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TPI Composites

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FY2019 Annual Report · TPI Composites
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 20 19  ANNUAL  REPORT

UNITED STATES  
SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549  

FORM 10-K  

(Mark One)  
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 

OF 1934                                            

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 

ACT OF 1934          

For the fiscal year ended December 31, 2019  

OR  

For the transition period from                      to 

Commission File Number 001-37839  

TPI Composites, Inc. 

(Exact name of Registrant as specified in its charter)  

Delaware 
(State or other jurisdiction of 
incorporation or organization) 

20-1590775 
(I.R.S. Employer 
Identification Number) 

8501 N. Scottsdale Rd. 
Gainey Center II, Suite 100 
Scottsdale, AZ 85253 

(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 
Common Stock, par value $0.01 

Trading symbol(s) 
TPIC 

Name of each exchange on which registered 
NASDAQ Global Market 

Securities registered pursuant to Section 12(g) of the Act: None 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No   
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  No  
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 
Non-accelerated filer 

   
     

  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  

   
   
   

 

The aggregate market value of the shares of common stock held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on 
June 28, 2019 as reported by the NASDAQ Global Market on such date was approximately $740 million. Shares of the Registrant’s common stock held by each 
executive officer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This 
calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose. 
As of January 31, 2020, the Registrant had 35,184,189 shares of common stock outstanding. 

Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, scheduled to be held on May 20, 2020, are incorporated by 
reference into Part III of this Report.     

Documents Incorporated by Reference 

 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
Table of Contents 

  Page 

PART I 
  Business ...........................................................................................................................................    
Item 1. 
Item 1A.   Risk Factors .....................................................................................................................................    
Item 1B.   Unresolved Staff Comments ............................................................................................................    
  Properties .........................................................................................................................................    
Item 2. 
  Legal Proceedings ............................................................................................................................    
Item 3. 
  Mine Safety Disclosures ..................................................................................................................    
Item 4. 

PART II      
Item 5. 

  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 

Equity Securities .........................................................................................................................  
  Selected Financial Data ....................................................................................................................    
Item 6. 
Item 7. 
  Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........    
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk .........................................................    
  Financial Statements and Supplementary Data ................................................................................    
Item 8. 
Item 9. 
  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure..........    
Item 9A.   Controls and Procedures ..................................................................................................................    
Item 9B.   Other Information ............................................................................................................................    

PART III     

Item 10.   Directors, Executive Officers and Corporate Governance ...............................................................    
Item 11.   Executive Compensation .................................................................................................................    
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 

Matters ........................................................................................................................................  
Item 13.   Certain Relationships and Related Transactions, and Director Independence .................................    
Item 14.   Principal Accounting Fees and Services ..........................................................................................    

PART IV     

Item 15.   Exhibits, Financial Statement Schedules .........................................................................................    
Item 16.   Form 10-K Summary .......................................................................................................................    

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal 

securities law. All statements other than statements of historical facts contained in this Annual Report on Form 10-
K, 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 Annual Report on 
Form 10-K include, but are not limited to, statements about: 

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growth of the wind energy market and our addressable market; 

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;   

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; 

competition from other wind blade and wind blade turbine manufacturers; 

the discovery of defects in our products; 

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 in wind 
energy markets; 

our ability to successfully open new manufacturing facilities and expand 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; 

the potential impact of the Coronavirus on our business and results of operations;  

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;  

our ability to procure adequate supplies of raw materials and components to fulfill our wind blade 
volume commitments to our customers; and 

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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 implied by these forward-looking statements. We have 
described under the heading “Risk Factors” included in Part 1, Item 1A of this Annual Report on Form 10-K 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 Annual Report on Form 10-K represent our views as of the date of this 

Annual Report on Form 10-K. 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 Annual Report on Form 10-K. Our forward-looking statements do not reflect the 
potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. 

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Item 1. Business 

Description of Business 

PART I 

TPI Composites, Inc. is the holding company that conducts substantially all of its business operations through 

its direct and indirect subsidiaries (collectively, the Company or we). The Company was founded in 1968 and has 
been producing composite wind blades since 2001. The Company’s knowledge and experience of composite 
materials and manufacturing originates with its 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 the boat building business in 2004, the Company reorganized in 
Delaware as LCSI Holding, Inc. and then changed its corporate name to TPI Composites, Inc. in 2008. 

Overview 

We are the only independent manufacturer of composite wind blades for the wind energy market with a global 

manufacturing footprint. We enable many of the industry’s leading wind turbine original equipment manufacturers 
(OEM), who have historically relied on in-house production, to outsource the manufacturing of some of their wind 
blades through our global footprint of advanced manufacturing facilities strategically located to serve large and 
growing wind markets in a cost-effective manner. Given the importance of wind energy capture, turbine reliability 
and cost to power producers, the size, quality and performance of wind blades have become highly strategic to our 
OEM customers. As a result, we have become a key supplier to our OEM customers in the manufacture of wind 
blades and related precision molding and assembly systems. We have entered into long-term supply agreements 
pursuant to which we dedicate capacity at our facilities to our customers in exchange for their commitment to 
purchase minimum annual volumes of wind blade sets (which consist of three wind blades). This collaborative 
dedicated supplier model provides us with contracted volumes that generate significant revenue visibility, drive 
capital efficiency and allow us to produce wind blades at a lower total delivered cost, while ensuring critical 
dedicated capacity for our customers. For a further discussion regarding our wind blade and precision molding and 
assembly systems manufacturing businesses, refer to the discussion in “Management’s Discussion and Analysis of 
Financial Condition and Results of Operations—Results of Operations” included in Part II, Item 7 of this Annual 
Report on Form 10-K. 

We also provide field service inspection and repair services to our OEM customers and wind farm owners and 

operators.  Our field service inspection and repairs services include diagnostic, repair and maintenance service 
offerings for wind blades that have been installed on wind turbines located at wind farms. Our field service 
inspection and repair services can be performed up-tower, where a blade technician performs these services in the 
air or from the wind turbine tower on a wind turbine blade, or down tower, where a blade is first removed from a 
wind turbine and these services are performed on the ground at the wind farm site or in a repair facility. 

We also leverage our advanced composite technology and history of innovation to supply high strength, 
lightweight and durable composite products to the transportation market.  In November 2017, we signed a five- year 
supply agreement with Proterra Inc. (Proterra) to supply Proterra Catalyst® composite bus bodies. In February 2018, 
we entered into an agreement with Navistar, Inc. (Navistar) to design and develop an all composite Class 8 tractor 
cab. This collaborative development project was entered into in connection with Navistar’s recent award under the 
Department of Energy’s (DOE) Super Truck II investment program, which is designed to promote fuel efficiency in 
commercial vehicles. In 2019, we also agreed to develop prototype composite body delivery vehicles for Workhorse 
Group. In November 2018, we announced a capital investment of approximately $11.5 million in 2019 to develop a 
highly automated pilot manufacturing line for the electric vehicle market within our Warren, Rhode Island facility, 
and we plan to commence operating this pilot line later this year. We expect this investment will enable us to further 
develop our technology, create defensible product and process IP and demonstrate our capability to manufacture 
composite components cost effectively at automotive volume rates. We also expect this pilot line will also help our 
current and potential customers to de-risk the decision-making process to commit to TPI for high-volume 
manufacturing programs in the future. 

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Our wind blade and precision molding and assembly systems manufacturing businesses accounted for 
approximately 96%, 95%, and 96% of our total net sales for each of the years ended December 31, 2019, 2018 and 
2017, respectively. As of February 27, 2020, our long-term wind and transportation supply agreements provide for 
minimum aggregate volume commitments from our customers of approximately $2.8 billion and encourage our 
customers to purchase additional volume up to, in the aggregate, a total contract value of approximately $5.2 billion 
through the end of 2023.   

Public Offerings and Stock Split 

In July 2016, we completed an initial public offering (IPO) of 7,187,500 shares of our common stock at a 
price of $11.00 per share, which included 937,500 shares issued pursuant to the underwriters’ over-allotment option. 
Certain of our existing stockholders, a non-employee director and executive officers purchased an aggregate of 
1,250,000 shares of our common stock in the IPO included in the total issuance above. The net proceeds from the 
IPO were $67.2 million after deducting underwriting discounts and offering expenses. Immediately prior to the 
closing of the IPO, all shares of the then-outstanding redeemable preferred shares converted into an aggregate 
of 21,110,204 shares of our common stock and the redeemable preferred share warrants converted on a net issuance 
basis into 120,923 shares of our common stock. In addition, concurrent with the closing of the IPO, certain 
subordinated convertible promissory notes in the aggregate principal and interest amount of $11.9 million were 
converted into 1,079,749 shares of our common stock at the public offering price of $11.00 per share. 

