

(4,638
)

(4,097
)
Net proceeds from (repayments of) other debt

4,556

(3,415
)
Proceeds from exercise of stock options

988

—

Repurchase of common stock including shares withheld in lieu of income taxes

(1,264
)

—

Restricted cash

(1,543
)

(649
)
Net cash provided by financing activities

3,483

52,371

Impact of foreign exchange rates on cash and cash equivalents

305

(545
)
Net change in cash and cash equivalents

19,999

60,885

Cash and cash equivalents, beginning of year

119,066

45,917

Cash and cash equivalents, end of period

$
139,065

$
106,802

Supplemental disclosures of cash flow information:

Cash paid for interest

$
8,717

$
9,505

Cash paid for income taxes, net

14,134

5,191

Supplemental disclosures of noncash investing and financing activities:

Conversion of subordinated convertible promissory notes into common stock

—

11,877

Equipment acquired through capital lease and financing obligations

4,749

1,464

Accrued capital expenditures in accounts payable

3,689

3,610


	Six Months Ended June 30, 2021
							Accumulated
	Common				Paid-in		other comprehensive			Accumulated			Treasury stock,			Total stockholders'
	Shares		Amount		capital		loss			deficit			at cost			equity
	(in thousands)
Balance at December 31, 2020		36,771	$	368	$	349,472	$	(32,990	)	$	(109,716	)	$	(6,099	)	$	201,035
Net loss		—		—		—		—			(1,797	)		—			(1,797	)
Share-based compensation expense		—		—		2,494		—			—			—			2,494
Issuances under share-based compensation plan		149		1		1,235		—			—			—			1,236
Common stock repurchased for treasury		—		—		—		—			—			(34	)		(34	)
Other comprehensive loss		—		—		—		(8,326	)		—			—			(8,326	)
Balance at March 31, 2021		36,920		369		353,201		(41,316	)		(111,513	)		(6,133	)		194,608
Net loss		—		—		—		—			(39,797	)		—			(39,797	)
Share-based compensation expense		—		—		2,836		—			—			—		��	2,836
Issuances under share-based compensation plan		328		3		3,490		—			—			—			3,493
Other comprehensive loss		—		—		—		(243	)		—			—			(243	)
Balance at June 30, 2021		37,248	$	372	$	359,527	$	(41,559	)	$	(151,310	)	$	(6,133	)	$	160,897


	Six Months Ended June 30, 2020
							Accumulated
	Common				Paid-in		other comprehensive			Accumulated			Treasury stock,			Total stockholders'
	Shares		Amount		capital		loss			deficit			at cost			equity
	(in thousands)
Balance at December 31, 2019		35,326	$	353	$	322,906	$	(23,612	)	$	(90,689	)	$	(3,908	)	$	205,050
Net loss		—		—		—		—			(492	)		—			(492	)
Share-based compensation expense		—		—		2,970		—			—			—			2,970
Issuances under share-based compensation plan		109		1		861		—			—			—			862
Common stock repurchased for treasury		—		—		—		—			—			(459	)		(459	)
Other comprehensive loss		—		—		—		(16,893	)		—			—			(16,893	)
Balance at March 31, 2020		35,435		354		326,737		(40,505	)		(91,181	)		(4,367	)		191,038
Net loss		—		—		—		—			(66,101	)		—			(66,101	)
Share-based compensation expense		—		—		2,186		—			—			—			2,186
Issuances under share-based compensation plan		81		1		510		—			—			—			511
Common stock repurchased for treasury		—		—		—		—			—			(49	)		(49	)
Other comprehensive income		—		—		—		1,260			—			—			1,260
Balance at June 30, 2020		35,516	$	355	$	329,433	$	(39,245	)	$	(157,282	)	$	(4,416	)	$	128,845

See accompanying notes to unaudited condensed consolidated financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended
	June 30,
	2021			2020
	(in thousands)
Cash flows from operating activities:
Net loss	$	(41,594	)	$	(66,593	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		24,110			22,644
Loss on sale of assets and asset impairments		2,748			3,358
Restructuring charges, net		2,454			298
Share-based compensation expense		5,324			5,316
Amortization of debt issuance costs		228			122
Deferred income taxes		13,221			28,134
Changes in assets and liabilities:
Accounts receivable		(19,465	)		44,864
Contract assets and liabilities		(16,007	)		(53,089	)
Operating lease right of use assets and operating lease liabilities		2,971			5,749
Inventories		(2,488	)		(5,899	)
Prepaid expenses		8,232			(6,272	)
Other current assets		7,151			3,396
Other noncurrent assets		(1,767	)		(957	)
Accounts payable and accrued expenses		15,747			(19,117	)
Accrued warranty		(3,390	)		9,133
Other noncurrent liabilities		(730	)		1,908
Net cash used in operating activities		(3,255	)		(27,005	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(27,059	)		(42,030	)
Net cash used in investing activities		(27,059	)		(42,030	)
Cash flows from financing activities:
Proceeds from revolving and term loans		2,106			80,000
Net repayments of accounts receivable financing		—			(3,829	)
Proceeds from working capital loans		6,383			—
Principal repayments of finance leases		(2,803	)		(2,837	)
Net proceeds from other debt		13,362			23,788
Debt issuance costs		—			(730	)
Proceeds from exercise of stock options		4,688			1,371
Repurchase of common stock including shares withheld in lieu of income taxes		(34	)		(508	)
Net cash provided by financing activities		23,702			97,255
Impact of foreign exchange rates on cash, cash equivalents and restricted cash		(323	)		(2,525	)
Net change in cash, cash equivalents and restricted cash		(6,935	)		25,695
Cash, cash equivalents and restricted cash, beginning of year		130,196			71,749
Cash, cash equivalents and restricted cash, end of period	$	123,261		$	97,444

See accompanying notes to ~~Unaudited Condensed Consolidated Financial Statements~~

~~Note 1. Summary of Operations and Significant Accounting Policies~~

~~Description of Business~~

TPI Composites, Inc. is the holding company that conducts substantially all of its business operations through its direct and indirect subsidiaries (collectively, the Company). The Company was founded in 1968 and has been producing composite wind blades since 2001. The Company’s knowledge and experience of composite materials and manufacturing originates with its predecessor company, Tillotson Pearson Inc., a leading manufacturer of high-performance sail and powerboats along with a wide range of composite structures used in other industrial applications. Following the separation from the boat building business in 2004, the Company reorganized in Delaware as LCSI Holding, Inc. and then changed its corporate name to TPI Composites, Inc. in 2008. Today, the Company is headquartered in Scottsdale, Arizona and has expanded its global footprint to include domestic facilities in Newton, Iowa; Fall River, Massachusetts; Warren, Rhode Island and Santa Teresa, New Mexico and international facilities in Dafeng, China; Taicang Port, China; Taicang City, China; Juárez, Mexico and Izmir, Turkey. In April 2017, the Company entered into a new lease agreement with a third party for a new manufacturing facility in Matamoros, Mexico, and the Company expects to commence operations at this facility in the second half of 2018.

~~Initial Public Offering and Stock Split~~

In July 2016, the Company completed an initial public offering (IPO) of 7,187,500 shares of the Company’s common stock at a price of $11.00 per share, which included 937,500 shares issued pursuant to the underwriters’ over-allotment option. Certain of the Company’s existing shareholders, a director and executive officers purchased an aggregate of 1,250,000 shares of common stock in the IPO included in the total issuance above. The net proceeds from the IPO were $67.2 million after deducting underwriting discounts and offering expenses. Immediately prior to the closing of the IPO, all shares of the then-outstanding redeemable preferred shares converted into an aggregate of 21,110,204 shares of common stock and the redeemable preferred share warrants converted on a net issuance basis into 120,923 shares of common stock. In addition, concurrent with the closing of the IPO, certain subordinated convertible promissory notes in the aggregate principal and interest amount of $11.9 million were converted into 1,079,749 shares of common stock at the public offering price of $11.00 per share.

Prior to the IPO, in July 2016 the Company amended its amended and restated certificate of incorporation to effect a 360-for-1 forward stock split of its common stock. As a result of the stock split, the Company has adjusted the share amounts authorized and issuable under the share-based compensation plans. All share and per share common stock information (including the share-based compensation plans) referenced throughout the unaudited condensed consolidated financial ~~statements and notes thereto have been retroactively adjusted to reflect this stock split. The stock split did not cause an adjustment to the par value of the authorized shares of common stock.~~statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(Unaudited)


	Six Months Ended
	June 30,
	2021		2020
	(in thousands)
Supplemental cash flow information:
Cash paid for interest	$	5,255	$	3,976
Cash paid for income taxes, net of refunds		14,866		7,393
Noncash investing and financing activities:
Right of use assets obtained in exchange for new operating lease liabilities		5,384		54,326
Property, plant, and equipment obtained in exchange for new finance lease liabilities		136		0
Accrued capital expenditures in accounts payable		3,682		7,970


Reconciliation of Cash, Cash Equivalents and Restricted Cash:	June 30,		December 31,		June 30,		December 31,
	2021		2020		2020		2019
	(in thousands)
Cash and cash equivalents	$	123,107	$	129,857	$	96,657	$	70,282
Restricted cash		154		339		312		992
Restricted cash included within other noncurrent assets		0		0		475		475
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	123,261	$	130,196	$	97,444	$	71,749

See accompanying notes to ~~Unaudited Condensed Consolidated Financial Statements~~

~~Secondary Public Offering~~

In May 2017, the Company completed a secondary public offering of 5,075,000 shares of its common stock at a price of $16.35 per share, which included 575,000 shares issued pursuant to the underwriters’ option to purchase additional shares. All of the shares were sold by existing shareholders and certain executive officers of the Company. The selling shareholders received all of the net proceeds of $78.8 million from the secondary public offering. The Company did not sell any shares and did not receive any of the proceeds from the offering and the costs paid by the Company in connection with the offering of $0.8 million were recorded in general and administrative costs in the accompanyingunaudited condensed consolidated ~~income statement.~~ financial statements.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

~~The Company divides its business operations into four geographic operating segments—the United States, Asia, Mexico and Europe, the Middle East and Africa (EMEA) as follows:~~

The U.S. segment includes (1) the manufacturing of wind blades at the Newton, Iowa plant, (2) the manufacturing of precision molding and assembly systems used for the manufacture of wind blades in the Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the transportation industry, which the Company also conducts in its Rhode Island and Massachusetts facilities and (4) its corporate headquarters, the costs of which are included in general and administrative expenses.

The Asia segment includes (1) the manufacturing of wind blades at a facility in Taicang Port, China and at its two facilities in Dafeng, China, (2) the manufacturing of precision molding and assembly systems in the Taicang City, China facility, (3) the manufacture of components in a second Taicang Port, China facility and (4) wind blade inspection and repair services.

The Mexico segment manufactures wind blades from three facilities in Juárez, Mexico, one of which commenced operations in 2014, the second during the third quarter of 2016 and the third in January 2017. In April 2017, the Company entered into a new lease agreement with a third party for a new manufacturing facility in Matamoros, Mexico and the Company expects to commence operations at this facility in the second half of 2018.

The EMEA segment manufactures wind blades from two facilities in Izmir, Turkey. The Company entered into a joint venture in 2012 to produce wind blades at the first Turkey plant and in 2013 became the sole owner of the Turkey operation with the acquisition of the remaining 25% interest. The EMEA segment commenced operations in the second facility during the third quarter of 2016.

The accompanying consolidated financial statements include the accounts of TPI Composites, Inc. and all majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

The condensed consolidated financial statements included herein have been prepared by ~~the Company~~us without audit, pursuant to the rules and regulations of the SEC and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2016~~2020 included in ~~the Company’s~~our Annual Report on Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted, as permitted by the SEC, although ~~the Company believes~~we believe the disclosures that are made are adequate to make the information presented herein not misleading. The accompanying condensed consolidated financial statements reflect, in the opinion of our management, all normal recurring adjustments necessary to present fairly ~~the Company’s~~our financial position at ~~September~~June 30, ~~2017,~~2021, and the results of ~~the Company’s~~our operations, comprehensive income (loss) and cash flows for the periods presented. ~~The Company derived the December 31, 2016 condensed consolidated balance sheet data from audited financial statements, but does not include all disclosures required by GAAP.~~ Interim results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are not necessarily indicative of the results to be expected for the full years.

~~Warranty Expense~~

~~The Company provides a limited warranty for its mold~~ Certain prior period amounts in the condensed consolidated financial statements and ~~wind blade products, including parts and labor, with terms and conditions that vary depending on the product sold, for periods that range from two~~accompanying notes have been reclassified to five years. Warranty expense is recorded based upon estimates of future repairs using a probability-based methodology. Once the warranty period has expired, any remaining unused warranty accrual for the specific products is reversed againstconform to the current ~~year warranty expense amount.~~period’s presentation.

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Warranty accrual at September 30 consisted of the following (in thousands):~~

2017

Warranty accrual at beginning of year

$
19,912

Accrual during the period

10,696

Cost of warranty services provided during the period

(372
)
Reversal of reserves upon warranty expiration

(2,086
)
Warranty accrual at end of period

$
28,150

~~Treasury Stock~~

~~Common stock purchased for treasury is recorded at historical cost. Transactions in treasury shares are primarily related to share-based compensation plans and are recorded at weighted-average cost.~~

~~Net Income Attributable to Preferred Shareholders~~

Net income attributable to preferred shareholders related to the accrual of dividends on previously outstanding convertible and senior redeemable preferred shares, the accretion to redemption amounts on the convertible preferred shares and warrant fair value adjustment. Immediately prior to the closing of the Company’s IPO, all preferred shares were converted into shares of the Company’s common stock and as a result, the accrual of dividends ceased.

~~Net Income Per Share Calculation~~

The basic net income per common share is computed by dividing the net income by the weighted-average number of common shares outstanding during a period. Diluted net income per common share is computed by dividing the net income by the weighted-average number of common shares outstanding plus potentially dilutive securities. The table below reflects the calculation of the weighted-average number of common shares outstanding used in computing basic and diluted earnings per common share (in thousands):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Basic weighted-average shares outstanding

33,891

27,284

33,789

12,042

Effect of dilutive stock options and warrants

1,124

91

959

91

Diluted weighted-average shares outstanding

35,015

27,375

34,748

12,133

The Company did not have any potentially dilutive securities outstanding that are not included in the diluted net income per share calculation for the three and nine months ended September 30, 2017 and 2016.

~~Use of Estimates~~

The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying condensed consolidated financial statements include the accounts of TPI ~~COMPOSITES, INC. AND SUBSIDIARIES~~Composites, Inc. and all of our majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

~~Notes~~References to ~~Unaudited Condensed Consolidated Financial Statements~~TPI Composites, Inc, the “Company,” “we,” “us” or “our” in these notes refer to TPI Composites, Inc. and its consolidated subsidiaries.

~~Recently Issued~~ Accounting Pronouncements

Recently Adopted Accounting Pronouncements ~~Adopted in 2017~~

Convertible Instruments

In ~~March 2016,~~August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-09,~~ ~~Compensation – Stock Compensation: Improvement~~2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU is intended to ~~Employee Share-Based Payment Accounting, to~~ simplify ~~certain aspects of~~ the accounting for ~~share-based payment transactions to employees. The new standard requires excess tax benefits~~certain convertible instruments with characteristics of both liability and ~~tax deficiencies to~~equity. This ASU removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be ~~recorded in the consolidated income statements~~wholly accounted for as ~~a component~~debt. This ASU also expands disclosure requirements for convertible instruments and simplifies areas of the ~~provision~~guidance for ~~income taxes when stock awards vest~~diluted earnings-per-share calculations by requiring the use of the if-converted method.

This ASU is effective for all public business entities (other than smaller reporting companies) for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or options are exercised. In addition, it eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the consolidated statements of cash flows. Further, the standard provides an accounting policy election to account for forfeitures as they occur, allows the Company to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on the Company’s consolidated statements of cash flows.

~~The Company adopted ASU 2016-09 in the first quarter of 2017 using the~~ modified retrospective ~~transition method through a cumulative effect adjustment to equity as~~basis. An entity should adopt the guidance at the beginning of its annual fiscal year. We adopted this standard on January 1, ~~2017. Upon adoption, the Company elected to eliminate application of~~2021 on a ~~forfeiture assumption to share based compensation expense~~modified retrospective basis and account for forfeitures as they occur over the vesting period. The cumulative effect of this change increased additional paid-in capital and decreased retained earnings as of January 1, 2017 by $1.1 million. The Company it did not have ~~any previously unrecognized excess tax effects that had not been recorded as~~ a ~~reduction to the tax liability.~~

The Company did not recognize any excess tax benefits from the vesting of restricted stock units and stock options which were later exercised during the three and nine months ended September 30, 2017 due to the valuation allowance recorded against the U.S. federal and state deferred tax assets. The provisions of the standard relating to the cash flow presentation and income taxes are included in the accompanying statements of cash flows and income statements for applicable periods presented in the accompanyingmaterial effect on our condensed consolidated financial statements. If or when the valuation allowance recorded against the U.S. federal and state deferred tax assets is released, the inclusion of excess tax benefits and deficiencies as a component of the Company’s income tax expense in future periods will increase volatility within the provision for income taxes as the amount of excess tax benefits or deficiencies from share-based compensation awards are dependent on the Company’s stock price at the date the restricted awards vest, the stock price on the date an option is exercised and the quantity of options exercised.

~~Revenue from Contracts with Customers~~Recently Issued Accounting Pronouncements

Reference Rate Reform

In ~~May 2014,~~March 2020, the FASB issued ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~,2020-04, Reference Rate Reform (Topic ~~606)~~848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides ~~new recognition~~optional expedients and ~~disclosure requirements~~exceptions for ~~revenue from~~applying GAAP to contracts, ~~with customers~~hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU only applies to contracts, hedging relationships, and other transactions that ~~supersedes~~reference the ~~existing revenue recognition guidance. The new recognition requirements focus on when the customer obtains control of the goods~~London Interbank Offered Rate (LIBOR) or services, rather than the current risks and rewards model of recognition. The core principle of the new standard is that an entity will recognize revenue when it transfers goods or services to its customers in an amount that reflects the consideration an entity expectsanother reference rate expected to be ~~entitled to for those goods or services. The new disclosure requirements will include information intended to communicate the nature, amount, timing and any uncertainty~~discontinued because of revenue and cash flows from the applicable contracts, including any significant judgments and changes in judgments and assets recognized from the costs to obtain or fulfill a contract. Entities will generally be required to make more estimates and use more judgment under the new standard.

