SCOTTSDALE, Ariz., Aug 06, 2020 (GLOBE NEWSWIRE via COMTEX) -- TPI Composites, Inc. (NAS:TPIC) , the only independent manufacturer of composite wind blades with a global footprint, today reported financial results for the second quarter ended June 30, 2020.
For the quarter ended June 30, 2020:
-- Net sales of $373.8 million
-- Net loss of $66.1 million or $(1.87) per share
-- EBITDA loss of $2.6 million
-- Adjusted EBITDA of $3.3 million
KPIs Q2'20 Q2'19 Sets 787 716 Estimated megawatts 2,650 2,016 Utilization 69% 70% Dedicated manufacturing lines 52 54 Manufacturing lines installed 54 50
"We delivered good financial results in the second quarter growing net sales 13% amidst a challenging operating environment impacted by COVID-19," said Bill Siwek, President and CEO of TPI Composites.
"As of today, all of our manufacturing facilities have returned to pre-COVID-19 capacity levels. We believe this positions us well for a strong second half of the year given the strong demand we are seeing from our customers.
"We announced today we extended two supply agreements with GE: one in Iowa through 2021 with an option to extend through 2022 and one in Juarez, Mexico through 2022. We will also be adding another production line in Mexico to provide for GE's wind turbine technologies in North America. Additionally, we announced today that we signed a multi-year agreement with Nordex for two manufacturing lines in our Chennai, India manufacturing facility, where we plan to start production in the first quarter next year. These new manufacturing lines and extensions of contracts added approximately $800 million of potential contract value.
"We continue to invest in our team by adding talented professionals with diverse backgrounds. We announced today that we hired Jim Hilderhoff as our Chief Commercial Officer responsible for all commercial activities at TPI. Jim brings over 30 years of experience of commercial leadership experience at Wabtec and GE.
"We remain nimble from a capital structure standpoint. We completed an amendment to our debt facility which gives us additional flexibility as we navigate through the dynamic macro environment. Our liquidity at the end of the quarter was $138.4 million, composed of $96.7 million of cash and cash equivalents and approximately $41.7 million of total availability under various debt facilities.
"While we believe we have executed well while navigating the COVID-19 pandemic with all of our plants currently operating at or above planned capacity, several of our manufacturing facilities, in particular Mexico and India, are operating in regions with high levels of reported COVID-19 positive cases. As such, we may be required to reinstate temporary production suspensions or volume reductions at these manufacturing facilities or at our other manufacturing facilities to the extent there is a significant resurgence of COVID-19 cases in the regions where we operate or there is an outbreak of COVID-19 cases in any of our manufacturing facilities. Due to the fluid nature of COVID-19 and the potential impact on our business we will not be providing 2020 guidance at this time.
"In closing, the hard work and tireless efforts of our associates allowed us to deal with COVID-19 over the last few months have enabled us to reach pre-COVID capacity levels. I want to thank each associate for their dedication in these trying times. We remain encouraged by the growth opportunities and runway in both the wind and transportation markets and look forward to creating value for our shareholders for years to come," concluded Mr. Siwek.
Second Quarter 2020 Financial Results
Net sales for the three months ended June 30, 2020 increased by $43.0 million or 13.0% to $373.8 million compared to $330.8 million in the same period in 2019. Net sales of wind blades increased by 15.3% to $348.1 million for the three months ended June 30, 2020 as compared to $301.8 million in the same period in 2019. The increase in net sales was primarily driven by a 10% increase in the number of wind blades produced during the three months ended June 30, 2020 compared to the same period in 2019 largely as a result of increased production at our China facilities and our Matamoros, Mexico facility. The increase was also due to a higher average sales price due to the mix of wind blade models produced during the three months ended June 30, 2020 compared to the same period in 2019. The impact of the fluctuating U.S. dollar against the Euro in our Turkey operations and the Chinese Renminbi in our China operations on consolidated net sales for the three months ended June 30, 2020 was a decrease of 0.3% as compared to the same period in 2019. Although our net sales increased for the three months ended June 30, 2020 compared to the same period in 2019, we estimate that our net sales were adversely impacted by approximately $96 million, based upon wind blade sets which we had forecasted to produce at our Mexico, Iowa, Turkey and India manufacturing facilities in the period under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of to the COVID-19 pandemic.
