06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended March 31, June 30, 2021
OR
☐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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
|
| ||||
|
| ☒ |
| Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of AprilJuly 30, 2021, there were 36,711,52537,248,140 shares of common stock outstanding.
TPI COMPOSITES, INC. AND SUBSIDIARIES
INDEX
Page | |||||
ITEM 1. |
| ||||
Condensed Consolidated Balance Sheets as of |
| ||||
| |||||
| |||||
| |||||
| |||||
Notes to Condensed Consolidated Financial Statements (Unaudited) |
| ||||
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | |||
ITEM 3. | 31 | ||||
ITEM 4. |
| ||||
ITEM 1. |
| ||||
ITEM 1A. |
| ||||
ITEM 2. |
| ||||
ITEM 3. |
| ||||
ITEM 4. |
| ||||
ITEM 5. |
| ||||
ITEM 6. |
| ||||
|
1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities 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 and electric vehicle markets and our addressable markets for our products and services; the potential impact of the increasing prevalence of auction-based tenders in the wind energy market and increased competition from solar energy on our gross margins and overall financial performance; our future financial performance, including our net sales, cost of goods sold, gross profit or gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve or maintain profitability; changes in domestic or international government or regulatory policy, including without limitation, changes in trade policy and a potential extension of the Production Tax Credit in the United States; the sufficiency of our cash and cash equivalents to meet our liquidity needs; our ability to attract and retain customers for our products, and to optimize product pricing; our ability to effectively manage our growth strategy and future expenses, including our startup and transition costs; our ability to successfully expand in our existing wind energy markets and into new international wind energy markets, including our ability to expand our field service inspection and repair services business and manufacture wind blades for offshore wind energy projects; our ability to successfully open new manufacturing facilities, take over existing facilities of our customers and expand our existing facilities on time and on budget; the impact of the accelerated pace of new product and wind blade model introductions on our business and our results of operations; our ability to successfully expand our transportation business and execute upon our strategy of entering new markets outside of wind energy; worldwide economic conditions and their impact on customer demand; our ability to maintain, protect and enhance our intellectual property; our ability to comply with existing, modified or new laws and regulations applying to our business, including the imposition of new taxes, duties or similar assessments on our products; the attraction and retention of qualified employees and key personnel; our ability to maintain good working relationships with our employees, and avoid labor disruptions, strikes and other disputes with labor unions that represent certain of our employees; and the potential impact of one or more of our customers becoming bankrupt or insolvent, or experiencing other financial problems.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These forward-looking statements are only predictions. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to materially differ from any future results, levels of activity, performance or achievements expressed or
2
implied by these forward-looking statements. We have described in the “Risk Factors” section of our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on February 25, 2021 the principal risks and uncertainties
that we believe could cause actual results to differ from these forward-looking statements. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to update any forward-looking statement to reflect events or developments after the date on which the statement is made or to reflect the occurrence of unanticipated events except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date after the date of this Quarterly Report on Form 10-Q. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
3
PART I—I. FINANCIAL INFORMATION
ITEM l. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
| March 31, |
|
| December 31, |
|
| June 30, |
| December 31, |
| |||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| |||||
|
| (in thousands, except par value data) |
|
| (in thousands, except par value data) |
| ||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 136,236 |
|
| $ | 129,857 |
|
| $ | 123,107 |
|
| $ | 129,857 |
|
Restricted cash |
|
| 336 |
|
|
| 339 |
|
|
| 154 |
|
|
| 339 |
|
Accounts receivable |
|
| 130,417 |
|
|
| 132,768 |
|
|
| 147,827 |
|
|
| 132,768 |
|
Contract assets |
|
| 216,035 |
|
|
| 216,928 |
|
|
| 231,780 |
|
|
| 216,928 |
|
Prepaid expenses |
|
| 23,128 |
|
|
| 29,507 |
|
|
| 21,019 |
|
|
| 29,507 |
|
Other current assets |
|
| 19,389 |
|
|
| 27,921 |
|
|
| 20,520 |
|
|
| 27,921 |
|
Inventories |
|
| 11,829 |
|
|
| 10,839 |
|
|
| 13,168 |
|
|
| 10,839 |
|
Total current assets |
|
| 537,370 |
|
|
| 548,159 |
|
|
| 557,575 |
|
|
| 548,159 |
|
Property, plant and equipment, net |
|
| 212,129 |
|
|
| 209,001 |
|
|
| 205,716 |
|
|
| 209,001 |
|
Operating lease right of use assets |
|
| 151,212 |
|
|
| 158,827 |
|
|
| 148,991 |
|
|
| 158,827 |
|
Other noncurrent assets |
|
| 53,345 |
|
|
| 40,270 |
|
|
| 28,232 |
|
|
| 40,270 |
|
Total assets |
| $ | 954,056 |
|
| $ | 956,257 |
|
| $ | 940,514 |
|
| $ | 956,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts payable and accrued expenses |
| $ | 291,947 |
|
| $ | 295,992 |
|
| $ | 310,320 |
|
| $ | 295,992 |
|
Accrued warranty |
|
| 45,956 |
|
|
| 50,852 |
|
|
| 47,462 |
|
|
| 50,852 |
|
Current maturities of long-term debt |
|
| 53,294 |
|
|
| 32,551 |
|
|
| 56,137 |
|
|
| 32,551 |
|
Current operating lease liabilities |
|
| 26,496 |
|
|
| 26,099 |
|
|
| 23,100 |
|
|
| 26,099 |
|
Contract liabilities |
|
| 2,132 |
|
|
| 614 |
|
|
| 2,258 |
|
|
| 614 |
|
Total current liabilities |
|
| 419,825 |
|
|
| 406,108 |
|
|
| 439,277 |
|
|
| 406,108 |
|
Long-term debt, net of debt issuance costs and current maturities |
|
| 180,976 |
|
|
| 184,316 |
| ||||||||
Long-term debt, net of current maturities |
|
| 180,138 |
|
|
| 184,316 |
| ||||||||
Noncurrent operating lease liabilities |
|
| 150,289 |
|
|
| 155,925 |
|
|
| 152,059 |
|
|
| 155,925 |
|
Other noncurrent liabilities |
|
| 8,358 |
|
|
| 8,873 |
|
|
| 8,143 |
|
|
| 8,873 |
|
Total liabilities |
|
| 759,448 |
|
|
| 755,222 |
|
|
| 779,617 |
|
|
| 755,222 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Common shares, $0.01 par value, 100,000 shares authorized, 36,920 shares issued and 36,712 shares outstanding at March 31, 2021 and 100,000 shares authorized, 36,771 shares issued and 36,564 shares outstanding at December 31, 2020 |
|
| 369 |
|
|
| 368 |
| ||||||||
Common shares, $0.01 par value, 100,000 shares authorized, 37,248 |
|
| 372 |
|
|
| 368 |
| ||||||||
Paid-in capital |
|
| 353,201 |
|
|
| 349,472 |
|
|
| 359,527 |
|
|
| 349,472 |
|
Accumulated other comprehensive loss |
|
| (41,316 | ) |
|
| (32,990 | ) |
|
| (41,559 | ) |
|
| (32,990 | ) |
Accumulated deficit |
|
| (111,513 | ) |
|
| (109,716 | ) |
|
| (151,310 | ) |
|
| (109,716 | ) |
Treasury stock, at cost, 208 shares at March 31, 2021 and 207 shares at December 31, 2020 |
|
| (6,133 | ) |
|
| (6,099 | ) | ||||||||
Treasury stock, at cost, 208 shares at June 30, 2021 and 207 shares at |
|
| (6,133 | ) |
|
| (6,099 | ) | ||||||||
Total stockholders’ equity |
|
| 194,608 |
|
|
| 201,035 |
|
|
| 160,897 |
|
|
| 201,035 |
|
Total liabilities and stockholders’ equity |
| $ | 954,056 |
|
| $ | 956,257 |
|
| $ | 940,514 |
|
| $ | 956,257 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
4
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| Three Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| March 31, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||||||
|
| (in thousands, except per share data) |
|
| (in thousands, except per share data) |
| ||||||||||||||||||
Net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
| $ | 458,841 |
|
| $ | 373,817 |
|
| $ | 863,521 |
|
| $ | 730,453 |
|
Cost of sales |
|
| 383,056 |
|
|
| 348,475 |
|
|
| 440,416 |
|
|
| 367,644 |
|
|
| 823,472 |
|
|
| 716,119 |
|
Startup and transition costs |
|
| 14,354 |
|
|
| 12,034 |
|
|
| 10,099 |
|
|
| 10,920 |
|
|
| 24,453 |
|
|
| 22,954 |
|
Total cost of goods sold |
|
| 397,410 |
|
|
| 360,509 |
|
|
| 450,515 |
|
|
| 378,564 |
|
|
| 847,925 |
|
|
| 739,073 |
|
Gross profit (loss) |
|
| 7,270 |
|
|
| (3,873 | ) |
|
| 8,326 |
|
|
| (4,747 | ) |
|
| 15,596 |
|
|
| (8,620 | ) |
General and administrative expenses |
|
| 8,922 |
|
|
| 9,496 |
|
|
| 6,712 |
|
|
| 6,887 |
|
|
| 15,634 |
|
|
| 16,383 |
|
Loss on sale of assets and asset impairments |
|
| 1,297 |
|
|
| 1,918 |
|
|
| 1,451 |
|
|
| 1,440 |
|
|
| 2,748 |
|
|
| 3,358 |
|
Restructuring charges, net |
|
| 258 |
|
|
| 117 |
|
|
| 2,196 |
|
|
| 181 |
|
|
| 2,454 |
|
|
| 298 |
|
Loss from operations |
|
| (3,207 | ) |
|
| (15,404 | ) |
|
| (2,033 | ) |
|
| (13,255 | ) |
|
| (5,240 | ) |
|
| (28,659 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense, net |
|
| (2,704 | ) |
|
| (1,771 | ) |
|
| (2,691 | ) |
|
| (2,545 | ) |
|
| (5,395 | ) |
|
| (4,316 | ) |
Foreign currency income (loss) |
|
| (3,727 | ) |
|
| 960 |
| ||||||||||||||||
Foreign currency loss |
|
| (6,504 | ) |
|
| (1,928 | ) |
|
| (10,231 | ) |
|
| (968 | ) | ||||||||
Miscellaneous income |
|
| 739 |
|
|
| 695 |
|
|
| 321 |
|
|
| 939 |
|
|
| 1,060 |
|
|
| 1,634 |
|
Total other expense |
|
| (5,692 | ) |
|
| (116 | ) |
|
| (8,874 | ) |
|
| (3,534 | ) |
|
| (14,566 | ) |
|
| (3,650 | ) |
Loss before income taxes |
|
| (8,899 | ) |
|
| (15,520 | ) |
|
| (10,907 | ) |
|
| (16,789 | ) |
|
| (19,806 | ) |
|
| (32,309 | ) |
Income tax benefit |
|
| 7,102 |
|
|
| 15,028 |
| ||||||||||||||||
Income tax provision |
|
| (28,890 | ) |
|
| (49,312 | ) |
|
| (21,788 | ) |
|
| (34,284 | ) | ||||||||
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
| $ | (39,797 | ) |
| $ | (66,101 | ) |
| $ | (41,594 | ) |
| $ | (66,593 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 36,601 |
|
|
| 35,213 |
|
|
| 36,881 |
|
|
| 35,299 |
|
|
| 36,742 |
|
|
| 35,256 |
|
Diluted |
|
| 36,601 |
|
|
| 35,213 |
|
|
| 36,881 |
|
|
| 35,299 |
|
|
| 36,742 |
|
|
| 35,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | (0.05 | ) |
| $ | (0.01 | ) |
| $ | (1.08 | ) |
| $ | (1.87 | ) |
| $ | (1.13 | ) |
| $ | (1.89 | ) |
Diluted |
| $ | (0.05 | ) |
| $ | (0.01 | ) |
| $ | (1.08 | ) |
| $ | (1.87 | ) |
| $ | (1.13 | ) |
| $ | (1.89 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
5
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
| Three Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||
|
| March 31, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
|
| 2021 |
| 2020 |
| |||||||||
|
| (in thousands) |
|
| (in thousands) |
| |||||||||||||||||||
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
| $ | (39,797 | ) |
| $ | (66,101 | ) |
| $ | (41,594 | ) |
| $ | (66,593 | ) | |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustments |
|
| (5,291 | ) |
|
| (9,224 | ) |
|
| (4 | ) |
|
| (2,289 | ) |
|
| (5,295 | ) |
|
| (11,513 | ) | |
Unrealized loss on hedging derivatives, net of taxes of $651 and $2,039, respectively |
|
| (3,035 | ) |
|
| (7,669 | ) | |||||||||||||||||
Unrealized gain (loss) on hedging derivatives, net of taxes of |
|
| (239 | ) |
|
| 3,549 |
|
|
| (3,274 | ) |
|
| (4,120 | ) | |||||||||
Comprehensive income (loss) |
| $ | (10,123 | ) |
| $ | (17,385 | ) |
| $ | (40,040 | ) |
| $ | (64,841 | ) |
| $ | (50,163 | ) |
| $ | (82,226 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
6
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
| Three Months Ended March 31, 2021 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2021 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||||||
|
| Common |
|
| Paid-in |
|
| other comprehensive |
|
| Accumulated |
|
| Treasury stock, |
|
| Total stockholders' |
|
| Common |
| Paid-in |
| other comprehensive |
| Accumulated |
| Treasury stock, |
| Total stockholders' |