~~The new requirements are~~reference rate reform. This ASU is effective for all entities beginning on March 12, 2020 and entities may elect to apply the ~~Company beginning January 1, 2018, and may be implemented either retrospectively for all periods presented, or as a cumulative-effect adjustment as of the date of adoption.~~

~~The Company will adopt Topic 606 as of January 1, 2018 with retrospective application to January 1, 2015~~ASU prospectively through December 31, 2017. Based on the Company’s evaluation of the new standard, revenue recognition in accordance with Topic 606 differs from the current guidance provided by GAAP as outlined in the SEC’s Staff Accounting Bulletin 104, which requires the Company to defer recognition of revenue until the risk of loss has passed to the customer and delivery has been made or a fixed delivery schedule has been provided by the customer. Since the Company’s products have no alternative use to the Company due to contractual restrictions placed by each customer on the technical specifications and design of the products, the Company’s assessment is that revenue upon adoption of Topic 606 will be recognized over time during the course of the production process and before the product is delivered to the customer.2022. The FASB later issued ASU 2021-01, Reference Rate

810

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 2. Revenue From Contracts with Customers

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

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


	Three Months Ended June 30, 2021
	U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)
Wind blade sales	$	39,427	$	82,491	$	131,188	$	103,201	$	62,397	$	418,704
Precision molding and assembly systems sales		0		7,634		5,969		0		0		13,603
Transportation sales		12,227		0		2,688		0		0		14,915
Other sales		5,107		981		3,325		2,149		57		11,619
Total net sales	$	56,761	$	91,106	$	143,170	$	105,350	$	62,454	$	458,841


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


	Six Months Ended June 30, 2021
	U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)
Wind blade sales	$	79,054	$	154,994	$	239,630	$	214,228	$	109,977	$	797,883
Precision molding and assembly systems sales		0		11,598		10,932		0		0		22,530
Transportation sales		18,651		0		4,395		0		0		23,046
Other sales		8,342		1,442		6,672		3,488		118		20,062
Total net sales	$	106,047	$	168,034	$	261,629	$	217,716	$	110,095	$	863,521


	Six Months Ended June 30, 2020
	U.S.		Asia		Mexico		EMEA		India		Total
	(in thousands)
Wind blade sales	$	62,242	$	227,416	$	193,379	$	175,643	$	25,720	$	684,400
Precision molding and assembly systems sales		0		8,637		5,020		0		0		13,657
Transportation sales		21,218		0		573		0		0		21,791
Other sales		6,050		1,002		2,698		855		0		10,605
Total net sales	$	89,510	$	237,055	$	201,670	$	176,498	$	25,720	$	730,453

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

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract Assets and Liabilities

Contract assets consist of ~~Topic 606 will have a material impact on~~ the amount of net sales, cost of goods sold and income from operations reported in the consolidated income statements in future periods. In accordance with Topic 606, revenues will be recognized over the time period of the production process, whereas currently it is recognized upon delivery to the customer. Further, since revenue ~~will be~~ recognized over time for ~~manufacturing contracts, future net sales will include amounts related to products that are~~performance obligations in production aswhere control has transferred to the customer but the contract does not yet allow for the customer to be billed. Typically, customers are billed when the product finishes production and meets the technical specifications contained in the contract. The majority of the ~~period end. Finally, the gross margin realized~~contract asset balance relates to materials procured based on customer specifications. The contract assets are recorded as current assets in the ~~period may be impacted by the changes related to the timing and amount~~condensed consolidated balance sheets. Contract liabilities consist of advance payments in excess of revenue ~~recognized for products~~earned. These amounts primarily represent progress payments received as precision molding and assembly systems are being manufactured. The contract liabilities are recorded as current liabilities in the ~~production process.~~condensed consolidated balance sheets and are reduced as we record revenue over time.

Although Topic 606 does not have a cash impact nor an effect on the economics of the Company's underlying customer contracts, applying Topic 606 to contracts in startup and transition will likely result in higher reported earnings in 2018 than under the previous guidance as revenue is shifted to the initial years of startup and transition activities of a contract. Topic 606 will not change the total amount of revenue recognized under the Company’s long-term supply contracts, only accelerate the timing of when the revenue is recognized. The Company expects a corresponding acceleration in timing of cost of goods sold recognition for these contracts upon adoption of Topic 606.

~~The changes noted above involving the timing of revenue recognition will materially impact the amount of reported~~These contract assets and liabilities are reported on the condensed consolidated balance ~~sheet associated with~~sheets net on a contract-by-contract basis at the ~~Company’s manufacturing contracts. Upon adoption~~end of ~~Topic 606,~~each reporting period.

Contract assets and contract liabilities consisted of the ~~Company will include amounts recognized~~following:


	June 30,			December 31,
	2021			2020			$ Change
	(in thousands)
Gross contract assets	$	234,045		$	223,428		$	10,617
Less: reclassification from contract liabilities		(2,265	)		(6,500	)		4,235
Contract assets	$	231,780		$	216,928		$	14,852


	June 30,			December 31,
	2021			2020			$ Change
	(in thousands)
Gross contract liabilities	$	4,523		$	7,114		$	(2,591	)
Less: reclassification to contract assets		(2,265	)		(6,500	)		4,235
Contract liabilities	$	2,258		$	614		$	1,644

Contract assets increased by $14.9 million from December 31, 2020 to June 30, 2021 due to an increase in ~~revenue for products in~~customer specific material purchases and incremental unbilled production as contract assets on the consolidated balance sheet, which differs from the current practice of including the balances in inventory, and will include an amount for the margin recognized to date. The Company will no longer report inventory held for customer orders since revenue will be recognized over time during the ~~course of the production process and before the product is delivered~~six months ended June 30, 2021. Contracts liabilities increased by $1.6 million from December 31, 2020 to ~~the customer. Work performed as production takes place will lead~~June 30, 2021 primarily due to ~~revenue recognition and be included in the consolidated balance sheet under contract assets until billed. The Company expects that contract liabilities will be reported for~~ amounts ~~collected from customers~~billed to a customer in advance of the production of ~~products. The Company also expects that~~precision molding and assembly systems during the ~~amount~~six months ended June 30, 2021.

For the three and six months ended June 30, 2021, we recognized $0.1 million and $0.1 million, respectively, of ~~deferred~~ revenue ~~will be substantially reduced as revenue for products will be recognized over time.~~

~~The Company does not anticipate a change~~related to precision molding and assembly systems and wind blades, which was included in the timing of cash receipts and payments from customers as customers will continue to be invoiced as products are completed. In addition, the Company does not expect changes to the aggregate amount of cash flows from operating activities in the consolidated statements of cash flows; however, the impact of changes in the captions on the consolidatedcorresponding contract liability balance ~~sheet will have a material effect on the captions within cash flows from operating activities in the consolidated statements of cash flows.~~

The Company has a project plan in place for the transition to revenue recognition in accordance with Topic 606 including necessary changes to accounting processes and procedures, the chart of accounts, the system of internal control and retrospective application of the standard to periods beginning January 1, 2015 through December 31, 2017. The Company expects to complete the plan in time to report in accordance with Topic 606 for the first quarterly filing on Form 10-Q for the period ended March 31, 2018.

~~Cash Flow Presentation~~

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments, that clarifies how certain cash receipts and cash payments are presented and classified in the consolidated statement of cash flows. In addition, in November 2016, the FASB issued ASU 2016-18,~~ ~~Restricted Cash~~, that requires restricted cash and cash equivalents to be included with the amount of cash and cash equivalents that are reconciled to on the consolidated statement of cash flows. These ASUs are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The Company does not believe that the adoption of ASU 2016-15 and 2016-18 on January 1, 2018 will have a material effect on the Company’s financial position or results of operations.

~~Leases~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 is a comprehensive new recognition model for leases requiring a lessee to recognize the asset and liability that arise from leases. For public companies, the amendment is effective for financial statements issued for annual periods beginning after December 16, 2018. Entities may elect to early adopt the lease standard in 2016. In adopting ASU 2016-02, entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. Management is evaluatingperiod.

Performance Obligations

Remaining performance obligations represent the ~~provisions of ASU 2016-02 and~~transaction price for which work has not ~~yet selected a transition method nor~~been performed and excludes any unexercised contract options. The transaction price includes estimated variable consideration as determined ~~what impact the adoption of ASU 2016-02 will have~~based on the ~~Company’s financial position or results~~estimated production output within the range of ~~operations.~~the contractual guaranteed minimum volume obligations and production capacity.

9As of June 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $3.2 billion. We estimate that we will recognize the remaining performance obligations as revenue as follows:


	$		% of Total
	(in thousands)
Year Ending December 31,
Remainder of 2021	$	874,559		27.3	%
2022		1,492,816		46.7
2023		712,885		22.3
2024		118,962		3.7
Total remaining performance obligations	$	3,199,222		100.0	%

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 2.3. Significant Risks and Uncertainties

~~The Company’s~~Our revenues and receivables are earned from a small number of customers. As such, ~~the Company’s~~our production levels are dependent on these customers’ orders. See ~~note 11,~~ Note 13, Concentration of ~~Customers.~~Customers.

~~The Company maintains its~~We may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. In addition, our global supply chain may in the future be adversely affected if the COVID-19 pandemic persists.

In 2021, there have been both significant price increases and supply constraints with respect to resin and carbon fiber, which are key raw materials that we use to manufacture our products, as well as increases in logistics costs to obtain raw materials. We expect that the price of resin and carbon fiber will remain at elevated levels for the remainder of 2021. Approximately 55% of the resin and resin systems we use are purchased under contracts either controlled or borne by 2 of our customers and therefore these customers receive/bear 100% of any increase in resin prices. With respect to our other customer supply agreements, our customers typically bear 70% of any raw material price increases. If the supply of resin feedstocks and carbon fiber continue to be constrained for an extended period of time, such shortages could impact our ability to meet our customers’ forecasted demand for our products for the remainder of 2021 and have a further material adverse impact on our results of operations.

We maintain our U.S. cash in bank deposit and money market accounts that, at times, exceed U.S. federally insured limits. U.S. bank accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) in an amount up to ~~$250,000~~$250,000 during ~~2017~~2021 and ~~2016.~~2020. U.S. money market accounts are not guaranteed by the FDIC. At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016, the Company~~2020, we had ~~$105.6~~$55.2 million and ~~$103.4~~$68.9 million, respectively, of cash in bank deposit and money market accounts in high quality U.S. banks, which was in excess of FDIC limits. ~~The Company has~~We have not experienced losses in any such accounts.

~~The Company~~We also ~~maintains~~maintain cash in bank deposit accounts outside the U.S. with no ~~deposit~~ insurance. ~~This includes $31.5~~At June 30, 2021, this included $58.7 million in China, ~~$1.2~~$5.1 million in Turkey, ~~and $0.8~~$2.3 million in Mexico, as$1.5 million in India and $0.3 million in other countries. As of ~~September 30, 2017. The Company has~~December 31, 2020, this included $47.4 million in China, $6.0 million in Turkey, $5.0 million in India, $2.1 million in Mexico and $0.5 million in other countries. We have not experienced losses in these accounts. In addition, at June 30, 2021 and December 31, 2020, we had short-term deposits in interest bearing accounts in China of $0.2 million and $0.3 million, respectively, which are reported as restricted cash in our condensed consolidated balance sheets.

Certain of our debt agreements are either tied to LIBOR or the ~~past.~~

~~Note 3. Related-Party Transactions~~

~~Related party transactions include transactions between the Company~~Euro Interbank Offered Rate (EURIBOR) and certain of its affiliates. The following transactions were in the normal course of operations and were measured at the exchange amount, which is the amount of consideration established and agreed to by the parties.

~~The Company has entered into several agreements with subsidiaries of General Electric Company and its consolidated affiliates (GE) relating~~them have associated interest rate hedges. Due to the ~~operation of its business. As a result of these agreements, GE has been a debtor, creditor~~relatively low LIBOR and holder of both preferred and common shares. During the second quarter of 2017, GE reduced its holdings of the Company’s common shares to less than five percent of the total shares outstanding and then completely divested of the Company’s common shares during the current quarter.

~~The Company has entered into five separate supply agreements with GE to manufacture wind blades~~EURIBOR rates in Newton, Iowa; Taicang Port, China; Juárez, Mexico (2) and Izmir, Turkey. The supply agreements in Taicang Port, China and Izmir, Turkey expire December 31, 2017 and GE has decided not to renew or extend these two contracts. As a result of the supply agreements, GE is the Company’s largest customer. For the six months ended June 30, 2017, the Company recorded related-party sales with GE of $187.3 million. As disclosed at note 11, ~~Concentration of Customers, for the three and nine months ended September 30, 2016, the Company recorded related-party sales with GE of $98.1 million and $292.4 million, respectively. As~~effect as of June 30, ~~2017 and December 31, 2016,~~2021, a 10% change in the ~~Company~~LIBOR or EURIBOR rate would not have had ~~accounts receivables related to sales to GE of $26.7 million and $16.6 million, respectively.~~a material impact on our future earnings, fair values or cash flows.

~~In January 2016,~~Note 4. Accrued Warranty

The warranty accrual activity for the ~~Company entered into an agreement with GE and received an advance of $2.0 million, which the Company repaid in full in August 2016.~~

~~Certain~~periods noted consisted of the Company’s existing stockholders, consisting of entities associated with Element Partners, Angeleno Group and Landmark Partners, each of which is an affiliate of a member of the board of directors, as well as certain executive officers and a director, purchased an aggregate of 1,250,000 shares of common stock in the IPO. In addition, all outstanding obligations and accrued interest under the Company’s subordinated convertible promissory notes held by certain existing stockholders, including Element Partners, Angeleno Group and Landmark Partners, were converted into an aggregate of 1,079,749 shares of common stock concurrent with the closing of the IPO at the public offering price of $11.00 per share. following:

In connection with the Company’s secondary offering, certain entities associated with Element Partners, Angeleno Group, Landmark Partners and NGP Energy Technology Partners, L.P, as well as certain executive officers of the Company sold an aggregate of 5,075,000 shares of common stock at the public offering price of $16.35 per share.


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

1013

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes to Unaudited Condensed Consolidated Financial Statements~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note 4. Accounts Receivable~~

~~Accounts receivable consisted of the following (in thousands):~~

September 30,

December 31,

2017

2016

Trade accounts receivable

$
130,578

$
66,612

Other accounts receivable

3,880

1,230

Total accounts receivable

$
134,458

$
67,842

Note 5. ~~Inventories~~

~~Inventories consisted of the following (in thousands):~~

September 30,

December 31,

2017

2016

Raw materials

$
30,260

$
29,278

Work in process

27,122

21,169

Finished goods

3,211

2,648

Total inventories

$
60,593

$
53,095

~~Note 6. Property, Plant and Equipment, Net~~

~~Property, plant and equipment, net consisted of the following (in thousands):~~

September 30,

December 31,

2017

2016

Machinery and equipment

$
92,938

$
70,481

Buildings

14,603

13,449

Leasehold improvements

21,518

16,818

Office equipment and software

11,061

6,403

Furniture

20,235

15,883

Vehicles

341

342

Construction in progress

16,472

11,592

Total

177,168

134,968

Accumulated depreciation

(57,533
)

(43,802
)
Property, plant and equipment, net

$
119,635

$
91,166

Total depreciation expense for the three months ended September 30, 2017 and 2016 was $5.1 million and $3.5 million, respectively, and for the nine months ended September 30, 2017 and 2016 was $13.5 million and $9.7 million, respectively.

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~Note 7.~~ Long-Term Debt, Net of ~~Debt Issuance Costs and~~ Current Maturities

Long-term debt, net of ~~debt issuance costs and~~ current maturities, consisted of the ~~following (in thousands):~~following:


	June 30,			December 31,
	2021			2020
	(in thousands)
Senior revolving loan—U.S.	$	171,154		$	171,154
Unsecured financing—EMEA		45,913			30,040
Equipment financing—EMEA		2,101			4,335
Secured and unsecured working capital—India		6,383			0
Unsecured term loan—India		2,106			0
Equipment finance lease—Mexico		6,261			8,038
Equipment finance lease—EMEA		3,012			4,119
Other equipment finance leases		168			232
Total debt—principal		237,098			217,918
Less: Debt issuance costs		(823	)		(1,051	)
Total debt, net of debt issuance costs		236,275			216,867
Less: Current maturities of long-term debt		(56,137	)		(32,551	)
Long-term debt, net of debt issuance costs and current maturities	$	180,138		$	184,316

September 30,

December 31,

2017

2016

Senior term loan—U.S.

$
72,188

$
75,000

Senior revolving loan—U.S.

2,820

2,820

Accounts receivable financing—EMEA

23,316

15,120

Unsecured financing—EMEA

—

4,638

Equipment financing—EMEA

17,704

15,813

Equipment capital lease—Mexico

14,731

8,037

Equipment capital lease—U.S.

867

2,016

Equipment capital lease—EMEA

3,810

1,898

Equipment loan—Mexico

61

103

Total long-term debt

135,497

125,445

Less: Debt issuance costs

(1,860
)

(2,290
)
Total long-term debt, net of debt issuance costs

133,637

123,155

Less: Current maturities of long-term debt

(44,498
)

(33,403
)
Long-term debt, net of debt issuance costs and
current maturities

$
89,139

$
89,752

Note 8.6. Share-Based Compensation Plans

~~The Company has granted restricted stock unit (RSU) and stock option awards~~During the six months ended June 30, 2021, we issued to certain employees and non-employee directors ~~under the Amended and Restated 2015 Stock Option and Incentive Plan (the 2015 Plan). Each award granted prior to the consummation~~an aggregate of ~~the IPO included a performance condition~~168,993 timed-based restricted stock units (RSUs), 58,396 performance-based restricted stock units (PSUs) that ~~required the completion of an initial public offering by the Company and a required vesting period of one to four years, commencing~~vest upon achievement of ~~the performance condition. As the IPO was consummated in July 2016, the Company began recording compensation expense in the third quarter~~a cumulative, three-year Adjusted EBITDA target measured from January 1, 2021 through December 31, 2023, and 79,784 PSUs that vest upon achievement of ~~2016~~certain stock price hurdles for the ~~requisite service~~ period ~~from~~of the grant date through ~~the IPO date, with the balance~~December 31, 2023. All of the time-based RSUs vest on the third anniversary date of the grant date. Each of the time-based and performance-based awards are subject to the recipient’s continued service with us, the terms and conditions of our stock option and incentive plan and the applicable award agreement.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands)
Cost of goods sold	$	1,129	$	465	$	1,332	$	636
General and administrative expenses		1,796		1,909		3,992		4,680
Total share-based compensation expense	$	2,925	$	2,374	$	5,324	$	5,316

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands)
RSUs	$	1,772	$	1,181	$	3,027	$	2,137
Stock options		573		599		1,191		2,252
PSUs		580		594		1,106		927
Total share-based compensation expense	$	2,925	$	2,374	$	5,324	$	5,316

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7. Leases

We have operating and finance leases for our manufacturing facilities, warehouses, offices, automobiles and certain of our machinery and equipment. Our leases have remaining lease terms of between one and 15 years, some of which may include options to ~~be expensed~~extend the leases up to five years.