Total cost of goods sold for the three months ended June 30, 2020 was $378.6 million and included $6.9 million related to lines in startup and $4.0 million related to lines in transition during the quarter. This compares to total cost of goods sold for the three months ended June 30, 2019 of $308.2 million and included $14.7 million related to lines in startup and $8.2 million related to lines in transition during the quarter. Total cost of goods sold as a percentage of net sales increased by approximately 8% during the three months ended June 30, 2020 as compared to the same period in 2019, driven primarily by the increase in direct materials and warranty costs primarily relating to a warranty remediation campaign for a specific wind blade model for one of our customers, and COVID-19 related costs associated with the health and safety of our associates and non-productive labor, partially offset by a decrease in startup and transition costs, the impact of savings in raw material costs and foreign currency fluctuations. The impact of the fluctuating U.S. dollar against the Euro, Turkish Lira, Chinese Renminbi and Mexican Peso decreased consolidated cost of goods sold by 3.2% for three months ended June 30, 2020 as compared to the same period in 2019.
General and administrative expenses for the three months ended June 30, 2020 totaled $6.9 million, or 1.8% of net sales, compared to $9.2 million, or 2.8% of net sales, for the same period in 2019. The decrease as a percentage of net sales was primarily driven by lower travel and training costs due to the COVID-19 pandemic.
Income taxes reflected a provision of $49.3 million for the three months ended June 30, 2020 as compared to a provision of $0.5 million for the same period in 2019. The increase in the provision was primarily due to a change in the forecasted annual effective tax rate as of June 30, 2020 in comparison to the forecast at March 31, 2020 and the earnings mix by jurisdiction in the three months ended June 30, 2020 as compared to the same period in 2019. More specifically, income taxes for the three months ended June 30, 2020 was the result of applying a revised forecasted annual effective tax rate to a quarter that was significantly impacted by losses in several jurisdictions due to the COVID-19 pandemic.
Net loss for the three months ended June 30, 2020 was $66.1 million as compared to net income of $1.8 million in the same period in 2019. The decrease in the net income was primarily due to the reasons set forth above. In addition, we estimate that our net loss was adversely impacted by approximately $39 million, net of taxes, based upon the forecasted gross margin on the wind blade sets we had forecasted to produce at our Mexico, Iowa, Turkey and India manufacturing facilities in the period under non-cancellable purchase orders associated with our long-term contracts but were unable to do so as a result of the COVID-19 pandemic. In addition, we incurred approximately $16 million, net of taxes, of COVID-19 related costs associated with the health and safety of our associates and non-productive labor. The net loss per share was $1.87 for the three months ended June 30, 2020, compared to a net income per share of $0.05 for the three months ended June 30, 2019. Adjusted EBITDA for the three months ended June 30, 2020 decreased to $3.3 million compared to $23.4 million during the same period in 2019. Adjusted EBITDA margin decreased to 0.9% compared to 7.1% during the same period in 2019. We estimate that our Adjusted EBITDA was adversely impacted for the three months ended June 30, 2020 by approximately $36 million, based upon the forecasted Adjusted EBITDA margin on the forecasted wind blade sets which we were to produce in those periods but were unable to do so as a result of the COVID-19 pandemic and COVID-19 related costs associated with the health and safety of our associates and non-productive labor.
Capital expenditures were $15.0 million for the three months ended June 30, 2020 compared to $19.0 million during the same period in 2019. Our capital expenditures have primarily related to machinery and equipment for new facilities and expansion and improvements at existing facilities.
We ended the quarter with $96.7 million of cash and cash equivalents and net debt was $142.5 million as compared to $71.8 million at December 31, 2019. For the quarter we used $29.6 million of cash flows in operations and invested $15.0 million in capital expenditures for a negative free cash flow of $44.6 million.
On April 23, 2020, TPI announced the withdrawal of its fiscal year 2020 financial guidance first issued on February 27, 2020. At this time, TPI will not be reinstating its fiscal year 2020 financial guidance due to the inability to forecast or quantify with reasonable accuracy the full duration and financial magnitude of the impact of the COVID-19 pandemic.