Prior to the IPO, in July 2016 we amended our amended and restated certificate of incorporation to effect a 

360-for-1 forward stock split of our common stock. As a result of the stock split, we have adjusted the share 
amounts authorized and issuable under the share-based compensation plans. All share and per share common stock 
information (including the share-based compensation plans) referenced throughout the consolidated financial 
statements and notes thereto have been retroactively adjusted to reflect this stock split. The stock split did not cause 
an adjustment to the par value of the authorized shares of our common stock. 

In May 2017, we completed a secondary public offering of 5,075,000 shares of our common stock at a price of 

$16.35 per share, which included 575,000 shares issued pursuant to the underwriters’ option to purchase additional 
shares. All of the shares were sold by existing stockholders and certain of our executive officers. The selling 
stockholders received all of the net proceeds of $78.8 million from the secondary public offering. We did not sell 
any shares and did not receive any of the proceeds from the offering and the costs paid by us in connection with the 
offering of $0.8 million were recorded in general and administrative costs in the accompanying consolidated 
statement of operations.   

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Financial Information about Segments and Geographic Areas 

We divide our business operations into four geographic operating segments—(1) the United States (U.S.), (2) Asia, 
(3) Mexico and (4) Europe, the Middle East, Africa and India (EMEAI) as follows: 

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Our U.S. segment includes (1) the manufacturing of wind blades at our Newton, Iowa plant, (2) the 
manufacturing of precision molding and assembly systems used to manufacture wind blades at our 
Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the transportation 
industry, which we also conduct at our Rhode Island facility, (4) wind blade inspection and repair 
services in North America, (5) our advanced engineering center in Kolding, Denmark, which provides 
technical and engineering resources to our manufacturing facilities, (6) our engineering center in Berlin, 
Germany which we purchased in July 2019 and (7) our corporate headquarters, the costs of which are 
included in general and administrative expenses.  

Our Asia segment includes (1) the manufacturing of wind blades at our facilities in Dafeng, China and 
Yangzhou, China, the latter of which commenced operations in March 2019, (2) the manufacturing of 
precision molding and assembly systems at our Taicang Port, China facility and (3) wind blade 
inspection and repair services.  

Our Mexico segment manufactures wind blades from three facilities in Juárez, Mexico and a facility in 
Matamoros, Mexico at which we commenced operations in July 2018. In November 2018, we entered 
into a new lease agreement with a third party for a new precision molding and assembly systems 
manufacturing facility in Juárez, Mexico and we commenced operations at this facility in March 2019. 
This segment also performs wind blade inspection and repair services.  

Our EMEAI segment manufactures wind blades from two facilities in Izmir, Turkey and also performs 
wind blade inspection and repair services. In February 2019, we entered into a new lease agreement 
with a third party for a new manufacturing facility that was built in Chennai, India and we commenced 
operations at this facility in the first quarter of 2020. This segment also performs wind blade inspection 
and repair services. 

For additional information regarding our operating segments and geographic areas, see Note 18 – Segment 
Reporting of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on 
Form 10-K. 

Business Strategy 

Our long-term success will be driven by our business strategy. The key elements of our business strategy are 

as follows: 

• 

Grow our existing relationships and develop new relationships with leading industry OEMs. We plan 
to continue growing and expanding our relationships with existing customers who, according to data 
from Wood Mackenzie (WoodMac), represented approximately 55% of the global onshore wind energy 
market, approximately 87% of that market excluding China, and 99% of the U.S. onshore wind turbine 
market over the three years ended December 31, 2018, based on megawatts (MWs) of energy capacity 
installed, as well as developing new relationships with other leading industry OEMs. We expect to be 
presented with opportunities to expand our existing relationships and develop new relationships with 
industry OEMs as they seek to capitalize on the benefits of outsourced wind blade manufacturing while 
maintaining high quality customization and dedicated capacity. General Electric International, Inc. and 
its affiliates (GE Wind) agreed to transition to a larger blade model in our Newton, Iowa plant in early 
2019 and to eliminate its option to terminate their supply agreement at this location prior to its 
December 2020 expiration. In December 2018, we entered into a multiyear supply agreement with 
Vestas to supply wind blades from a new manufacturing facility that was built in Chennai, India and we 
commenced operations at this facility in the first quarter of 2020. In the first quarter of 2019, GE Wind 
executed a joint development agreement to cooperatively develop advanced blade technology for future 
wind turbines. In August 2019, we reached an agreement with Nordex SE (Nordex) to transition 
multiple existing lines at one of our Izmir, Turkey locations to longer blades and at the same time 
extended the contract by two years through 2022.   

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Leverage our footprint in large and growing wind markets, capitalize on the continuing outsourcing 
trend, evaluate building wind turbine blades for the offshore market and evaluate strategic 
acquisitions. As the wind energy market continues to expand globally and many wind turbine OEMs 
continue to shift towards increased outsourcing of wind blade manufacturing, we believe we are well-
positioned with our global footprint. We utilize our strengths in composites technology and 
manufacturing, combined with our collaborative dedicated supplier model to provide our customers 
with an efficient solution for their expansion in large and growing wind markets. Our quality, reliability 
and total delivered cost reduce sourcing risk for our customers. In addition, our demonstrated ability to 
enter into new markets and the strength of our manufacturing capabilities afford us the optionality to 
build new factories or grow through strategic acquisitions. 

Continue to drive down costs of wind energy. We continue to work with our customers on larger size 
wind blade models that maximize the capture of wind energy and drive down the levelized cost of 
energy (LCOE). We also continue to utilize our advanced technology, regional manufacturing facilities 
strategically located to cost effectively serve large and growing wind markets and ability to source 
materials globally at competitive costs to deliver high-performing, composite wind blades. Our 
collaborative engineering approach and our advanced precision molding and assembly systems allow us 
to integrate our customer’s design requirements with cost-efficient, replicable and scalable 
manufacturing processes. This collaborative engineering approach with our customers also allows us to 
reduce manufacturing cycle times, new line and factory start up times and new blade model transition 
times. We also continue to work with our customers to drive down the cost of materials and production, 
the benefit of which we typically share with our customers contractually in a manner that reduces LCOE 
for customers, further strengthens our customer relationships and improves our margins. 

Expand our field service inspection and repair business. Although sales from our field service 
inspection and repair business currently represent a very small percentage of our total revenue, we plan 
to expand our field service inspection and repair business by leveraging our existing wind blade 
manufacturing and composites expertise.  We believe there is an increasing demand and growing market 
for experienced wind blade inspection and repair services worldwide as the number of wind turbines 
installed worldwide continues to grow and the fleet of existing wind turbines continues to age.  

Expand our transportation business and expand into other strategic markets.  We leverage our 
advanced composite technology and history of innovation to supply high strength, lightweight and 
durable composite products to the transportation market. As the vehicle electrification trend continues, 
reducing the weight of these vehicles is critical to expanding range and/or providing more room for 
additional batteries or reducing the number of batteries. As a result, we believe there is an increasing 
demand for composites products for electric vehicles. In addition, we believe there is a potential demand 
in other strategic markets for composites as to replace aluminum or other more expensive composite 
materials such as carbon. 

Focus on continuing innovation. We have a history of innovation in advanced composite technologies 
and production techniques and use several proprietary technologies related to wind blade 
manufacturing. With this culture of innovation and a collaborative “design for manufacturability” 
approach, we continue to address increasing physical dimensions, demanding technical specifications 
and strict quality control requirements for our customers’ most advanced wind blades. We also invest in 
ongoing simplification and selective automation of production processes for increased efficiency and 
precision. In addition, we plan to leverage our history of composite industry-first innovations to grow 
our business in the transportation market, in which we believe there is a demand for high precision, 
structural composites manufacturing as well as high speed, high volume manufacturing of structural 
composite components, particularly in the transportation market.  