The components of lease cost were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
	(in thousands)
Total operating lease cost	$	9,645	$	9,148	$	19,361	$	17,719

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

Total lease assets and liabilities were as follows:


	June 30,			December 31,
	2021			2020
	(in thousands)
Operating Leases
Operating lease right of use assets	$	148,991		$	158,827

Current operating lease liabilities	$	23,100		$	26,099
Noncurrent operating lease liabilities		152,059			155,925
Total operating lease liabilities	$	175,159		$	182,024

Finance Leases
Property, plant and equipment, gross	$	27,069		$	28,462
Less: accumulated depreciation		(13,341	)		(12,461	)
Total property, plant and equipment, net	$	13,728		$	16,001

Current maturities of long-term debt	$	6,104		$	6,018
Long-term debt, net of debt issuance costs and current maturities		3,337			6,371
Total finance lease liabilities	$	9,441		$	12,389

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


	Operating			Finance
	Leases			Leases
	(in thousands)
Year Ending December 31,
Remainder of 2021	$	18,046		$	2,955
2022		33,175			5,824
2023		31,374			904
2024		27,381			254
2025		27,076			37
Thereafter		100,393			7
Total future minimum lease payments		237,445			9,981
Less: interest		(62,286	)		(540	)
Total lease liabilities	$	175,159		$	9,441

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental cash flow information related to leases was as follows:


	Six Months Ended
	June 30,
	2021		2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	18,297	$	14,651
Operating cash flows from finance leases		358		535
Financing cash flows from finance leases		2,803		2,837

Other information related to leases was as follows:


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

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

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

Note 8. Financial Instruments

Interest Rate Swap

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

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

Foreign Exchange Forward Contracts

We use foreign exchange forward contracts to mitigate our exposure to fluctuations in exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact. We do not use such forward contracts for speculative or trading purposes.

Mexican Peso

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

With regards to our foreign exchange call option contracts, for the three and six months ended June 30, ~~2017~~2021, $0.7 million and $1.4 million, respectively, of premium amortization was ~~$1.0 million,~~recorded through cost of ~~which $0.2 million~~sales within our condensed consolidated statements of operations. The net income (loss) recognized in accumulated other comprehensive loss in our condensed consolidated statements of changes in stockholders’ equity for our foreign exchange call option contracts is ~~included~~expected to be recognized in cost of ~~goods sold and the remaining $0.8 million is included~~sales in ~~general and administrative expenses. The amount related to RSUs was $0.4 million while $0.6 million related to stock options. Total share-based compensation expense recognized~~our condensed consolidated statements of operations during the next nine months ended September 30, 2017 was $4.8 million, of which $0.8 million is included in cost of goods sold and the remaining $4.0 million is included in general and administrative expenses. The amount related to RSUs was $1.5 million while $3.3 million related to stock options. No share-based compensation costs were capitalized during the three or nine months ended September 30, 2017 and 2016.months.

As of September 30, 2017, the unamortized cost of the unvested RSUs was $1.8 million, which the Company expects to recognize in the consolidated financial statements over a weighted-average period of approximately 1.3 years. The total unrecognized cost related to unvested stock option awards was $5.3 million as of September 30, 2017. The Company expects to recognize such costs in the consolidated financial statements over a weighted-average period of approximately 1.9 years.

~~The following table summarizes the activity of the stock options and RSUs under the Company’s incentive plans:~~

Stock Options

RSUs

Shares
Available
for Grant

Shares

Weighted-
Average
Exercise Price

Options
Exercisable

Units

Weighted-
Average
Grant Date
Fair Value

Balance as of December 31, 2016

3,587,692

3,331,418

$
12.72

25,828

636,120

$
10.90

Increase in shares authorized

1,349,475

—

—

—

—

Granted

(190,290
)

161,090

20.00

29,200

16.69

Exercised/vested

—

(107,527
)

10.81

(218,040
)

10.95

Forfeited/cancelled

227,650

(202,450
)

11.54

(25,200
)

10.87

Balance as of September 30, 2017

4,974,527

3,182,531

13.23

729,196

422,080

11.27

1216

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Chinese Renminbi

With regards to ~~Unaudited Condensed Consolidated Financial Statements~~our foreign exchange forward contracts, for which hedge accounting does not apply, for the three and six months ended June 30, 2021, $0.5 million and $0.6 million, respectively, in gains were recorded through foreign currency loss within our condensed consolidated statements of operations.

India Rupee

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

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


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

The following table ~~summarizes~~presents the ~~outstanding and exercisable stock option awards as~~pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of ~~September 30, 2017:~~operations:


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

Options Outstanding

Options Exercisable

Range of Exercise Prices:

Shares

Weighted-
Average
Remaining
Contractual Life
(in years)

Weighted-
Average
Exercise Price

Shares

Weighted-
Average
Exercise Price

$8.49

22,728

2.3

$
8.49

22,728

$
8.49

$
10.87

2,004,700

7.7

10.87

465,700

10.87

$11.00 to $16.53

656,523

8.3

16.12

157,072

16.33

$18.70

342,790

8.7

18.68

83,696

18.70

$20.05 to $22.34

155,790

9.9

20.14

—

—

$8.49 to $22.34

3,182,531

8.0

13.23

729,196

12.87

Note 9. Income Taxes

~~Income~~

The income tax ~~expense was $0.4 million~~provisions for the three and ~~$0.3 million~~six months ended June 30, 2021 were lower than for the corresponding periods in 2020 primarily due to the change in the mix of earnings of foreign jurisdictions and U.S. tax on foreign earnings in the comparable periods, partially offset by the recording of a full U.S. valuation allowance during the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively,~~an increase in our uncertain tax positions for the three and ~~$8.5 million and $4.6 million in the nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively. The lower effective tax rate was primarily due~~2021 as compared to the ~~release of the valuation allowance which was recorded against the Turkey operation’s deferred tax assets as well as the tax benefit received by the Turkey operations~~same periods in ~~the third quarter of 2017 from new tax incentives from the Turkish government.~~2020.

The Company has historically provided a valuation allowance to reduce its U.S. federal, state and non-U.S. deferred tax assets to the amount that is more likely than not to be realized. In the current quarter, the Company released the majority of its valuation allowance against its Turkey operation’s deferred tax assets, resulting in a non-cash benefit to income tax expense of approximately $2.6 million, $1.2 million of which was related to future earnings. Given the Turkey operation’s current level of pre-tax income, and assuming the Turkey operations maintains this current level of pre-tax income at a minimum, the Company expects to generate income before taxes in Turkey in future periods at a level that would fully realize the benefit of its deferred tax assets in Turkey. As of September 30, 2017, the Company continues to maintain a valuation allowance against net deferred tax assets in the U.S. and certain of its state jurisdictions where it does not currently believe that the realization of the deferred tax assets is more likely than not.

The Company evaluates its deferred tax assets quarterly to determine whether adjustments to the valuation allowance are appropriate in light of changes in facts or circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities and developments in case law. In making this evaluation, the Company relies on its recent history of pre-tax earnings. The Company's material assumptions are its forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment.

~~The impact of the new tax incentives received related to the Turkey operations was $1.8 million, all of which will be used to reduce the taxes paid on future earnings.~~

No ~~other~~ changes in tax law ~~since December 31, 2016 have~~occurred during the six months ended June 30, 2021, which had a material impact on ~~the Company’s~~our income tax provision. We do not record a deferred tax liability related to unremitted foreign earnings as we maintain our assertion to indefinitely reinvest our unremitted foreign earnings.

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10. Net Income (Loss) Per Common Share

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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(in thousands, except per share data)
Numerator:
Net Loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)

Denominator:
Basic weighted-average shares outstanding		36,881			35,299			36,742			35,256
Effect of dilutive awards		0			0			0			0
Diluted weighted-average shares outstanding		36,881			35,299			36,742			35,256

Basic net loss per common share	$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)
Diluted net loss per common share	$	(1.08	)	$	(1.87	)	$	(1.13	)	$	(1.89	)

Potentially dilutive shares excluded from the calculation due to net losses in the period		1,607			1,154			1,864			1,117
Anti dilutive share-based compensation awards excluded from the calculation		0			6			0			55
Performance-based restricted stock units excluded from the calculation because the performance conditions had not been met		196			98			196			98

Note 11. Stockholders’ Equity

Accumulated Other Comprehensive Loss

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


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

TPI COMPOSITES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Six Months Ended June 30, 2020
	Foreign						Foreign
	currency						exchange
	translation			Interest rate			forward			Total
	adjustments			swap			contracts			AOCL
	(in thousands)
Balance at December 31, 2019	$	(22,012	)	$	(2,145	)	$	545		$	(23,612	)
Other comprehensive income (loss) before reclassifications		(9,223	)		(2,550	)		(6,936	)		(18,709	)
Amounts reclassified from AOCL		0			0			(222	)		(222	)
Net tax effect		0			535			1,503			2,038
Net current period other comprehensive income (loss)		(9,223	)		(2,015	)		(5,655	)		(16,893	)
Balance at March 31, 2020		(31,235	)		(4,160	)		(5,110	)		(40,505	)
Other comprehensive income (loss) before reclassifications		(2,290	)		0			1,750			(540	)
Amounts reclassified from AOCL		0			0			2,738			2,738
Net tax effect		0			0			(938	)		(938	)
Net current period other comprehensive income (loss)		(2,290	)		0			3,550			1,260
Balance at June 30, 2020	$	(33,525	)	$	(4,160	)	$	(1,560	)	$	(39,245	)

Note ~~10.~~12. Commitments and Contingencies

Legal Proceedings

~~A complaint was filed against the Company in the Superior Court of the State of Arizona (Maricopa County) by a former employee of the Company, alleging that the Company had agreed~~From time to ~~make certain cash payments~~time, we are party to such employee upon any future sale of the Company. The Company denies the substantive allegations of the complaint and intends to vigorously defend this lawsuit; however, the Company is currently unable to determine the ultimate outcome of this case. The Court has set a trial date in August 2018.

In addition, the Company entered into a transition agreement with a former officer, pursuant to which he transitioned out of his role at the end of 2015 and was to serve in a consulting capacity in 2016 and 2017. In January 2016, following the discovery that he had materially violated the terms of his transition agreement, the Company terminated his consultancy for cause. In April 2016, the officer filed an arbitration claim alleging that the Company improperly terminated his transition agreement. The Company believes that the termination of his transition agreement was valid and the Company intends to vigorously defend this matter. The arbitration tribunal held that the former officer was entitled to a portion of the compensationvarious lawsuits, claims, and other ~~payments contemplated under the transition agreement. The Company has appealed the arbitration tribunal’s decision to a Chinese court and the appeal remains pending.~~

~~TPI COMPOSITES, INC. AND SUBSIDIARIES~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~The Company is involved in various claims and~~ legal ~~actions arising~~proceedings that arise in the ordinary course of ~~business. In~~business, some of which may not be covered by insurance. Upon resolution of any pending legal matters, we may incur charges in excess of presently established reserves. Our management does not believe that any such charges would, individually or in the ~~opinion of management, the ultimate disposition of these matters will not~~aggregate, have a material adverse effect on ~~the Company’s consolidated~~our financial ~~position,~~condition, results of operations or ~~liquidity.~~cash flows.

Note ~~11.~~13. Concentration of Customers

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


	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2021						2020					2021					2020
Customer	Net sales			% of Total			Net sales		% of Total			Net sales		% of Total			Net sales		% of Total
Vestas	$	208,787			45.5	%	$	193,426		51.7	%	$	378,005		43.8	%	$	350,838		48.0	%
GE		105,937	��		23.1	%		71,176		19.0	%		210,789		24.4	%		171,308		23.5	%
Nordex		81,505			17.8	%		62,258		16.7	%		158,048		18.3	%		115,515		15.8	%

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Customer

Revenues

% of Total

Revenues

% of Total

Revenues

% of Total

Revenues

% of Total

GE

$
99,623

40.9
%

$
98,141

49.3
%

$
286,941

42.0
%

$
292,435

51.4
%
Vestas

69,125

28.4

50,300

25.3

195,556

28.6

120,716

21.2

Nordex Group

46,998

19.3

31,132

15.6

119,530

17.5

96,139

16.9

Gamesa

23,820

9.8

17,844

9.0

71,405

10.5

54,553

9.6

Other

3,788

1.6

1,521

0.8

9,710

1.4

5,460

0.9

Total

$
243,354

100.0
%

$
198,938

100.0
%

$
683,142

100.0
%

$
569,303

100.0
%

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


	June 30,			December 31,
	2021			2020
Customer	% of Total			% of Total
Nordex		36.5	%		40.8	%
Vestas		32.9	%		35.0	%
Siemens Gamesa		10.8	%		5.9	%

September 30,

December 31,

2017

2016

Customer

% of Total

% of Total

GE

17.1
%

24.9
%
Vestas

42.7
%

26.2
%
Nordex Group

28.0
%

26.8
%
Gamesa

8.7
%

16.2
%

Note ~~12.~~14. Segment Reporting

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

All of ~~the Company’s~~our segments operate in their local currency except for the ~~China~~Mexico and ~~Mexico~~Asia segments, which both include a U.S. parent ~~company.~~company, and India and Switzerland, which operate in the U.S. dollar.

1419

TPI COMPOSITES, INC. AND SUBSIDIARIES

~~Notes to Unaudited Condensed Consolidated Financial Statements~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following tables set forth certain information ~~(in thousands)~~ regarding each of our segments:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(in thousands)
Net sales by segment:
U.S.	$	56,761		$	42,079		$	106,047		$	89,510
Asia		91,106			145,918			168,034			237,055
Mexico		143,170			83,420			261,629			201,670
EMEA		105,350			87,541			217,716			176,498
India		62,454			14,859			110,095			25,720
Total net sales	$	458,841		$	373,817		$	863,521		$	730,453

Net sales by geographic location (1):
United States	$	56,761		$	42,079		$	106,047		$	89,510
China		91,106			145,918			168,034			237,055
Mexico		143,170			83,420			261,629			201,670
Turkey		105,350			87,541			217,716			176,498
India		62,454			14,859			110,095			25,720
Total net sales	$	458,841		$	373,817		$	863,521		$	730,453

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


	June 30,		December 31,
	2021		2020
	(in thousands)
Property, plant and equipment, net:
U.S.	$	33,246	$	31,811
Asia (China)		41,143		46,075
Mexico		78,839		78,813
EMEA (Turkey)		22,154		28,312
India		30,334		23,990
Total property, plant and equipment, net	$	205,716	$	209,001

(1) Net sales are attributable to countries based on the ~~Company’s segments:~~location where the product is manufactured or the services are performed.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues by segment:

U.S.

$
44,599

$
45,090

$
136,314

$
141,920

Asia

102,463

86,834

278,284

232,639

Mexico

44,941

35,448

134,010

88,623

EMEA

51,351

31,566

134,534

106,121

Total revenues

$
243,354

$
198,938

$
683,142

$
569,303

Revenues by geographic location (1):

U.S.

$
44,599

$
45,090

$
136,314

$
141,920

China

102,463

86,834

278,284

232,639

Mexico

44,941

35,448

134,010

88,623

Turkey

51,351

31,566

134,534

106,121

Total revenues

$
243,354

$
198,938

$
683,142

$
569,303

Income (loss) from operations:

U.S. (2)

$
(8,120
)

$
(12,929
)

$
(26,247
)

$
(18,052
)
Asia

24,031

17,291

64,191

48,055

Mexico

3,286

3,574

5,254

6,197

EMEA

4,349

201

13,861

(2,396
)
Total income from operations

$
23,546

$
8,137

$
57,059

$
33,804

September 30,

December 31,

2017

2016

Property, plant and equipment, net:

U.S.

$
21,693

$
16,740

Asia (China)

29,262

26,341

Mexico

40,359

24,842

EMEA (Turkey)

28,321

23,243

Total property, plant and equipment, net

$
119,635

$
91,166

~~(1)~~

~~Revenues are attributable to countries based on the location where the product is manufactured or the services are performed.~~

~~(2)~~

~~The losses from operations in the~~(2) The losses from operations in our U.S. segment includes corporate general and administrative costs of $9.3 million and $14.1 million for the three months ended September 30, 2017 and 2016, respectively, and $28.4 million and $24.2 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Note 13. Subsequent Events~~

~~In October 2017, the Company granted an aggregate~~ of 191,300 RSU awards to certain employees. Each of these RSU awards vests as follows: 20% on March 7, 2018, 30% on March 7, 2019 and the remaining 50% on March 7, 2020. The Company estimates that the total share-based-compensation expense for these RSU awards will be approximately $4.5$6.7 million and ~~will be recognized over~~$6.9 million for the ~~requisite service period of approximately 1.7 years.~~three months ended June 30, 2021 and 2020, respectively, and $15.6 million and $16.4 million for the six months ended June 30, 2021 and 2020, respectively.

On November 8, 2017, the Company signed a new, five-year supply agreement with Proterra Inc. to produce composite bus bodies at the Company’s existing Rhode Island manufacturing facility and from a new facility in Newton, Iowa that the Company expects to open in the first half of 2018.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q ~~(“Form 10-Q”)~~(Form 10-Q). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to plans and strategy for our business, ~~and related financing,~~ includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-Q or in our previously filed Annual Report on Form 10-K, particularly those under “Risk Factors.”

OVERVIEW

Our Company

We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We ~~enable many of the industry’s~~deliver high-quality, cost-effective composite solutions through long term relationships with leading ~~wind turbine~~ original equipment manufacturers (OEM)~~, who have historically relied on in-house production, to outsource~~ in the ~~manufacturing of some of their~~ wind ~~blades through our global footprint of advanced manufacturing facilities strategically located to serve large~~ and ~~growing wind markets in a cost-effective manner. Given the importance of wind energy capture, turbine reliability~~transportation markets. We also provide field service inspection and ~~cost to power producers, the size, quality and performance of wind blades have become highly strategic to our OEM customers. As a result, we have become a key supplier~~repair services to our OEM customers and wind farm owners and operators, and supply high strength, lightweight and durable composite products to the transportation market. We are headquartered in Scottsdale, Arizona and operate factories throughout the ~~manufacture of wind blades~~U.S., China, Mexico, Turkey, and ~~related precision molding~~India. We operate additional engineering development centers in Denmark and assembly systems. We have entered into long-term supply agreements pursuant to which we dedicate capacity at our facilities to our customers in exchange for their commitment to purchase minimum annual volumes of wind blade sets, which consist of three wind blades. As of November 8, 2017, our long-term supply agreements provide for minimum aggregate volume commitments from our customers of approximately $2.7 billion and encourage our customers to purchase additional volume up to, in the aggregate, a total contract value of over approximately $4.4 billion through the end of 2023. This collaborative dedicated supplier model provides us with contracted volumes that generate significant revenue visibility, drive capital efficiency and allow us to produce wind blades at a lower total delivered cost, while ensuring critical dedicated capacity for our customers. Our wind blade and precision molding and assembly systems manufacturing businesses accounted for approximately 98% of our total net sales in the three and nine months ended September 30, 2017 and for approximately 99% of our total net sales in the three and nine months ended September 30, 2016.Germany.