Conference Call and Webcast Information
TPI Composites will host an investor conference call this afternoon, Thursday, August 6, 2020 at 5:00 pm ET. Interested parties are invited to listen to the conference call which can be accessed live over the phone by dialing 1-855-327-6837, or for international callers, 1-631-891-4304. A replay will be available two hours after the call and can be accessed by dialing 1-844-512-2921, or for international callers, 1-412-317-6671. The passcode for the live call and the replay is 10010271. The replay will be available until August 13, 2020. Interested investors and other parties may also listen to a simultaneous webcast of the conference call by logging onto the Investors section of the Company's website at www.tpicomposites.com . The online replay will be available for a limited time beginning immediately following the call.
About TPI Composites, Inc.
TPI Composites, Inc. is the only independent manufacturer of composite wind blades for the wind energy market with a global manufacturing footprint. TPI delivers high-quality, cost-effective composite solutions through long-term relationships with leading OEMs in the wind and transportation markets. TPI is headquartered in Scottsdale, Arizona and operates factories in the U.S., China, Mexico, Turkey and India. TPI operates additional engineering development centers in Denmark and Germany.
This release contains forward-looking statements which are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, among other things, concerning: the impact of the COVID-19 pandemic on our business, effects on our financial statements and our financial outlook; our business strategy, including anticipated trends and developments in and management plans for our business and the wind industry and other markets in which we operate; our projected annual revenue growth; competition; future financial results, operating results, revenues, gross margin, operating expenses, profitability, products, projected costs, warranties, our ability to improve our operating margins, and capital expenditures. These forward-looking statements are often characterized by the use of words such as "estimate," "expect," "anticipate," "project," "plan," "intend," "seek," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," "continue" and the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the matters discussed in "Risk Factors," in our Annual Report on Form 10-K and other reports that we will file with the SEC.
This press release includes unaudited non-GAAP financial measures, including EBITDA, adjusted EBITDA, net cash (debt) and free cash flow. We define EBITDA as net income (loss) plus interest expense (including losses on extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define adjusted EBITDA as EBITDA plus any share-based compensation expense, any realized gains or losses from foreign currency remeasurement, any realized gains or losses from the sale of assets and asset impairments and any restructuring costs. We define net cash (debt) as the total unrestricted cash and cash equivalents less the total principal amount of debt outstanding. We define free cash flow as net cash flow from operating activities less capital expenditures. We present non-GAAP measures when we believe that the additional information is useful and meaningful to investors. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See below for a reconciliation of certain non-GAAP financial measures to the comparable GAAP measures as well as our Investor Presentation which can be found in the Investors section at www.tpicomposites.com .
TPI COMPOSITES, INC. AND SUBSIDIARIES TABLE ONE - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, (in thousands, except per share data) 2020 2019 2020 2019 Net sales $ 373,817 $ 330,771 $ 730,453 $ 630,551 Cost of sales 367,644 285,319 716,119 568,357 Startup and transition costs 10,920 22,901 22,954 41,079 Total cost of goods sold 378,564 308,220 739,073 609,436 Gross profit (loss) (4,747 ) 22,551 (8,620 ) 21,115 General and administrative expenses 6,887 9,208 16,383 17,193 Realized loss on sale of assets and asset impairments 1,440 4,972 3,358 7,207 Restructuring charges, net 181 3,874 298 3,874 Income (loss) from operations (13,255 ) 4,497 (28,659 ) (7,159 ) Other income (expense): Interest income 