Wind Blade Manufacturing Operations and Process 

We have developed significant expertise in advanced composite technology and use high performance 

composite materials, precision molding and assembly systems including modular tooling, and advanced process 
technology, as well as sophisticated measurement, inspection, testing and quality assurance tools, allowing us to 
produce over 55,000 wind blades since 2001 with an excellent field performance record in a market where reliability 

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is critical to our customers’ success. We manufacture or have manufactured wind blades ranging from 30 meters to 
over 70 meters across our global facilities, and have the capability to manufacture wind blades of greater lengths as 
required by existing or new customers. In combination with our advanced technologies, we seek to create 
manufacturing processes that are replicable and scalable in our manufacturing facilities located worldwide, 
regardless of cultural or language barriers. Using continuous improvement principles, we can customize each 
manufacturing step, from raw materials to finished products. This also allows us to systematically design for the 
entire manufacturing process so that we can achieve better quality control and increase production efficiencies. We 
believe that our focus on simplifying and, where feasible, automating production processes is critical to 
manufacturing high-precision, lightweight and durable products at a reasonable cost to our customers. We produce 
high unit volumes of near-aerospace grade products at industrial costs. 

Raw Materials 

The key raw materials for the wind blades we manufacture include highly advanced fiberglass fabrics, select 

carbon reinforcements, foam, balsa wood, resin, adhesives for assembly of molded components, gel coat or paint for 
preparation of cosmetic surfaces and attachment hardware including steel components. Most of these materials are 
available in multiple geographic regions and in reasonably close proximity to our manufacturing facilities. Our 
agreements for the supply of raw materials are designed to guarantee volumes that we believe will be required to 
fulfill our customers’ wind blade commitments. A portion of our raw materials are subject to price volatility, such as 
the resins used in our manufacturing processes. Although the majority of materials incorporated into our products 
are available from a number of sources, certain materials are available only from a relatively limited number of 
suppliers. We seek multiple suppliers for our raw materials and continually evaluate potential new supplier 
relationships. 

Precision Molding and Assembly Systems 

Over the last decade, we have produced hundreds of precision molding and assembly systems, ranging from 

30 meters to over 70 meters in length, to support our global operations. We began these operations in our tooling 
technology center in Warren, Rhode Island. In 2013, we expanded our precision molding and assembly system 
production capabilities to a facility in Taicang City, China, which was recently moved to Taicang Port, China, which 
serves customers around the globe. While capable of cost-effectively delivering precision molding and assembly 
systems across all of our facilities, our Rhode Island tooling technology center primarily serves the North American 
market. We currently have transitioned most of our North American precision molding and assembly system 
production capabilities from Warren, Rhode Island to a new facility in Juárez, Mexico, which can serve customers 
globally. We expect this transition to be completed during 2020. Our precision molding and assembly systems have 
been used to build tens of thousands of wind blades worldwide. 

Our tooling solutions include precision wind blade patterns, precision molding and assembly systems, 
including modular tooling techniques. We believe that our technological and production expertise are key factors in 
our continued competitiveness, as we address continually increasing physical dimensions, demanding technical 
specifications, and strict quality control requirements for wind blades. 

Wind Blade Production Process 

Production of wind blades requires adherence to the unique specifications of each of our customers, who 

design their wind turbines and wind blades to optimize performance, reliability and total delivered cost. With our 
culture of innovation and a collaborative “design for manufacturability” approach, we have the capability and 
expertise to manufacture wind blades of different designs, utilizing fiberglass, carbon or other advanced composite 
materials to meet unique customer specifications. We also have the flexibility to quickly transition our 
manufacturing facilities to produce different wind blade models and sizes using our precision molding and assembly 
systems, including modular tooling techniques. 

We have developed a highly dependable method for making high-quality wind blades. In conjunction with our 

continuous improvement principles, we design our proprietary manufacturing processes to be replicable, scalable 
and transferable to each of our advanced manufacturing facilities worldwide. As a result, we can repeatedly move a 
product from its design phase to volume production while maintaining quality, even in developing regions of the 

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world. Similarly, we have developed the manual portions of our manufacturing processes based on proven 
technologies and production methods that can be learned and implemented rapidly by line personnel. We focus on 
consistency and quality control across our facilities, using hands-on training methods and employing repeatable 
manufacturing processes. 

We use an advanced form of vacuum-assisted resin transfer tooling process to pull liquid resin into a dry lay-
up, resulting in light, strong, and reliable composite structures. In our manufacturing process, fiber reinforcements 
and core materials are laid up in a mold while dry, followed by a vacuum bag that is placed over the layup and 
sealed to the mold. The wind blade component is then placed under vacuum. The resin is introduced into the wind 
blade component via resin inlet ports and then distributed through the reinforcement and core materials via a flow 
medium and a series of channels, saturating the wind blade component. The vacuum removes air and gases during 
processing, thereby eliminating voids. Pressure differentials drive resin uniformly throughout the wind blade 
component, providing a consistent laminate. By using a variety of reinforcement and core materials, the structural 
characteristics of the wind blade can be highly engineered to suit the custom specifications of our customers. 
Although only occasionally required by our customers, we are also capable of employing additional composite 
fabrication processes, such as pre-impregnated laminates, in addition to our vacuum infusion process. 

8 

Wind Blade Long-Term Supply Agreements 

Our current wind blade customers, which include Vestas, GE Wind, Nordex, Siemens Gamesa Renewable 

Energy S.A. (Siemens Gamesa) and ENERCON GmbH (ENERCON), are some of the world’s largest wind turbine 
manufacturers. According to data from WoodMac, our customers represented approximately 55% of the global 
onshore wind energy market, approximately 87% of that market excluding China, and 99% of the U.S. onshore wind 
turbine market over the three years ended December 31, 2018, based on MWs of energy capacity installed. In our 
collaborative dedicated supplier model, our customers are incentivized to maximize the volume of wind blades 
purchased through lower pricing at higher purchase volumes. As of February 27, 2020, our existing wind blade 
supply agreements provide for minimum aggregate volume commitments from our customers of approximately $2.7 
billion and encourage our customers to purchase additional volume up to, in the aggregate, a total contract value of 
approximately $5.0 billion through the end of 2023, which we believe provides us with significant future revenue 
visibility and helps to insulate us from potential short-term fluctuations or legislative changes in any one market. 
Our supply agreements generally contain liquidated damages provisions in the event of late delivery, however, we 
generally do not bear the responsibility for transporting the wind blades we manufacture to our customers. 

Our long-term supply agreements with our customers generally encourage our customers to maximize the 
volume of wind blades they purchase from us, since purchasing less than a specified amount triggers higher pricing, 
as well as provide downside protection for us through minimum annual volume commitments. Some of our long-
term supply agreements also provide for annual sales price reductions reflecting assumptions regarding increases in 
our manufacturing efficiency and productivity. We work to continue to drive down the cost of materials and 
production through innovation and global sourcing, a portion of the benefit of which we share with our customers 
contractually, further strengthening our deep customer relationships. Wind blade pricing is based on annual 
commitments of volume as established in the customer’s contract, with orders less than committed volume resulting 
in additional costs per wind blade to customers. Orders in excess of annual commitments may but generally do not 
result in discounts to customers from the contracted price for the committed volume. Customers may utilize early 
payment discounts, which are reported as a reduction of revenue at the time the discount is taken. 

Vestas  

In 2014, we entered into a new supply agreement with Vestas to supply wind blades from a new 

manufacturing facility in Dafeng, China. Based on the success of this manufacturing arrangement, we expanded our 
relationship with Vestas through additional supply agreements for a manufacturing facility in Turkey, Matamoros, 
Mexico and Yangzhou, China. Additionally, in 2018, we entered into a supply agreement with Vestas to supply 
wind blades from a new manufacturing facility that was built in Chennai, India and we commenced operations at 
this facility in the first quarter of 2020. Each of the supply agreements with Vestas provide for a minimum number 
of wind blade sets to be purchased by Vestas each year during the term, the schedule for which is established at the 
outset of the agreement. In return, we commit to dedicate a specific number of manufacturing lines to Vestas for 
each of the years under the supply agreements. Additionally, we create some of the model-specific tooling for 
Vestas. If either party commits a material breach of the supply agreement, the non-breaching party may terminate 
the supply agreement if the breach is not remedied or if the parties have not mutually agreed to plan for cure within 
30 days after notice of breach has been given.   