| |||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| capital |
|
| loss |
|
| deficit |
|
| at cost |
|
| equity |
|
| Shares |
| Amount |
| capital |
| loss |
| deficit |
| at cost |
| equity |
| ||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
|
| 36,771 |
|
| $ | 368 |
|
| $ | 349,472 |
|
| $ | (32,990 | ) |
| $ | (109,716 | ) |
| $ | (6,099 | ) |
| $ | 201,035 |
|
|
| 36,771 |
|
| $ | 368 |
|
| $ | 349,472 |
|
| $ | (32,990 | ) |
| $ | (109,716 | ) |
| $ | (6,099 | ) |
| $ | 201,035 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,797 | ) |
|
| — |
|
|
| (1,797 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,797 | ) |
|
| — |
|
|
| (1,797 | ) |
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,494 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,494 |
|
|
| — |
|
|
| — |
|
|
| 2,494 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,494 |
|
Issuances under share-based compensation plan |
|
| 149 |
|
|
| 1 |
|
|
| 1,235 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,236 |
|
|
| 149 |
|
|
| 1 |
|
|
| 1,235 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,236 |
|
Common stock repurchased for treasury |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34 | ) |
|
| (34 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34 | ) |
|
| (34 | ) |
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,326 | ) |
|
| — |
|
|
| — |
|
|
| (8,326 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,326 | ) |
|
| — |
|
|
| — |
|
|
| (8,326 | ) |
Balance at March 31, 2021 |
|
| 36,920 |
|
| $ | 369 |
|
| $ | 353,201 |
|
| $ | (41,316 | ) |
| $ | (111,513 | ) |
| $ | (6,133 | ) |
| $ | 194,608 |
|
|
| 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 |
|
| 328 |
|
|
| 3 |
|
|
| 3,490 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,493 |
| ||||||||||||||||||||||||||||
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (243 | ) |
|
| — |
|
|
| — |
|
|
| (243 | ) | ||||||||||||||||||||||||||||
Balance at June 30, 2021 |
|
| 37,248 |
|
| $ | 372 |
|
| $ | 359,527 |
|
| $ | (41,559 | ) |
| $ | (151,310 | ) |
| $ | (6,133 | ) |
| $ | 160,897 |
|
|
| Three Months Ended March 31, 2020 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2020 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||||||
|
| Common |
|
| Paid-in |
|
| other comprehensive |
|
| Accumulated |
|
| Treasury stock, |
|
| Total stockholders' |
|
| Common |
| Paid-in |
| other comprehensive |
| Accumulated |
| Treasury stock, |
| Total stockholders' |
| |||||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| capital |
|
| loss |
|
| deficit |
|
| at cost |
|
| equity |
|
| Shares |
| Amount |
| capital |
| loss |
| deficit |
| at cost |
| equity |
| ||||||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| 35,326 |
|
| $ | 353 |
|
| $ | 322,906 |
|
| $ | (23,612 | ) |
| $ | (90,689 | ) |
| $ | (3,908 | ) |
| $ | 205,050 |
|
|
| 35,326 |
|
| $ | 353 |
|
| $ | 322,906 |
|
| $ | (23,612 | ) |
| $ | (90,689 | ) |
| $ | (3,908 | ) |
| $ | 205,050 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (492 | ) |
|
| — |
|
|
| (492 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (492 | ) |
|
| — |
|
|
| (492 | ) |
Share-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,970 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,970 |
|
|
| — |
|
|
| — |
|
|
| 2,970 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,970 |
|
Issuances under share-based compensation plan |
|
| 109 |
|
|
| 1 |
|
|
| 861 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 862 |
|
|
| 109 |
|
|
| 1 |
|
|
| 861 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 862 |
|
Common stock repurchased for treasury |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (459 | ) |
|
| (459 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (459 | ) |
|
| (459 | ) |
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,893 | ) |
|
| — |
|
|
| — |
|
|
| (16,893 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,893 | ) |
|
| — |
|
|
| — |
|
|
| (16,893 | ) |
Balance at March 31, 2020 |
|
| 35,435 |
|
| $ | 354 |
|
| $ | 326,737 |
|
| $ | (40,505 | ) |
| $ | (91,181 | ) |
| $ | (4,367 | ) |
| $ | 191,038 |
|
|
| 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 |
|
| 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.
7
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| March 31, |
|
| June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
| $ | (41,594 | ) |
| $ | (66,593 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net loss to net cash used in |
|
|
|
|
|
| ||||||||||
Depreciation and amortization |
|
| 11,609 |
|
|
| 11,028 |
|
|
| 24,110 |
|
|
| 22,644 |
|
Loss on sale of assets and asset impairments |
|
| 1,297 |
|
|
| 1,918 |
|
|
| 2,748 |
|
|
| 3,358 |
|
Restructuring charges, net |
|
| 258 |
|
|
| 117 |
|
|
| 2,454 |
|
|
| 298 |
|
Share-based compensation expense |
|
| 2,399 |
|
|
| 2,942 |
|
|
| 5,324 |
|
|
| 5,316 |
|
Amortization of debt issuance costs |
|
| 114 |
|
|
| 56 |
|
|
| 228 |
|
|
| 122 |
|
Deferred income taxes |
|
| (11,574 | ) |
|
| (17,612 | ) |
|
| 13,221 |
|
|
| 28,134 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable |
|
| (428 | ) |
|
| 50,328 |
|
|
| (19,465 | ) |
|
| 44,864 |
|
Contract assets and liabilities |
|
| (132 | ) |
|
| (32,574 | ) |
|
| (16,007 | ) |
|
| (53,089 | ) |
Operating lease right of use assets and operating lease liabilities |
|
| 2,376 |
|
|
| 2,018 |
|
|
| 2,971 |
|
|
| 5,749 |
|
Inventories |
|
| (1,129 | ) |
|
| (3,515 | ) |
|
| (2,488 | ) |
|
| (5,899 | ) |
Prepaid expenses |
|
| 6,105 |
|
|
| (4,558 | ) |
|
| 8,232 |
|
|
| (6,272 | ) |
Other current assets |
|
| 8,302 |
|
|
| 4,552 |
|
|
| 7,151 |
|
|
| 3,396 |
|
Other noncurrent assets |
|
| (1,526 | ) |
|
| 167 |
|
|
| (1,767 | ) |
|
| (957 | ) |
Accounts payable and accrued expenses |
|
| (3,724 | ) |
|
| (17,557 | ) |
|
| 15,747 |
|
|
| (19,117 | ) |
Accrued warranty |
|
| (4,896 | ) |
|
| 3,889 |
|
|
| (3,390 | ) |
|
| 9,133 |
|
Other noncurrent liabilities |
|
| (514 | ) |
|
| 1,861 |
|
|
| (730 | ) |
|
| 1,908 |
|
Net cash provided by operating activities |
|
| 6,740 |
|
|
| 2,568 |
| ||||||||
Net cash used in operating activities |
|
| (3,255 | ) |
|
| (27,005 | ) | ||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (18,786 | ) |
|
| (26,983 | ) |
|
| (27,059 | ) |
|
| (42,030 | ) |
Net cash used in investing activities |
|
| (18,786 | ) |
|
| (26,983 | ) |
|
| (27,059 | ) |
|
| (42,030 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proceeds from revolving loans |
|
| — |
|
|
| 50,000 |
| ||||||||
Proceeds from revolving and term loans |
|
| 2,106 |
|
|
| 80,000 |
| ||||||||
Net repayments of accounts receivable financing |
|
| — |
|
|
| (101 | ) |
|
| — |
|
|
| (3,829 | ) |
Proceeds from working capital loans |
|
| 6,383 |
|
|
| — |
| ||||||||
Principal repayments of finance leases |
|
| (1,406 | ) |
|
| (1,492 | ) |
|
| (2,803 | ) |
|
| (2,837 | ) |
Net proceeds from other debt |
|
| 18,695 |
|
|
| 16,505 |
|
|
| 13,362 |
|
|
| 23,788 |
|
Debt issuance costs |
|
| — |
|
|
| (183 | ) |
|
| — |
|
|
| (730 | ) |
Proceeds from exercise of stock options |
|
| 1,216 |
|
|
| 812 |
|
|
| 4,688 |
|
|
| 1,371 |
|
Repurchase of common stock including shares withheld in lieu of income taxes |
|
| (34 | ) |
|
| (459 | ) |
|
| (34 | ) |
|
| (508 | ) |
Net cash provided by financing activities |
|
| 18,471 |
|
|
| 65,082 |
|
|
| 23,702 |
|
|
| 97,255 |
|
Impact of foreign exchange rates on cash, cash equivalents and restricted cash |
|
| (49 | ) |
|
| (1,806 | ) |
|
| (323 | ) |
|
| (2,525 | ) |
Net change in cash, cash equivalents and restricted cash |
|
| 6,376 |
|
|
| 38,861 |
|
|
| (6,935 | ) |
|
| 25,695 |
|
Cash, cash equivalents and restricted cash, beginning of year |
|
| 130,196 |
|
|
| 71,749 |
|
|
| 130,196 |
|
|
| 71,749 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 136,572 |
|
| $ | 110,610 |
|
| $ | 123,261 |
|
| $ | 97,444 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
8
TPI COMPOSITES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| March 31, |
|
| June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| |||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash paid for interest |
| $ | 2,617 |
|
| $ | 1,773 |
|
| $ | 5,255 |
|
| $ | 3,976 |
|
Cash paid for income taxes, net of refunds |
|
| 5,130 |
|
|
| 3,414 |
|
|
| 14,866 |
|
|
| 7,393 |
|
Noncash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Right of use assets obtained in exchange for new operating lease liabilities |
|
| 1,245 |
|
|
| 55,156 |
|
|
| 5,384 |
|
|
| 54,326 |
|
Property, plant, and equipment obtained in exchange for new finance lease liabilities |
|
| 136 |
|
|
| 0 |
| ||||||||
Accrued capital expenditures in accounts payable |
|
| 6,975 |
|
|
| 14,669 |
|
|
| 3,682 |
|
|
| 7,970 |
|
Reconciliation of Cash, Cash Equivalents and Restricted Cash: |
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| June 30, |
|
| December 31, |
| |||||||||
|
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
| 2020 |
| 2020 |
| 2019 |
| |||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 136,236 |
|
| $ | 129,857 |
|
| $ | 109,473 |
|
| $ | 70,282 |
|
| $ | 123,107 |
|
| $ | 129,857 |
|
| $ | 96,657 |
|
| $ | 70,282 |
|
Restricted cash |
|
| 336 |
|
|
| 339 |
|
|
| 662 |
|
|
| 992 |
|
|
| 154 |
|
|
| 339 |
|
|
| 312 |
|
|
| 992 |
|
Restricted cash included within other noncurrent assets |
|
| — |
|
|
| — |
|
|
| 475 |
|
|
| 475 |
|
|
| 0 |
|
|
| 0 |
|
|
| 475 |
|
|
| 475 |
|
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows |
| $ | 136,572 |
|
| $ | 130,196 |
|
| $ | 110,610 |
|
| $ | 71,749 |
|
| $ | 123,261 |
|
| $ | 130,196 |
|
| $ | 97,444 |
|
| $ | 71,749 |
|
See accompanying notes to unaudited condensed consolidated financial statements.
9
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by us without audit, pursuant to the rules and regulations of the SEC and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted, as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading. The accompanying condensed consolidated financial statements reflect, in the opinion of our management, all normal recurring adjustments necessary to present fairly our financial position at March 31,June 30, 2021, and the results of our operations, comprehensive income (loss) and cash flows for the periods presented. Interim results for the three and six months ended March 31,June 30, 2021 and 2020 are not necessarily indicative of the results to be expected for the full years. Certain prior period amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.
The preparation of these condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The accompanying condensed consolidated financial statements include the accounts of TPI Composites, Inc. and all of our majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated.
References to TPI Composites, Inc, the “Company,” “we,” “us” or “our” in these notes refer to TPI Composites, Inc. and its consolidated subsidiaries.
Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Convertible Instruments
In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU is intended to simplify the accounting for certain convertible instruments with characteristics of both liability and equity. This ASU removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. As a result, after the adoption of this guidance, an entity’s convertible debt instrument will be wholly accounted for as debt. This ASU also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations by requiring the use of the if-converted method.
This ASU is effective for all public business entities (other than smaller reporting companies) for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020 and can be adopted on either a fully retrospective or modified retrospective basis. An entity should adopt the guidance at the beginning of its annual fiscal year. We adopted this standard on January 1, 2021 on a modified retrospective basis and it did not have a material effect on our condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. This ASU only applies to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. This ASU is effective for all entities beginning on March 12, 2020 and entities may elect to apply the ASU prospectively through December 31, 2022. The FASB later issued ASU 2021-01, Reference Rate
10
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.