~~We divide our~~Our business operations are defined geographically into ~~four~~five geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico, ~~and~~(4) Europe, the Middle East and Africa (EMEA) ~~as follows:~~

~~Our U.S. segment includes (1) the manufacturing of wind blades at~~and (5) India. See Note 14, Segment Reporting, to our ~~Newton, Iowa plant, (2) the manufacturing of precision molding and assembly systems used~~condensed consolidated financial statements for ~~the manufacture of wind blades in~~more details about our Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the transportation industry, which we also conduct in our Rhode Island and Massachusetts facilities and (4) our corporate headquarters, the costs of which are included in general and administrative expenses.operating segments.

Our Asia segment includes (1) the manufacturing of wind blades in facilities in Taicang Port, China and in two facilities in Dafeng, China, (2) the manufacturing of precision molding and assembly systems in our Taicang City, China facility, (3) the manufacture of components in our second Taicang Port, China facility and (4) wind blade inspection and repair services.

Our Mexico segment manufactures wind blades from three facilities in Juárez, Mexico, one of which commenced operations in 2014, the second during the third quarter of 2016 and the third in January 2017. In April 2017, our Mexico segment entered into a new lease agreement with a third party for a new manufacturing facility in Matamoros, Mexico and expects to commence operations at this facility in the second half of 2018.

Our EMEA segment manufactures wind blades from two facilities in Izmir, Turkey. We entered into a joint venture in 2012 to produce wind blades at our first Turkey plant and in 2013 became the sole owner of the Turkey operation with the acquisition of the remaining 25% interest. Our EMEA segment commenced operations at our second facility during the third quarter of 2016.

KEY TRENDS AND RECENT DEVELOPMENTS AFFECTING OUR BUSINESS

The ~~trend~~COVID-19 pandemic did not materially adversely affect our business and operations during the three and six months ended June 30, 2021. Although all of ~~wind turbine OEMs outsourcing~~our manufacturing facilities currently are operating at or near normal production levels, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. For example, India and Turkey recently experienced significant increases in positive COVID-19 cases although these resurgences did not have a material impact on our operations during the three months ended June 30, 2021. In addition, although we currently have not experienced any significant disruptions in our global supply chain due to the COVID-19 pandemic, our global supply chain may in the future be adversely affected if the COVID-19 pandemic persists.

We expect decreased demand for our wind blades ~~remains strong as evidenced by~~from our ~~signing~~customers during the remainder of 2021, in ~~August 2017 of a new multiyear supply agreement with Senvion S.A. for two production lines~~particular during the fourth quarter. We believe this decrease in ~~our Taicang Port, China manufacturing facility.~~

~~Our wind turbine OEMs are experiencing significant pricing pressure in many geographic markets~~demand is short term and due to ~~several factors, including~~the continued global renewable energy regulatory and policy uncertainty and raw material cost increases mentioned below. The result is an ~~increasing prevalence~~expected adverse impact to our Adjusted EBITDA in 2021 of ~~“winner take all” auction-based pricing models for new wind farm projects, increasing competition from solar energy projects and market demand shifts driven by~~approximately $28 million. We believe that general optimism around potential legislation in the ~~current~~U.S. to extend the Production Tax Credit ~~cycle~~(PTC) on a long-term basis is causing developers to reevaluate project timelines in anticipation of being able to build projects at higher PTC levels once the ~~United States. As~~expected extensions are in place and therefore are not purchasing wind blades or turbines to satisfy current PTC safe harbor requirements.

In 2021, there have been both significant price increases and supply constraints with respect to resin and carbon fiber, which are key raw materials that we use to manufacture our products, as well as increases in logistics costs to obtain raw materials. The resin price increases and supply constraints are due to a ~~result~~multitude of ~~these market trends,~~factors, including the extreme cold weather in Texas in February 2021, fires at resin manufacturing facilities in China and unplanned maintenance outages at resin manufacturing facilities in Europe. Carbon fiber prices have increased primarily due to the cost of raw material inputs as well as increased global demand for carbon fiber across multiple industries. These raw material price increases adversely affected our ~~wind turbine OEM customers are requiring an increasing number~~results of ~~wind blade model transitions in late 2017~~operations by approximately $4.4 million for both the three and ~~2018.~~

six months ended June 30, 2021. We expect that the price of resin and carbon fiber will remain at elevated levels for the remainder of 2021. Approximately 55% of the resin and resin systems we use are purchased under contracts either controlled or borne by two of our customers and therefore these customers receive/bear 100% of any increase in resin prices. With respect to our other customer supply agreements, our customers typically bear 70% of any raw material price increases. After taking into account our contractual share of any price increases for resin and carbon fiber, we estimate that the impact of these raw materials price increases, together with increased ~~number~~logistics costs, will adversely impact our results of operations by approximately $20 million for 2021. If the supply of resin feedstocks and carbon fiber continue to be constrained for an extended period of time, such shortages could impact our ability to meet our customers’ forecasted demand for our products for the remainder of 2021 and have a further material adverse impact on our results of operations for the remainder of 2021.

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

In July 2021, we commenced supplying wind blades to one of our customers at a manufacturing facility in Matamoros, Mexico pursuant to a 3-year supply agreement. In connection with the supply agreement, we will, among other things, (1) operate the manufacturing facility, and (2) utilize our workforce, procure raw materials and manufacture blades for the customer. The customer will resume management and operation of the wind blade ~~model transitions in late 2017~~manufacturing facility at the end of the 3-year term if the supply agreement is not extended and ~~2018 may reduce our year-over-year revenue growth rate in 2018.~~we will cease to operate and supply blades from the customer’s manufacturing facility.

~~COMPONENTS OF RESULTS OF OPERATIONS~~KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE

~~Net Sales~~

~~Net sales reflect sales~~For a detailed discussion of our ~~products, including wind blades, precision molding~~key financial measures and ~~assembly systems and transportation products, as well as fees and other amounts paid by~~ our customers to compensate us for our costs and capital expenditures associated with wind blade model transitions. Several factors affect net sales in any period, including customer demand, wind blade model transitions, general economic conditions and weather conditions. We currently derive an immaterial amount of net sales from our transportation business. Under GAAP, we do not recognize revenue on our wind blade sales until the wind blades have been delivered to our customers. Under our long-term supply agreements with our customers, we invoice our customers for wind blades once the blades pass certain acceptance procedures and title passes to our customers. Our customers generally pay us for the wind blades between 15 to 65 days after receipt of the invoice based on negotiated payment terms. However, in many cases, our customers request that we store their wind blades until they are ready to assemble wind turbines at a particular wind farm project. We have no control over when our customers decide to ship wind blades from our storage sites, and in some cases, our customers have stored large numbers of their wind blades at our sites for six months or more. Even if the customer has paid us for the wind blades and title has passedkey operating metrics, refer to the ~~customer, we do not recognize revenue for these wind blades until the wind blades have been delivered to the customer. Instead, these transactions are recorded as deferred revenue~~discussion in ~~our condensed consolidated financial statements.~~

~~Cost~~“Management’s Discussion and Analysis of ~~Goods Sold~~

~~Cost~~Financial Condition and Results of goods sold includes the costs associated with products invoiced during the period as well as unallocated manufacturing overhead costs associated with startup and transition costs. Cost of sales includes all costs incurred at our production facilities to make products saleable, such as raw materials, direct labor and indirect labor and facilities costs, including purchasing and receiving costs, plant management, inspection costs, product engineering and internal transfer costs. In addition, all depreciation associated with assets used to produce composite products and make them saleable isOperations – Key Metrics Used By Management To Measure Performance” included in ~~cost of sales. Direct labor costs consist of salaries, benefits and other personnel related costs for employees engaged in the manufacture~~Part II, Item 7 of our ~~products.~~Annual Report on Form 10-K.

Startup costs represent the unallocated overhead related to both new manufacturing facilities as well as new lines in existing manufacturing facilities. Transition costs represent the unallocated overhead related to the transition of wind blade models at the request of our customers. The startup and transition costs are primarily fixed overhead costs incurred during the period production facilities are under-utilized while transitioning wind blade models and ramping up manufacturing, which are not allocated to products and are expensed as incurred. The cost of sales for the initial wind blades from a new model manufacturing line is generally higher than when the line is operating at optimal production volume levels due to inefficiencies during ramp-up related to labor hours per blade, cycle times per blade and raw material usage. Additionally, manufacturing overhead as a percentage of net sales is generally higher during the period in which a facility is ramping up to full production capacity due to underutilization of the facility. Manufacturing overhead at each of our facilities includes virtually all indirect costs (including share-based compensation costs) incurred at the plants, including engineering, finance, information technology, human resources and plant management.

~~General and Administrative Expenses~~

General and administrative expenses are primarily incurred at our corporate headquarters and our research facilities and include salaries, benefits and other personnel related costs for employees engaged in research and development, engineering, finance, information technology, human resources, business development, global operational excellence, global supply chain, in-house legal and executive management. Other costs include outside legal and accounting fees, risk management (insurance), share-based compensation and certain other administrative and global resources costs.

For the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, our research and development expenses (included in general and administrative expenses) totaled $0.3 million, $0.4 million, $1.1 million and $1.0 million, respectively.

~~Other Income (Expense)~~

Other income (expense) consists primarily of interest expense on our credit facilities and the amortization of deferred financing costs and beneficial conversion features related to our debt borrowings. Other income (expense) also includes realized gains and losses on foreign currency remeasurement, interest income and miscellaneous income and expense.

~~Income Tax Provision~~

Income tax provision consists of federal, state, provincial, local and foreign taxes based on income in jurisdictions in which we operate, including in the United States, China, Mexico and Turkey. The composite income tax rate, tax provisions, deferred tax assets and deferred tax liabilities vary according to the jurisdiction in which the income or loss arises. Tax laws are complex and subject to different interpretations by management and the respective governmental taxing authorities, and require us to exercise judgment in determining our income tax provision, our deferred tax assets and liabilities and the valuation allowance recorded against our net deferred tax assets.

~~Net Income Attributable to Preferred Shareholders~~

Net income attributable to preferred shareholders related to the accrual of dividends on our convertible and senior redeemable preferred shares, the accretion to redemption amounts on our convertible preferred shares and warrant fair value adjustment. Immediately prior to the closing of our IPO, all preferred shares were converted into shares of our common stock and as a result, the accrual of dividends ceased.

KEY FINANCIAL MEASURES

~~In addition~~


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(in thousands)
Net sales	$	458,841		$	373,817		$	863,521		$	730,453
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)
EBITDA (1)	$	4,285		$	(2,628	)	$	9,699		$	(5,349	)
Adjusted EBITDA (1)	$	17,361		$	3,295		$	30,456		$	4,591
Capital expenditures							$	27,059		$	42,030
Free cash flow (1)							$	(30,314	)	$	(69,035	)


	June 30,			December 31,
	2021			2020
	(in thousands)
Total debt, net of debt issuance costs	$	236,275		$	216,867
Net debt (1)	$	(113,991	)	$	(88,061	)

(1)

See below for a reconciliation of EBITDA, adjusted EBITDA, free cash flow and net debt to net income (loss), net income (loss), net cash provided by (used in) operating activities and total debt, net of debt issuance costs, respectively, the most directly comparable financial measures ~~of financial performance~~calculated and presented ~~in our condensed consolidated financial statements~~ in accordance with GAAP, we use certain other financial measures and operating metrics to analyze the performance of our company. The “non-GAAP” financial measures consist of total billings, EBITDA, adjusted EBITDA and net debt, which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our overall liquidity, and evaluate our overall financial performance. The key operating metrics consist of wind blade sets invoiced, estimated megawatts (MWs) of energy capacity for wind blades invoiced, manufacturing lines dedicated to customers under long-term supply agreements, total manufacturing lines installed, manufacturing lines in startup and manufacturing lines in transition, which help us evaluate our operational performance. We believe that these measures are useful to investors in evaluating our performance.GAAP.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands)

Net sales

$
243,354

$
198,938

$
683,142

$
569,303

Total billings (1)

$
256,404

$
196,095

$
698,833

$
566,779

Net income

$
20,398

$
2,797

$
37,801

$
16,098

EBITDA (1)

$
29,114

$
11,272

$
69,074

$
42,999

Adjusted EBITDA (1)

$
30,118

$
19,632

$
76,443

$
51,816

Capital expenditures

$
8,585

$
4,673

$
35,312

$
18,917

September 30,

December 31,

2017

2016

(in thousands)

Total debt, net of debt issuance costs

$
133,637

$
123,155

Net debt (1)

$
(3,568
)

$
6,379

~~(1)~~

See below for more information and a reconciliation of total billings, EBITDA, adjusted EBITDA and net debt to net sales, net income, net income and total debt, net of debt issuance costs and discount, respectively, the most directly comparable financial measures calculated and presented in accordance with GAAP.

~~Net sales and total billings~~

We define total billings, a non-GAAP financial measure, as the total amounts we have invoiced our customers for products and services for which we are entitled to payment under the terms of our long-term supply agreements or other contractual agreements. We monitor total billings, and believe it is useful to present to investors as a supplement to our GAAP measures, because we believe it more directly correlates to sales activity and operations based on the timing of actual transactions with our customers, which facilitates comparison of our performance between periods and provides a more timely indication of trends in sales. Under GAAP, we do not recognize revenue on our wind blade sales until the wind blades have been delivered to our customers. Under our long-term supply agreements with our customers, we invoice our customers for wind blades once the blades pass certain acceptance procedures and title passes to our customers. Our customers generally pay us for the wind blades between 15 to 65 days after receipt of the invoice based on negotiated payment terms. However, in many cases, our customers request that we store their wind blades until they are ready to assemble wind turbines at a particular wind farm project. We have no control over when our customers decide to ship wind blades from our storage sites, and in some cases, our customers have stored large numbers of their wind blades on our sites for six months or more. Even if the customer has paid us for the wind blades and title has passed to the customer, we do not recognize revenue for these wind blades until the wind blades have been delivered to the customer. Instead, these transactions are recorded as deferred revenue in our condensed consolidated financial statements. However, we are contractually entitled to payment for those wind blades and, accordingly, invoice them when the blades are placed in storage.

~~Our use of total billings has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.~~

~~EBITDA and Adjusted EBITDA~~

We define EBITDA, a non-GAAP financial measure, as net income or loss plus interest expense (including losses on extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define adjusted EBITDA as EBITDA plus any share-based compensation expense plus or minus any realized gains or losses from foreign currency remeasurement. Adjusted EBITDA is the primary metric used by our management and our board of directors to establish budgets and operational goals for managing our business and evaluating our performance. In addition, our Credit Facility contains minimum EBITDA (as defined in the Credit Facility) covenants with which we must comply. We monitor adjusted EBITDA as a supplement to our GAAP measures, and believe it is useful to present to investors, because we believe that it facilitates evaluation of our period-to-period operating performance by eliminating items that are not operational in nature, allowing comparison of our recurring core business operating results over multiple periods unaffected by differences in capital structure, capital investment cycles and fixed asset base. In addition, we believe adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our industry as a measure of financial performance and debt-service capabilities.

~~Our uses of EBITDA and adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP.~~

In evaluating EBITDA and adjusted EBITDA, you should be aware that in the future, we will incur expenses similar to the adjustments noted in this presentation. Our presentations of EBITDA and adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider EBITDA and adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP measures.

~~Net debt~~

We define net debt as the total principal amount of debt outstanding less unrestricted cash and cash equivalents. The total principal amount of debt outstanding is comprised of the long-term debt and current maturities of long-term debt as presented in our condensed consolidated balance sheets adding back any debt issuance costs and discount. We believe that the presentation of net debt provides useful information to investors because our management reviews net debt as part of our oversight of overall liquidity, financial flexibility and leverage. Net debt is important when we consider opening new plants and expanding existing plants, as well as for capital expenditure requirements.

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

EBITDA and adjusted EBITDA are reconciled as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands)

Net sales

$
243,354

$
198,938

$
683,142

$
569,303

Change in deferred revenue:

Blade-related deferred revenue at beginning of period (1)

(74,255
)

(65,656
)

(69,568
)

(65,520
)
Blade-related deferred revenue at end of period (1)

87,294

61,949

87,294

61,949

Foreign exchange impact (2)

11

864

(2,035
)

1,047

Change in deferred revenue

13,050

(2,843
)

15,691

(2,524
)
Total billings

$
256,404

$
196,095

$
698,833

$
566,779

Net income

$
20,398

$
2,797

$
37,801

$
16,098

Adjustments:

Depreciation and amortization

5,139

3,530

13,622

9,703

Interest expense (net of interest income)

3,206

4,636

9,137

12,633

Income tax provision

371

309

8,514

4,565

EBITDA

29,114

11,272

69,074

42,999

Share-based compensation expense

1,043

8,117

4,794

8,117

Realized loss (gain) on foreign currency remeasurement

(39
)

243

2,575

700

Adjusted EBITDA

$
30,118

$
19,632

$
76,443

$
51,816

~~(1)~~

~~Total billings is reconciled using the blade-related deferred revenue amounts at the beginning and the end of the period as follows:~~


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
	(in thousands)
Net loss	$	(39,797	)	$	(66,101	)	$	(41,594	)	$	(66,593	)
Adjustments:
Depreciation and amortization		12,501			11,616			24,110			22,644
Interest expense, net		2,691			2,545			5,395			4,316
Income tax provision		28,890			49,312			21,788			34,284
EBITDA		4,285			(2,628	)		9,699			(5,349	)
Share-based compensation expense		2,925			2,374			5,324			5,316
Foreign currency loss		6,504			1,928			10,231			968
Loss on sale of assets and asset impairments		1,451			1,440			2,748			3,358
Restructuring charges, net		2,196			181			2,454			298
Adjusted EBITDA	$	17,361		$	3,295		$	30,456		$	4,591

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands)

Blade-related deferred revenue at beginning of period

$
74,255

$
65,656

$
69,568

$
65,520

Non-blade related deferred revenue at beginning of period

—

—

—

—

Total current and noncurrent deferred revenue at beginning
of period

$
74,255

$
65,656

$
69,568

$
65,520

Blade-related deferred revenue at end of period

$
87,294

$
61,949

$
87,294

$
61,949

Non-blade related deferred revenue at end of period

—

—

—

—

Total current and noncurrent deferred revenue at end
of period

$
87,294

$
61,949

$
87,294

$
61,949

Free cash flow is reconciled as follows:

~~(2)~~

~~Represents the effect of the difference between the exchange rate used by our various foreign subsidiaries on the invoice date versus the exchange rate used at the period-end balance sheet date.~~


	Six Months Ended
	June 30,
	2021			2020
	(in thousands)
Net cash used in operating activities	$	(3,255	)	$	(27,005	)
Less capital expenditures		(27,059	)		(42,030	)
Free cash flow	$	(30,314	)	$	(69,035	)

Net debt is reconciled as follows:

September 30,

December 31,

2017

2016

(in thousands)

Total debt, net of debt issuance costs

$
133,637

$
123,155

Add debt issuance costs

1,860

2,290

Less cash and cash equivalents

(139,065
)

(119,066
)
Net debt

$
(3,568
)

$
6,379


	June 30,			December 31,
	2021			2020
	(in thousands)
Cash and cash equivalents	$	123,107		$	129,857
Less total debt, net of debt issuance costs		(236,275	)		(216,867	)
Less debt issuance costs		(823	)		(1,051	)
Net debt	$	(113,991	)	$	(88,061	)

KEY OPERATING METRICS


	Three Months Ended				Nine Months Ended				Three Months Ended						Six Months Ended
	September 30,				September 30,				June 30,						June 30,
	2017		2016		2017		2016		2021			2020			2021			2020
Sets		739		581		2,067		1,613		843			788			1,657			1,519
Estimated megawatts		1,796		1,321		4,876		3,686		3,303			2,655			6,375			4,984
Utilization										82	%		70	%		80	%		70	%
Dedicated manufacturing lines		48		38		48		38		50			52			50			52
Total manufacturing lines installed		38		32		41		32
Manufacturing lines in startup		10		2		12		2
Manufacturing lines in transition		—		—		—		3
Manufacturing lines installed										51			54			52			54

~~Sets~~ represents the number of wind blade sets, consisting of three wind blades each, which we invoiced worldwide during the period. We monitor sets and believe that presenting sets to investors is helpful because we believe that it is the most direct measurement of our manufacturing output during the period. Sets primarily impact net sales and total billings.