GE Wind   

We have entered into multiple supply agreements with GE Wind to manufacture wind blades from two 
manufacturing facilities in Juárez, Mexico and our Newton, Iowa manufacturing facility. Each of the supply 
agreements with GE Wind provide for a minimum number of wind blade sets to be purchased by GE Wind each 
year during the term, the schedule for which is established at the outset of the agreement. In return, we commit to 
dedicate a specific number of manufacturing lines to GE Wind for each of the years under the supply agreements. In 
August 2018, GE Wind agreed to extend our existing supply agreement for one of our Mexico manufacturing 
facilities by two years to 2022 and increased the number of wind blade manufacturing lines in that facility from 
three to five. In addition, GE Wind agreed to transition to a larger blade model in our Newton, Iowa plant in early 
2019 and to eliminate its option to terminate their supply agreement at this location prior to its December 2020 
expiration. Unless otherwise terminated or renewed, our supply agreements with GE Wind are in effect until the end 
of 2020 for one of our Mexico manufacturing facilities and our Iowa manufacturing facility, and until the end of 
2022 for our other Mexico facility. GE Wind may terminate the Mexico supply agreements with no advance notice 

9 

and paying us termination fees as set forth in the applicable agreement. In addition, either party may terminate these 
supply agreements upon a material breach by the other party which goes uncured for 30 days after written notice has 
been provided.  

In 2017, General Electric Company (GE) completed its acquisition of LM Wind Power (LM), our largest 
competitor. We expect that GE Wind will utilize LM for a substantial percentage of its wind blade production in the 
future and may reduce the volumes of wind blades it purchases from us or not extend any of our supply agreements 
beyond 2022, which may materially harm our business, financial condition and results of operations. See “Risk 
Factors—Risks Related to Our Wind Blade Business—GE’s acquisition of LM Wind Power, our largest competitor, 
may materially harm our business, financial condition and results of operations and may cause the price of our 
common stock to decline” included in Part I, Item 1A of this Annual Report on Form 10-K for further discuss on the 
GE’s acquisition of LM and its potential effects on us.   

See Note 4 – Related Party Transactions of the Notes to Consolidated Financial Statements included in Part II, 

Item 8 of this Annual Report on Form 10-K for additional information regarding our related party transactions with 
GE Wind for the year ended December 31, 2017 when GE Wind was a stockholder of the Company.  

Other Long-Term Supply Agreements 

We have entered into other long-term supply agreements in China, Mexico and Turkey with Nordex, Siemens 
Gamesa and ENERCON. With respect to these supply agreements, we agree to dedicate capacity for a set number of 
wind blades for each calendar year during the term of the agreement in exchange for commitments to purchase 
minimum annual volumes of wind blade sets. Unless otherwise terminated, these supply agreements generally 
remain in effect for a period of five years and either party may terminate their respective supply agreements upon a 
material breach by the other party which goes uncured. Some of these supply agreements contain provisions that 
allow for our customers to purchase less volume in later years of these supply agreements, reduce the number of 
dedicated manufacturing lines or to terminate the supply agreement upon notice for reasons such as our failure to 
deliver the contracted wind blade volumes or our failure to meet certain mutually agreed upon cost reduction targets. 
See “Risk Factors—Risks Related to Our Wind Blade Business—Our long-term supply agreements with our 
customers are subject to termination on short notice and our failure to perform our obligations under such 
agreements, and termination of a significant number of these agreements would materially harm our business” 
included in Part I, Item 1A of this Annual Report on Form 10-K. 

Research and Development 

We have a long history of developing composite products as well as the development of new and advanced 
materials, tooling, manufacturing processes and inspection methods. Our knowledge and experience of composite 
materials and manufacturing originates with our predecessor company, Tillotson Pearson Inc., a leading 
manufacturer of high-performance recreational sail and powerboats along with a wide range of composite structures 
used in other industrial applications. Leveraging our knowledge and experience, we realized the opportunity to 
specialize in wind energy and other industrial end-markets where there was a demand for high precision composite 
manufacturing capabilities. 

We conduct extensive research and development in close collaboration with our customers on the design, 
development and deployment of innovative manufacturing processes, including automation, advanced materials and 
sophisticated product quality inspection tools. We have partnered with the U.S. Department of Energy (DOE), 
government laboratories, universities and our customers to innovate through cost sharing Advanced Manufacturing 
Innovation Initiative programs. In 2015, we received a $3.0 million award from the DOE’s Office of Energy 
Efficiency & Renewable Energy to lead a team of industry and academic participants to design, develop and 
demonstrate an ultra-light composite vehicle door for high volume manufacturing production in conjunction with 
other industry and university participants. In February 2018, we entered into an agreement with Navistar to design 
and develop an all composite Class 8 tractor cab. This collaborative development project was entered into in 
connection with Navistar’s recent award under the DOE’s Super Truck II investment program, which is designed to 
promote fuel efficiency in commercial vehicles.  Incorporating composite materials into a Class 8 tractor cab offers 
multiple potential performance and efficiency advantages compared to traditional metals in terms of weight savings, 
reduced part counts, and non-corrosion. In the first quarter of 2019, we executed a joint development agreement 
with GE Wind to cooperatively develop advanced blade technology for future wind turbines. 

10 

 
We employ a highly experienced workforce of engineers in various facets of our business, from discrete 
research and development projects, to the ongoing, real-time development and implementation of incremental 
manufacturing and material improvements. Our research and development effort places a priority on improving 
quality through process and procedure improvement, in addition to reducing cost through specification changes and 
sourcing of more cost-effective suppliers. Other areas of emphasis include composite design, in-house fabrication of 
precision molding and assembly systems, prototyping, testing, optimization and volume production capabilities. We 
also encourage our employees to invent and develop new technologies to maintain our competitiveness in the 
marketplace. In addition to our internal research and development activities, from time to time, we also conduct 
research and development activities pursuant to funded development arrangements with our customers and other 
third parties, and intend to continue to seek opportunities for product development programs that could create 
recurring revenue and increase our overall profitability over the long term. 

In July 2019, we acquired certain intellectual property and hired a team of engineering resources from the 
EUROS group, based in Berlin, Germany. This team of approximately 20 technical experts focuses on blade design, 
tooling, materials and process technology development, which will strengthen our technical capabilities in support 
of our global operations and growth. In 2017, we established an advanced engineering center in Kolding, Denmark 
which provides technical and engineering resources to our manufacturing facilities and our customers.  

Competition 

The wind blade market is highly concentrated, competitive and subject to evolving customer needs and 
expectations. In 2017, GE Wind, our largest customer at the time, completed its acquisition of LM, our largest 
competitor. We also compete primarily with other independent wind blade manufacturers such as Sinoma Science & 
Technology Co. Ltd., Shanghai Aeolon Wind Energy Technology Development (Group) Co., Ltd., Aeris Industria E 
Comercio De Equipamentos Para Geracao De Energia S.A. and ZhongFu Lianzhong Composites Group Co., Ltd., as 
well as regional wind blade suppliers in geographic areas where our current or prospective manufacturing facilities 
are located.  

We also compete with, and in a number of cases supplement, vertically integrated wind turbine OEMs that 
manufacture their wind blades. We believe that a number of other established companies are manufacturing wind 
blades that will compete directly with our offerings, and some of our competitors noted above, may have significant 
financial and institutional resources. 

The principal competitive factors in the wind blade market include reliability, total delivered cost, 

manufacturing capability, product quality, engineering capability and timely completion of wind blades. We believe 
we compete favorably with our competitors on the basis of the foregoing factors. Our ability to remain competitive 
will depend to a great extent upon our ongoing performance in the areas of manufacturing capability, timely 
completion and product quality. 

Transportation Products 

We seek to create additional recurring revenue opportunities through the supply of other composite structures 

outside the wind energy market. We believe transportation products, including buses, trucks, electric vehicles and 
high performance automotive products, are ideally suited for our advanced composite technology because of the 
benefits derived from weight reduction, corrosion resistance, strength and durability. These benefits should allow us 
to develop structural composite solutions to assist our customers in developing electric vehicles, including light, 
medium and heavy duty trucks, buses and automobiles with clean propulsion systems or in meeting new and 
developing fuel economy standards.  

In addition, by producing a range of composite structures, we are able to leverage the materials and 
manufacturing process technology and expertise developed through one project to maximize production quality, 
improve performance and minimize costs across our other manufacturing efforts, including our wind blade business. 
Our projects for customers in the transportation market have historically generated project-related revenues for a 
specific duration. We intend to seek collaborations with additional customers in these markets that will provide 
recurring revenue and business opportunities for us, in addition to the opportunities provided by our existing 
customers and relationships, and contribute to our overall profitability over the long term.  