11
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 March 31, 2021 |
|
| Three Months Ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| U.S. |
|
| Asia |
|
| Mexico |
|
| EMEA |
|
| India |
|
| Total |
|
| U.S. |
| Asia |
| Mexico |
| EMEA |
| India |
| Total |
| |||||||||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 39,627 |
|
| $ | 72,503 |
|
| $ | 108,442 |
|
| $ | 111,027 |
|
| $ | 47,580 |
|
| $ | 379,179 |
|
| $ | 39,427 |
|
| $ | 82,491 |
|
| $ | 131,188 |
|
| $ | 103,201 |
|
| $ | 62,397 |
|
| $ | 418,704 |
|
Precision molding and assembly systems sales |
|
| — |
|
|
| 3,964 |
|
|
| 4,963 |
|
|
| — |
|
|
| — |
|
|
| 8,927 |
|
|
| 0 |
|
|
| 7,634 |
|
|
| 5,969 |
|
|
| 0 |
|
|
| 0 |
|
|
| 13,603 |
|
Transportation sales |
|
| 6,424 |
|
|
| — |
|
|
| 1,707 |
|
|
| — |
|
|
| — |
|
|
| 8,131 |
|
|
| 12,227 |
|
|
| 0 |
|
|
| 2,688 |
|
|
| 0 |
|
|
| 0 |
|
|
| 14,915 |
|
Other sales |
|
| 3,235 |
|
|
| 461 |
|
|
| 3,347 |
|
|
| 1,339 |
|
|
| 61 |
|
|
| 8,443 |
|
|
| 5,107 |
|
|
| 981 |
|
|
| 3,325 |
|
|
| 2,149 |
|
|
| 57 |
|
|
| 11,619 |
|
Total net sales |
| $ | 49,286 |
|
| $ | 76,928 |
|
| $ | 118,459 |
|
| $ | 112,366 |
|
| $ | 47,641 |
|
| $ | 404,680 |
|
| $ | 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 |
|
| 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 |
|
| 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 |
|
| 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 |
|
|
| Three Months Ended March 31, 2020 |
| |||||||||||||||||||||
|
| U.S. |
|
| Asia |
|
| Mexico |
|
| EMEA |
|
| India |
|
| Total |
| ||||||
|
| (in thousands) |
| |||||||||||||||||||||
Wind blade sales |
| $ | 35,933 |
|
| $ | 85,876 |
|
| $ | 115,186 |
|
| $ | 88,481 |
|
| $ | 10,861 |
|
| $ | 336,337 |
|
Precision molding and assembly systems sales |
|
| — |
|
|
| 5,061 |
|
|
| 1,702 |
|
|
| — |
|
|
| — |
|
|
| 6,763 |
|
Transportation sales |
|
| 6,679 |
|
|
| — |
|
|
| 210 |
|
|
| — |
|
|
| — |
|
|
| 6,889 |
|
Other sales |
|
| 4,819 |
|
|
| 200 |
|
|
| 1,152 |
|
|
| 476 |
|
|
| — |
|
|
| 6,647 |
|
Total net sales |
| $ | 47,431 |
|
| $ | 91,137 |
|
| $ | 118,250 |
|
| $ | 88,957 |
|
| $ | 10,861 |
|
| $ | 356,636 |
|
For a further discussion regarding our operating segments, see Note 14, Segment Reporting. The geography of Europe, the Middle East and Africa comprises the EMEA segment.
11
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract Assets and Liabilities
Contract assets consist of the amount of revenue recognized over time for performance obligations in production where control has transferred to the customer but the contract does not yet allow for the customer to be billed. Typically, customers are billed when the product finishes production and meets the technical specifications contained in the contract. The majority of the contract asset balance relates to materials procured based on customer specifications. The contract assets are recorded as current assets in the condensed consolidated balance sheets. Contract liabilities consist of advance payments in excess of revenue earned. These amounts primarily represent progress payments received as precision molding and assembly systems are being manufactured. The contract liabilities are recorded as current liabilities in the condensed consolidated balance sheets and are reduced as we record revenue over time.
These contract assets and liabilities are reported on the condensed consolidated balance sheets net on a contract-by-contract basis at the end of each reporting period.
Contract assets and contract liabilities consisted of the following:
|
| June 30, |
|
| December 31, |
|
|
|
| |||
|
| 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 |
|
|
| March 31, |
|
| December 31, |
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
|
| (in thousands) |
| |||||||||
Gross contract assets |
| $ | 221,938 |
|
| $ | 223,428 |
|
| $ | (1,490 | ) |
Less: reclassification from contract liabilities |
|
| (5,903 | ) |
|
| (6,500 | ) |
|
| 597 |
|
Contract assets |
| $ | 216,035 |
|
| $ | 216,928 |
|
| $ | (893 | ) |
|
| 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 |
|
12
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
| March 31, |
|
| December 31, |
|
|
|
|
| ||
|
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
|
| (in thousands) |
| |||||||||
Gross contract liabilities |
| $ | 8,035 |
|
| $ | 7,114 |
|
| $ | 921 |
|
Less: reclassification to contract assets |
|
| (5,903 | ) |
|
| (6,500 | ) |
|
| 597 |
|
Contract liabilities |
| $ | 2,132 |
|
| $ | 614 |
|
| $ | 1,518 |
|
Contract assets decreasedincreased by $0.9$14.9 million from December 31, 2020 to March 31,June 30, 2021 due to a decreasean increase in customer specific material purchases and incremental unbilled production during the threesix months ended March 31,June 30, 2021. Contracts liabilities increased by $1.5$1.6 million from December 31, 2020 to March 31,June 30, 2021 primarily due to amounts billed to a customer in advance of the production of
precision molding and assembly systems during the threesix months ended March 31,June 30, 2021.
For the three and six months ended March 31,June 30, 2021, we recognized $0.1$0.1 million and $0.1 million, respectively, of revenue related to precision molding and assembly systems and wind blades, which was included in the corresponding contract liability balance at the beginning of the period.
Performance Obligations
Remaining performance obligations represent the transaction price for which work has not been performed and excludes any unexercised contract options. The transaction price includes estimated variable consideration as determined based on the estimated production output within the range of the contractual guaranteed minimum volume obligations and production capacity.
As of March 31,June 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations to be satisfied in future periods was approximately $3.5$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 |
| % |
12
|
| $ |
|
| % of Total |
|
| ||
|
| (in thousands) |
|
|
|
|
|
| |
Year Ending December 31, |
|
|
|
|
|
|
|
|
|
Remainder of 2021 |
| $ | 1,332,175 |
|
|
| 38.6 |
| % |
2022 |
|
| 1,426,379 |
|
|
| 41.3 |
|
|
2023 |
|
| 613,392 |
|
|
| 17.8 |
|
|
2024 |
|
| 78,353 |
|
|
| 2.3 |
|
|
Total remaining performance obligations |
| $ | 3,450,299 |
|
|
| 100.0 |
| % |
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the three and six months ended March 31,June 30, 2021, net revenue recognized from our performance obligations satisfied in previous periods decreased by $8.5 million.$4.0 million and $12.5 million, respectively, as compared to increases of $5.8 million and $0.6 million, respectively, in the same periods in 2020. The current year decreasedecreases primarily relates to changes in certain of our estimated total contract values and related direct costs to complete the performance obligations.
Note 3. Significant Risks and Uncertainties
Our revenues and receivables are earned from a small number of customers. As such, our production levels are dependent on these customers’ orders. See Note 13, Concentration of Customers.
We may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. In addition, our global 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 2021 and 2020. U.S. money market accounts are not guaranteed by the FDIC. At March 31,June 30, 2021 and December 31, 2020, we had $97.0$55.2 million and $68.9$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. We have not experienced losses in any such accounts.
13
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We also maintain cash in bank deposit accounts outside the U.S. with no insurance. At March 31,June 30, 2021, this included $32.7$58.7 million in China, $3.5$5.1 million in Turkey, $1.8$2.3 million in Mexico, $1.5 million in India $0.8 million in Mexico and $0.4$0.3 million in other countries. As of December 31, 2020, this included $47.4$47.4 million in China, $6.0$6.0 million in Turkey, $5.0$5.0 million in India, $2.1$2.1 million in Mexico and $0.5$0.5 million in other countries. We have not experienced losses in these accounts. In addition, at March 31,June 30, 2021 and December 31, 2020, we had short-term deposits in interest bearing accounts of $0.3 million in both periods 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 Euro Interbank Offered Rate (EURIBOR) and certain of them have associated interest rate hedges. Due to the relatively low LIBOR and EURIBOR rates in effect as of March 31,June 30, 2021, a 10%10% change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or cash flows.
Note 4. Accrued Warranty
The warranty accrual activity for the periods noted consisted of the following:
|
| 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, |
|
| (113 | ) |
|
| 6,002 |
|
|
| (2,285 | ) |
| 9,241 |
|
Warranty accrual at end of period |
| $ | 47,462 |
|
| $ | 56,772 |
|
| $ | 47,462 |
| $ | 56,772 |
|
13
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Warranty accrual at beginning of period |
| $ | 50,852 |
|
| $ | 47,639 |
|
Accrual during the period |
|
| 4,847 |
|
|
| 3,865 |
|
Cost of warranty services provided during the period |
|
| (7,571 | ) |
|
| (3,215 | ) |
Changes in estimate for pre-existing warranties, including expirations during the period |
|
| (2,172 | ) |
|
| 3,239 |
|
Warranty accrual at end of period |
| $ | 45,956 |
|
| $ | 51,528 |
|
Note 5. 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:
|
| 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 |
| $ | 180,138 |
|
| $ | 184,316 |
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Senior revolving loan—U.S. |
| $ | 171,154 |
|
| $ | 171,154 |
|
Unsecured financing—EMEA |
|
| 50,211 |
|
|
| 30,040 |
|
Equipment financing—EMEA |
|
| 3,107 |
|
|
| 4,335 |
|
Equipment finance lease—Mexico |
|
| 7,083 |
|
|
| 8,038 |
|
Equipment finance lease—EMEA |
|
| 3,458 |
|
|
| 4,119 |
|
Other equipment finance leases |
|
| 194 |
|
|
| 232 |
|
Total debt - principal |
|
| 235,207 |
|
|
| 217,918 |
|
Less: Debt issuance costs |
|
| (937 | ) |
|
| (1,051 | ) |
Total debt, net of debt issuance costs |
|
| 234,270 |
|
|
| 216,867 |
|
Less: Current maturities of long-term debt |
|
| (53,294 | ) |
|
| (32,551 | ) |
Long-term debt, net of debt issuance costs and current maturities |
| $ | 180,976 |
|
| $ | 184,316 |
|
Note 6. Share-Based Compensation Plans
During the threesix months ended March 31,June 30, 2021, we issued to certain employees and non-employee directors an aggregate of 145,643168,993 timed-based restricted stock units (RSUs), 58,396 performance-based restricted stock units (PSUs) that vest upon achievement of 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 certain stock price hurdles for the period of the grant date through December 31, 2023. All of the time-based RSUs vest on the third
14
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 the 2015 Planour 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 |
|
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Cost of goods sold |
| $ | 203 |
|
| $ | 171 |
|
General and administrative expenses |
|
| 2,196 |
|
|
| 2,771 |
|
Total share-based compensation expense |
| $ | 2,399 |
|
| $ | 2,942 |
|
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 |
|
14
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
RSUs |
| $ | 1,255 |
|
| $ | 956 |
|
Stock options |
|
| 618 |
|
|
| 1,653 |
|
PSUs |
|
| 526 |
|
|
| 333 |
|
Total share-based compensation expense |
| $ | 2,399 |
|
| $ | 2,942 |
|
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 extend the leases up to five years.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 |
|
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Total operating lease cost |
| $ | 9,716 |
|
| $ | 8,571 |
|
|
|
|
|
|
|
|
|
|
Finance lease cost |
|
|
|
|
|
|
|
|
Amortization of assets under finance leases |
| $ | 900 |
|
| $ | 1,547 |
|
Interest on finance leases |
|
| 189 |
|
|
| 279 |
|
Total finance lease cost |
| $ | 1,089 |
|
| $ | 1,826 |
|
Total lease assets and liabilities as of March 31, 2021 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 |
|
|
| Operating |
|
| Finance |
| ||
|
| Leases |
|
| Leases |
| ||
|
| (in thousands) |
| |||||
Current operating lease liabilities |
| $ | 26,496 |
|
| $ | — |
|
Current maturities of long-term debt |
|
| — |
|
|
| 5,989 |
|
Noncurrent operating lease liabilities |
|
| 150,289 |
|
|
| — |
|
Long-term debt, net of debt issuance costs and current maturities |
|
| — |
|
|
| 4,746 |
|
Total lease liabilities |
| $ | 176,785 |
|
| $ | 10,735 |
|
15
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of March 31, 2021, the cost and accumulated depreciation of property, plant and equipment that we are leasing under finance lease arrangements were $27.5 million and $12.8 million, respectively. As of December 31, 2020, the cost and accumulated depreciation of property, plant and equipment that we are leasing under finance lease arrangements were $28.5 million and $12.5 million, respectively.
