United states

Note 13. Segment Reporting

FASB ASC Topic 280, Segment Reporting , establishes standards for the manner in which companies report financial information about operating segments, products, services, geographic areas and major customers. In managing the Company’s business, management focuses on growing its revenues and earnings in select geographic areas serving primarily the wind energy market. The Company has operations in the United States, China, Turkey and Mexico. The Company’s operating segments are defined geographically as the United States, Asia, EMEA (Europe, the Middle East and Africa) and Mexico. Financial results are aggregated into four reportable segments based on quantitative thresholds. All of the Company’s segments operate in their local currency except for the Mexico and China segments, which both include a U.S. parent company.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

The following tables set forth certain information regarding each of the Company’s segments as of and for the three months ended March 31 (in thousands):

 

		2016				2015
Revenues by segment:
U.S.		$	51,761			$	37,376
Asia			64,352				28,005
EMEA			34,457				17,532
Mexico			25,540				12,676
Total revenues		$	176,110			$	95,589
Revenues by geographic location (1):
U.S.		$	51,761			$	37,376
China			64,352				28,005
Turkey			34,457				17,532
Mexico			25,540				12,676
Total revenues		$	176,110			$	95,589
Income (loss) from operations:
U.S.		$	(661	)		$	(2,222	)
Asia			15,542				2,520
EMEA			(7,659	)			(1,627	)
Mexico			967				(1,328	)
Total income (loss) from operations		$	8,189			$	(2,657	)
		March 31, 2016				December 31, 2015
Tangible long-lived assets:
U.S.		$	13,785			$	13,805
Asia (China)			29,185				29,957
EMEA (Turkey)			17,530				11,370
Mexico			14,443				12,600
Total tangible long-lived assets		$	74,943			$	67,732

 

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

Note 14. Subsequent Events

In May 2016, the Company entered into a new three-year collective bargaining agreement with the employees at the Company’s Turkey facility. The Company expects that the new agreement will result in an average increase in pay of approximately 20% for employees covered by the agreement.

In June 2016, the Company entered into a settlement agreement and release with one of its customers to resolve a potential warranty claim related to wind blades primarily manufactured in 2014 in the Company’s Turkey facility. The settlement agreement and release requires the Company to make a cash payment to the customer, replace or repair a specified number of wind blades and provide margin concessions on certain products to be produced by the Company. The expected aggregate cost to the Company of fulfilling its obligations under the settlement agreement and release is estimated to be $15.0 million, all of which has been accrued as of March 31, 2016.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

 

In June 2016, the Company entered into a ten year lease agreement for a third wind blade manufacturing facility in Juárez, Mexico. The new facility will provide approximately 340,000 square feet of manufacturing space when completed. The lease commences in March 2017 and the base rent will approximate $191,500 per month.

On July 6, 2016, the Company amended its amended and restated certificate of incorporation to effect a 360-for-1 stock split of its common stock. The stock split did not cause an adjustment to the par value of the authorized shares of common stock. As a result of the stock split, the Company has adjusted the share amounts authorized and issuable under the share-based compensation plans. All of the share and per share information for common stock (and the share-based compensation plans) referenced throughout the unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted to reflect this stock split.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

TPI Composites, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of TPI Composites, Inc. and subsidiaries (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2015. In connection with our audits of the consolidated financial statements, we also have audited financial statement schedule I. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TPI Composites, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Phoenix, Arizona

April 8, 2016, except for Note 21(b) which is as of July 8, 2016

 

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