11 

Our facilities in Warren, Rhode Island and Juárez, Mexico manufacture products for customers in the 
transportation market using a similar proprietary and replicable manufacturing processes that we use to produce 
wind blades. Our projects for customers in the transportation market include, or have included, the supply of all-
composite bodies for electric buses and automated people mover systems for airports. We will cease manufacturing 
composite bus bodies from our Newton, Iowa facility in the first quarter of 2020. 

Our current principal competitors in the transportation market include suppliers of conventional steel and 

aluminum products and non-structural automotive fiberglass and other advanced composites-based manufacturers 
for transportation applications. 

Intellectual Property 

We have a variety of intellectual property rights, including patents issued, filed and applied-for in a number of 
jurisdictions, including the United States, Germany, the European Union and China, trademarks and copyrights, but 
we believe that our continued success and competitive position depend, in large part, on our proprietary materials, 
tooling, process and inspection technologies and our ability to innovate. Accordingly, we take measures to protect 
the confidentiality and control the disclosure of our proprietary technology. We rely primarily on a combination of 
patents, know-how and trade secrets to establish and protect our proprietary rights and preserve our competitive 
position. We also seek to protect our proprietary technology, in part, by confidentiality agreements with our 
customers, employees, consultants and other contractors. Trade secrets, however, are difficult to protect. These 
agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets 
may otherwise become known or be independently discovered by competitors. To the extent that our customers, 
employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may 
arise as to the rights in related or resulting know-how and inventions. 

Backlog 

As of December 31, 2019 and 2018, our backlog for wind blades and related products totaled $1,038.9 million 

and $514.8 million, respectively. Our backlog includes purchase orders issued in connection with our long-term 
supply agreements. We generally record a purchase order into backlog when the following requirements have been 
met: a signed long-term supply agreement or other contractual agreement has been executed with our customer, a 
purchase order has been issued by our customer and we expect to ship wind blades to or produce the related 
products for such customer in satisfaction of any purchase order within 12 months. Backlog as of any particular date 
should not be relied upon as indicative of our revenue for any future period.  

Regulation 

Wind Energy 

Our operations are subject to various foreign, federal, state and local regulations related to environmental 
protection, health and safety, labor relationships, general business practices and other matters. These regulations are 
administered by various foreign, federal, state and local environmental agencies and authorities, including the EPA, 
the Occupational Safety and Health Administration of the U.S. Department of Labor and comparable agencies in 
China, Mexico, Turkey, India and individual U.S. states. In addition, our manufacturing operations in China, 
Mexico, Turkey and India are subject to those countries’ wage and price controls, currency exchange control 
regulations, investment and tax laws, laws restricting our ability to repatriate profits, trade restrictions and laws that 
may restrict foreign investment in certain industries. Some of these laws have only been recently adopted or are 
subject to further rulemaking or interpretation, and their impact on our operations, including the cost of complying 
with these laws, is uncertain. We believe that our operations currently comply, in all material respects, with 
applicable laws and regulations. Further, as a U.S. corporation, we are subject to The Foreign Corrupt Practices Act 
of 1977 (FCPA), which generally prohibits U.S. companies and their intermediaries from making improper 
payments to foreign officials for the purpose of obtaining or keeping business. 

In addition, our business has been and will continue to be affected by subsidization of the wind turbine 
industry with its influence declining over time as wind energy reaches grid parity with traditional sources of energy. 
In the United States, the federal government has encouraged capital investment in renewable energy primarily 

12 

through tax incentives. Production tax credits for new renewable energy projects were first established in 1992. The 
Production Tax Credit for Renewable Energy (PTC) provided the owner of a wind turbine placed in operation before 
January 1, 2015 with a 10-year credit against its U.S. federal income tax obligations based on the amount of 
electricity generated by the wind turbine. 

The PTC was extended in 2015 for wind power projects through December 31, 2019, and was to be phased 

down over the term of the PTC extension. Specifically, the PTC was kept at the same rate in effect at the end of 
2014 for wind power projects that either commenced construction or met certain safe harbor requirements by the end 
of 2016, and thereafter was to be reduced by 20% per year in 2017, 2018 and 2019, respectively. In December 2019, 
Congress extended the PTC through the end of 2020 and increased the rate from 40% to 60% for projects that either 
commenced construction or met certain safe harbor requirements by the end of 2020 and are commissioned by the 
end of 2024.   

In June 2019, the EPA issued the Affordable Clean Energy Rule, which replaced the Clean Power Plan, which 
was designed to promote renewable energy.  The Clean Power Plan, which was established by the EPA in 2015, set 
national standards for states to reduce carbon emissions from power plants. Specifically, the Clean Power Plan 
required states to reduce carbon emissions from power plants 32% below 2005 levels by 2030.  In general, the 
Affordable Clean Energy Rule, provides for efficiency improvements at power plants and directs individual States to 
choose how they want to regulate power plant emissions.   Unlike the Clean Power Plan, the Affordable Clean 
Energy Rule does not set specific standards or limits for carbon emissions.  

At the state level, as of December 31, 2019, 29 states, the District of Columbia and Puerto Rico have 
implemented renewable portfolio standard (RPS) programs that generally require that, by a specified date, a certain 
percentage of a utility’s electricity supplied to consumers within such state is to be from renewable sources (ranging 
from 10% to 100% and from between the present and 2045). 

In addition, there are also increasing regulatory efforts to promote renewable power. China implemented its 
13th 5-Year Plan with a goal of 15% total primary energy from non-fossil fuel sources and targeting 210 gigawatts 
(GWs) of grid-connected wind capacity by 2020 according to its National Development and Reform Commission, 
and employs preferential feed-in tariff schemes, in addition to local tax-based incentives. Mexico has established 
strict targets, aiming for 35% renewable energy by 2024 and 50% by 2050, according to WoodMac, which it is 
facilitating through tax incentives. Large European Union members have renewable energy targets for 2020 of 
between 10% and 49% of all energy use derived from renewable energy sources, according to the European 
Commission. Additionally, Turkey enacted Law No. 5346 in 2005 to promote renewable-based electricity 
generation within their domestic electricity market by introducing tariffs and purchase obligations for distribution 
companies requiring purchases from certified renewable energy producers. The World Bank also provided Turkey 
with an aggregate of $600 million of loan proceeds to encourage investors to construct generation plants with 
renewable energy resources. 

Employees 

As of December 31, 2019, we employed over 13,300 full-time employees, approximately 1,300 of whom were 

located in the United States, 2,900 in China, 5,500 in Mexico, 3,300 in Turkey and 300 in India. Certain of our 
employees in Turkey and at our manufacturing facility in Matamoros, Mexico are represented by a labor union. We 
believe that our relations with our employees are generally good. 

13 

 
 
In January 2019, thousands of workers employed in dozens of manufacturing facilities in Matamoros, Mexico, 

went on strike.  In general, these workers, who were represented by several different labor unions, demanded an 
increase in their wage rate and an annual bonus. In February 2019, our manufacturing production employees in 
Matamoros, Mexico, who are represented by a labor union, went on strike also demanding an increase in their 
hourly wage rate and the payment of an annual bonus, even though our collective bargaining agreement did not 
provide for such incentives. During this strike, our Matamoros manufacturing facility stopped production from 
February 15, 2019 until March 2, 2019. In March 2019, we reached an agreement with the labor union to end the 
strike and we reopened our Matamoros manufacturing facility on March 3, 2019. In the first quarter of 2020, we 
amended our Matamoros collective bargaining agreement to adjust the salaries and bonuses payable to our 
associates for calendar year 2020 that are covered by this agreement.   

Environmental, Health and Safety  

We are subject to various environmental, health and safety laws, regulations and permit requirements in the 

jurisdictions in which we operate governing, among other things, health, safety, pollution and protection of the 
environment and natural resources, the handling and use of hazardous substances, the generation, storage, treatment 
and disposal of wastes, and the cleanup of any contaminated sites. We are not aware of any pending environmental 
compliance or remediation matters that are reasonably likely to have a material adverse effect on our business, 
financial position or results of operations. However, failure by us to comply with applicable environmental and 
other requirements could result in fines, penalties, enforcement actions, third party claims, remediation actions, 
and could negatively impact our reputation with customers. We have adopted environmental, health and safety 
policies outlining our commitment to environmental responsibility and accountability. These policies apply to the 
company as a whole, and our vendors and suppliers and are available on our website. We have a company-wide 
focus on safety and have implemented a number of measures to promote workplace safety. Customers are 
increasingly focused on safety records in their sourcing decisions due to increased regulations to report all 
incidents that occur at their sites and the costs associated with such incidents. 