Future minimum lease payments under noncancelable leases as of March 31,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 |
|
15
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
| Operating |
|
| Finance |
| ||
|
| Leases |
|
| Leases |
| ||
|
| (in thousands) |
| |||||
Year Ending December 31, |
|
|
|
|
|
|
|
|
Remainder of 2021 |
| $ | 26,297 |
|
| $ | 4,565 |
|
2022 |
|
| 32,414 |
|
|
| 5,771 |
|
2023 |
|
| 30,585 |
|
|
| 871 |
|
2024 |
|
| 26,903 |
|
|
| 224 |
|
2025 |
|
| 26,721 |
|
|
| 7 |
|
Thereafter |
|
| 98,447 |
|
|
| — |
|
Total future minimum lease payments |
|
| 241,367 |
|
|
| 11,438 |
|
Less: interest |
|
| (64,582 | ) |
|
| (703 | ) |
Total lease liabilities |
| $ | 176,785 |
|
| $ | 10,735 |
|
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 |
|
|
|
|
|
| ||
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 |
|
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
| $ | 9,250 |
|
| $ | 7,508 |
|
Operating cash flows from finance leases |
|
| 189 |
|
|
| 279 |
|
Financing cash flows from finance leases |
|
| 1,406 |
|
|
| 1,492 |
|
Other information related to leases was as follows:
|
| March 31, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Weighted-Average Remaining Lease Term (In Years): |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating leases |
|
| 7.5 |
|
|
| 7.7 |
|
|
| 7.3 |
|
|
| 7.7 |
|
Finance leases |
|
| 2.0 |
|
|
| 2.2 |
|
|
| 1.8 |
|
|
| 2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Weighted-Average Discount Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating leases |
|
| 7.9 | % |
|
| 7.9 | % |
|
| 8.0 | % |
|
| 7.9 | % |
Finance leases |
|
| 6.4 | % |
|
| 6.4 | % |
|
| 6.3 | % |
|
| 6.4 | % |
As of March 31,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
16
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 March 31,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 March 31,June 30, 2021, and none is anticipated over the remaining term of the agreement.
Foreign Exchange Forward Contracts
We use foreign exchange forward contracts to mitigate our exposure to fluctuations in exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact. We do not use such forward contracts for speculative or trading purposes.
Mexican Peso
All of our remaining outstanding foreign exchange forward contracts (excluding those with call options) expired during the three months ended March 31, 2021. As of December 31, 2020, the notional values associated with our foreign exchange forward contracts qualifying as cash flow hedges were approximately 0.3 billion Mexican Pesos (approximately $14.0$14.0 million).
With regards to our foreign exchange call option contracts, for the three and six months ended March 31,June 30, 2021, $0.7$0.7 million and $1.4 million, respectively, of premium amortization was recorded through cost of 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 expected to be recognized in cost of sales in our condensed consolidated statements of operations during the next nine months.
16
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of March 31,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 1.41.6 billion Mexican Pesos (approximately $68.1$79.7 million) and approximately 0.4 billion Mexican Pesos (approximately $17.3$17.3 million), respectively.
Chinese Renminbi
With regards to our balance sheet hedges,foreign exchange forward contracts, for which hedge accounting does not apply, for the three and six months ended March 31,June 30, 2021, $0.1$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 |
|
| 1,218 |
|
|
| 2,096 |
|
Interest rate swap |
| Other noncurrent liabilities |
|
| 3,365 |
|
|
| 4,414 |
|
|
| Condensed Consolidated |
| March 31, |
|
| December 31, |
| ||
Financial Instrument |
| Balance Sheet Line Item |
| 2021 |
|
| 2020 |
| ||
|
|
|
| (in thousands) |
| |||||
Foreign exchange forward contracts |
| Other current assets |
|
| 1,693 |
|
|
| 5,832 |
|
Foreign exchange forward contracts |
| Accounts payable and accrued expenses |
|
| 1,283 |
|
|
| 2,096 |
|
Interest rate swap |
| Other noncurrent liabilities |
|
| 3,818 |
|
|
| 4,414 |
|
The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations:
Accumulated |
| Condensed Consolidated |
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
Other Comprehensive |
| Statement of Operations |
| June 30, |
|
| June 30, |
| ||||||||||
Loss Component |
| Line Item |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
|
|
| (in thousands) |
| |||||||||||||
Foreign exchange forward |
| Cost of sales |
| $ | (1,035 | ) |
| $ | 2,738 |
|
| $ | (3,037 | ) |
| $ | 2,516 |
|
Accumulated Other |
| Condensed |
| Three Months Ended |
| |||||
Comprehensive |
| Consolidated Statement |
| March 31, |
| |||||
Loss Component |
| of Operations Line Item |
| 2021 |
|
| 2020 |
| ||
|
|
|
| (in thousands) |
| |||||
Foreign exchange forward contracts |
| Cost of sales |
| $ | (2,002 | ) |
| $ | (222 | ) |
17
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Income Taxes
The income tax benefitprovisions for the three and six months ended March 31,June 30, 2021 waswere lower than for the corresponding period ended March 31,periods in 2020 primarily due to the change in the mix of earnings mixof foreign jurisdictions and U.S. tax on foreign earnings in the comparable periods, partially offset by jurisdictionthe recording of a full U.S. valuation allowance during the three months ended June 30, 2021 and an increase in our uncertain tax positions for the three and six months ended June 30, 2021 as compared to the same periods in 2020.
No changes in tax law occurred during the six months ended June 30, 2021, which had a material impact on our income tax provision. We do not record a deferred tax liability related to unremitted foreign earnings as we maintain our assertion to indefinitely reinvest our unremitted foreign earnings. No changes in tax law occurred during the quarter which have a material impact on our income tax provision.
17
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 10. Net Income (Loss) Per Common Share Calculation
Basic net income (loss) per common share is computed by dividingThe following table sets forth the net income (loss) by the weighted-average numbercomputation of common shares outstanding during a period. Diluted net income per common share is computed by giving effect to all potentially dilutive securities, unless there is a net loss for the period and/or performance-based awards which are not included until performance conditions are met. In computing diluted net income per common share, we use the treasury stock method. The table below reflects the calculation of the weighted-average number of common shares outstanding, using the treasury stock method, used in computing 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 |
|
| 1,607 |
|
|
| 1,154 |
|
|
| 1,864 |
|
|
| 1,117 |
|
Anti dilutive share-based compensation awards excluded |
|
| 0 |
|
|
| 6 |
|
|
| 0 |
|
|
| 55 |
|
Performance-based restricted stock units excluded from |
|
| 196 |
|
|
| 98 |
|
|
| 196 |
|
|
| 98 |
|
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Basic weighted-average shares outstanding |
|
| 36,601 |
|
|
| 35,213 |
|
Effect of dilutive awards |
|
| 0 |
|
|
| 0 |
|
Diluted weighted-average shares outstanding |
|
| 36,601 |
|
|
| 35,213 |
|
For the three months ended March 31, 2021 and 2020, approximately 2,040,000 and 890,000 potentially dilutive shares, respectively, were excluded from the calculation due to net losses. In addition, for the three months ended March 31, 2020, approximately 66,000 share-based compensation awards were excluded from the computation of net income (loss) per common share because their effect would be anti-dilutive. Certain performance-based restricted stock units have been excluded from the computation of diluted shares outstanding for the 2021 and 2020 periods presented as the performance conditions had not yet been met.
Note 11. Stockholders’ Equity
Accumulated Other Comprehensive Loss
The following tables presents the changes in accumulated other comprehensive loss (AOCL) by component:
|
| Three Months Ended March 31, 2021 |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, 2021 |
| |||||||||||||
|
| Foreign |
|
|
|
|
|
| Foreign |
|
|
|
|
|
| Foreign |
|
|
|
| Foreign |
|
|
|
| |||||||
|
| currency |
|
|
|
|
|
| exchange |
|
|
|
|
|
| currency |
|
|
|
| exchange |
|
|
|
| |||||||
|
| translation |
|
| Interest rate |
|
| forward |
|
| Total |
|
| translation |
|
| Interest rate |
| forward |
|
| Total |
| |||||||||
|
| adjustments |
|
| swap |
|
| contracts |
|
| AOCL |
|
| adjustments |
| swap |
| contracts |
| AOCL |
| |||||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||||||||||
Balance at December 31, 2020 |
| $ | (30,111 | ) |
| $ | (3,443 | ) |
| $ | 564 |
|
| $ | (32,990 | ) |
| $ | (30,111 | ) |
| $ | (3,443 | ) |
| $ | 564 |
|
| $ | (32,990 | ) |
Other comprehensive income (loss) before reclassifications |
|
| (5,291 | ) |
|
| 597 |
|
|
| (2,281 | ) |
|
| (6,975 | ) |
|
| (5,291 | ) |
|
| 597 |
|
|
| (2,281 | ) |
|
| (6,975 | ) |
Amounts reclassified from AOCL |
|
| — |
|
|
| — |
|
|
| (2,002 | ) |
|
| (2,002 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (2,002 | ) |
|
| (2,002 | ) |
Net tax effect |
|
| — |
|
|
| (139 | ) |
|
| 790 |
|
|
| 651 |
|
|
| 0 |
|
|
| (139 | ) |
|
| 790 |
|
|
| 651 |
|
Net current period other comprehensive income (loss) |
|
| (5,291 | ) |
|
| 458 |
|
|
| (3,493 | ) |
|
| (8,326 | ) |
|
| (5,291 | ) |
|
| 458 |
|
|
| (3,493 | ) |
|
| (8,326 | ) |
Balance at March 31, 2021 |
| $ | (35,402 | ) |
| $ | (2,985 | ) |
| $ | (2,929 | ) |
| $ | (41,316 | ) |
|
| (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 | ) |
18
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 | ) |
|
| Three Months Ended March 31, 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 |
|
| — |
|
|
| — |
|
|
| (222 | ) |
|
| (222 | ) |
Net tax effect |
|
| — |
|
|
| 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 | ) |
Note 12. Commitments and Contingencies
Legal Proceedings
From time to time, we are party to various lawsuits, claims, and other legal proceedings that arise in the ordinary course of business, some of which may not be covered by insurance. Upon resolution of any pending legal matters, we may incur charges in excess of presently established reserves. Our management does not believe that any such charges would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.
Note 13. Concentration of Customers
RevenuesNet sales from certain customers (in thousands) in excess of 10 percent of our total consolidated revenuesnet 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 |
| |||||||||||||
|
| March 31, |
| |||||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||
Customer |
| Revenues |
|
| % of Total |
|
| Revenues |
|
| % of Total |
| ||||
Vestas |
| $ | 169,218 |
|
|
| 41.8 | % |
| $ | 157,412 |
|
|
| 44.1 | % |
GE |
|
| 104,852 |
|
|
| 25.9 | % |
|
| 100,132 |
|
|
| 28.1 | % |
Nordex |
|
| 76,543 |
|
|
| 18.9 | % |
|
| 53,257 |
|
|
| 14.9 | % |
Trade accounts receivable from certain customers in excess of 10 percent of our total consolidated trade accounts receivable are as follows:
|
| June 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Customer |
| % of Total |
|
| % of Total |
| ||
Nordex |
|
| 36.5 | % |
|
| 40.8 | % |
Vestas |
|
| 32.9 | % |
|
| 35.0 | % |
Siemens Gamesa |
|
| 10.8 | % |
|
| 5.9 | % |
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Customer |
| % of Total |
|
| % of Total |
| ||
Vestas |
|
| 26.7 | % |
|
| 35.0 | % |
Nordex |
|
| 44.3 | % |
|
| 40.8 | % |
Enercon |
|
| 11.2 | % |
|
| 8.3 | % |
Note 14. Segment Reporting
Our operating segments are defined geographically into 5 geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico, (4) EMEA and (5) India. For a detailed discussion of our operating segments, refer to the discussion in Note 19, Segment Reporting, to the Notes to Consolidated Financial Statements within our Annual Report on Form 10-K.
All of our segments operate in their local currency except for the Mexico and Asia segments, which both include a U.S. parent company, and India and Switzerland, which operate in the U.S. dollar.
