United states

Note 12. Customer Deposits and Customer Advances

The Company regularly enters into contracts for the production of composite structures that require the purchase of raw materials specific to the customers’ orders. As such, the Company may require that customers pay a deposit prior to the beginning of production. The customer deposits are recorded as current liabilities in the consolidated balance sheets and are reduced as the Company invoices its customers for work performed or the products are delivered. As of December 31, 2015 and 2014, the Company had customer deposits of $8.9 million and $12.1 million, respectively.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The Company may receive customers advances used to assist with the cash required for the transition and startup of operations at facilities. Interest on these advances is imputed and a discount is recorded on the customer advances. The rate used approximates that which the Company estimates it could have received if financed from third parties. The discount is recorded as deferred revenue and recognized as net sales on a straight-line basis over the term of the supply agreements with the customer.

Customer advances received from GE through July 2014 included $9.0 million for the Newton, Iowa plant; $8.0 million for the plant in Taicang Port, China and $5.0 million for the plant in Turkey. In connection with the debt refinancing in August 2014 as detailed in note 14, Long-Term Debt , Net of Discount , the remaining advance payments were paid off in full.

In March 2014, the Company’s Mexico segment received aggregate advance payments of $2.0 million as well as manufacturing equipment valued at $0.8 million from one of its customers to help fund the startup of the plant in Mexico. The agreement, as amended in May 2014, required the Company to repay the advance payments and equipment cost without interest, through future credits against a specified number of products sold to the customer. During the years ended December 31, 2015 and 2014, $1.2 million and $1.6 million was repaid through credits, respectively. Customer advances at December 31 consisted of the following (in thousands):

 

		2015				2014
Customer advances, beginning of year		$	1,171			$	4,149
Customer advances received			—				5,280
Less: Repayments			(1,171	)			(8,258	)
Total customer advances, end of year			—				1,171
Less: Current portion of customer advances			—				1,171
Customer advances, net of current portion		$	—			$	—

Note 13. Share-Based Compensation

The Company maintains two active incentive compensation plans: the 2008 Stock Option and Grant Plan and the 2015 Stock Option and Incentive Plan. The Company granted 10-year term stock options to employees and directors during 2010 under the 2008 Stock Option and Grant Plan, which vested over a 4- or 5-year period. The 2,869 shares available for grant under the 2008 Stock Option and Grant Plan have been added to the shares available under the 2015 Plan.

The Company granted awards of stock options and restricted stock units (RSUs) during 2015 to certain employees and non-employee directors under the 2015 Plan. Each award includes a performance condition that requires the completion of an initial public offering (IPO) by the Company and a required vesting period of one to four years commencing upon achievement of the performance condition. The Company will begin recording share-based compensation expense for the 2015 awards when the IPO is considered probable. The performance requirement has not been deemed to be probable of achievement until the consummation of the IPO, and therefore no compensation cost will be recognized until the IPO occurs. If an IPO is consummated by the Company, compensation expense will be recorded for the requisite service period from the grant date through the IPO date with the balance of the stock based compensation expensed over the remaining vesting period. No share-based compensation awards were granted in 2014 or 2013.

 

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TPI COMPOSITES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The summary of activity for the Company’s incentive plans is as follows:

 

						Stock Options												RSUs
		Shares Available for Grant				Shares				Weighted- Average Exercise Price				Options Exercisable				Shares				Weighted- Average Grant Date Fair Value
Balance as of December 31, 2012			1,537,733				48,960			$	8.49				39,960				—			$	—
Granted			—				—				—								—				—
Exercised			—				—				—								—				—
Forfeited/cancelled			13,257				(13,257	)			8.49								—				—
Balance as of December 31, 2013			1,550,990				35,703				8.49				34,560				—				—
Granted			—				—				—								—				—
Exercised			—				—				—								—				—
Forfeited/cancelled (1)			(518,040	)			—				—								—				—
Balance as of December 31, 2014			1,032,950				35,703				8.49				35,703				—				—
Increase in shares authorized			6,317,031				—				—								—				—
Granted			(4,001,040	)			3,269,160				11.92								731,880				10.89
Exercised/vested			—				—				—								—				—
Forfeited/cancelled			43,200				(43,200	)			10.87								—				—
Balance as of December 31, 2015			3,392,141				3,261,663				11.90				35,703				731,880				10.89

 

 

(1)	Relates to shares previously available under the 2004 Long-Term Incentive Plan, which expired in September 2014.