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Risks Related to Our Business



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Risks Related to Our Business

Our business is subject to many risks and uncertainties of which you should be aware before you decide to invest in our common stock. These risks are discussed more fully under “Risk Factors” in this prospectus. Some of these risks include, but are not limited to, the following:

 

 



 

A significant portion of our business is derived from a small number of customers, and one wind blade customer in particular, therefore any loss of or reduction in purchase orders, failure of these customers to fulfill their obligations or our failure to secure long-term supply agreement renewals from these customers would materially harm our business.

 

 



 

Defects in materials and workmanship or wind blade failures could harm our reputation, expose us to product warranty or other liability claims, decrease demand for our wind blades, or materially harm existing or prospective customer relationships.

 

 



 

We have experienced and could in the future experience quality or operational issues in connection with plant construction or expansion, wind blade model transition and wind blade manufacturing,

 

 

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which could result in losses and cause delays in our ability to complete our projects and may therefore materially harm our business, financial condition and results of operations.

 

 



 

Demand for our wind blades may fluctuate for a variety of reasons, including the growth of the wind industry, and decreases in demand could materially harm our business and may not be sufficient to support our growth strategy.

 

 



 

We may not be able to manage our future growth effectively, which may materially harm our business, operating results and financial condition.

 

 



 

We operate a substantial portion of our business in international markets and we may be unable to effectively manage a variety of currency, legal, regulatory, economic, social and political risks associated with our global operations and those in developing markets.

 

 



 

Our financial position, revenue, operating results and profitability are difficult to predict and may vary from quarter to quarter, which could cause our share price to decline significantly.

 

 



 

We have a history of net losses and may not achieve or maintain profitability in the future.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:



 

 



 

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting;

 

 



 

an exemption from compliance with any requirement that the Public Company Accounting Oversight Board may adopt regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

 



 

reduced disclosure about our executive compensation arrangements; and

 

 



 

exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a shareholder approval of any golden parachute arrangements.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. We have irrevocably elected to “opt out” of the exemption for the delayed adoption of certain accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

 



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Company and Other Information

We were founded in 1968 and have been providing composite wind blades for 15 years. Our knowledge and experience of composite materials and manufacturing originates with our predecessor company, Tillotson Pearson Inc., a leading manufacturer of high-performance sail and powerboats along with a wide range of composite structures used in other industrial applications. Following the separation from our boat building business in 2004, we reorganized in Delaware as LCSI Holding, Inc. We changed our corporate name to TPI Composites, Inc. in 2008. Today, we are headquartered in Scottsdale, Arizona, and we have expanded our global footprint to include domestic facilities in Newton, Iowa; Fall River, Massachusetts; Warren, Rhode Island; and Santa Teresa, New Mexico and international facilities in Dafeng, China; Taicang Port, China; Taicang City, China; Juarez, Mexico; and Izmir, Turkey. Together, as of June 30, 2016, we have approximately 3.5 million square feet of manufacturing space and over 6,000 employees, including materials and process engineers, manufacturing process engineers, quality assurance personnel and production workers.

Our principal executive offices are located at 8501 North Scottsdale Road, Gainey Center II, Suite 100, Scottsdale, Arizona 85253 and our telephone number is (480) 305-8910. Our website address is www.tpicomposites.com . The information contained on our website or that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in deciding whether to purchase our common stock.

This prospectus contains references to our trademarks. This prospectus contains additional trade names, trademarks and service marks of other companies. Those other trade names, trademarks and service marks are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

 

 

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THE OFFERING



 

Common stock offered by us

7,250,000 shares (8,337,500 shares in the event the underwriters exercise their option to purchase additional shares in full).

 

Common stock to be outstanding immediately after this offering

32,781,263 shares (33,868,763 shares in the event the underwriters exercise their option to purchase additional shares in full).

 

Option to purchase additional shares from us

We have granted the underwriters an option for a period of 30 days to purchase up to an additional 1,087,500 shares of our common stock at the public offering price, less underwriting discounts.

 

Use of proceeds

We estimate that we will receive net proceeds from this offering of approximately $102.9 million, or $119.1 million if the underwriters fully exercise their option to purchase additional shares, assuming an initial public offering price of $16.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and estimated offering expenses payable by us.

 

 

We intend to use the net proceeds from this offering for working capital and other general corporate purposes, including financing our existing manufacturing operations, expansion in existing and new geographies and repayment of certain indebtedness. Although we currently have no agreements or commitments for any specific acquisitions, we may also use a portion of the net proceeds to expand our current business through strategic alliances or acquisitions of other businesses, products or technologies. See “Use of Proceeds.”

 

Concentration of Ownership

Upon the completion of this offering, our executive officers and directors and stockholders holding more than 5% of our capital stock, and their affiliates, will beneficially own, in the aggregate, approximately 77% of our outstanding shares of common stock.

 

Dividend Policy

We currently intend to retain earnings, if any, to finance the development and growth of our business and do not anticipate paying cash dividends on the common stock in the future.

 

Proposed trading symbol

We intend to have our common stock listed on The NASDAQ Global Market under the symbol “TPIC”.

 

Risk factors

You should read “Risk Factors” beginning on page 21 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

 

 

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Table of Contents

The number of shares of common stock to be outstanding after this offering is based on 25,531,263 shares of common stock outstanding as of March 31, 2016 and excludes:

 

 



 

3,348,628 shares of common stock issuable upon exercise of outstanding options as of March 31, 2016 at a weighted-average exercise price of $12.73 per share;

 

 



 

654,120 shares of common stock issuable upon the vesting of restricted stock units outstanding as of March 31, 2016;

 

 



 

61,720 shares of our common stock reserved for issuance in connection with the exercise of our outstanding warrants to purchase common stock issued on December 29, 2014, or the Common Warrants, which we issued in connection with our subordinated convertible promissory notes issued in December 2014, or the Subordinated Convertible Promissory Notes; and

 

 



 

3,382,936 shares of our common stock reserved for future issuance under our Amended and Restated 2015 Stock Option and Incentive Plan, or the 2015 Plan, and which contains provisions that automatically increase its share reserve each year.