Available Information 

Our website address is www.tpicomposites.com. All of our filings with the Securities and Exchange 

Commission (SEC), including this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on 
Form 8-K, statements of changes in beneficial ownership and amendments to those reports, are available free of 
charge on our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the 
SEC. The information contained on our website is neither a part of, nor incorporated by reference into, this Annual 
Report on Form 10-K. The SEC also maintains an Internet website that contains reports, proxy and information 
statements, and other information regarding issuers, like us, that file electronically with the SEC. The address of that 
website is www.sec.gov. 

Our investor relations website address is www.tpicomposites.com/investors and includes key information 
about our corporate governance initiatives, including our Nominating and Corporate Governance Committee charter, 
charters of the Audit and Compensation committees and our Code of Business Conduct & Ethics. 

Information about our Executive Officers 

The following table sets forth certain information regarding our Executive Officers as of February 27, 2020: 

Name 
Steven C. Lockard 
William E. Siwek 
Bryan Schumaker 
Ramesh Gopalakrishnan 
Thomas J. Castle 
Steven G. Fishbach 

Age 
58 
57 
44 
52 
48 
50 

  Position 
  Chief Executive Officer and Director 
  President 
  Chief Financial Officer 
  Chief Operating Officer, Wind 
  Senior Vice President—Operations, Strategic Markets 
  General Counsel and Secretary 

14 

 
  
 
Steven C. Lockard. Mr. Lockard became our President and Chief Executive Officer in 2004 and has served as 

a member of our board of directors since 2004. In May 2019, he relinquished the title of President to Mr. Siwek. 
Prior to joining us in 1999, Mr. Lockard was Vice President of Satloc, Inc., a supplier of precision GPS equipment, 
from 1997 to 1999. Prior to that, Mr. Lockard was Vice President of marketing and business development and a 
founding officer of ADFlex Solutions, Inc., a NASDAQ-listed international manufacturer of interconnect products 
for the electronics industry, from 1993 to 1997. Prior to that, Mr. Lockard held several marketing and management 
positions including Business Unit Manager, Corporate Market Development Manager and Marketing/Applications 
Engineer at Rogers Corporation from 1982 to 1993. Mr. Lockard currently serves as a member of the Board of 
Directors for the American Wind Energy Association and previously served as its Chairman from May 2018 to May 
2019. Mr. Lockard holds a B.S. degree in Electrical Engineering from Arizona State University. 

William E. Siwek. Mr. Siwek joined us in August 2013 as our Chief Financial Officer. In May 2019, Mr. 

Siwek was named our President and ceased serving as our Chief Financial Officer. Prior to joining us, Mr. Siwek 
previously served as the Chief Financial Officer for T.W. Lewis Company, an Arizona-based real estate investment 
company, from September 2012 to September 2013. From May 2010 until September 2012, he was an independent 
consultant assisting companies in the real estate, construction, insurance and renewable energy industries. Prior to 
that, Mr. Siwek was Executive Vice President and Chief Financial Officer of Talisker Mountain, Inc., from January 
2009 to April 2010. Prior to that, he was President and Chief Financial Officer of the Lyle Anderson Company from 
December 2002 to December 2008. Prior to that, Mr. Siwek spent 18 years, from September 1984 to May 2002, 
with Arthur Andersen where he became a Partner in both Audit and Business Consulting Divisions. Mr. Siwek holds 
B.S. degrees in Accounting and Economics from University of Redlands and is a Certified Public Accountant. 

Bryan Schumaker. Mr. Schumaker joined us in May 2019 as our Chief Financial Officer. Prior to joining us, 

Mr. Schumaker served as the Chief Accounting Officer of First Solar, Inc. from July 2015 to May 2019 and the 
Chief Financial Officer of 8point3 Energy Partners, a publicly-traded limited partnership formed by First Solar and 
Sunpower Corporation to own, operate and acquire solar energy generation projects from July 2016 to July 2018. 
Mr. Schumaker also served as Assistant Corporate Controller of First Solar from April 2008 to December 2011 and 
Vice President, Corporate Controller from December 2011 to July 2015. Prior to working at First Solar, Mr. 
Schumaker worked for Swift Transportation from January 2003 to April 2008 in multiple roles, including Vice 
President, Corporate Controller. Prior to that, Mr. Schumaker worked for KPMG, LLP as a Supervising Senior for 
the Assurance Practice and for a BDO Alliance Firm as a Senior Audit Associate. Mr. Schumaker holds a B.B.A. 
degree in Accounting from the University of New Mexico. Mr. Schumaker also serves on the Board of Directors of 
the Arizona Manufacturing Extension Partnership.  

Ramesh Gopalakrishnan. Mr. Gopalakrishnan joined us in September 2016 as Vice President, Technology, 

Transfer and Launch, and was promoted to Senior Vice President, Technology and Industrialization in August 2017 
and Senior Vice President, Global Quality, Technology and Latin American Operations in February 2019. In May 
2019, Mr. Gopalakrishnan was named our Chief Operating Officer – Wind. Prior to joining us, Mr. Gopalakrishnan 
served as Executive Vice President, Manufacturing for Senvion GmbH from May 2015 to August 2016 and Senior 
Vice President, Global Blades from February 2013 to April 2015. Prior to joining Senvion GmbH, 
Mr. Gopalakrishnan served as the Chief Executive Officer of Suzlon Energy Composites from February 2011 to 
January 2014, where he oversaw blade and mold factories in the United States, China and India and engineering 
centers in Europe. Prior to joining Suzlon Energy Composites, Mr. Gopalakrishnan served in various operations, 
supply chain and engineering roles at Halliburton Company and General Electric Company. Mr. Gopalakrishnan 
holds a B.S. in Mechanical Engineering from the Indian Institute of Technology and a M.S. and Ph.D in Mechanical 
Engineering from the State University of New York at Stony Brook. 

Thomas J. Castle. Mr. Castle joined us in November 2015 as our Senior Vice President—North American 

Wind Operations and Global Operational Excellence. In February 2019, Mr. Castle was named our Senior Vice 
President—U.S. and Transportation Operations. In May 2019, Mr. Castle was named our Senior Vice President – 
Operations, Strategic Markets. Prior to joining us, Mr. Castle was with Honeywell Aerospace from 2007 to 2015. 
Mr. Castle served as the Vice President of Integrated Supply Chain, Americas Electronics Operations Center from 
2014 to 2015. From 2012 to 2014, he was the Global Vice President of the Honeywell Operating System for 
Aerospace. Prior to that, Mr. Castle held various positions at the Americas Services Organization from 2007 to 
2012. From 1996 to 2007, Mr. Castle was with GE Aviation in roles of increasing responsibility, most recently as 
the Managing Director of a manufacturing facility in Thailand from 2005 to 2007. Mr. Castle holds a B.S. degree in 
Aeronautics from St. Louis University. 

15 

Steven G. Fishbach. Mr. Fishbach has served as our General Counsel since January 2015. Prior to joining us, 

Mr. Fishbach served as Deputy General Counsel of Global Cash Access Holdings, Inc. from 2011 to 2015 and 
Associate General Counsel from 2009 to 2011. Prior to that, Mr. Fishbach served in various senior roles in the legal 
department of Fidelity National Information Services, Inc./eFunds Corporation from 2005 to 2008. Mr. Fishbach 
also practiced corporate and securities law at Squire Sanders (now Squire Patton Boggs) from 2000 to 2005. Mr. 
Fishbach holds a B.A. degree in American Studies from Georgetown University and a J.D. degree from William & 
Mary Law School. 

16 

Item 1A. Risk Factors 

You should carefully consider the following risk factors. If any of the events contemplated by the following 

discussion of risks should occur, our business, results of operations, financial condition, growth prospects and cash 
flows could suffer significantly. Additional risks that we currently do not know about or that we currently believe to 
be immaterial may also impair our business. Certain statements below are forward-looking statements. See “Special 
Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.   

Risks Related to Our Wind Blade Business 

A significant portion of our business is derived from a small number of customers, and two wind blade customers 
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 could materially 
harm our business. 