19
TPI COMPOSITES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth certain information regarding each of our segments:
|
| Three Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| March 31, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Net sales by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. |
| $ | 49,286 |
|
| $ | 47,431 |
|
| $ | 56,761 |
|
| $ | 42,079 |
|
| $ | 106,047 |
|
| $ | 89,510 |
|
Asia |
|
| 76,928 |
|
|
| 91,137 |
|
|
| 91,106 |
|
|
| 145,918 |
|
|
| 168,034 |
|
|
| 237,055 |
|
Mexico |
|
| 118,459 |
|
|
| 118,250 |
|
|
| 143,170 |
|
|
| 83,420 |
|
|
| 261,629 |
|
|
| 201,670 |
|
EMEA |
|
| 112,366 |
|
|
| 88,957 |
|
|
| 105,350 |
|
|
| 87,541 |
|
|
| 217,716 |
|
|
| 176,498 |
|
India |
|
| 47,641 |
|
|
| 10,861 |
|
|
| 62,454 |
|
|
| 14,859 |
|
|
| 110,095 |
|
|
| 25,720 |
|
Total net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
| $ | 458,841 |
|
| $ | 373,817 |
|
| $ | 863,521 |
|
| $ | 730,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net sales by geographic location (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
| $ | 49,286 |
|
| $ | 47,431 |
|
| $ | 56,761 |
|
| $ | 42,079 |
|
| $ | 106,047 |
|
| $ | 89,510 |
|
China |
|
| 76,928 |
|
|
| 91,137 |
|
|
| 91,106 |
|
|
| 145,918 |
|
|
| 168,034 |
|
|
| 237,055 |
|
Mexico |
|
| 118,459 |
|
|
| 118,250 |
|
|
| 143,170 |
|
|
| 83,420 |
|
|
| 261,629 |
|
|
| 201,670 |
|
Turkey |
|
| 112,366 |
|
|
| 88,957 |
|
|
| 105,350 |
|
|
| 87,541 |
|
|
| 217,716 |
|
|
| 176,498 |
|
India |
|
| 47,641 |
|
|
| 10,861 |
|
|
| 62,454 |
|
|
| 14,859 |
|
|
| 110,095 |
|
|
| 25,720 |
|
Total net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
| $ | 458,841 |
|
| $ | 373,817 |
|
| $ | 863,521 |
|
| $ | 730,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. (2) |
| $ | (11,620 | ) |
| $ | (15,586 | ) |
| $ | 148 |
|
| $ | (12,045 | ) |
| $ | (11,472 | ) |
| $ | (27,631 | ) |
Asia |
|
| 2,709 |
|
|
| 5,072 |
|
|
| 8,105 |
|
|
| 18,492 |
|
|
| 10,814 |
|
|
| 23,564 |
|
Mexico |
|
| (4,024 | ) |
|
| (1,768 | ) |
|
| (25,256 | ) |
|
| (11,324 | ) |
|
| (29,280 | ) |
|
| (13,092 | ) |
EMEA |
|
| 9,788 |
|
|
| 2,664 |
|
|
| 10,782 |
|
|
| (1,145 | ) |
|
| 20,570 |
|
|
| 1,519 |
|
India |
|
| (60 | ) |
|
| (5,786 | ) |
|
| 4,188 |
|
|
| (7,233 | ) |
|
| 4,128 |
|
|
| (13,019 | ) |
Total loss from operations |
| $ | (3,207 | ) |
| $ | (15,404 | ) |
| $ | (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 location where the product is manufactured or the services are performed.
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Property, plant and equipment, net: |
|
|
|
|
|
|
|
|
U.S. |
| $ | 32,884 |
|
| $ | 31,811 |
|
Asia (China) |
|
| 43,771 |
|
|
| 46,075 |
|
Mexico |
|
| 81,857 |
|
|
| 78,813 |
|
EMEA (Turkey) |
|
| 23,890 |
|
|
| 28,312 |
|
India |
|
| 29,727 |
|
|
| 23,990 |
|
Total property, plant and equipment, net |
| $ | 212,129 |
|
| $ | 209,001 |
|
(2) The losses from operations in our U.S. segment includes corporate general and administrative costs of $6.7 million and $6.9 million for the 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. |
|
|
|
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q (Form 10-Q). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-Q or in our previously filed Annual Report on Form 10-K, particularly those under “Risk Factors.”
OVERVIEW
Our Company
We are the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. We deliver high-quality, cost-effective composite solutions through long term relationships with leading original equipment manufacturers (OEM) in the wind and transportation markets. We also provide field service inspection and repair services to our OEM customers and wind farm owners and operators, and supply high strength, lightweight and durable composite products to the transportation market. We are headquartered in Scottsdale, Arizona and operate factories throughout the U.S., China, Mexico, Turkey, and India. We operate additional engineering development centers in Denmark and Germany.
Our business operations are defined geographically into five geographic operating segments—(1) the United States (U.S.), (2) Asia, (3) Mexico, (4) Europe, the Middle East and Africa (EMEA) and (5) India. See Note 14, Segment Reporting, to our condensed consolidated financial statements for more details about our operating segments.
KEY TRENDS AND RECENT DEVELOPMENTS AFFECTING OUR BUSINESS
The COVID-19 pandemic did not materially adversely affect our business and operations during the three and six months ended March 31,June 30, 2021. Although all of our manufacturing facilities currently are operating at or near normal production levels, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. For example, India and Turkey are currently experiencingrecently experienced significant increases in positive COVID-19 cases although these resurgences aredid not currently havinghave a material impact on our operations.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 from our customers during the remainder of 2021, in particular during the fourth quarter. We believe this decrease in demand is short term and due to the continued global renewable energy regulatory and policy uncertainty and raw material cost increases mentioned below. The result is an expected adverse impact to our Adjusted EBITDA in 2021 of approximately $28 million. We believe that general optimism around potential legislation in the U.S. to extend the Production Tax Credit (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 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 is aare key raw materialmaterials that we use to manufacture our products, as well as increases in the manufacture of our wind and transportation composite products. Theselogistics costs to obtain raw materials. The resin price increases and supply constraints are due to a multitude of factors, including the extreme cold weather in Texas in February 2021, fires at resin manufacturing facilities in China and unplanned maintenance outages at resin manufacturing facilities in Europe. To date, weCarbon fiber prices have been ableincreased primarily due to pass on the majoritycost of theseraw material inputs as well as increased global demand for carbon fiber across multiple industries. These raw material price increases to our customers and these resin price increases and supply constraints did not have a material impact onadversely affected our results of operations by approximately $4.4 million for both the three and six months ended June 30, 2021. We expect that the price of resin and carbon fiber will remain at elevated levels for the three months ended March 31,remainder of 2021. Approximately 55% of the resin and resin systems we use are purchased under contracts either controlled or borne by two of our customers and therefore these customers receive/bear 100% of any increase in resin prices. With respect to our other customer supply agreements, our customers typically bear 70% of any raw material price increases. After taking into account our contractual share of any price increases for resin and carbon fiber, we estimate that the impact of these raw materials price increases, together with increased logistics costs, will adversely impact our results of operations by approximately $20 million for 2021. If the supply of resin feedstocks and carbon fiber continue to be constrained for an extended period of time, such shortages could impact our ability to meet our customers’ forecasted demand for our products for the balanceremainder of 2021 and have a further material adverse impact on our results of operations for the remainder of 2021.
21
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 manufacturing facility at the end of the 3-year term if the supply agreement is not extended and we will cease to operate and supply blades from the customer’s manufacturing facility.
KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE
For a detailed discussion of our key financial measures and our key operating metrics, refer to the discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics Used By Management To Measure Performance” included in Part II, Item 7 of our Annual Report on Form 10-K.
KEY FINANCIAL MEASURES
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 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 | ) |
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
EBITDA (1) |
| $ | 5,414 |
|
| $ | (2,721 | ) |
Adjusted EBITDA (1) |
| $ | 13,095 |
|
| $ | 1,296 |
|
Capital expenditures |
| $ | 18,786 |
|
| $ | 26,983 |
|
Free cash flow (1) |
| $ | (12,046 | ) |
| $ | (24,415 | ) |
22
|
| March 31, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
| (in thousands) |
| |||||
Total debt, net of debt issuance costs |
| $ | 234,270 |
|
| $ | 216,867 |
|
Net debt (1) |
| $ | (98,971 | ) |
| $ | (88,061 | ) |
|
|
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 |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| March 31, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||||||||||
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
| $ | (39,797 | ) |
| $ | (66,101 | ) |
| $ | (41,594 | ) |
| $ | (66,593 | ) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 11,609 |
|
|
| 11,028 |
|
|
| 12,501 |
|
|
| 11,616 |
|
|
| 24,110 |
|
|
| 22,644 |
|
Interest expense, net |
|
| 2,704 |
|
|
| 1,771 |
|
|
| 2,691 |
|
|
| 2,545 |
|
|
| 5,395 |
|
|
| 4,316 |
|
Income tax benefit |
|
| (7,102 | ) |
|
| (15,028 | ) | ||||||||||||||||
Income tax provision |
|
| 28,890 |
|
|
| 49,312 |
|
|
| 21,788 |
|
|
| 34,284 |
| ||||||||
EBITDA |
|
| 5,414 |
|
|
| (2,721 | ) |
|
| 4,285 |
|
|
| (2,628 | ) |
|
| 9,699 |
|
|
| (5,349 | ) |
Share-based compensation expense |
|
| 2,399 |
|
|
| 2,942 |
|
|
| 2,925 |
|
|
| 2,374 |
|
|
| 5,324 |
|
|
| 5,316 |
|
Foreign currency loss (income) |
|
| 3,727 |
|
|
| (960 | ) | ||||||||||||||||
Foreign currency loss |
|
| 6,504 |
|
|
| 1,928 |
|
|
| 10,231 |
|
|
| 968 |
| ||||||||
Loss on sale of assets and asset impairments |
|
| 1,297 |
|
|
| 1,918 |
|
|
| 1,451 |
|
|
| 1,440 |
|
|
| 2,748 |
|
|
| 3,358 |
|
Restructuring charges, net |
|
| 258 |
|
|
| 117 |
|
|
| 2,196 |
|
|
| 181 |
|
|
| 2,454 |
|
|
| 298 |
|
Adjusted EBITDA |
| $ | 13,095 |
|
| $ | 1,296 |
|
| $ | 17,361 |
|
| $ | 3,295 |
|
| $ | 30,456 |
|
| $ | 4,591 |
|
Free cash flow is reconciled as follows:
|
| Three Months Ended |
| |||||||||||||
|
| March 31, |
|
| Six Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| June 30, |
| |||||||
|
| (in thousands) |
|
| 2021 |
| 2020 |
| ||||||||
Net cash provided by operating activities |
| $ | 6,740 |
|
| $ | 2,568 |
| ||||||||
|
| (in thousands) |
| |||||||||||||
Net cash used in operating activities |
| $ | (3,255 | ) |
| $ | (27,005 | ) | ||||||||
Less capital expenditures |
|
| (18,786 | ) |
|
| (26,983 | ) |
|
| (27,059 | ) |
|
| (42,030 | ) |
Free cash flow |
| $ | (12,046 | ) |
| $ | (24,415 | ) |
| $ | (30,314 | ) |
| $ | (69,035 | ) |
Net debt is reconciled as follows:
|
| March 31, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
Cash and cash equivalents |
| $ | 136,236 |
|
| $ | 129,857 |
|
| $ | 123,107 |
|
| $ | 129,857 |
|
Less total debt, net of debt issuance costs |
|
| (234,270 | ) |
|
| (216,867 | ) |
|
| (236,275 | ) |
|
| (216,867 | ) |
Less debt issuance costs |
|
| (937 | ) |
|
| (1,051 | ) |
|
| (823 | ) |
|
| (1,051 | ) |
Net debt |
| $ | (98,971 | ) |
| $ | (88,061 | ) |
| $ | (113,991 | ) |
| $ | (88,061 | ) |
KEY OPERATING METRICS
|
| Three Months Ended |
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||
|
| March 31, |
|
| June 30, |
| June 30, |
| ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||||||
Sets |
|
| 814 |
|
|
| 731 |
|
|
| 843 |
|
|
| 788 |
|
|
| 1,657 |
|
|
| 1,519 |
|
Estimated megawatts |
|
| 3,072 |
|
|
| 2,329 |
|
|
| 3,303 |
|
|
| 2,655 |
|
|
| 6,375 |
|
|
| 4,984 |
|
Utilization |
|
| 77 | % |
|
| 70 | % |
|
| 82 | % |
|
| 70 | % |
|
| 80 | % |
|
| 70 | % |
Dedicated manufacturing lines |
|
| 50 |
|
|
| 52 |
|
|
| 50 |
|
|
| 52 |
|
|
| 50 |
|
|
| 52 |
|
Manufacturing lines installed |
|
| 52 |
|
|
| 52 |
|
|
| 51 |
|
|
| 54 |
|
|
| 52 |
|
|
| 54 |
|
Results of Operations 23
RESULTS OF OPERATIONS
The following table summarizes our operating results as a percentage of net sales for the three and six months ended March 31,June 30, 2021 and 2020 that have been derived from our condensed consolidated statements of operations:
|
| Three Months Ended |