8 31 40 82 Interest expense (2,553 ) (2,274 ) (4,356 ) (4,273 ) Realized loss on foreign currency remeasurement (1,928 ) (967 ) (968 ) (4,769 ) Miscellaneous income 939 1,016 1,634 1,718 Total other expense (3,534 ) (2,194 ) (3,650 ) (7,242 ) Income (loss) before income taxes (16,789 ) 2,303 (32,309 ) (14,401 ) Income tax benefit (provision) (49,312 ) (475 ) (34,284 ) 4,125 Net income (loss) $ (66,101 ) $ 1,828 $ (66,593 ) $ (10,276 ) Weighted-average common shares outstanding: Basic 35,299 35,033 35,256 34,970 Diluted 35,299 36,369 35,256 34,970 Net income (loss) per common share: Basic $ (1.87 ) $ 0.05 $ (1.89 ) $ (0.29 ) Diluted $ (1.87 ) $ 0.05 $ (1.89 ) $ (0.29 ) Non-GAAP Measures (unaudited): EBITDA $ (2,628 ) $ 11,671 $ (5,349 ) $ 7,574 Adjusted EBITDA $ 3,295 $ 23,421 $ 4,591 $ 26,346
TPI COMPOSITES, INC. AND SUBSIDIARIES TABLE TWO - CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, (in thousands) 2020 2019 Assets Current assets: Cash and cash equivalents $ 96,657 $ 70,282 Restricted cash 312 992 Accounts receivable 133,147 184,012 Contract assets 214,556 166,515 Prepaid expenses 15,983 10,047 Other current assets 25,900 29,843 Inventories 12,368 6,731 Total current assets 498,923 468,422 Noncurrent assets: Property, plant, and equipment, net 211,175 205,007 Operating lease right of use assets 162,767 122,351 Other noncurrent assets 22,420 30,897 Total assets $ 895,285 $ 826,677 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 267,833 $ 293,104 Accrued warranty 56,772 47,639 Current maturities of long-term debt 25,285 13,501 Current operating lease liabilities 21,918 16,629 Contract liabilities 2,447 3,008 Total current liabilities 374,255 373,881 Noncurrent liabilities: Long-term debt, net of debt issuance costs and current maturities 212,617 127,888 Noncurrent operating lease liabilities 154,759 113,883 Other noncurrent liabilities 24,809 5,975 Total liabilities 766,440 621,627 Total stockholders' equity 128,845 205,050 Total liabilities and stockholders' equity $ 895,285 $ 826,677 Non-GAAP Measure (unaudited): Net debt $ (142,524 ) $ (71,779 )
TPI COMPOSITES, INC. AND SUBSIDIARIES TABLE THREE - CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2020 2019 2020 2019 Net cash provided by (used in) operating activities $ (29,573 ) $ 10,573 $ (27,005 ) $ (1,518 ) Net cash used in investing activities (15,047 ) (19,030 ) (42,030 ) (37,739 ) Net cash provided by (used in) financing activities 32,173 (10,629 ) 97,255 10,446 Impact of foreign exchange rates on cash, cash equivalents and restricted cash (719 ) (297 ) (2,525 ) 696 Cash, cash equivalents and restricted cash, beginning of period 110,610 80,644 71,749 89,376 Cash, cash equivalents and restricted cash, end of period $ 97,444 $ 61,261 $ 97,444 $ 61,261 Non-GAAP Measure (unaudited): Free cash flow $ (44,620 ) $ (8,457 ) $ (69,035 ) $ (39,257 )
TPI COMPOSITES, INC. AND SUBSIDIARIES TABLE FOUR - RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED) EBITDA and adjusted EBITDA are reconciled as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2020 2019 2020 2019 Net income (loss) $ (66,101 ) $ 1,828 $ (66,593 ) $ (10,276 ) Adjustments: Depreciation and amortization 11,616 7,125 22,644 17,784 Interest expense (net of interest income) 2,545 2,243 4,316 4,191 Income tax provision (benefit) 49,312 475 34,284 (4,125 ) EBITDA (2,628 ) 11,671 (5,349 ) 7,574 Share-based compensation expense 2,374 1,937 5,316 2,922 Realized loss on foreign currency remeasurement 1,928 967 968 4,769 Realized loss on sale of assets and asset impairments 1,440 4,972 3,358 7,207 Restructuring charges, net 181 3,874 298 3,874 Adjusted EBITDA $ 3,295 $ 23,421 $ 4,591 $ 26,346 Net debt is reconciled as follows: June 30, December 31, (in thousands) 2020 2019 Cash and cash equivalents $ 96,657 $ 70,282 Less total debt, net of debt issuance costs (237,902 ) (141,389 ) Less debt issuance costs (1,279 ) (672 ) Net debt $ (142,524 ) $ (71,779 ) Free cash flow is reconciled as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2020 2019 2020 2019 Net cash provided by (used in) operating activities $ (29,573 ) $ 10,573 $ (27,005 ) $ (1,518 ) Less capital expenditures (15,047 ) (19,030 ) (42,030 ) (37,739 ) Free cash flow $ (44,620 ) $ (8,457 ) $ (69,035 ) $ (39,257 )
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