~~Estimated megawatts~~ are the energy capacity to be generated by wind blade sets invoiced in the period. Our estimate is based solely on name-plate capacity of the wind turbine on which our wind blades are expected to be installed. We monitor estimated megawatts and believe that presenting estimated megawatts to investors is helpful because we believe that it is a commonly followed measurement of energy capacity across our industry and provides an indication of our share of the overall wind blade market.23

~~Dedicated manufacturing lines~~ are the number of wind blade manufacturing lines that we have dedicated to our customers pursuant to our long-term supply agreements. We monitor dedicated manufacturing lines and believe that presenting this metric to investors is helpful because we believe that the number of dedicated manufacturing lines is the best indicator of demand for our wind blades from customers under our long-term supply agreements in any given period. Dedicated manufacturing lines primarily impacts our net sales and total billings. In April 2017, we entered into a multiyear supply agreement with Vestas to supply wind blades from two manufacturing lines at a new manufacturing facility that will be constructed in Matamoros, Mexico. We expect to commence operations at this facility in the second half of 2018. In August 2017, we entered into a multiyear supply agreement with Senvion S.A. to supply wind blades from two manufacturing lines at our Taicang Port, China facility. We expect to commence operations for this customer before the end of the first quarter of 2018. RESULTS OF OPERATIONS

~~Total manufacturing lines installed~~ ~~represents the number of wind blade manufacturing lines installed and either in operation, startup or transition.~~

~~Manufacturing lines in startup~~ is the number of dedicated wind blade manufacturing lines that were in a startup phase during the pre-production and production ramp up period, pursuant to the opening of a new manufacturing facility, the expansion of an existing manufacturing facility or the addition of new manufacturing lines in an existing manufacturing facility. We monitor and present this metric because we believe it helps investors to better understand the impact of the startup phase of our new manufacturing facilities on our gross profit and net income.

~~Manufacturing lines in transition~~ is the number of wind blade manufacturing lines that were being transitioned to a new wind blade model during the period. We monitor and present this metric because we believe it helps investors to better understand the impact of these transitions on our gross profit and net income.

~~Results of Operations~~

~~Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016~~

The following table summarizes ~~certain information relating to~~ our operating results ~~and related~~as a percentage of net sales for the three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 that ~~has~~have been derived from our ~~unaudited~~ condensed consolidated ~~financial statements.~~statements of operations:

Three Months Ended

September 30,

2017

2016

(dollars in thousands)

Net sales

$
243,354

100.0
%

$
198,938

100.0
%
Cost of sales

198,141

81.4

171,648

86.3

Startup and transition costs

12,352

5.1

5,088

2.5

Total cost of goods sold

210,493

86.5

176,736

88.8

Gross profit

32,861

13.5

22,202

11.2

General and administrative expenses

9,315

3.8

14,065

7.1

Income from operations

23,546

9.7

8,137

4.1

Other expense

(2,777
)

(1.2
)

(5,031
)

(2.5
)
Income before income taxes

20,769

8.5

3,106

1.6

Income tax provision

(371
)

(0.1
)

(309
)

(0.2
)
Net income

20,398

8.4

2,797

1.4

Net income attributable to preferred shareholders

—

—

596

0.3

Net income attributable to common shareholders

$
20,398

8.4
%

$
2,201

1.1
%


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

Net sales

Consolidated discussion

The following table summarizes our net sales by product/service for the three and six months ended ~~September~~June 30, ~~2017 increased by $44.4 million or 22.3% to $243.4 million compared to $198.9 million~~2021 and 2020:


	Three Months Ended									Six Months Ended
	June 30,				Change					June 30,				Change
	2021		2020		$		%			2021		2020		$		%
	(in thousands)									(in thousands)
Wind blade sales	$	418,704	$	348,063	$	70,641		20.3	%	$	797,883	$	684,400	$	113,483		16.6	%
Precision molding and assembly systems sales		13,603		6,894		6,709		97.3	%		22,530		13,657		8,873		65.0	%
Transportation sales		14,915		14,902		13		0.1	%		23,046		21,791		1,255		5.8	%
Other sales		11,619		3,958		7,661		193.6	%		20,062		10,605		9,457		89.2	%
Total net sales	$	458,841	$	373,817	$	85,024		22.7	%	$	863,521	$	730,453	$	133,068		18.2	%

The increase in ~~the same period in 2016. Net~~net sales of wind blades ~~increased by 20.3% to $233.5 million for~~during the three and six months ended ~~September~~June 30, ~~2017~~2021 as compared to ~~$194.2 million in~~ the same ~~period~~periods in ~~2016. The increase~~2020 was primarily driven by a ~~21%~~7% and 9% increase in the number of wind blades ~~delivered~~produced, respectively, primarily as a result of increased production at our Mexico, India, Turkey and Iowa facilities. The increase was also due to a higher average sales price due to the mix of wind blade models produced during the three and six months ended June 30, 2021 as compared to the same periods in 2020 and foreign currency fluctuations. Additionally, when comparing our net sales during the three and six months ended June 30, 2021 against the comparable prior year periods, our net sales were negatively impacted by the removal of five contracted manufacturing lines that expired in China at the end of 2020, which was partially offset by the adverse impact that the COVID-19 pandemic had on our net sales in the prior year periods. Finally, the net sales increases in both periods were partially offset by a decrease in the year over year number of wind blades still in the production process at the end of the periods. The fluctuating U.S. dollar against the Euro in our Turkey operations and the Chinese Renminbi in our China operations had a favorable impact of 1.8% and 1.7% on consolidated net sales for the three and six months ended June 30, 2021, respectively, as compared to the 2020 periods.

Segment discussion

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


	Three Months Ended										Six Months Ended
	June 30,				Change						June 30,				Change
	2021		2020		$			%			2021		2020		$			%
	(in thousands)										(in thousands)
U.S.	$	56,761	$	42,079	$	14,682			34.9	%	$	106,047	$	89,510	$	16,537			18.5	%
Asia		91,106		145,918		(54,812	)		-37.6	%		168,034		237,055		(69,021	)		-29.1	%
Mexico		143,170		83,420		59,750			71.6	%		261,629		201,670		59,959			29.7	%
EMEA		105,350		87,541		17,809			20.3	%		217,716		176,498		41,218			23.4	%
India		62,454		14,859		47,595		NM				110,095		25,720		84,375		NM
Total net sales	$	458,841	$	373,817	$	85,024			22.7	%	$	863,521	$	730,453	$	133,068			18.2	%

NM - not meaningful

U.S. Segment

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


	Three Months Ended										Six Months Ended
	June 30,				Change						June 30,				Change
	2021		2020		$			%			2021		2020		$			%
	(in thousands)										(in thousands)
Wind blade sales	$	39,427	$	26,309	$	13,118			49.9	%	$	79,054	$	62,242	$	16,812			27.0	%
Transportation sales		12,227		14,539		(2,312	)		-15.9	%		18,651		21,218		(2,567	)		-12.1	%
Other sales		5,107		1,231		3,876		NM				8,342		6,050		2,292			37.9	%
Total net sales	$	56,761	$	42,079	$	14,682			34.9	%	$	106,047	$	89,510	$	16,537			18.5	%

The increase in the U.S. segment’s net sales of wind blades during the three and six months ended June 30, 2021 as compared to the same periods in 2020 was primarily due to a 35% and 17% increase in the number of wind blades produced, respectively, primarily due to the adverse impact of the COVID-19 pandemic in the prior year periods, as well as a higher average sales price of wind blade models produced in the two comparative periods.

Asia Segment

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


	Three Months Ended										Six Months Ended
	June 30,				Change						June 30,				Change
	2021		2020		$			%			2021		2020		$			%
	(in thousands)										(in thousands)
Wind blade sales	$	82,491	$	141,540	$	(59,049	)		-41.7	%	$	154,994	$	227,416	$	(72,422	)		-31.8	%
Precision molding and assembly systems sales		7,634		3,576		4,058			113.5	%		11,598		8,637		2,961			34.3	%
Other sales		981		802		179			22.3	%		1,442		1,002		440			43.9	%
Total net sales	$	91,106	$	145,918	$	(54,812	)		-37.6	%	$	168,034	$	237,055	$	(69,021	)		-29.1	%

The decrease in the Asia segment’s net sales of wind blades during the three months ended ~~September~~June 30, 2017 compared to the same period in 2016 primarily from our China, Mexico and Turkey plants as well as from foreign currency fluctuations in Turkey, partially offset by a decline in the average sales prices of the same wind blade models delivered in both periods as a result of geographic mix and savings in raw material costs, a portion of which we share with our customers. Net sales from the manufacturing of precision molding and assembly systems during the three months ended September 30, 2017 increased to $5.9 million from $3.3 million in the same period in 2016. This increase was primarily the result of our customers requiring more precision molding and assembly systems from our Taicang facility during the three months ended September 30, 20172021 as compared to the same period in ~~2016. Total billings~~2020 was primarily due to a 52% decrease in the number of wind blades produced, primarily due to the removal of five contracted manufacturing lines that expired in China at the end of 2020. The sales decrease during the three months ended June 30, 2021 was partially offset by an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. Additionally, for the three months ended ~~September~~June 30, ~~2017 increased by $60.3 million or 30.8% to $256.4 million compared to $196.1 million~~2021, there was an increase in the ~~same~~ period over period number of wind blades still in ~~2016. The favorable impact~~the production process at the end of the ~~weakening of the~~period. The fluctuating U.S. dollar against the ~~Euro at~~Chinese Renminbi in our ~~Turkey~~China operations had a favorable impact of 0.1% on consolidated net sales ~~and total billings~~ for the three months ended ~~September~~June 30, ~~2017 were increases~~2021 as compared to the 2020 period.

The decrease in the Asia segment’s net sales of ~~1.0% and 0.9%, respectively. For~~wind blades during the ~~three~~six months ended ~~September~~June 30, ~~2016,~~2021 as compared to the same period in 2020 was primarily due to a 35% decrease in the number of wind blades produced, primarily due to the removal of five contracted manufacturing lines that expired in China at the end of 2020, partially offset by the adverse impact that the COVID-19 pandemic had on our net sales in the prior year period. In addition, for the six months ended June 30, 2021, there was a decrease in the period over period number of wind blades still in the production process at the end of the period. The sales decreases during the six months ended June 30, 2021 was partially offset by an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. The fluctuating U.S. dollar against the Chinese Renminbi in our China operations had a favorable impact of ~~foreign currency fluctuations~~0.2% on consolidated net sales for the six months ended June 30, 2021 as compared to the 2020 period.

Mexico Segment

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


	Three Months Ended									Six Months Ended
	June 30,				Change					June 30,				Change
	2021		2020		$		%			2021		2020		$		%
	(in thousands)									(in thousands)
Wind blade sales	$	131,188	$	78,193	$	52,995		67.8	%	$	239,630	$	193,379	$	46,251		23.9	%
Precision molding and assembly systems sales		5,969		3,318		2,651		79.9	%		10,932		5,020		5,912		117.8	%
Transportation sales		2,688		363		2,325	NM				4,395		573		3,822	NM
Other sales		3,325		1,546		1,779		115.1	%		6,672		2,698		3,974		147.3	%
Total net sales	$	143,170	$	83,420	$	59,750		71.6	%	$	261,629	$	201,670	$	59,959		29.7	%

The increase in the Mexico segment’s net sales of wind blades during the three and six months ended June 30, 2021 as compared to the same periods in 2020 reflects a 76% and 24% net increase in overall wind blade volume, respectively, primarily due to the adverse impact of the COVID-19 pandemic in the prior year periods, as well as an increase in the average sales price of wind blades due to the mix of wind blades produced in the two comparative periods.

EMEA Segment

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


	Three Months Ended									Six Months Ended
	June 30,				Change					June 30,				Change
	2021		2020		$		%			2021		2020		$		%
	(in thousands)									(in thousands)
Wind blade sales	$	103,201	$	87,162	$	16,039		18.4	%	$	214,228	$	175,643	$	38,585		22.0	%
Other sales		2,149		379		1,770	NM				3,488		855		2,633	NM
Total net sales	$	105,350	$	87,541	$	17,809		20.3	%	$	217,716	$	176,498	$	41,218		23.4	%

The increase in the EMEA segment’s net sales of wind blades during the three and six months ended June 30, 2021 as compared to the same periods in 2020 was driven by a 19% and 14% increase in wind blade production at our two Turkey plants, respectively, primarily due to transitions and the adverse impact of the COVID-19 pandemic in the prior year, as well as an increase in the average sales price of wind blades produced in the two comparative periods and foreign currency fluctuations. The sales increases for three months ended June 30, 2021 were ~~both reductions~~partially offset by a decrease in the year over year number of ~~0.4%.~~wind blades still in the production process at the end of the period. The fluctuating U.S. dollar relative to the Euro had a favorable impact of 7.9% and 6.5% on net sales during the three and six months ended June 30, 2021, respectively, as compared to the 2020 periods.

India Segment

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


	Three Months Ended							Six Months Ended
	June 30,				Change			June 30,				Change
	2021		2020		$		%	2021		2020		$		%
	(in thousands)							(in thousands)
Wind blade sales	$	62,397	$	14,859	$	47,538	NM	$	109,977	$	25,720	$	84,257	NM
Other sales		57		—		57	NM		118		—		118	NM
Total net sales	$	62,454	$	14,859	$	47,595	NM	$	110,095	$	25,720	$	84,375	NM

The increase in the India segment’s net sales of wind blades during the three and six months ended June 30, 2021 as compared to the same period in 2020 was driven by the commencement of production in 2020, and the ramp up of such production in 2021.

Total cost of goods sold ~~for the three months ended September 30, 2017 was $210.5 million and included aggregate costs of $12.4 million related to startup costs in~~

The following table summarizes our ~~new plants in Mexico and Turkey and the startup of new wind blade models for certain of our customers in Turkey and Dafeng, China. This compares to~~ total cost of goods sold for the three and six months ended ~~September~~June 30, ~~2016 of $176.7 million, including aggregate costs of $5.1 million related to startup costs in our new plants in Mexico~~2021 and ~~Turkey as well as the transition of wind blade models in our original plant in Mexico. Cost~~2020:


	Three Months Ended												Six Months Ended
	June 30,						Change						June 30,						Change
	2021			2020			$			%			2021			2020			$			%
	(in thousands)												(in thousands)
Cost of sales	$	440,416		$	367,644		$	72,772			19.8	%	$	823,472		$	716,119		$	107,353			15.0	%
Startup costs		4,504			6,897			(2,393	)		-34.7	%		9,056			14,753			(5,697	)		-38.6	%
Transition costs		5,595			4,023			1,572			39.1	%		15,397			8,201			7,196			87.7	%
Total startup and transition costs		10,099			10,920			(821	)		-7.5	%		24,453			22,954			1,499			6.5	%
Total cost of goods sold	$	450,515		$	378,564		$	71,951			19.0	%	$	847,925		$	739,073		$	108,852			14.7	%
% of net sales		98.2	%		101.3	%					-3.1	%		98.2	%		101.2	%					-3.0	%

Total cost of goods sold as a percentage of net sales ~~of wind blades~~ decreased ~~slightly~~by approximately three percentage points during the three and six months ended ~~September~~June 30, ~~2017~~2021 as compared to the same ~~period~~periods in ~~2016,~~2020, driven primarily by ~~improved operating efficiencies~~a decrease in warranty costs and ~~the impact of savings in raw material~~direct labor costs, partially offset by ~~the~~an increase in ~~startup~~direct material costs and ~~transition costs.~~foreign currency fluctuations. The ~~net impact of the~~ fluctuating U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso had an unfavorable impact of 2.2% and 1.7% on consolidated cost of goods sold for the three and six months ended ~~September~~June 30, ~~2017 was not significant~~2021, respectively, as compared to ~~a favorable impact of 1.9% for~~ the ~~three months ended September 30, 2016.~~2020 periods.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three and six months ended ~~September~~June 30, ~~2017 totaled $9.3 million~~2021 and 2020:


	Three Months Ended												Six Months Ended
	June 30,						Change						June 30,						Change
	2021			2020			$			%			2021			2020			$			%
	(in thousands)												(in thousands)
General and administrative expenses	$	6,712		$	6,887		$	(175	)		-2.5	%	$	15,634		$	16,383		$	(749	)		-4.6	%
% of net sales		1.5	%		1.8	%					-0.3	%		1.8	%		2.2	%					-0.4	%

The decreases in general and administrative expenses as ~~compared to $14.1 million for the same period in 2016. As~~ a percentage of net sales ~~general~~for the three and ~~administrative expenses~~six months ended June 30, 2021 as compared to the same periods in 2020 were ~~3.8%~~primarily driven by our continued focus on reducing costs.

Restructuring costs, net

The increases in restructuring costs, net for the three and six months ended June 30, 2021 as compared to the same periods in 2020 were associated with the optimization of our global footprint, comprised of $2.2 million and $2.5 million, respectively, of severance benefits to terminated employees. All severance benefits were paid to the terminated employees by the end of July 2021.