Substantially all of our revenues are derived from four wind blade customers. Two customers, Vestas and GE 

Wind, accounted for 46.1% and 25.7%, respectively, of our total net sales for the year ended December 31, 2019, 
and 32.0% and 31.7%, respectively, of our total net sales for the year ended December 31, 2018, and 27.9% and 
44.6%, respectively, of our total net sales for the year ended December 31, 2017. In addition, two customers, Nordex 
and Siemens Gamesa accounted for 16.1% and 5.1%, respectively, of our net sales for the year ended December 31, 
2019, 19.0% and 11.2%, respectively, of our net sales for the year ended December 31, 2018, and 16.0% and 9.7%, 
respectively, of our net sales for the year ended December 31, 2017. Accordingly, we are substantially dependent on 
continued business from our current wind blade customers, and Vestas and GE Wind in particular. If one or more of 
our wind blade customers were to reduce or delay wind blade orders, file for bankruptcy or become insolvent, fail to 
pay amounts due or satisfactorily perform their respective contractual obligations with us or otherwise terminate or 
fail to renew their long-term supply agreements with us, our business, financial condition and results of operations 
could be materially harmed. 

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 wind blades we manufacture, or materially harm existing 
or prospective customer relationships. 

Defects in the wind blades we manufacture, whether caused by a design, engineering, materials, 
manufacturing or component failure or deficiencies in our manufacturing processes, are unpredictable and an 
inherent risk in manufacturing technically advanced products. Under our supply agreements, we warranty the 
materials and workmanship of the wind blades while our customers are responsible for the fitness of use and design 
of the wind blades. We have, in the past, experienced wind blade testing failures and defects at some of our facilities 
during the startup manufacturing phase of new products, and we may experience failures or defects in the future. We 
have also experienced wind blade failures in the field. Any such customer qualification and wind blade testing 
failures or other product defects in the future could materially harm our existing and prospective customer 
relationships. Specifically, negative publicity about the quality of the wind blades we manufacture or defects in the 
wind blades supplied to our customers could result in a reduction in wind blade orders, increased warranty claims, 
product liability claims and other damages or termination of our long-term supply agreements or business 
relationships with current or new customers. In addition, we have recently started wind blade production at a new 
facility in Yangzhou, China in March 2019 and have commenced operations at a new facility in Chennai, India in 
the first quarter of 2020 which may expose us to greater risk of warranty claims as these facilities ramp up to serial 
production levels.    

We may determine that resolving potential warranty claims through a negotiated settlement may be in the best 

interest of the business and long-term customer relationships. Wind blades may also fail due to lightning strikes or 
other extreme weather, which could also result in negative publicity regarding our wind blades and wind energy in 
general. In addition, product defects may require costly repairs or replacement components, a change in our 
manufacturing processes or recall of previously manufactured wind blades, which could result in significant expense 
and materially harm our existing or prospective customer relationships. Further, defects or product liability claims, 
with or without merit, may result in negative publicity that could harm our future sales and our reputation in the 
industry. Any of the foregoing could materially harm our business, operating results and financial condition. 

17 

We operate in an industry characterized by changing customer demands and associated transition costs, 

which could materially harm our business. 

The wind energy industry is competitive and is characterized by evolving customer demands. As a result, we 
must adapt quickly to customer requests for changes to wind blade specifications, which increases our costs and can 
provide periods of reduced revenue and margins. For instance, during 2019 and into 2020, we have undertaken and 
will undertake model transitions at several of our facilities for various customer demands. In 2019, we had 10 
manufacturing lines in transition which adversely impacted our revenue and profitability. We currently expect to 
have manufacturing lines in transition during 2020 which could adversely affect our revenue and profitability in 
2020. We are generally able to share transition costs with the customer in connection with these changing customer 
demands, but any sharing is the subject of negotiation and the amount is not always contractually defined. If we do 
not receive transition payments from our customers sufficient to cover our transition costs or lost margins, our 
business, financial condition and results of operations could be materially harmed. 

We have experienced, and could in the future experience, quality or operational issues in connection with 

plant construction or expansion, wind blade model transitions and wind blade manufacturing, 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. 

We dedicate most of the capacity of our current wind blade manufacturing facilities to existing customers and, 
as a result, we may need to build additional manufacturing capacity or facilities to serve the needs of new customers 
or expanded needs of existing customers. Since the third quarter of 2016, we have commenced operations at four 
new manufacturing facilities in Mexico, one in Turkey, one in Yangzhou, China, one in Chennai, India and one in 
Iowa. The construction of new plants and the expansion of existing plants involves significant time, cost and other 
risks. We generally expect our plants to generate losses in their first 12 to 24 months of operations related to 
production startup costs. Additionally, numerous factors can contribute, and have in the past contributed, to delays 
or difficulties in the startup of, or the adoption of our manufacturing lines to produce larger wind blade models, 
which we refer to as model transitions, in our manufacturing facilities. These factors include permitting, 
construction or renovation delays, the engineering and fabrication of specialized equipment, the modification of our 
general production know-how and customer-specific manufacturing processes to address the specific wind blades to 
be tested and built, changing and evolving customer specifications and expectations and the hiring and training of 
plant personnel. If our production or the delivery by any third-party suppliers of any custom equipment is delayed, 
the construction or renovation of the facility, or the addition of a production line would be delayed. Any delays or 
difficulties in plant startup or expansion may result in cost overruns, production delays, contractual penalties, loss of 
revenues, reduced margins and impairment of customer relationships, which could materially harm our business, 
financial condition and results of operations. For example, we experienced construction and startup delays with 
respect to our new manufacturing facility in Yangzhou, China.  These delays resulted in us paying liquidated 
damages of $7.8 million to one of our customers payable in installment payments in 2019 and 2020.    

Some of our long-term supply agreements with our customers are subject to early termination and our failure to 
perform our obligations under these agreements or the termination of these agreements would materially harm 
our business, financial condition and results of operation.   

Our current long-term supply agreements expire between the end of the third quarter of 2020 and the end of 

2023. Some of our long-term supply agreements contain provisions that allow for the early termination of these 
agreements upon the customer providing us with advance written notice and paying an early termination fee.  
Additionally, our long-term supply agreements contain provisions allowing our customers to terminate these 
agreements upon our failure to deliver the contracted wind blade volumes or our failure to meet certain mutually 
agreed upon cost reductions or a force majeure event that impacts our supply agreements for a contractually 
specified period of time. Our customers may not continue to maintain long-term supply agreements with us in the 
future. If one or more of our customers terminate, or reduce the number of lines or fail to renew their long-term 
supply agreements with us, it would materially harm our business, financial condition and results of operations. 

18 

Our long-term supply agreements and our backlog are subject to reduction within contractual parameters and we 
may not realize all of the expected revenue. 

Our current long-term wind blade supply agreements generally establish annual purchase requirements on 
which we rely for our future production and financial forecasts. However, the timing and volume of purchases, 
within certain parameters, may be subject to change by our customers.  In addition, the amount of the annual 
purchase requirements typically decline in the later years of our long-term supply agreements. In some instances, 
our customers have the contractual right to require us to reduce the number of manufacturing lines committed to 
them and correspondingly reduce their minimum annual purchase requirements. Additionally, our minimum annual 
purchase commitments could potentially understate the forecasted net sales that we are likely to generate in a given 
period or periods if all of our long-term supply agreements remain in place and pricing remains materially 
unchanged. Such minimum annual purchase requirements could also potentially overstate the forecasted net sales 
that we are likely to generate in a given period or periods if one or more of our long-term supply agreements were to 
be terminated by our customers for any reason or due to market conditions our plants are underutilized. As a result, 
we may not realize the forecasted net sales we expect under our long-term supply agreements or pursuant to our 
backlog, which we define as the value of purchase orders received less the revenue recognized to date on those 
purchase orders. In addition, fulfillment of our backlog may not result in profits. 

Many of our long-term supply agreements contain liquidated damages provisions, which may require us to make 
unanticipated payments to our customers. 

Many of our long-term supply agreements contain liquidated damages provisions in the event that we fail to 

perform our obligations thereunder in a timely manner or in accordance with the agreed terms, conditions and 
standards. Our liquidated damages provisions generally require us to make a payment to the customer if we fail to 
deliver a product or service on time. For example, we experienced construction and startup delays with respect to 
our new manufacturing facility in Yangzhou, China and a work stoppage in Matamoros, Mexico during 2019. These 
delays resulted in us paying liquidated damages of $20.5 million to one of our customers payable in installment 
payments in 2019 and 2020. We generally try to limit our exposure under any individual long-term supply 
agreement to a maximum penalty. Nevertheless, if we incur liquidated damages, they may materially harm our 
business, operating results and financial condition.  