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||||||||||||
|
| March 31, |
|
|
| June 30, |
| June 30, |
| ||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| |||||||||||
Net sales |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
|
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
| 100.0 |
| % |
Cost of sales |
|
| 94.7 |
|
|
| 97.7 |
|
|
|
| 96.0 |
|
|
| 98.4 |
|
|
| 95.4 |
|
|
| 98.0 |
|
| |
Startup and transition costs |
|
| 3.5 |
|
|
| 3.4 |
|
|
|
| 2.2 |
|
|
| 2.9 |
|
|
| 2.8 |
|
|
| 3.2 |
|
| |
Total cost of goods sold |
|
| 98.2 |
|
|
| 101.1 |
|
|
|
| 98.2 |
|
|
| 101.3 |
|
|
| 98.2 |
|
|
| 101.2 |
|
| |
Gross profit (loss) |
|
| 1.8 |
|
|
| (1.1 | ) |
|
|
| 1.8 |
|
|
| (1.3 | ) |
|
| 1.8 |
|
|
| (1.2 | ) |
| |
General and administrative expenses |
|
| 2.2 |
|
|
| 2.7 |
|
|
|
| 1.5 |
|
|
| 1.8 |
|
|
| 1.8 |
|
|
| 2.2 |
|
| |
Loss on sale of assets and asset impairments |
|
| 0.3 |
|
|
| 0.5 |
|
|
|
| 0.3 |
|
|
| 0.4 |
|
|
| 0.3 |
|
|
| 0.5 |
|
| |
Restructuring charges, net |
|
| 0.1 |
|
|
| 0.0 |
|
|
|
| 0.5 |
|
|
| 0.1 |
|
|
| 0.3 |
|
|
| 0.0 |
|
| |
Loss from operations |
|
| (0.8 | ) |
|
| (4.3 | ) |
|
|
| (0.5 | ) |
|
| (3.6 | ) |
|
| (0.6 | ) |
|
| (3.9 | ) |
| |
Total other expense |
|
| (1.4 | ) |
|
| 0.0 |
|
|
|
| (1.9 | ) |
|
| (0.9 | ) |
|
| (1.7 | ) |
|
| (0.5 | ) |
| |
Loss before income taxes |
|
| (2.2 | ) |
|
| (4.3 | ) |
|
|
| (2.4 | ) |
|
| (4.5 | ) |
|
| (2.3 | ) |
|
| (4.4 | ) |
| |
Income tax benefit |
|
| 1.8 |
|
|
| 4.2 |
|
| ||||||||||||||||||
Income tax provision |
|
| (6.3 | ) |
|
| (13.2 | ) |
|
| (2.5 | ) |
|
| (4.7 | ) |
| ||||||||||
Net loss |
|
| (0.4 | ) | % |
|
| (0.1 | ) | % |
|
| (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 March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 379,179 |
|
| $ | 336,337 |
|
| $ | 42,842 |
|
|
| 12.7 | % |
| $ | 418,704 |
|
| $ | 348,063 |
|
| $ | 70,641 |
|
|
| 20.3 | % |
| $ | 797,883 |
|
| $ | 684,400 |
|
| $ | 113,483 |
|
|
| 16.6 | % |
Precision molding and assembly systems sales |
|
| 8,927 |
|
|
| 6,763 |
|
|
| 2,164 |
|
|
| 32.0 | % |
|
| 13,603 |
|
|
| 6,894 |
|
|
| 6,709 |
|
|
| 97.3 | % |
|
| 22,530 |
|
|
| 13,657 |
|
|
| 8,873 |
|
|
| 65.0 | % |
Transportation sales |
|
| 8,131 |
|
|
| 6,889 |
|
|
| 1,242 |
|
|
| 18.0 | % |
|
| 14,915 |
|
|
| 14,902 |
|
|
| 13 |
|
|
| 0.1 | % |
|
| 23,046 |
|
|
| 21,791 |
|
|
| 1,255 |
|
|
| 5.8 | % |
Other sales |
|
| 8,443 |
|
|
| 6,647 |
|
|
| 1,796 |
|
|
| 27.0 | % |
|
| 11,619 |
|
|
| 3,958 |
|
|
| 7,661 |
|
|
| 193.6 | % |
|
| 20,062 |
|
|
| 10,605 |
|
|
| 9,457 |
|
|
| 89.2 | % |
Total net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
| $ | 48,044 |
|
|
| 13.5 | % |
| $ | 458,841 |
|
| $ | 373,817 |
|
| $ | 85,024 |
|
|
| 22.7 | % |
| $ | 863,521 |
|
| $ | 730,453 |
|
| $ | 133,068 |
|
|
| 18.2 | % |
The increase in 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 driven by an 11%a 7% and 9% increase in the number of wind blades produced, during the three months ended March 31, 2021 as compared to the same period in 2020respectively, primarily as a result of increased production at our Mexico, India, Turkey and TurkeyIowa 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 March 31,June 30, 2021 as compared to the same periodperiods in 2020 and foreign currency fluctuations. Additionally, when viewingcomparing our 2021 first quarter net sales during the three and six months ended June 30, 2021 against the comparable prior year period,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 China net sales in the prior year period.periods. Finally, the net sales increase wasincreases 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 period.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 March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
24
Segment discussion
The following table summarizes our net sales by our five geographic operating segments for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
U.S. |
| $ | 49,286 |
|
| $ | 47,431 |
|
| $ | 1,855 |
|
|
| 3.9 | % |
| $ | 56,761 |
|
| $ | 42,079 |
|
| $ | 14,682 |
|
|
| 34.9 | % |
| $ | 106,047 |
|
| $ | 89,510 |
|
| $ | 16,537 |
|
|
| 18.5 | % |
Asia |
|
| 76,928 |
|
|
| 91,137 |
|
|
| (14,209 | ) |
|
| -15.6 | % |
|
| 91,106 |
|
|
| 145,918 |
|
|
| (54,812 | ) |
|
| -37.6 | % |
|
| 168,034 |
|
|
| 237,055 |
|
|
| (69,021 | ) |
|
| -29.1 | % |
Mexico |
|
| 118,459 |
|
|
| 118,250 |
|
|
| 209 |
|
|
| 0.2 | % |
|
| 143,170 |
|
|
| 83,420 |
|
|
| 59,750 |
|
|
| 71.6 | % |
|
| 261,629 |
|
|
| 201,670 |
|
|
| 59,959 |
|
|
| 29.7 | % |
EMEA |
|
| 112,366 |
|
|
| 88,957 |
|
|
| 23,409 |
|
|
| 26.3 | % |
|
| 105,350 |
|
|
| 87,541 |
|
|
| 17,809 |
|
|
| 20.3 | % |
|
| 217,716 |
|
|
| 176,498 |
|
|
| 41,218 |
|
|
| 23.4 | % |
India |
|
| 47,641 |
|
|
| 10,861 |
|
|
| 36,780 |
|
| NM |
|
|
| 62,454 |
|
|
| 14,859 |
|
|
| 47,595 |
|
| NM |
|
| 110,095 |
|
|
| 25,720 |
|
|
| 84,375 |
|
| NM |
| ||||
Total net sales |
| $ | 404,680 |
|
| $ | 356,636 |
|
| $ | 48,044 |
|
|
| 13.5 | % |
| $ | 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 March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 39,627 |
|
| $ | 35,933 |
|
| $ | 3,694 |
|
|
| 10.3 | % |
| $ | 39,427 |
|
| $ | 26,309 |
|
| $ | 13,118 |
|
|
| 49.9 | % |
| $ | 79,054 |
|
| $ | 62,242 |
|
| $ | 16,812 |
|
|
| 27.0 | % |
Transportation sales |
|
| 6,424 |
|
|
| 6,679 |
|
|
| (255 | ) |
|
| -3.8 | % |
|
| 12,227 |
|
|
| 14,539 |
|
|
| (2,312 | ) |
|
| -15.9 | % |
|
| 18,651 |
|
|
| 21,218 |
|
|
| (2,567 | ) |
|
| -12.1 | % |
Other sales |
|
| 3,235 |
|
|
| 4,819 |
|
|
| (1,584 | ) |
|
| -32.9 | % |
|
| 5,107 |
|
|
| 1,231 |
|
|
| 3,876 |
|
| NM |
|
|
| 8,342 |
|
|
| 6,050 |
|
|
| 2,292 |
|
|
| 37.9 | % | |
Total net sales |
| $ | 49,286 |
|
| $ | 47,431 |
|
| $ | 1,855 |
|
|
| 3.9 | % |
| $ | 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 3%35% and 17% increase in the number of wind blades produced, during the three months ended March 31, 2021 as comparedrespectively, primarily due to the same periodadverse impact of the COVID-19 pandemic in 2020,the prior year periods, as well as a higher average sales price due to the mix of wind blade models produced in the comparabletwo 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 March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 72,503 |
|
| $ | 85,876 |
|
| $ | (13,373 | ) |
|
| -15.6 | % |
| $ | 82,491 |
|
| $ | 141,540 |
|
| $ | (59,049 | ) |
|
| -41.7 | % |
| $ | 154,994 |
|
| $ | 227,416 |
|
| $ | (72,422 | ) |
|
| -31.8 | % |
Precision molding and assembly systems sales |
|
| 3,964 |
|
|
| 5,061 |
|
|
| (1,097 | ) |
|
| -21.7 | % |
|
| 7,634 |
|
|
| 3,576 |
|
|
| 4,058 |
|
|
| 113.5 | % |
|
| 11,598 |
|
|
| 8,637 |
|
|
| 2,961 |
|
|
| 34.3 | % |
Other sales |
|
| 461 |
|
|
| 200 |
|
|
| 261 |
|
|
| 130.5 | % |
|
| 981 |
|
|
| 802 |
|
|
| 179 |
|
|
| 22.3 | % |
|
| 1,442 |
|
|
| 1,002 |
|
|
| 440 |
|
|
| 43.9 | % |
Total net sales |
| $ | 76,928 |
|
| $ | 91,137 |
|
| $ | (14,209 | ) |
|
| -15.6 | % |
| $ | 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 June 30, 2021 as compared to the same period in 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 June 30, 2021, there was an increase in the period over period number of wind blades still in the production process at the end of the period. The fluctuating U.S. dollar against the Chinese Renminbi in our China operations had a favorable impact of 0.1% on consolidated net sales for the three months ended June 30, 2021 as compared to the 2020 period.
25
The decrease in the Asia segment’s net sales of wind blades during the six months ended June 30, 2021 as compared to the same period in 2020 was primarily due to a 35% decrease in the number of wind blades produced, primarily due to the removal of five contracted manufacturing lines that expired in China at the end of 2020, partially offset by the adverse impact that the COVID-19 pandemic had on our net sales in the prior year period. In addition, for the six months ended June 30, 2021, there was a decrease in the period over period number of wind blades still in the production process at the end of the period as well as a slight net decrease in the number of wind blades produced during the three months ended March 31, 2021 as compared to the same period in 2020. When viewing Asia’s 2021 first quarter net sales against the comparable prior year period, their net sales were negatively impacted by the removal of five manufacturing lines in China at the end of 2020, which was partially offset by the adverse impact that the COVID-19 pandemic had on their net sales in the prior year period. The sales decreases were alsoduring the six months ended June 30, 2021 was partially offset by an increase in the average sales price of wind blades due to a change in the mix of wind blades produced in the two comparative periods. The fluctuating U.S. dollar against the Chinese Renminbi in our China operations had a favorable impact of 0.6%0.2% on consolidated net sales for the threesix months ended March 31,June 30, 2021 as compared to the 2020 period.
Mexico Segment
The following table summarizes our net sales by product/service for the Mexico segment for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 108,442 |
|
| $ | 115,186 |
|
| $ | (6,744 | ) |
|
| -5.9 | % |
| $ | 131,188 |
|
| $ | 78,193 |
|
| $ | 52,995 |
|
|
| 67.8 | % |
| $ | 239,630 |
|
| $ | 193,379 |
|
| $ | 46,251 |
|
|
| 23.9 | % |
Precision molding and assembly systems sales |
|
| 4,963 |
|
|
| 1,702 |
|
|
| 3,261 |
|
|
| 191.6 | % |
|
| 5,969 |
|
|
| 3,318 |
|
|
| 2,651 |
|
|
| 79.9 | % |
|
| 10,932 |
|
|
| 5,020 |
|
|
| 5,912 |
|
|
| 117.8 | % |
Transportation sales |
|
| 1,707 |
|
|
| 210 |
|
|
| 1,497 |
|
| NM |
|
|
| 2,688 |
|
|
| 363 |
|
|
| 2,325 |
|
| NM |
|
| 4,395 |
|
|
| 573 |
|
|
| 3,822 |
|
| NM |
| ||||
Other sales |
|
| 3,347 |
|
|
| 1,152 |
|
|
| 2,195 |
|
|
| 190.5 | % |
|
| 3,325 |
|
|
| 1,546 |
|
|
| 1,779 |
|
|
| 115.1 | % |
|
| 6,672 |
|
|
| 2,698 |
|
|
| 3,974 |
|
|
| 147.3 | % |
Total net sales |
| $ | 118,459 |
|
| $ | 118,250 |
|
| $ | 209 |
|
|
| 0.2 | % |
| $ | 143,170 |
|
| $ | 83,420 |
|
| $ | 59,750 |
|
|
| 71.6 | % |
| $ | 261,629 |
|
| $ | 201,670 |
|
| $ | 59,959 |
|
|
| 29.7 | % |
The decreaseincrease 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 6%76% and 24% net decreaseincrease in overall wind blade volume, respectively, primarily due to transitions partially offset bythe 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 a change in 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 March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Wind blade sales |
| $ | 111,027 |
|
| $ | 88,481 |
|
| $ | 22,546 |
|
|
| 25.5 | % |
| $ | 103,201 |
|
| $ | 87,162 |
|
| $ | 16,039 |
|
|
| 18.4 | % |
| $ | 214,228 |
|
| $ | 175,643 |
|
| $ | 38,585 |
|
|
| 22.0 | % |
Other sales |
|
| 1,339 |
|
|
| 476 |
|
|
| 863 |
|
|
| 181.3 | % |
|
| 2,149 |
|
|
| 379 |
|
|
| 1,770 |
|
| NM |
|
|
| 3,488 |
|
|
| 855 |
|
|
| 2,633 |
|
| NM |
| ||
Total net sales |
| $ | 112,366 |
|
| $ | 88,957 |
|
| $ | 23,409 |
|
|
| 26.3 | % |
| $ | 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 10%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 partially offset by a decrease in the year over year number of wind blades still in the production process at the end of the period, and a slight increase in the average sales price of wind blades produced in the comparative periods.period. The fluctuating U.S. dollar relative to the Euro had a favorable impact of 6.0%7.9% and 6.5% on net sales during the three and six months ended March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
26
India Segment
The following table summarizes our net sales by product/service for the India segment for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
| |||||
|
| March 31, |
|
| Change | |||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % | |||
|
| (in thousands) |
|
|
| |||||||||
Wind blade sales |
| $ | 47,580 |
|
| $ | 10,861 |
|
| $ | 36,719 |
|
| NM |
Other sales |
|
| 61 |
|
|
| — |
|
|
| 61 |
|
| NM |
Total net sales |
| $ | 47,641 |
|
| $ | 10,861 |
|
| $ | 36,780 |
|
| NM |
|
| 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 was driven by ramp up of production induring the three and six months ended June 30, 2021 period as compared to the comparablesame period in 2020.2020 was driven by the commencement of production in 2020, and the ramp up of such production in 2021.