Income (loss) from operations

Segment discussion

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


	Three Months Ended												Six Months Ended
	June 30,						Change						June 30,						Change
	2021			2020			$			%			2021			2020			$			%
	(in thousands)												(in thousands)
U.S.	$	148		$	(12,045	)	$	12,193			101.2	%	$	(11,472	)	$	(27,631	)	$	16,159			58.5	%
Asia		8,105			18,492			(10,387	)		-56.2	%		10,814			23,564			(12,750	)		-54.1	%
Mexico		(25,256	)		(11,324	)		(13,932	)		-123.0	%		(29,280	)		(13,092	)		(16,188	)		-123.6	%
EMEA		10,782			(1,145	)		11,927		NM				20,570			1,519			19,051		NM
India		4,188			(7,233	)		11,421			157.9	%		4,128			(13,019	)		17,147			131.7	%
Total loss from operations	$	(2,033	)	$	(13,255	)	$	11,222			84.7	%	$	(5,240	)	$	(28,659	)	$	23,419			81.7	%
% of net sales		-0.4	%		-3.5	%					3.1	%		-0.6	%		-3.9	%					3.3	%

U.S. Segment

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

Asia Segment

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

Mexico Segment

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

EMEA Segment

The increase in the income from operations in the EMEA segment for the three and six months ended June 30, 2021 as compared to the same periods in 2020 was primarily driven by increased wind blade production at our two Turkey manufacturing facilities, an increase in the average sales price of wind blades, and a decrease in warranty costs. In addition, for the three months ended ~~September~~June 30, ~~2017, down from 7.1% in the same period in 2016. The decrease~~2021, there was ~~primarily driven by~~ a ~~$6.1 million~~ decrease in ~~share-based compensation~~startup and transition costs ~~in the 2017 period~~ as compared to the ~~2016 period, which was the period in which we recorded the expense from grant date through the end of the third quarter of 2016~~2020 period. Additionally, for the ~~performance awards upon consummation~~six months ended June 30, 2021, there was an increase in direct material costs as compared to the 2020 period. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had an unfavorable impact of ~~the IPO. This decrease was partially offset by additional costs incurred to enhance our corporate support functions to support our growth~~1.1% and ~~public company governance.~~

~~Other expense totaled $2.8 million~~0.4% on cost of goods sold for the three and six months ended ~~September~~June 30, ~~2017~~2021, respectively, as compared to ~~$5.0 million for~~ the ~~same period~~2020 periods.

India Segment

The increase in ~~2016. The amount~~the income from operations in the India segment for the three and six months ended ~~September~~June 30, ~~2017~~2021 as compared to the same periods in 2020 was ~~primarily comprised~~driven by the commencement of ~~interest expense~~production in 2020, and the ramp up of ~~$3.3 million. This compares to interest expense of $4.7 million~~such production in ~~the three months ended September 30, 2016.~~2021.

~~Income tax provision increased to $0.4 million~~28

Other income (expense)

The following table summarizes our total other income (expense) for the three and six months ended ~~September~~June 30, ~~2017 from $0.3 million~~2021 and 2020:


	Three Months Ended												Six Months Ended
	June 30,						Change						June 30,						Change
	2021			2020			$			%			2021			2020			$			%
	(in thousands)												(in thousands)
Interest expense, net	$	(2,691	)	$	(2,545	)	$	(146	)		-5.7	%	$	(5,395	)	$	(4,316	)	$	(1,079	)		-25.0	%
Foreign currency loss		(6,504	)		(1,928	)		(4,576	)	NM				(10,231	)		(968	)		(9,263	)	NM
Miscellaneous income		321			939			(618	)		-65.8	%		1,060			1,634			(574	)		-35.1	%
Total other expense	$	(8,874	)	$	(3,534	)	$	(5,340	)		-151.1	%	$	(14,566	)	$	(3,650	)	$	(10,916	)	NM

The increase in the total other expense for the three and six months ended June 30, 2021 as compared to the same ~~period~~periods in ~~2016. The lower effective tax rate was~~2020 were primarily due to ~~the release of the valuation allowance which was recorded against our Turkey operation’s deferred tax assets as well as the tax benefit received~~an increase in the ~~2017 period by the Turkey operations from new tax incentives from~~foreign currency loss primarily due to net Euro liability exposure against the Turkish ~~government.~~Lira in the current year periods as compared to the same periods in 2020.

~~Net~~Income taxes

The following table summarizes our income taxes for the three and six months ended ~~September~~June 30, ~~2017 was $20.4 million~~2021 and 2020:


	Three Months Ended											Six Months Ended
	June 30,						Change					June 30,						Change
	2021			2020			$		%			2021			2020			$		%
	(in thousands)											(in thousands)
Income tax provision	$	(28,890	)	$	(49,312	)	$	20,422		41.4	%	$	(21,788	)	$	(34,284	)	$	12,496		36.4	%
Effective tax rate		-264.9	%		-293.7	%							-110.0	%		-106.1	%

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

Net loss

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


	Three Months Ended											Six Months Ended
	June 30,						Change					June 30,						Change
	2021			2020			$		%			2021			2020			$		%
	(in thousands)											(in thousands)
Net loss	$	(39,797	)	$	(66,101	)	$	26,304		39.8	%	$	(41,594	)	$	(66,593	)	$	24,999		37.5	%

The decrease in the net loss for the three and six months ended June 30, 2021 as compared to ~~$2.8 million in~~ the same ~~period~~periods in ~~2016. The increase~~2020 was primarily due to the reasons set forth above.

~~Net income attributable to preferred shareholders~~ The diluted net loss per share was ~~$0.6 million~~$1.08 for the three months ended ~~September~~June 30, ~~2016 and there was none in the 2017 period as following our IPO in July 2016, all~~2021, compared to a diluted net loss per share of ~~the previously outstanding preferred shares were converted to common shares.~~

~~Net income attributable to common shareholders was $20.4 million~~$1.87 for the three months ended ~~September~~June 30, ~~2017, compared to $2.2 million in the same period in 2016. This increase was primarily due to the improved operating results discussed above. Diluted earnings~~2020. The diluted net loss per share was ~~$0.58~~$1.13 for the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$0.08~~a diluted net loss per share of $1.89 for the ~~three~~six months ended ~~September~~June 30, ~~2016.~~2020.

~~Segment Discussion~~LIQUIDITY AND CAPITAL RESOURCES

~~The following table summarizes our net sales and income (loss) from operations by our four geographic operating segments:~~

Three Months Ended

September 30,

2017

2016

Net Sales

(in thousands)

U.S.

$
44,599

$
45,090

Asia

102,463

86,834

Mexico

44,941

35,448

EMEA

51,351

31,566

Total net sales

$
243,354

$
198,938

Three Months Ended

September 30,

2017

2016

Income (Loss) from Operations

(in thousands)

U.S. (1)

$
(8,120
)

$
(12,929
)
Asia

24,031

17,291

Mexico

3,286

3,574

EMEA

4,349

201

Total income from operations

$
23,546

$
8,137

~~(1)~~

~~Includes the costs of our corporate headquarters totaling $9.3 million and $14.1 million for the three months ended September 30, 2017 and 2016, respectively.~~

~~U.S. Segment~~

Net sales in the three months ended September 30, 2017 decreased slightly to $44.6 million compared to $45.1 million in the same period in 2016. Net sales of wind blades decreased to $39.5 million during the three months ended September 30, 2017 as compared to $41.8 million in the same period of 2016 primarily due to a slight reduction in the number of wind blades delivered and a decline in the average sales prices of the same wind blade models delivered in both periods asAs a result of ~~savings in raw material costs, a portion of which we share with our customers. Net sales from~~ the ~~manufacturing of precision molding~~uncertainty relating to: (i) the evolving nature, magnitude and assembly systems during the three months ended September 30, 2017 were $1.2 million compared to $1.9 million during the same period in 2016. These decreases were partially offset by a $2.5 million increase in non-wind related net sales during the three months ended September 30, 2017 as compared to the same period in 2016.

The loss from operations for the three months ended September 30, 2017 was $8.1 million as compared to a loss of $12.9 million in the same period in 2016. These amounts include corporate general and administrative costs of $9.3 million and $14.1 million for the three months ended September 30, 2017 and 2016, respectively. The decrease in the corporate general and administrative costs was primarily due to a $6.1 million decrease in share-based compensation costs, partially offset by additional costs incurred to enhance our corporate support functions to support our growth and public company governance. The operating results were also unfavorably impacted by lower precision molding volume discussed above during the three months ended September 30, 2017 as compared to the 2016 period.

~~Asia Segment~~

Net sales in the three months ended September 30, 2017 increased by $15.6 million or 18.0% to $102.5 million compared to $86.8 million in the same period in 2016. Net sales of wind blades were $97.8 million in the three months ended September 30, 2017 as compared to $85.4 million in the same period of 2016. The increase was the result of a 24% increase in the number of wind blades delivered during the three months ended September 30, 2017 compared to the same period in 2016. These increases were partially offset by a change in the mix of wind blade models sold and lower average sales prices of wind blades delivered in both periods due to savings in raw material costs, a portion of which we share with our customers. The impactduration of the ~~fluctuating U.S. dollar against~~COVID-19 pandemic, (ii) the ~~Chinese Renminbi did not have a significant effect on net sales during~~variety of measures implemented by governments around the ~~three months ended September 30, 2017, as compared~~world to ~~an unfavorable impact of 1.2% in~~address its effects and (iii) the three months ended September 30, 2016. Net sales from the manufacturing of precision molding and assembly systems totaled $4.7 million during the three months ended September 30, 2017 compared to $1.4 million during the three months ended September 30, 2016.

Income from operations in the Asia segment for the three months ended September 30, 2017 was $24.0 million as compared to $17.3 million in the same period in 2016. In addition to the factors noted above, the increase reflects lower overhead costs in the 2017 period as compared to 2016. As with net sales, the fluctuating U.S. dollar against the Chinese Renminbi did not have a significant effect on cost of goods sold for three months ended September 30, 2017 versus a favorable impact of 4.2% in the comparable 2016 period.

~~Mexico Segment~~

Net sales in the three months ended September 30, 2017 increased by $9.5 million or 26.8% to $44.9 million compared to $35.4 million in the same period in 2016, reflecting the beginning of wind blade production in our second and third plants and a slight increase in wind blade volume at our first Mexico plant. These increases were partially offset by lower average sales prices of wind blades delivered in both periods. Net sales of wind blades represents the entirety of net sales in the Mexico segment in the 2017 and 2016 periods.

Income from operations in the Mexico segment for the three months ended September 30, 2017 was $3.3 million as compared to $3.6 million in the same period in 2016. The decrease in income from operations was due to the startup losses incurred at our three new Mexico facilities and the unfavorable impact of the weakening U.S. dollar relative to the Mexican Peso on cost of goods sold of 1.1%, partially offset by the increase in wind blade volume in the 2017 period as compared to 2016 as well as from savings in raw material costs. The fluctuating U.S. dollar against the Mexican Peso had a favorable impact of 2.2% on cost of goods sold for three months ended September 30, 2016.

~~EMEA Segment~~

Net sales during the three months ended September 30, 2017 increased by $19.8 million or 62.7% to $51.4 million compared to $31.6 million in the same period in 2016. The increase was driven by the beginning of wind blade production in our second Turkey plant, partially offset by a 34% decrease in wind blade volume at our first Turkey plant as a result of GE only requiring the minimum volume required under its contract after its decision to not renew or extend its supply agreement with us beyond 2017. We completed 100% of this volume by the end of June to enable us to accelerate the transition of those manufacturing lines to two new manufacturing lines for Nordex Group. Other items having a favorable impact on ~~net sales include~~our manufacturing operations, we have and will continue to manage our liquidity to ensure our long-term viability until the mix of wind blades sold during the period as well as overall higher average sales prices of wind blades delivered in the comparative periods due to the beginning of wind blade production in our second Turkey plant and the impact of the weakening U.S. dollar relative to the Euro of 5.2%. This compares to a favorable impact on net sales of 0.5% in the three months ended September 30, 2016. Net sales of wind blades represents the entirety of net sales in the EMEA segment in 2017 and 2016.COVID-19 pandemic abates.

Income from operations in the EMEA segment for the three months ended September 30, 2017 was $4.3 million as compared to $0.2 million in the same period in 2016. The increase was primarily driven by the wind blade production in our second Turkey plant, improved operating efficiency at our first Turkey plant, savings in raw materials and the net favorable impact on cost of goods sold of the fluctuation of the U.S. dollar relative to the Turkish Lira and Euro of 1.1% compared to 0.2% in the three months ended September 30, 2016.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

The following table summarizes certain information relating to our operating results and related percentage of net sales for the nine months ended September 30, 2017 and 2016 that has been derived from our unaudited condensed consolidated financial statements.

Nine Months Ended

September 30,

2017

2016

(dollars in thousands)

Net sales

$
683,142

100.0
%

$
569,303

100.0
%
Cost of sales

568,659

83.2

499,896

87.8

Startup and transition costs

29,051

4.3

11,449

2.0

Total cost of goods sold

597,710

87.5

511,345

89.8

Gross profit

85,432

12.5

57,958

10.2

General and administrative expenses

28,373

4.1

24,154

4.2

Income from operations

57,059

8.4

33,804

6.0

Other expense

(10,744
)

(1.6
)

(13,141
)

(2.3
)
Income before income taxes

46,315

6.8

20,663

3.7

Income tax provision

(8,514
)

(1.3
)

(4,565
)

(0.8
)
Net income

37,801

5.5

16,098

2.9

Net income attributable to preferred shareholders

—

0.0

5,471

1.0

Net income attributable to common shareholders

$
37,801

5.5
%

$
10,627

1.9
%

Net sales for the nine months ended September 30, 2017 increased by $113.8 million or 20.0% to $683.1 million compared to $569.3 million in the same period in 2016. Net sales of wind blades increased by 21.4% to $657.6 million for the nine months ended September 30, 2017 as compared to $541.7 million in the same period in 2016. The increase was primarily driven by a 24% increase in the number of wind blades delivered during the nine months ended September 30, 2017 compared to the same period in 2016 from each of our segments, partially offset by a decline in the average sales prices of the same wind blade models delivered in both periods as a result of geographical mix and savings in raw material costs, a portion of which we share with our customers, as well as from foreign currency fluctuations in China. Net sales from the manufacturing of precision molding and assembly systems during the nine months ended September 30, 2017 decreased to $15.3 million from $23.2 million in the same period in 2016. This decrease was primarily the result of our customers requiring less precision molding and assembly systems from our Rhode Island facility during the nine months ended September 30, 2017 as compared to the same period in 2016. Total billings for the nine months ended September 30, 2017 increased by $132.1 million or 23.3% to $698.8 million compared to $566.8 million in the same period in 2016. The net unfavorable impact of foreign currency fluctuations on consolidated net sales and total billings of 0.6% and 0.7%, respectively, was driven by the strengthening of the U.S. dollar against the Chinese Renminbi at our China operations for the nine months ended September 30, 2017 compared to reductions of 0.5% for both categories during the nine months ended September 30, 2016.

Total cost of goods sold for the nine months ended September 30, 2017 was $597.7 million and included aggregate costs of $29.1 million related to startup costs in our new plants in Mexico and Turkey and the startup of new wind blade models for certain of our customers in Turkey and Dafeng, China. This compares to total cost of goods sold for the nine months ended September 30, 2016 of $511.3 million, including aggregate costs of $11.4 million related to startup costs in our new plants in Mexico and Turkey as well as the transition of wind blade models in our original plant in Mexico. Cost of goods sold as a percentage of net sales of wind blades decreased by two percentage points during the nine months ended September 30, 2017 as compared to the same period in 2016, driven by improved operating efficiencies and the impact of savings in raw material costs and foreign currency fluctuations, partially offset by the increase in startup and transition costs. The impact of the strengthening of the U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso reduced consolidated cost of goods sold by 2.8% for nine months ended September 30, 2017, as compared to 1.3% in the same period in 2016.

General and administrative expenses for the nine months ended September 30, 2017 totaled $28.4 million as compared to $24.2 million for the same period in 2016. As a percentage of net sales, general and administrative expenses were 4.1% for the nine months ended September 30, 2017, down from 4.2% in the same period in 2016. The increase was primarily driven by additional costs incurred to enhance our corporate support functions to support our growth and public company governance, partially offset by a $2.9 million decrease in share-based compensation costs in the 2017 period as compared to the same period in 2016, which was the period in which we recorded the expense from grant date through the end of the third quarter of 2016 for the performance awards upon consummation of the IPO.

Other expense totaled $10.7 million for the nine months ended September 30, 2017 as compared to $13.1 million for the same period in 2016. The amount for the nine months ended September 30, 2017 was primarily comprised of interest expense of $9.2 million and the realized loss on foreign currency remeasurement of $2.6 million. This compares to interest expense of $12.7 million and $0.7 million related to the realized loss on foreign currency remeasurement in the nine months ended September 30, 2016.

Income tax provision increased to $8.5 million for the nine months ended September 30, 2017 from $4.6 million for the same period in 2016. The lower effective tax rate was primarily due to the release of the valuation allowance which was recorded against our Turkey operation’s deferred tax assets as well as the benefit received in the quarter by the Turkey operations from new tax incentives from its government.

~~Net income for the nine months ended September 30, 2017 was $37.8 million as compared to $16.1 million in the same period in 2016. The increase was primarily due to the reasons set forth above.~~

Net income attributable to preferred shareholders was $5.5 million for the nine months ended September 30, 2016 and there was none in the 2017 period as following our IPO in July 2016, all of the previously outstanding preferred shares were converted to common shares.

Net income attributable to common shareholders was $37.8 million during the nine months ended September 30, 2017, compared to $10.6 million in the same period in 2016. This was primarily due to the improved operating results discussed above. Diluted earnings per share was $1.09 for the nine months ended September 30, 2017, compared to $0.88 for the nine months ended September 30, 2016.

~~Segment Discussion~~

~~The following table summarizes our net sales and income (loss) from operations by our four geographic operating segments:~~

Nine Months Ended

September 30,

2017

2016

Net Sales

(in thousands)

U.S.

$
136,314

$
141,920

Asia

278,284

232,639

Mexico

134,010

88,623

EMEA

134,534

106,121

Total net sales

$
683,142

$
569,303

Nine Months Ended

September 30,

2017

2016

Income (loss) from Operations

(in thousands)

U.S. (1)

$
(26,247
)

$
(18,052
)
Asia

64,191

48,055

Mexico

5,254

6,197

EMEA

13,861

(2,396
)
Total income from operations

$
57,059

$
33,804

~~(1)~~

~~Includes the costs of our corporate headquarters totaling $28.4 million and $24.2 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~U.S. Segment~~

Net sales in the nine months ended September 30, 2017 decreased by $5.6 million or 4.0% to $136.3 million compared to $141.9 million in the same period in 2016. The decrease was driven by lower net sales from the manufacturing of precision molding and assembly systems at our Rhode Island facility during the nine months ended September 30, 2017 of $5.8 million compared to $17.0 million during the same period in 2016. There was also a slight decrease in our net sales of wind blades which totaled $120.3 million during the nine months ended September 30, 2017 as compared to $120.5 million in the same period of 2016. This decrease was driven by a decline in the average sales prices of the same wind blade models delivered in both periods as a result of savings in raw material costs, a portion of which we share with our customers, partially offset by a 4% increase in the number of wind blades delivered. These decreases were partially offset by a $5.9 million increase in non-wind related net sales during the nine months ended September 30, 2017 as compared to the same period in 2016.