Except as otherwise indicated, all information in this prospectus:

 


 



 

gives effect to a 360-for-1 stock split of our common stock effected pursuant to an amendment to our amended and restated certificate of incorporation on July 6, 2016;

 

 



 

gives effect to the automatic conversion of all outstanding shares of our convertible preferred stock into an aggregate of 21,110,204 shares of our common stock upon the completion of this offering;

 

 



 

gives effect to the conversion on a net issuance basis of our Series B warrants into an aggregate of 182,572 shares of our common stock;

 

 



 

assumes no exercise by the underwriters of their option to purchase up to an additional 1,087,500 shares of our common stock in this offering; and

 

 



 

assumes no exercise of the outstanding options described above.

 

 

 



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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

We have derived the summary consolidated statements of operations data for the three months ended March 31, 2016 and 2015 and the consolidated balance sheet data as of March 31, 2016 from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The unaudited interim condensed consolidated financial statements were prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments, consisting only of a normal recurring nature, that are necessary for a fair presentation of the financial information set forth in those statements. We have derived the summary consolidated statements of operations data for the years ended December 31, 2015, 2014 and 2013 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future and the results in the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the full year or any other period. The following summary consolidated financial and other data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.



 
































































 

 

Three Months Ended
March 31,


 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2015

 

 

2014

 

 

2013

 

 

 

(in thousands, except per share data)

 

Consolidated Statements of Operations Data:

 










 










 










 










 










Net sales

 

$

176,110

  

 

$

95,589

  

 

$

585,852

  

 

$

320,747

  

 

$

215,054

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

159,866

  

 

 

90,884

  

 

 

528,247

  

 

 

289,528

  

 

 

200,182

  

Startup and transition costs

 

 

3,306

  

 

 

4,154

  

 

 

15,860

  

 

 

16,567

  

 

 

6,607

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

 

163,172

  

 

 

95,038

  

 

 

544,107

  

 

 

306,095

  

 

 

206,789

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

12,938

  

 

 

551

  

 

 

41,745

  

 

 

14,652

  

 

 

8,265

  

General and administrative expenses

 

 

4,749

  

 

 

3,208

  

 

 

14,126

  

 

 

9,175

  

 

 

7,566

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

8,189

  

 

 

(2,657



 

 

27,619

  

 

 

5,477

  

 

 

699

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 










 










 










 










 










Interest income

 

 

21

  

 

 

59

  

 

 

161

  

 

 

186

  

 

 

155

  

Interest expense

 

 

(3,912



 

 

(3,551



 

 

(14,565



 

 

(7,236



 

 

(3,474



Loss on extinguishment of debt

 

 

—  

  

 

 

—  

  

 

 

—  

  

 

 

(2,946



 

 

—  

  

Realized gain (loss) on foreign currency remeasurement

 

 

(439



 

 

163

  

 

 

(1,802



 

 

(1,743



 

 

(1,892



Miscellaneous income

 

 

190

  

 

 

129

  

 

 

246

  

 

 

539

  

 

 

140

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other expense

 

 

(4,140



 

 

(3,200



 

 

(15,960



 

 

(11,200



 

 

(5,071






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

4,049

  

 

 

(5,857



 

 

11,659

  

 

 

(5,723



 

 

(4,372



Income tax benefit (provision)

 

 

(2,303



 

 

120

  

 

 

(3,977



 

 

(925



 

 

3,346

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before noncontrolling interest

 

 

1,746

  

 

 

(5,737



 

 

7,682

  

 

 

(6,648



 

 

(1,026



Net loss attributable to noncontrolling interest (1)

 

 

—  

  

 

 

—  

  

 

 

—  

  

 

 

—  

  

 

 

2,305

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

1,746

  

 

 

(5,737



 

 

7,682

  

 

 

(6,648



 

 

1,279

  

Net income attributable to preferred shareholders (2)

 

 

2,437

  

 

 

2,356

  

 

 

9,423

  

 

 

13,930

  

 

 

14,149

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(691



 

$

(8,093



 

$

(1,741



 

$

(20,578



 

$

(12,870






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted (3)

 

 

4,238

  

 

 

4,238

  

 

 

4,238

  

 

 

4,238

  

 

 

4,238

  




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted (3)

 

$

(0.16



 

$

(1.91



 

$

(0.41



 

$

(4.86



 

$

(3.04






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income attributable to common shareholders

 

$

1,746

  

 










 

$

7,682

  

 










 













 

 

 

 

 










 

 

 

 

 










 










Pro forma weighted-average common shares outstanding (unaudited)

 










 










 










 










 










Basic (3)

 

 

25,531

  

 










 

 

25,531

  

 










 













 

 

 

 

 










 

 

 

 

 










 










Diluted (3)

 

 

25,553

  

 










 

 

25,553

  

 










 













 

 

 

 

 










 

 

 

 

 










 










Pro forma net income per common share (unaudited)

 










 










 










 










 










Basic

 

$

0.07

  

 










 

$

0.30

  

 










 













 

 

 

 

 










 

 

 

 

 










 










Diluted

 

$

0.07

  

 










 

$

0.30

  

 










 













 

 

 

 

 










 

 

 

 

 










 










 

 

17




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