Total cost of goods sold
The following table summarizes our total cost of goods sold for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
| June 30, |
| Change |
|
| June 30, |
| Change |
| |||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| |||||||||||||||||
|
| (in thousands) |
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Cost of sales |
| $ | 383,056 |
|
| $ | 348,475 |
|
| $ | 34,581 |
|
| 9.9% |
| $ | 440,416 |
|
| $ | 367,644 |
|
| $ | 72,772 |
|
|
| 19.8 | % |
| $ | 823,472 |
|
| $ | 716,119 |
|
| $ | 107,353 |
|
|
| 15.0 | % |
Startup and transition costs |
|
| 14,354 |
|
|
| 12,034 |
|
|
| 2,320 |
|
| 19.3% | ||||||||||||||||||||||||||||||||
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 |
|
| 10,099 |
|
|
| 10,920 |
|
|
| (821 | ) |
|
| -7.5 | % |
|
| 24,453 |
|
|
| 22,954 |
|
|
| 1,499 |
|
|
| 6.5 | % | ||||||||||||||
Total cost of goods sold |
| $ | 397,410 |
|
| $ | 360,509 |
|
| $ | 36,901 |
|
| 10.2% |
| $ | 450,515 |
|
| $ | 378,564 |
|
| $ | 71,951 |
|
|
| 19.0 | % |
| $ | 847,925 |
|
| $ | 739,073 |
|
| $ | 108,852 |
|
|
| 14.7 | % |
% of net sales |
|
| 98.2 | % |
|
| 101.1 | % |
|
|
|
|
| -2.9% |
|
| 98.2 | % |
|
| 101.3 | % |
|
|
|
| -3.1 | % |
|
| 98.2 | % |
|
| 101.2 | % |
|
|
|
| -3.0 | % |
Total cost of goods sold for the three months ended March 31, 2021 was $397.4 million and included $4.6 million of costs related to lines in startup and $9.8 million of costs related to lines in transition during the period. This compares to total cost of goods sold for the three months ended March 31, 2020 of $360.5 million and included $7.8 million of costs related to lines in startup and $4.2 million of costs related to lines in transition during the period. Total cost of goods sold as a percentage of net sales decreased by approximately three percentage points during the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020, driven primarily by a decrease in warranty costs and direct labor costs, partially offset by an increase in direct material costs and foreign currency fluctuations. The fluctuating U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso had an unfavorable impact of 1.3%2.2% and 1.7% on consolidated cost of goods sold for the three and six months ended March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
General and administrative expenses
The following table summarizes our general and administrative expenses for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
General and administrative expenses |
| $ | 8,922 |
|
| $ | 9,496 |
|
| $ | (574 | ) |
|
| -6.0 | % |
| $ | 6,712 |
|
| $ | 6,887 |
|
| $ | (175 | ) |
|
| -2.5 | % |
| $ | 15,634 |
|
| $ | 16,383 |
|
| $ | (749 | ) |
|
| -4.6 | % |
% of net sales |
|
| 2.2 | % |
|
| 2.7 | % |
|
|
|
|
|
| -0.5 | % |
|
| 1.5 | % |
|
| 1.8 | % |
|
|
|
| -0.3 | % |
|
| 1.8 | % |
|
| 2.2 | % |
|
|
|
| -0.4 | % |
The decreasedecreases in general and administrative expenses as a percentage of net sales for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020 waswere primarily driven by lower travel and training costs due to the COVID-19 pandemic and 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.
27
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 March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
|
| (in thousands) |
|
|
| |||||||||||||||||||||||||||||||
U.S. |
| $ | (11,620 | ) |
| $ | (15,586 | ) |
| $ | 3,966 |
|
|
| 25.4 | % |
| $ | 148 |
|
| $ | (12,045 | ) |
| $ | 12,193 |
|
|
| 101.2 | % |
| $ | (11,472 | ) |
| $ | (27,631 | ) |
| $ | 16,159 |
|
|
| 58.5 | % |
Asia |
|
| 2,709 |
|
|
| 5,072 |
|
|
| (2,363 | ) |
|
| -46.6 | % |
|
| 8,105 |
|
|
| 18,492 |
|
|
| (10,387 | ) |
|
| -56.2 | % |
|
| 10,814 |
|
|
| 23,564 |
|
|
| (12,750 | ) |
|
| -54.1 | % |
Mexico |
|
| (4,024 | ) |
|
| (1,768 | ) |
|
| (2,256 | ) |
|
| -127.6 | % |
|
| (25,256 | ) |
|
| (11,324 | ) |
|
| (13,932 | ) |
|
| -123.0 | % |
|
| (29,280 | ) |
|
| (13,092 | ) |
|
| (16,188 | ) |
|
| -123.6 | % |
EMEA |
|
| 9,788 |
|
|
| 2,664 |
|
|
| 7,124 |
|
| NM |
|
|
| 10,782 |
|
|
| (1,145 | ) |
|
| 11,927 |
|
| NM |
|
| 20,570 |
|
|
| 1,519 |
|
|
| 19,051 |
|
| NM |
| ||||
India |
|
| (60 | ) |
|
| (5,786 | ) |
|
| 5,726 |
|
|
| 99.0 | % |
|
| 4,188 |
|
|
| (7,233 | ) |
|
| 11,421 |
|
|
| 157.9 | % |
|
| 4,128 |
|
|
| (13,019 | ) |
|
| 17,147 |
|
|
| 131.7 | % |
Total loss from operations |
| $ | (3,207 | ) |
| $ | (15,404 | ) |
| $ | 12,197 |
|
|
| 79.2 | % |
| $ | (2,033 | ) |
| $ | (13,255 | ) |
| $ | 11,222 |
|
|
| 84.7 | % |
| $ | (5,240 | ) |
| $ | (28,659 | ) |
| $ | 23,419 |
|
|
| 81.7 | % |
% of net sales |
|
| -0.8 | % |
|
| -4.3 | % |
|
|
|
|
|
| 3.5 | % |
|
| -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 March 31,June 30, 2021 as compared to the same periodperiods in 2020 was primarily due to the increase in wind blade volume, thean 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 and a decrease in general and administrative expenses.facility.
Asia Segment
The decrease in the income from operations in the Asia segment for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020 was primarily due to the decrease in the net sales of wind blades and foreign currency fluctuations, partially offset by lower direct material costs andan 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. Additionally, when viewing Asia’s 2021 first quarter income from operations against the comparable prior year period, their income from operations was negatively impacted by the removal of five manufacturing lines in China at the end of 2020, which was partially offset by the adverse impact that the COVID-19 pandemic had on their income from operations in the prior year period. The fluctuating U.S. dollar against the Chinese Renminbi had an unfavorable impact of 6.1%6.7% and 6.5% on cost of goods sold for the three and six months ended March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
Mexico Segment
The increase in the loss from operations in the Mexico segment for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020 was primarily due to increasedan increase in direct material costs and startup and transition costs, at our Mexico manufacturing facilities.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 a favorablean unfavorable impact of 0.4%2.1% and 1.1% on cost of goods sold for the three and six months ended March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
EMEA Segment
The increase in the income from operations in the EMEA segment for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods 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 decreaseda decrease in warranty costs. In addition, for the three months ended June 30, 2021, there was a decrease in startup and transition costs partially offset by increasedas compared to the 2020 period. Additionally, for the six months ended June 30, 2021, there was an increase in direct material costs and startup and transition costs.as compared to the 2020 period. The fluctuating U.S. dollar relative to the Turkish Lira and Euro had an unfavorable impact of 0.9%1.1% and 0.4% on cost of goods sold for the three and six months ended March 31,June 30, 2021, respectively, as compared to the 2020 period.periods.
India Segment
The decreaseincrease in the lossincome from operations in the India segment for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020 was primarily due todriven by the commencement of production in 2020, and the ramp up of such production in 2021 as compared to the comparable period in 2020.2021.
28
Other income (expense)
The following table summarizes our total other income (expense) for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| ||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| (in thousands) |
|
|
| (in thousands) |
|
|
| ||||||||||||||||||||||||||||||||
Interest expense, net |
|
| (2,704 | ) |
|
| (1,771 | ) |
|
| (933 | ) |
|
| -52.7 | % |
| $ | (2,691 | ) |
| $ | (2,545 | ) |
| $ | (146 | ) |
|
| -5.7 | % |
| $ | (5,395 | ) |
| $ | (4,316 | ) |
| $ | (1,079 | ) |
|
| -25.0 | % |
Foreign currency income (loss) |
|
| (3,727 | ) |
|
| 960 |
|
|
| (4,687 | ) |
| NM |
| |||||||||||||||||||||||||||||||||
Foreign currency loss |
|
| (6,504 | ) |
|
| (1,928 | ) |
|
| (4,576 | ) |
| NM |
|
| (10,231 | ) |
|
| (968 | ) |
|
| (9,263 | ) |
| NM |
| |||||||||||||||||||
Miscellaneous income |
|
| 739 |
|
|
| 695 |
|
|
| 44 |
|
|
| 6.3 | % |
|
| 321 |
|
|
| 939 |
|
|
| (618 | ) |
|
| -65.8 | % |
|
| 1,060 |
|
|
| 1,634 |
|
|
| (574 | ) |
|
| -35.1 | % |
Total other expense |
| $ | (5,692 | ) |
| $ | (116 | ) |
| $ | (5,576 | ) |
| NM |
|
| $ | (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 March 31,June 30, 2021 as compared to the same periodperiods in 2020 waswere primarily due to an increase in the foreign currency loss primarily due to net Euro liability exposure against the Turkish Lira in the current year periodperiods as compared to the same periodperiods in 2020.
Income taxes
The following table summarizes our income taxes for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
|
| March 31, |
|
| Change |
|
| Three Months Ended |
|
|
|
|
| Six Months Ended |
|
|
|
|
| |||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
|
| June 30, |
| Change |
|
| June 30, |
| Change |
| ||||||||||||||||||||||||||
|
| (in thousands) |
|
|
|
|
|
| 2021 |
| 2020 |
| $ |
| % |
|
| 2021 |
| 2020 |
| $ |
| % |
| |||||||||||||||||||||||
Income tax benefit |
| $ | 7,102 |
|
| $ | 15,028 |
|
| $ | (7,926 | ) |
|
| -52.7 | % | ||||||||||||||||||||||||||||||||
|
| (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 |
|
| -79.8 | % |
|
| -96.8 | % |
|
|
|
|
|
|
|
|
|
| -264.9 | % |
|
| -293.7 | % |
|
|
|
|
|
| -110.0 | % |
|
| -106.1 | % |
|
|
|
|
|
The decrease in the
See Note 9, Income Taxes, to our condensed consolidated financial statements for more details about our income tax benefittaxes for the three and six months ended March 31,June 30, 2021 as compared to the same period in 2020 was primarily due to the earnings mix by jurisdiction in the comparable periods.and 2020.
Net loss
The following table summarizes our net loss for the three and six months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
|
|
| |||||
|
| March 31, |
|
| Change | |||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % | |||
|
| (in thousands) |
|
|
| |||||||||
Net loss |
| $ | (1,797 | ) |
| $ | (492 | ) |
| $ | (1,305 | ) |
| NM |
|
| 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 increasedecrease in the net loss for the three and six months ended March 31,June 30, 2021 as compared to the same periodperiods in 2020 was primarily due to the reasons set forth above. The diluted net loss per share was $0.05$1.08 for the three months ended March 31,June 30, 2021, compared to a diluted net loss per share of $0.01$1.87 for the three months ended March 31,June 30, 2020.