The loss from operations for the nine months ended September 30, 2017 was $26.2 million as compared to a loss of $18.1 million in the same period in 2016. These amounts include corporate general and administrative costs of $28.4 million for the nine months ended September 30, 2017 compared to $24.2 million for the nine months ended September 30, 2016. The increase in the corporate general and administrative costs was primarily due to additional costs incurred to enhance our corporate support functions to support our growth and public company governance, partially offset by a $2.8 million decrease in share-based compensation costs during the nine months ended September 30, 2017 as compared to the same period in 2016. The operating results were also unfavorably impacted by slightly lower gross profit on wind blades delivered during the nine months ended September 30, 2017 as compared to the 2016 period as well as the lower precision molding volume discussed above during the nine months ended September 30, 2017 as compared to the 2016 period.

~~Asia Segment~~

Net sales in the nine months ended September 30, 2017 increased by $45.6 million or 19.6% to $278.3 million compared to $232.6 million in the same period in 2016. Net sales of wind blades were $268.8 million in the nine months ended September 30, 2017 as compared to $226.4 million in the same period of 2016. The increase was the result of a 26% increase in the number of wind blades delivered during the nine months ended September 30, 2017 compared to the same period in 2016. These increases were partially offset by a change in the mix of wind blade models sold, lower average sales prices of wind blades due to savings in raw material costs, a portion of which we share with our customers and the unfavorable impact of the fluctuation of the U.S. dollar relative to the Chinese Renminbi of 1.0% during the nine months ended September 30, 2017 as compared to an unfavorable impact of 1.4% during the comparable 2016 period. Net sales from the manufacturing of precision molding and assembly systems totaled $9.5 million during the nine months ended September 30, 2017 as compared to $6.2 million during the nine months ended September 30, 2016.

Income from operations in the Asia segment for the nine months ended September 30, 2017 was $64.2 million as compared to $48.1 million in the same period in 2016. In addition to the factors noted above, the increase in income from operations reflects higher gross margins on wind blade sales driven by operating efficiencies and the favorable impact on cost of goods sold of the fluctuation of the U.S. dollar relative to the Chinese Renminbi of 3.2%, as well as lower overhead costs in the 2017 period as compared to 2016. The impact of the strengthening of the U.S. dollar against the Chinese Renminbi on cost of goods sold for nine months ended September 30, 2016 was 4.5%.

~~Mexico Segment~~

Net sales in the nine months ended September 30, 2017 increased by $45.4 million or 51.2% to $134.0 million compared to $88.6 million in the same period in 2016, reflecting a 35% increase in wind blade volume at our first Mexico plant and the beginning of wind blade production in our second plant, partially offset by lower average sales prices of wind blades delivered in both periods. Net sales of wind blades represents the entirety of net sales in the Mexico segment in the 2017 and 2016 periods.

Income from operations in the Mexico segment for the nine months ended September 30, 2017 was $5.3 million as compared to $6.2 million in the same period in 2016. The decrease was largely driven by the startup losses incurred at our three new Mexico facilities, partially offset by the increase in wind blade volume in the 2017 period as compared to 2016 and operating efficiencies at our first Mexico plant, as well as from savings in raw material costs and the favorable impact of the fluctuation of the U.S. dollar relative to the Mexican Peso on cost of goods sold of 0.6%. The fluctuating U.S. dollar against the Mexican Peso had a favorable impact of 3.0% for nine months ended September 30, 2016.

~~EMEA Segment~~

Net sales during the nine months ended September 30, 2017 increased by $28.4 million or 26.8% to $134.5 million compared to $106.1 million in the same period in 2016. The increase was driven by the beginning of wind blade production in our second Turkey plant, partially offset by a 24% decrease in wind blade volume at our first Turkey plant as a result of GE only requiring the minimum volume required under its contract after its decision to not renew or extend its supply agreement with us beyond 2017. We completed 100% of this volume by the end of June to enable us to accelerate the transition of those manufacturing lines to two new manufacturing lines for Nordex Group. Other items having a favorable impact on net sales include the mix of wind blades sold during the period as well as overall higher average sales prices of wind blades delivered in the comparative periods due to the beginning of wind blade production in our second Turkey plant. The fluctuating U.S. dollar against the Euro did not have a significant effect on net sales in either the nine months ended September 30, 2017 or 2016. Net sales of wind blades represents the entirety of net sales in the EMEA segment in 2017 and 2016.

Income from operations in the EMEA segment for the nine months ended September 30, 2017 was $13.9 million as compared to a loss of $2.4 million in the same period in 2016. The increase was primarily driven by the wind blade production in our second Turkey plant, improved operating efficiencies at our first Turkey plant, savings in raw material costs, and a large warranty reserve accrual expensed related to the settlement agreement and release with one of its customers to resolve a potential warranty claim related to

wind blades primarily manufactured in 2014 in the 2016 period as well as the net favorable impact on cost of goods sold of the fluctuation of the U.S. dollar relative to the Turkish Lira and Euro of 8.4%. This compares to the favorable impact of the fluctuation of the U.S. dollar relative to the Turkish Lira and Euro of 3.9% for nine months ended September 30, 2016.

~~Liquidity and Capital Resources~~

Our primary needs for liquidity have been, and in the future will continue to be, capital expenditures, new facility startup costs, the impact of transitions, working capital, ~~and~~ debt service ~~costs.~~costs, warranty costs and restructuring costs associated with the optimization of our global footprint. Our capital expenditures have been primarily related to machinery and equipment ~~for~~at our new facilities ~~or facility expansions.~~and expansion and improvements at our existing facilities. Historically, we have funded our working capital needs through cash flows from operations, the proceeds received from our credit facilities and from proceeds received from the issuance of stock. We had net ~~borrowings on~~proceeds under our financing arrangements of ~~$5.3~~$19.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 as compared to net ~~repayments on~~proceeds under our financing arrangements of ~~$14.2~~$97.1 million in the comparable period of ~~2016.~~2020. As of ~~September~~June 30, ~~2017,~~2021 and December 31, 2020, we had ~~$135.5~~$237.1 million and $217.9 million in outstanding indebtedness, excluding debt issuance ~~costs.~~costs, respectively. As of ~~September~~June 30, ~~2017,~~ 2021,

we had an aggregate of ~~$74.8~~$115.9 million of remaining capacity and ~~$39.7~~$91.1 million of remaining availability under our various credit facilities. Working capital requirements have increased as a result of our overall growth and the need to fund higher accounts receivable and inventory levels as our business volumes have ~~increased.~~increased, as well as increased raw material costs primarily related to resin, carbon fiber and logistics. Based upon current and anticipated levels of operations, we believe that cash on hand, available credit facilities and cash ~~flow~~flows from operations will be adequate to fund our working capital and capital expenditure requirements and to make required payments of principal and interest on our indebtedness over the next twelve months.

We anticipate that any new facilities and future facility expansions will be funded through cash flows from operations, the ~~proceeds of our IPO in July 2016, the~~ incurrence of other indebtedness and other potential sources of liquidity.

At ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, we had unrestricted cash, cash equivalents and short-term investments totaling ~~$139.1~~$123.1 million and ~~$119.1~~$129.9 million, respectively. The ~~September~~June 30, ~~2017~~2021 balance includes ~~$33.5~~$67.9 million of cash located outside of the United States, including ~~$31.5~~$58.7 million in China, ~~$1.2~~$5.1 million in Turkey, ~~and $0.8~~$2.3 million in ~~Mexico.~~ Mexico, $1.5 million in India, and $0.3 million in other countries.

Our ability to repatriate funds from China ~~to the United States~~ is subject to a number of restrictions imposed by the Chinese government. We repatriate funds through several technology license and corporate/administrative service agreements. We are compensated quarterly based on agreed upon royalty rates for such intellectual property licenses and quarterly fees for those services. Certain of our subsidiaries are limited in their ability to declare dividends without first meeting statutory restrictions of ~~the People’s Republic of~~ China, including retained earnings as determined under Chinese-statutory accounting requirements. Until 50% ($~~5.2 million)~~26.6 million as of June 30, 2021 and December 31, 2020) of registered capital is contributed to a surplus reserve, our ~~Chinese~~China operations can only pay dividends equal to 90% of after-tax profits (10% must be contributed to the surplus reserve). Once the surplus reserve fund requirement is met, our ~~Chinese~~China operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. At June 30, 2021 and December 31, ~~2016,~~2020, the amount of the surplus reserve fund was ~~$4.4 million.~~$9.4 million and $7.0 million, respectively. In July 2021, China paid a dividend of approximately $19.5 million, net of withholding taxes, to our subsidiary in Switzerland.

Financing Facilities

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

Cash Flow Discussion

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


	Six Months Ended
	June 30,
	2021			2020			$ Change
	(in thousands)
Net cash used in operating activities	$	(3,255	)	$	(27,005	)	$	23,750
Net cash used in investing activities		(27,059	)		(42,030	)		14,971
Net cash provided by financing activities		23,702			97,255			(73,553	)
Impact of foreign exchange rates on cash, cash equivalents and restricted cash		(323	)		(2,525	)		2,202
Net change in cash, cash equivalents and restricted cash	$	(6,935	)	$	25,695		$	(32,630	)

Operating Cash Flows

Nine Months Ended

September 30,

2017

2016

(in thousands)

Net income

$
37,801

$
16,098

Depreciation and amortization

13,622

9,703

Share-based compensation expense

4,794

8,117

Other non-cash items

430

4,291

Changes in assets and liabilities

(5,124
)

(10,233
)
Net cash provided by operating activities

$
51,523

$
27,976

Net cash ~~provided by~~used in operating activities ~~totaled $51.5~~decreased by $23.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and was~~2021 as compared to the same period in 2020 primarily ~~the~~as a result of ~~net income for the period of $37.8 million, depreciation~~higher operating results and ~~amortization of $13.6 million, share-based compensation costs of $4.8 million and net changes in working capital. The key components of the $5.1 million increase in~~favorable working capital include a $66.4 million increase in accounts receivable and a $25.0 million increase in inventory. This was partially offset by $47.5 million increase in accounts payable and accrued expenses, a $17.7 million increase in deferred revenue, a $9.0 million increase in customer deposits, an $8.2 million increase in accrued warranty, a $3.1 million decrease in other noncurrent assets and a $0.9 million decrease in prepaid expenses and other current assets. The working capital changes in accounts receivable, inventory, accounts payable and accrued expenses and deferred revenue are primarily the result of the material increase in and the timing of sales in the nine months ended September 30, 2017.usage.

Net cash provided by operating activities totaled $28.0 million for the nine months ended September 30, 2016 and was primarily the result of net income for the period of $16.1 million, depreciation and amortization of $9.7 million, share-based compensation costs of

$8.1 million and other non-cash items of $4.3 million, partially offset by net changes in working capital. The key components of the $10.2 million increase in working capital include an increase in accounts receivable of $27.2 million, a $6.9 million increase in other noncurrent assets, a $6.6 million increase in inventory and a $3.6 million decrease in deferred revenue. This was partially offset by a $17.5 million increase in accrued warranty, a $6.3 million increase in accounts payable and accrued expenses, a $4.9 million decrease in prepaid expenses and other current assets and a $4.9 million increase in customer deposits. The working capital changes in accounts receivable, inventory, accounts payable and accrued expenses and deferred revenue are primarily the result of the material increase in and the timing of sales in the nine months ended September 30, 2016.

Investing Cash Flows

Nine Months Ended

September 30,

2017

2016

(in thousands)

Purchase of property and equipment

$
(35,312
)

$
(18,917
)
Net cash used in investing activities

$
(35,312
)

$
(18,917
)

Net cash used in investing activities ~~totaled $35.3 million and $18.9~~decreased by $15.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively, driven primarily by~~2021 as compared to the same period in 2020 as a result of a decrease in capital expenditures for new facilities and expansion or improvements at existing facilities and costs at our corporate office to enhance our information technology systems. The capital expenditures for the nine months ended September 30, 2017 primarily related to our second and third wind blade plants in Mexico and Turkey. The capital expenditures for the nine months ended September 30, 2016 primarily related to our second wind blade plants in Mexico and Turkey as well as the expansion of our original wind blade facility in Mexico.expenditures.

We anticipate fiscal year ~~2017~~2021 capital expenditures of between ~~$70~~$55 million to ~~$75 million. We~~$65 million and we estimate that the cost that we will incur after ~~September~~June 30, ~~2017~~2021 to complete our current projects in process iswill be approximately ~~$5.7~~$8.5 million. We have used, and will

continue to use, cash ~~flow~~flows from operations, the proceeds received from our credit facilities and ~~debt~~the proceeds received from the issuance of stock for major projects currently being undertaken, which include ~~the~~ new manufacturing facilities in ~~Mexico~~Chennai, India and ~~Turkey discussed above, our new manufacturing facility in Matamoros, Mexico as well as our~~the continued investment in our existing ~~wind blade~~Tukey, Mexico, China and U.S. facilities.

Financing Cash Flows

Nine Months Ended

September 30,

2017

2016

(in thousands)

Net proceeds from issuance of common stock in initial
public offering

$
—

$
67,199

Repayments of term loan

(2,812
)

(617
)
Net proceeds from (repayments of) accounts receivable financing

8,196

(6,050
)
Net repayments of working capital loans

(4,638
)

(4,097
)
Net proceeds from (repayments of) other debt

4,556

(3,415
)
Proceeds from exercise of stock options

988

—

Repurchase of common stock including shares withheld in lieu of income taxes

(1,264
)

—

Restricted cash

(1,543
)

(649
)
Net cash provided by financing activities

$
3,483

$
52,371

The net cash provided by financing activities totaled $3.5 million for the nine months ended September 30, 2017 compared to net cash provided by financing activities of $52.4 million in the comparable period of 2016. Net cash provided by financing activities ~~for the nine months ended September 30, 2017 primarily reflects the net proceeds from accounts receivable financing and other growth-related debt, partially offset~~decreased by net repayments of working capital and term loans. The 2016 period reflects the Company’s net proceeds from the IPO of $67.2 million, partially offset by the net repayments of accounts receivable financing, working capital loans, the term loan and other debt, all of which were repaid with cash flows from operations.

~~Share Repurchases~~

During the three months ended September 30, 2017, we repurchased 68,815 shares of our common stock for $1.3 million related to tax withholding requirements on restricted stock units which vested during the period.

~~Description of Our Indebtedness~~

~~Senior Financing Agreements (U.S.):~~

In December 2016, we amended and restated our previous credit facility (the Restated Credit Facility). The previous $100.0 million of available principal was replaced with a $75.0 million term loan and a $25.0 million revolving credit facility, which originally included a $15.0 million letter of credit sub-facility, which was increased to $20.0 million in April 2017. The borrowings under the Restated Credit Facility bear interest at a variable rate through maturity at LIBOR, with a 1.0% floor, plus 5.75% (currently 7.09%). The Restated Credit Facility requires us to make quarterly principal payments in the amount of $0.9 million of the outstanding principal loan balance commencing in March 2017, with the remaining outstanding balance to be repaid on or before December 30, 2020. The Restated Credit Facility contains customary affirmative covenants, negative covenants and events of default, including covenants and restrictions that, among other things, require us and our subsidiaries to satisfy certain capital expenditure and other financial covenants, and restricts the ability of us and our subsidiaries to incur liens, incur additional indebtedness, enter into joint ventures or partnerships, engage in mergers and acquisitions, engage in asset sales and declare dividends on its capital stock without the prior written consent of the lenders. The obligations under the Restated Credit Facility are secured by a lien on substantially all tangible and intangible property of us and our domestic subsidiaries and by a pledge by us and our domestic subsidiaries of 65% of the equity of their direct foreign subsidiaries, subject to customary exceptions and exclusions from collateral.

If we prepay any of the outstanding principal loan balance prior to December 30, 2017, we are required to pay the lenders a premium in an amount equal to the amount of interest that otherwise would have been payable from the date of prepayment until December 30, 2017 plus 3.0% of the amount of the principal loan balance that was prepaid. If we prepay any of the outstanding principal loan balance after December 30, 2017 through December 30, 2018, we are required to pay the lenders 2.0% of the principal loan balance that was prepaid, and if we prepay any of the outstanding loan balance after December 30, 2018 through December 30, 2019, we are required to pay a premium of 1.5% of the amount of the principal loan balance that was prepaid.

As of September 30, 2017 and December 31, 2016, the aggregate outstanding balance under the Restated Credit Facility was $75.0 million and $77.8 million, respectively. We cannot assure you that we will be able to maintain appropriate minimum leverage or fixed-charge coverage ratio requirements in the future.

~~Accounts Receivable, Secured and Unsecured Financing:~~

~~EMEA~~: During 2014, we renewed a general credit agreement with a financial institution in Turkey to provide up to $20.0 million (later updated to 21.0 million Euro, or approximately $24.8 million as of September 30, 2017) of short-term collateralized financing on invoiced accounts receivable of one of Turkey’s customers. Interest accrues annually at a variable rate (currently 5.75%) and is paid quarterly. In December 2014, we obtained an additional $7.0 million (later decreased to $5.0 million) of unsecured financing in Turkey under the credit agreement, increasing the total facility. All credit agreement terms remained the same. The credit agreement does not have a maturity date, however the limits are reviewed in September of each year. Amounts outstanding under this agreement as of September 30, 2017 and December 31, 2016 include $13.9 million and $15.1 million of accounts receivable financing and none and $4.6 million of unsecured financing, respectively.

In December 2014, we entered into a credit agreement with a Turkish financial institution to provide up to $16.0 million of short-term financing of which $10.0 million is collateralized financing on invoiced accounts receivable of one of our customers in Turkey, $5.0 million is unsecured financing and $1.0 million is related to letters of guarantee. Interest accrues at a variable rate (currently 6.5%). The credit agreement does not have a maturity date, however the limits are reviewed in September of each year. No amounts were outstanding under this agreement as of September 30, 2017 or December 31, 2016.

In March 2016, we entered into a general credit agreement, as amended, with a Turkish financial institution to provide up to 35.0 million Euro (approximately $41.3 million as of September 30, 2017) of short-term financing of which 20.0 million Euro (approximately $23.6 million as of September 30, 2017) is collateralized financing based on invoiced accounts receivable of one of the EMEA segment’s customers and 12.5 million Euro (later increased to 15.0 million Euro, or approximately $17.7 million as of September 30, 2017) for the collateralized financing of capital expenditures. An additional 1.0 million Euro related to letters of guarantee matured in March 2017. Interest on the collateralized financing based on invoiced accounts receivable accrues at the three month EURIBOR plus 5.75% (currently 5.75%) and is paid quarterly with a maturity date equal to four months from the applicable invoice date. Interest on the collateralized capital expenditures financing accrues at the one month EURIBOR, plus 6.75% (currently 6.75%) with monthly principal repayments beginning in October 2017 with a final maturity date of December 2021. Interest on the letters of guarantee accrued at 2.00% annually. As of September 30, 2017 and December 31, 2016, there was $17.7 million and $15.8 million outstanding under the collateralized financing of capital expenditures line, respectively. Additionally, as of

~~September 30, 2017, there was $9.4 million outstanding under the collateralized financing based on invoiced accounts receivables, with no corresponding amounts outstanding as of December 31, 2016.~~

~~Asia~~: In January 2016, we entered into a credit agreement with a Chinese financial institution to provide up to 95.0 million Renminbi (approximately $13.6 million as of December 31, 2016) of short-term financing of which 85.0 million Renminbi (approximately $12.2 million as of December 31, 2016) is collateralized financing based on invoiced accounts receivables of one of our Asia segment’s customers and 10.0 million Renminbi (approximately $1.4 million as of December 31, 2016) of working capital loans collateralized by one of our Asia segment location’s machinery and equipment. Interest on the collateralized financing and the collateralized working capital loan accrues at a specified LIBOR rate plus an applicable margin and can be paid monthly, quarterly or at the time of the debt’s final maturity (January 12, 2017). As of December 31, 2016, there were no amounts outstanding under these accounts receivable financing and working capital loans. This credit agreement matured in January 2017.

In February 2017, we entered into a credit agreement with a Chinese financial institution to provide an unsecured credit line of up to 150.0 million Renminbi (approximately $22.5 million as of September 30, 2017) which can be used for the purpose of domestic and foreign currency loans, issuing letters of guarantee or other transactions approved by the lender. Interest on the credit line accrues at the LIBOR rate plus an applicable margin and can be paid monthly, quarterly or at the time of the debt’s maturity (in February 2018). No amounts were outstanding under this agreement as of September 30, 2017.

~~Equipment Lease and Other Arrangements:~~ We have entered into certain capital lease, sale-leaseback and construction loan arrangements in the United States, Mexico and EMEA for equipment used in our operations as well as for office use. These leases bear interest at rates ranging from 3.0% to 9.0% annually, and principal and interest are payable monthly. As of September 30, 2017 and December 31, 2016, there was $19.5 million and $12.1 million outstanding under these arrangements, respectively.

~~Operating Leases:~~ We lease various facilities and equipment under non-cancelable operating lease agreements. As of September 30, 2017, we leased a total of approximately 4.8 million square feet in Dafeng, China; Izmir, Turkey; Newton, Iowa; Juárez, Mexico; Santa Teresa, New Mexico; Taicang City, China; Taicang Port, China; Matamoros, Mexico; Warren, Rhode Island; and Fall River, Massachusetts, as well as our corporate office in Scottsdale, Arizona. The terms of these leases range from 12 months to 120 months with annual payments approximating $16$73.6 million for the ~~full year 2017.~~ six months ended June 30, 2021 as compared to the same period in 2020 primarily as a result of decreased net borrowings on our revolving loans.

~~Off-Balance Sheet Transactions~~OFF-BALANCE SHEET TRANSACTIONS

We are not presently involved in any off-balance sheet arrangements, including transactions with unconsolidated special-purpose or other entities that would materially affect our financial position, results of operations, liquidity or capital resources, other than ~~the~~our accounts receivable assignment ~~agreement~~agreements described ~~below and the operating lease arrangements presented in our Annual Report on Form 10-K.~~below. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes.

~~In July 2014, our Mexico segment entered~~Our segments enter into an accounts receivable assignment ~~agreement~~agreements with avarious financial ~~institution.~~institutions. Under ~~this agreement,~~these agreements, the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to ~~one of~~ our ~~Mexico~~ segment’s customers at aan agreed-upon discount ~~calculated based on an effective annual rate~~rate.

The following table summarizes certain key details of ~~LIBOR plus 2.75%.~~ each of the accounts receivable assignment agreements in place as of June 30, 2021:


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

As ~~these~~the receivables are purchased by the financial ~~institution, they~~institutions under the agreements noted above, the receivables are removed from ~~the Mexico segment’s~~our condensed consolidated balance sheet. During the three ~~and nine~~ months ended ~~September~~June 30, ~~2017, $17.3~~2021 and 2020, $360.8 million and ~~$60.0~~$235.7 million, respectively, and during the six months ended June 30, 2021 and 2020, $654.9 million and $459.9 million, respectively, of receivables were sold tounder the ~~financial institution, respectively.~~accounts receivable assignment agreements described above.

~~Critical Accounting Policies and Estimates~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

~~Recent Accounting Pronouncements~~RECENT ACCOUNTING PRONOUNCEMENTS

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

~~Contractual Obligations~~CONTRACTUAL OBLIGATIONS

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, there have been no material changes to the contractual obligations reported in our Annual Report on Form 10-K, other than in the ordinary course of business.

Item 3. ~~Quantitative and Qualitative Disclosures about Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of our business. These market risks are principally limited to changes in foreign currency exchange rates and commodity prices. ~~We currently do not hedge our exposure to these risks.~~

Foreign Currency Risk. We conduct international operations in China, Mexico, Turkey and ~~Turkey.~~India. Our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the local currency of the transacting entity. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant domestic currency and then translated into U.S. dollars for inclusion in our ~~historical~~condensed consolidated financial statements. In recent years, exchange rates between these foreign currencies and the U.S. ~~dollars~~dollar have fluctuated significantly and may do so in the future. A hypothetical change of 10% in the exchange rates for the countries above would have resulted in a change to income from operations of approximately ~~$6.0 million and $5.7~~$15.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2021.

Commodity Price Risk. We are subject to commodity price risk under agreements for the supply of our raw materials. We have not hedged ~~nor do we intend to hedge,~~ our commodity price exposure. We generally lock in pricing for most of our key raw materials for 12 months which protects us from price increases within that ~~period. Additionally, the arrangements~~period, which we ~~have with our customers limit~~believe helps to mitigate the impact of ~~any~~raw material price ~~or cost~~ increases.

~~Finally, since~~ As many of our raw material supply agreements have meet or release clauses, if raw materials prices ~~go down,~~decrease, we ~~can also~~are able to benefit from the reductions in price. ~~We believe that this adequately protects us from increases in raw material prices but also enables us to take full advantage of decreases. We believe that a 10% change in the price of resin~~

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

Prior to taking into account any contractual obligations of our customers to share with us the cost savings or increases resulting from a change in the current forecasted price of resin and resin systems, we believe that a 10% change in the current forecasted price of resin and resin systems for the customers in which we are exposed to fluctuating prices would have had an impact to income from operations of approximately ~~$9.9 million and $12.0~~$11.8 million for the ~~nine months ended September 30, 2017~~full year 2021. Under our customer supply agreements, our customers typically receive 70% of the cost savings or increases resulting from a change in the price of resin and ~~2016, respectively.~~resin systems.

Interest Rate Risk. As of ~~September~~June 30, ~~2017, we have an aggregate~~2021, our Credit Agreement includes interest on the unhedged principal amount of ~~$75.0~~$96.2 million which is tied to the London Interbank Offered Rate (LIBOR), our India segment has two credit agreements outstanding ~~under the Restated Credit Facility that is~~which are tied to LIBOR, and ~~an aggregate of $27.1 million outstanding under a~~our EMEA segment has one general credit agreement ~~with a Turkish financial institution that~~outstanding which is tied to ~~EURIBOR.~~the Euro Interbank Offered Rate (EURIBOR). For a discussion of the interest rate swap arrangement we entered into related to our Credit Agreement, see Note 13, Financial Instruments, to the notes to the consolidated financial statements within our 2020 Annual Report on Form 10-K. The ~~Restated~~India credit agreements had secured and unsecured working capital financing of $6.4 million and unsecured term loan financing of $2.1 million outstanding as of June 30, 2021. The two EMEA credit agreements had unsecured financing of $5.9 million and financing of capital expenditures of $2.1 million outstanding as of June 30, 2021. Our Credit ~~Facility~~Agreement, the two India credit agreements, and the ~~Turkish~~one EMEA general credit agreement are the only variable rate debt ~~instruments~~agreements that we had outstanding as of ~~September~~June 30, ~~2017 and December 31, 2016~~2021 as all remaining working capital loans, secured and unsecured financing ~~accounts receivable financing~~ and ~~capital~~finance lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates. Due to the relatively low LIBOR and EURIBOR rates in effect as of ~~September~~June 30, ~~2017,~~2021, a 10% change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or cash flows.

Item 4. ~~Controls and Procedures~~CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) promulgated under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the design and operating effectiveness as of ~~September~~June 30, ~~2017~~2021 of our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2021.

Changes in Internal Control Over Financial Reporting

There ~~have not been any~~were no changes in our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2017,~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART ~~II—~~II. OTHER INFORMATION

Item 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

~~From time to time, we may be involved in disputes or litigation relating to claims arising out of our operations.~~

As previously disclosed in our Annual Report on Form 10-K, in March 2015, a complaint was filed against the Company in the Superior Court of the State of Arizona (Maricopa County) by a former employee of the Company, alleging that the Company had agreed to make certain cash payments to such employee upon any future sale of the Company. We filed a motion to dismiss the complaint in April 2015, which was denied. We subsequently filed an answer to the complaint in July 2015 denying the substantive allegations of the complaint. The parties completed court-ordered mediation in December 2015 but were not able to reach a settlement. We filed a motion for summary judgment to dismiss the complaint in April 2016See Note 12, Commitments and the court denied our motion in August 2016. The court set a trial date for September 2017. In May 2017, we filed a motion for continuance to change the trial date and the court granted our motion. The court has set a trial date in August 2018. We continue to deny the substantive allegations of the complaint and we intend to vigorously defend this lawsuit; however, we are currently unable to determine the ultimate outcome of this case.

~~As previously disclosed in our Annual Report on Form 10-K, in August 2015, we entered into a transition agreement with our former Senior Vice President – Asia (SVP–Asia)~~Contingencies, pursuant to which he transitioned out of this role at the end of 2015 and was to serve in a consulting capacity in 2016 and 2017. In January 2016, following our discovery that he had materially violated the terms of his transition agreement, we terminated his consultancy for cause. In April 2016, he filed an arbitration claim in China with the Taicang Labor and Personnel Dispute Arbitration Committee alleging that we improperly terminated his transition agreement. He is demanding that we continue to honor the terms of the transition agreement and pay him compensation and fees owed to him under the ~~transition agreement, which in the aggregate total approximately $2.6 million. In addition, he is also challenging the validity~~heading “Legal Proceedings” to our condensed consolidated financial statements for a discussion of ~~our termination of his option to purchase 164,880 shares of our common stock~~legal proceedings and 77,760 restricted stock units under the 2015 Plan, which were canceled in January 2016 when we terminated his consultancy. In May 2017, the arbitration committee awarded our former SVP–Asia approximately fifty percent of the amounts demanded under the transition agreement but denied his claims regarding the improper termination of his stock option and restricted stock units. We have appealed the arbitration committee’s award of damages in favor of our former SVP–Asia and the appeal remains pending. We previously established a reserve for this matter and we do not believe the award, if upheld on appeal, will have a material impact on our operating results or financial condition.other related matters.

Item 1A. ~~Risk Factors~~RISK FACTORS

~~Other than the supplemental risk factor set forth~~Except as noted below, there have been no material changes to the Risk Factors (Part I, Item 1A) in our Annual Report on Form 10-K, which could materially affect ~~the Company’s~~our business, financial condition, and/or future results.

~~The proposed tax reform bill introduced~~Our business, operations and financial condition during the six months ended June 30, 2021 were not materially adversely affected by the COVID-19 pandemic however we cannot estimate the duration of the COVID-19 pandemic and our business may be adversely affected in the ~~U.S. House~~future if the COVID-19 pandemic persists.

The COVID-19 pandemic did not materially adversely affect our business and operations during the six months ended June 30, 2021. Although all of ~~Representatives~~our manufacturing facilities currently are operating at or near normal production levels, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in ~~early November contains provisions which, if enacted, would likely~~the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. For example, India and Turkey recently experienced significant increases in positive COVID-19 cases although these resurgences did not have a material ~~adverse effect~~impact on our operations during the ~~U.S. wind energy sector and~~six months ended June 30, 2021. In addition, although we are not currently experiencing any significant disruptions in our global supply chain due to the COVID-19 pandemic, our global supply chain may ~~materially harm our business, financial condition and results of operations.~~

~~The proposed tax reform bill introduced~~ in the ~~U.S. House of Representatives in early November contains provisions that would limit~~future be adversely affected if the value and potential use of the Production Tax Credit for Renewable Energy (PTC) to finance the development of wind energy projects in the United States. Under current law, a taxpayer may claim a PTC for the production of electricity from qualified wind energy projects at a qualifying facility during the 10-year period beginning on the date the facility was originally placed in service. In addition, current law provides that the base amount of the PTC is 1.5 cents (indexed annually for inflation) per kilowatt-hour of electricity produced. For 2016, the amount of the PTC is generally 2.3 cents per kilowatt-hour. Under the proposed tax reform bill, the inflation adjustment would be repealed, effective for electricity produced at a wind energy facility, the construction of which begins after November 2, 2017, and taxpayers’ credit amount would revert back to 1.5 cents per kilowatt- hour for the remaining portion of the 10-year period. The proposed tax reform legislation also would require a “continuous program of construction” from the date a wind energy facility begins construction to the date it is placed in service to qualify for the PTC. The “continuous program of construction” requirement exists under current law and has been interpreted by the Department of the Treasury to permit several “safe harbor” time periods. At present, it is unclear whether the proposed tax reform bill, if enacted, would effectively eliminate those safe harbors or whether the U.S. Department of Treasury may issue them unchanged or substantially unchanged. If the proposed changes to the PTC are enacted, it would likely have a material adverse effect on the U.S. wind energy sector and reduce the demand for our wind turbine blades. Any reduction in the demand for our wind turbine blades may materially harm our business, financial condition and results of operations.COVID-19 pandemic persists.

Item 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

Not applicable.

The following table summarizes the total number of shares of our common stock that we repurchased during the three months ended September 30, 2017 from certain employees who surrendered common stock to pay the taxes in connection with the vesting of restricted stock units.

Period

Total Number
of Shares Purchased

Average Price
Paid per Share

Total Number
of Shares Purchased as Part of Publicly Announced Program

Maximum Number of Shares That May
Yet Be Purchased Under the Program

July (July 1, 2017 - July 31, 2017)

68,815

$
18.37

—

—

August (August 1, 2017 - August 31, 2017)

—

—

—

—

September (September 1, 2017 - September 30, 2017)

—

—

—

—

Total

68,815

$
18.37

—

—

Use of Proceeds

On July 21, 2016, our Registration Statement on Form S-1 (File No. 333-212093) was declared effective by the SEC for our IPO whereby we registered an aggregate of 7,187,500 shares of our common stock, including 937,500 shares of our common stock registered for sale by us upon the full exercise of the underwriters’ option to purchase additional shares. On July 27, 2016, we completed our IPO and sold 7,187,500 shares of our common stock at a price to the public of $11.00 per share. J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC acted as the managing underwriters. The total gross proceeds from the offering to us were $79.1 million. After deducting underwriting discounts and commissions of $4.6 million and offering expenses of $7.3 million, we received $67.2 million in net proceeds. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on July 22, 2016 pursuant to Rule 424(b) of the Securities Act. We continue to invest the remaining funds received in registered money market funds.Not applicable.

Item 3. ~~Defaults Upon Senior Securities~~DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. ~~Mine Safety Disclosures~~MINE SAFETY DISCLOSURES

Not applicable.

Item 5. ~~Other Information~~OTHER INFORMATION

None.

Item 6. E~~xhibits~~ EXHIBITS


Exhibit Number		Exhibit Description

~~31.1~~ 31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~ 31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

~~SIGNATURES~~* Filed herewith.

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		TPI COMPOSITES, INC.

~~Date: November 8, 2017~~	~~By:~~	~~/s/ William E. Siwek~~
		~~William E. Siwek~~
		~~Chief Financial Officer~~
Date: August 5, 2021	By:	/s/ Adan Gossar
		Adan Gossar
		Chief Accounting Officer
		(Principal ~~Financial and~~ Accounting Officer)

3635


	2017
Warranty accrual at beginning of year	$	19,912
Accrual during the period		10,696
Cost of warranty services provided during the period		(372	)
Reversal of reserves upon warranty expiration		(2,086	)
Warranty accrual at end of period	$	28,150

				Stock Options							RSUs
	Shares Available for Grant			Shares			Weighted- Average Exercise Price		Options Exercisable		Units			Weighted- Average Grant Date Fair Value
Balance as of December 31, 2016		3,587,692			3,331,418		$	12.72		25,828		636,120		$	10.90
Increase in shares authorized		1,349,475			—			—				—			—
Granted		(190,290	)		161,090			20.00				29,200			16.69
Exercised/vested		—			(107,527	)		10.81				(218,040	)		10.95
Forfeited/cancelled		227,650			(202,450	)		11.54				(25,200	)		10.87
Balance as of September 30, 2017		4,974,527			3,182,531			13.23		729,196		422,080			11.27

		Options Outstanding						Options Exercisable
Range of Exercise Prices:		Shares		Weighted- Average Remaining Contractual Life (in years)		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
$8.49			22,728		2.3	$	8.49		22,728	$	8.49
$	10.87		2,004,700		7.7		10.87		465,700		10.87
$11.00 to $16.53			656,523		8.3		16.12		157,072		16.33
$18.70			342,790		8.7		18.68		83,696		18.70
$20.05 to $22.34			155,790		9.9		20.14		—		—
$8.49 to $22.34			3,182,531		8.0		13.23		729,196		12.87

	Three Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2017					2016
Customer	Revenues		% of Total			Revenues		% of Total			Revenues		% of Total			Revenues		% of Total
GE	$	99,623		40.9	%	$	98,141		49.3	%	$	286,941		42.0	%	$	292,435		51.4	%
Vestas		69,125		28.4			50,300		25.3			195,556		28.6			120,716		21.2
Nordex Group		46,998		19.3			31,132		15.6			119,530		17.5			96,139		16.9
Gamesa		23,820		9.8			17,844		9.0			71,405		10.5			54,553		9.6
Other		3,788		1.6			1,521		0.8			9,710		1.4			5,460		0.9
Total	$	243,354		100.0	%	$	198,938		100.0	%	$	683,142		100.0	%	$	569,303		100.0	%

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program
July (July 1, 2017 - July 31, 2017)		68,815	$	18.37		—		—
August (August 1, 2017 - August 31, 2017)		—		—		—		—
September (September 1, 2017 - September 30, 2017)		—		—		—		—
Total		68,815	$	18.37		—		—