Liquidity and Capital ResourcesThe diluted net loss per share was $1.13 for the six months ended June 30, 2021, compared to a diluted net loss per share of $1.89 for the six months ended June 30, 2020.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the uncertainty relating to: (i) the evolving nature, magnitude and duration of the COVID-19 pandemic, (ii) the variety of measures implemented by governments around the world to address its effects and (iii) the impact on our manufacturing operations, we have and will continue to manage our liquidity to ensure our long-term viability until the COVID-19 pandemic abates.
Our primary needs for liquidity have been, and in the future will continue to be, capital expenditures, new facility startup costs, the impact of transitions, working capital, debt service costs, warranty costs and warranty costs.restructuring costs associated with the optimization of our global footprint. Our capital expenditures have been primarily related to machinery and equipment at our new facilities and expansion and improvements at our existing facilities. Historically, we have funded our working capital needs through cash flows from operations, the proceeds received from our credit facilities and from proceeds received from the issuance of stock. We had net borrowingsproceeds under our financing arrangements of $17.3$19.0 million for the threesix months ended March 31,June 30, 2021 as compared to net borrowingsproceeds under our financing arrangements of $64.9$97.1 million in the comparable period of 2020. As of March 31,June 30, 2021 and December 31, 2020, we had $235.2$237.1 million and $217.9 million in outstanding indebtedness, excluding debt issuance costs, respectively. As of March 31,June 30, 2021,
29
we had an aggregate of $108.8$115.9 million of remaining capacity and $83.3$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 flows from operations will be adequate to fund our working capital and capital expenditure requirements and to make required payments of principal and interest on our indebtedness over the next twelve months.
We anticipate that any new facilities and future facility expansions will be funded through cash flows from operations, the incurrence of other indebtedness and other potential sources of liquidity. At March 31,June 30, 2021 and December 31, 2020, we had unrestricted cash, cash equivalents and short-term investments totaling $136.2$123.1 million and $129.9 million, respectively. The March 31,June 30, 2021 balance includes $39.2$67.9 million of cash located outside of the United States, including $32.7$58.7 million in China, $3.5$5.1 million in Turkey, $1.8$2.3 million in Mexico, $1.5 million in India, $0.8 million in Mexico and $0.4$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 China, including retained earnings as determined under Chinese-statutory accounting requirements. Until 50% ($26.6 million as of June 30, 2021 and December 31, 2020) of registered capital is contributed to a surplus reserve, our China operations can only pay dividends equal to 90% of after-tax profits (10% must be contributed to the surplus reserve). Once the surplus reserve fund requirement is met, our China operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. At June 30, 2021 and December 31, 2020, the amount of the surplus reserve fund was $9.4 million and $7.0 million. 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 threesix months ended March 31,June 30, 2021 and 2020:
|
| Three Months Ended |
|
|
|
|
| |||||||||||||||||
|
| March 31, |
|
|
|
|
|
| Six Months Ended |
|
|
|
| |||||||||||
|
| 2021 |
|
| 2020 |
|
| $ Change |
|
| June 30, |
|
|
|
| |||||||||
|
| (in thousands) |
|
|
|
|
|
| 2021 |
| 2020 |
|
| $ Change |
| |||||||||
Net cash provided by operating activities |
| $ | 6,740 |
|
| $ | 2,568 |
|
| $ | 4,172 |
| ||||||||||||
|
| (in thousands) |
| |||||||||||||||||||||
Net cash used in operating activities |
| $ | (3,255 | ) |
| $ | (27,005 | ) |
| $ | 23,750 |
| ||||||||||||
Net cash used in investing activities |
|
| (18,786 | ) |
|
| (26,983 | ) |
|
| 8,197 |
|
|
| (27,059 | ) |
|
| (42,030 | ) |
|
| 14,971 |
|
Net cash provided by financing activities |
|
| 18,471 |
|
|
| 65,082 |
|
|
| (46,611 | ) |
|
| 23,702 |
|
|
| 97,255 |
|
|
| (73,553 | ) |
Impact of foreign exchange rates on cash, cash equivalents and restricted cash |
|
| (49 | ) |
|
| (1,806 | ) |
|
| 1,757 |
|
|
| (323 | ) |
|
| (2,525 | ) |
|
| 2,202 |
|
Net change in cash, cash equivalents and restricted cash |
| $ | 6,376 |
|
| $ | 38,861 |
|
| $ | (32,485 | ) |
| $ | (6,935 | ) |
| $ | 25,695 |
|
| $ | (32,630 | ) |
Operating Cash Flows
Net cash provided byused in operating activities increaseddecreased by $4.2$23.8 million for the threesix months ended March 31,June 30, 2021 as compared to the same period in 2020 primarily as a result of higher operating results.results and favorable working capital usage.
Investing Cash Flows
Net cash used in investing activities decreased by $8.2$15.0 million for the threesix months ended March 31,June 30, 2021 as compared to the same period in 2020 as a result of a decrease in capital expenditures.
We anticipate fiscal year 2021 capital expenditures of between $55 million to $65 million and we estimate that the cost that we will incur after March 31,June 30, 2021 to complete our current projects in process will be approximately $11.8$8.5 million. We have used, and will
30
continue to use, cash flows from operations, the proceeds received from our credit facilities and the proceeds received from the issuance of stock for major projects currently being undertaken, which include new manufacturing facilities in Chennai, India and the continued investment in our existing Tukey, Mexico, China and U.S. facilities.
Financing Cash Flows
Net cash provided by financing activities decreased by $46.6$73.6 million for the threesix months ended March 31,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
Financing Facilities
Our total principal amount of debt outstanding as of March 31, 2021 was $235.2 million, including our Credit Agreement, unsecured financing agreements and equipment finance leases. See Note 5, Long-Term Debt, Net of Debt Issuance Costs and Current Maturities, to our condensed consolidated financial statements for more details on our debt balances.
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 our accounts receivable assignment agreements described below. Furthermore, we do not have any relationships with special-purpose or other entities that provide off-balance sheet financing; liquidity, market risk or credit risk support; or engage in leasing or other services that may expose us to liability or risks of loss that are not reflected in the condensed consolidated financial statements and related notes.
Our segments enter into accounts receivable assignment agreements with various financial institutions. Under these agreements, the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to our segment’s customers at an agreed-upon discount rate.
The following table summarizes certain key details of each of the accounts receivable assignment agreements in place as of March 31,June 30, 2021:
Year Of Initial Agreement | Segment(s) Related To | Current Annual Interest Rate | ||
2014 | Mexico | LIBOR plus 0.75% | ||
|
|
| ||
2019 | Asia |
| ||
|
|
| ||
|
| Fixed rate of 3.85% | ||
2020 | EMEA | EURIBOR plus 1.95% | ||
2020 | India | LIBOR plus 1.00% | ||
2020 | U.S. | LIBOR plus 1.25% | ||
2021 | Mexico | LIBOR plus 1.25% |
As the receivables are purchased by the financial institutions under the agreements noted above, the receivables are removed from our condensed consolidated balance sheet. During the three months ended March 31,June 30, 2021 and 2020, $294.1$360.8 million and $224.2$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 under the accounts receivable assignment agreements described above.
Critical Accounting Policies and EstimatesCRITICAL 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 PronouncementsRECENT ACCOUNTING PRONOUNCEMENTS
See Note 1, Basis of Presentation, under the heading “Accounting Pronouncements” to our condensed consolidated financial statements for a discussion of recent accounting pronouncements.
Contractual ObligationsCONTRACTUAL OBLIGATIONS
During the threesix months ended March 31,June 30, 2021, there have been no material changes to the contractual obligations reported in our Annual Report on Form 10-K, other than in the ordinary course of business.
Item 3. Quantitative and Qualitative Disclosures About Market RiskQUANTITATIVE 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.
31
Foreign Currency Risk. We conduct international operations in China, Mexico, Turkey and India. Our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk whenever we enter into either a purchase or sale transaction using a currency other than the local 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 condensed consolidated financial statements. In recent years, exchange rates between these foreign currencies and the U.S. dollar have fluctuated significantly and may do so in the future. A hypothetical change of 10% in the exchange rates for the countries above would have resulted in a change to income from operations of approximately $7.7$15.7 million for the threesix months ended March 31,June 30, 2021.
Commodity Price Risk. We are subject to commodity price risk under agreements for the supply of our raw materials. We have not hedged our commodity price exposure. We generally lock in pricing for most of our key raw materials for 12 months which protects us from price increases within that period.period, which we believe helps to mitigate the impact of raw material price increases. As many of our raw material supply agreements have meet or release clauses, if raw materials prices go down,decrease, we are able to benefit from the reductions in price. We believe that this adequately protects us from increases in raw material prices and also enables us to take full advantage of decreases.
Resin and resin systems are the primary commodities for which we do not have fixed 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 $2.4$11.8 million for the three months ended March 31,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 resin systems.
Interest Rate Risk. As of March 31,June 30, 2021, our Credit Agreement includes interest on the unhedged principal amount of $96.2 million which is tied to the London Interbank Offered Rate (LIBOR), our India segment has two credit agreements outstanding which are tied to LIBOR, and our EMEA segment has one general credit agreement outstanding which is tied to the Euro Interbank Offered Rate (EURIBOR). For a discussion of the interest rate swap arrangement we entered into related to our Credit Agreement, see Note 8,13, Financial Instruments, to the notes to the condensed consolidated financial statements.statements within our 2020 Annual Report on Form 10-K. The India credit agreements had secured and unsecured working capital financing of $6.4 million and unsecured term loan financing of $2.1 million outstanding as of June 30, 2021. The two EMEA credit agreementagreements had unsecured financing of $7.6$5.9 million and financing of capital expenditures of $3.1$2.1 million outstanding as of March 31,June 30, 2021. Our Credit Agreement, the two India credit agreements, and the one EMEA general credit agreement are the only variable rate debt agreements that we had outstanding as of March 31,June 30, 2021 as all remaining working capital loans, secured and unsecured financing and finance lease obligations are fixed rate instruments and are not subject to fluctuations in interest rates. Due to the relatively low LIBOR and EURIBOR rates in effect as of March 31,June 30, 2021, a 10% change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or cash flows.
Item 4. Controls and ProceduresCONTROLS 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 March 31,June 30, 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 March 31,June 30, 2021.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31,June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II—II. OTHER INFORMATION
Item 1. Legal ProceedingsLEGAL PROCEEDINGS
See Note 12, Commitments and Contingencies, under the heading “Legal Proceedings” to our condensed consolidated financial statements for a discussion of legal proceedings and other related matters.
Item 1A. RISK FACTORSRisk Factors
Except as noted below, there have been no material changes to the Risk Factors (Part I, Item 1A) in our Annual Report on Form 10-K, which could materially affect our business, financial condition, and/or future results.
Our business, operations and financial condition during the threesix months ended March 31,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 future if the COVID-19 pandemic persists.
The COVID-19 pandemic did not materially adversely affect our business and operations during the threesix months ended March 31,June 30, 2021. Although all of our manufacturing facilities currently are operating at or near normal production levels, we may be required to reinstate temporary production suspensions or volume reductions at our manufacturing facilities to the extent there are new resurgences of COVID-19 cases in the regions where we operate or there is an outbreak of positive COVID-19 cases in any of our manufacturing facilities. For example, India and Turkey are currently experiencingrecently experienced significant increases in positive COVID-19 cases although these resurgences aredid not currently havinghave a material impact on our operations.operations during the six months ended June 30, 2021. In addition, although we are not currently have not experiencedexperiencing 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.
Item 2. Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table summarizes the total number of shares of our common stock that we repurchased during the three months ended March 31, 2021 from certain employees who surrendered common stock to pay the taxes in connection with the vesting of restricted stock units.Not applicable.
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Program |
|
| Maximum Number of Shares That May Yet Be Purchased Under the Program |
| ||||
January (January 1 - January 31) |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
February (February 1 - February 28) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
March (March 1 - March 31) |
|
| 646 |
|
|
| 53.97 |
|
|
| — |
|
|
| — |
|
Total |
|
| 646 |
|
| $ | 53.97 |
|
|
| — |
|
|
| — |
|
Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. Mine Safety DisclosuresMINE SAFETY DISCLOSURES
Not applicable.
Item 5. Other InformationOTHER INFORMATION
None.
33
Item 6. EXHIBITSExhibits
Exhibit Number | Exhibit Description | |
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document | |
101.SCH* | ||
| Inline XBRL Taxonomy Extension Schema Document | |
101.CAL* | ||
| Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | ||
| Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | ||
| Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | ||
| Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | ||
| Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* Filed herewith. ** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. 34 SIGNATURES
|
|
|
|
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: | By: | /s/ Adan Gossar | ||
Adan Gossar | ||||
Chief Accounting Officer | ||||
(Principal Accounting Officer) |
3435