Our wind turbine OEM customers are facing increasing competition and pricing pressure due to the increasing 
prevalence of auction-based tenders in wind energy markets, and correspondingly our margins and results of 
operations may be adversely affected.  

Many governments are shifting from feed-in tariffs to auction-based tenders as a means of promoting the 

development and growth of renewable energy sources such as wind energy.  As a result of this shift, our wind 
turbine OEM customers are experiencing intense pricing pressure with respect to the sale of their turbines. As a 
result of this pricing pressure, we will be required to further reduce the costs we incur to manufacture wind blades to 
remain competitive.  We typically share the benefit of cost reductions related to manufacturing wind blades with our 
customers pursuant to the terms of our long-term supply agreements.  If these pricing pressures continue, we may 
choose to reduce our margins or pass on a greater percentage of the savings to our OEM customers obtained from 
manufacturing cost reductions than required under our supply agreements to remain competitive, each of which may 
materially harm our business, financial condition and results of operations. 

Although a majority of our manufacturing facilities are located outside the United States, our business is still 
heavily dependent upon the demand for wind energy in the United States and any downturn in demand for wind 
energy in the United States could materially harm our business. 

We have developed a global footprint to serve the growing wind energy market worldwide and have wind 
blade manufacturing facilities in the United States, China, Mexico, Turkey and India. Although a majority of our 
manufacturing facilities are located outside of the United States, historically more than half of the wind blades that 
we produced were deployed in wind farms located within the United States. Our Iowa and Mexico manufacturing 
facilities manufacture wind blades that are generally deployed within the United States. In addition, we export wind 
blades from our China and Turkey manufacturing facilities to the United States and wind blades that will be 
produced at our India manufacturing facility could be exported by our customers to the United States as well. In 
addition, tariffs imposed by the current administration on components of wind turbines from China, including wind 
blades, in 2018 and 2019 could also have a negative impact on demand for our wind blades manufactured in our 

19 

Chinese manufacturing facilities. Consequently, demand for wind energy and our wind blade sales in the United 
States could be adversely affected by a variety of reasons and factors, and any downturn in demand for wind energy 
and our wind blade sales in the United States could materially harm our business. 

We could experience shortages of raw materials or components critical to our manufacturing needs, which may 
hinder our ability to perform under our supply agreements. 

We rely upon third parties for raw materials, such as fiberglass, carbon, resins, foam core and balsa wood, and 
various components for the wind blades we manufacture. Some of these raw materials and components may only be 
purchased from a limited number of suppliers. For example, balsa wood is only grown and produced in a limited 
number of geographies and is only available from a limited number of suppliers. Additionally, our ability to 
purchase the appropriate quantities of raw materials is constrained by our customers’ transitioning wind blade 
designs and specifications. As a result, we maintain relatively low inventory and acquire raw materials and 
components as needed. Due to significant international demand for these raw materials from many industries, we 
may be unable to acquire sufficient quantities or secure a stable supply for our manufacturing needs. For example, in 
2019, we experienced shortages in the supply of balsa wood and other core materials which adversely impacted our 
results of operations. If shortages or delays occur, we may be unable to provide our products to our customers on 
time, or at all. In some instances, our customers directly control the purchase of certain key raw materials and 
components and if they are unable to procure and provide us with such raw materials and components, it could cause 
delays and disruptions with respect to our business and operations. In addition, a disruption in any aspect of our 
global supply chain caused by transportation delays, customs delays, cost issues or other factors could result in a 
shortage of raw materials or components critical to our manufacturing needs. Any supply shortages, delays in the 
shipment of materials or components from third party suppliers, or changes in the terms on which they are available 
could disrupt or materially harm our business, operating results and financial condition. 

The concentration of customers in our wind business could enable one or more of our customers to attempt to 
substantially influence our policies, business and affairs going forward, or adversely affect our business, 
financial condition or results of operations if one or more of our customers experience financial difficulties, 
become insolvent or file for bankruptcy.  

Our dependence on five wind blade customers for substantially all of our revenues could encourage these 

customers to attempt to impose new or additional requirements on us that reduce the profitability of our long-term 
supply agreements with them or otherwise influence our policies, choice of and arrangements with raw material 
suppliers and other aspects of our business. Our customers could also attempt to influence the outcome of a 
corporate transaction if the transaction benefits a customer’s competitor or is otherwise perceived as not 
advantageous to a customer, which could have the effect of delaying, deterring, or preventing a transaction that 
could benefit us. In addition, consolidation of some of our customers may result in increased customer concentration 
and the potential loss of customers. For example, Nordex completed its acquisition of Acciona in 2016 and Gamesa 
completed the merger of Siemens’ Wind Power with Gamesa in 2017. Although we are not constrained by any 
exclusivity agreements with any of our existing wind blade customers, they may resist our development of new 
customer relationships, which could affect our relationships with them or our ability to secure new customers. 

In addition, if one or more of our customers experience financial difficulties, demand for the wind blades we 

manufacture could decline significantly. In such a circumstance, we could also be at risk of collecting accounts 
receivable amounts owed from such customers as well as realizing the value of inventory balances for such 
customers. Similarly, if one or more of our customers becomes insolvent or files for bankruptcy, the demand for the 
wind blades we manufacture from the affected customers could be eliminated altogether. For example, in 2019, 
Senvion GmbH entered into a provisional self-administration procedure concerning its assets as ordered by the 
Local Court of Hamburg, Germany pursuant to the Insolvency Act in Germany. As a result of this event, we 
reevaluated the outstanding accounts receivables due from Senvion, the revenue recognized under our supply 
agreement with Senvion as well as the property, plant and equipment at our Taicang Port, China facility where we 
manufactured blades for Senvion. As a result of that reevaluation, we revised our estimate of consideration to be 
received under that contract, which reduced the revenue recorded in the year ended December 31, 2019 by $7.8 
million. We also revised the useful life of the property, plant and equipment which was being used to fulfill the 
Senvion supply agreement which does not have an alternative use. The reevaluation and the lost production from 
Senvion had an adverse impact on our results of operations for the year ended December 31, 2019. If any of our 

20 

 
other customers experience financial difficulties, they also may seek pricing concessions, extended payment terms, 
reduced minimum purchase commitments and other changes to the key terms of our supply agreements that could 
adversely affect our business, financial condition and results of operations.      

Demand for the wind blades we manufacture 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. 

Our revenues, business prospects and growth strategy heavily depend on the continued growth of the wind 

industry and our customers’ continuing demand for wind blades. Customer demand could decrease from anticipated 
levels due to numerous factors outside of our control that may affect the development of the wind energy market 
generally, portions of the market or individual wind project developments, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

general economic conditions; 

the general availability and demand for electricity; 

wind energy market volatility; 

cost-effectiveness, availability and reliability of alternative sources of energy and competing methods of 
producing electricity, including solar and non-renewable sources such as natural gas; 

foreign, federal and state governmental tariffs, subsidies and tax or regulatory policies; 

delays or cancellations of government tenders or auctions for wind energy projects; 

the availability of financing for wind development projects; 

the development of electrical transmission infrastructure and the ability to implement a proper grid 
connection for wind development projects; 

foreign, federal and state laws and regulations regarding avian protection plans, noise or turbine setback 
requirements and other environmental laws and regulations; 

administrative and legal challenges to proposed wind development projects; and 

public perception and localized community responses to wind energy projects. 

In addition to factors affecting the wind energy market generally, our customers’ demand may also fluctuate 

based on other factors beyond our control. Any decline in customer demand below anticipated levels could 
materially harm our revenues and operating results and could delay or impede our growth strategy. 

Changes in customers’ business focus and strategy could materially harm our business and results of operations. 

Changes in our customers’ business focus could significantly reduce their demand for wind blades. For 
instance, GE, the parent corporation of GE Wind, is a highly diversified company that operates in a number of 
different industries and could decide to devote more resources to operations outside of wind energy or cease selling 
wind turbines altogether. In addition, we expect that GE Wind will utilize LM for a substantial percentage of its 
wind blade production in the future. If any of our customers change their business focus, including a strategic shift 
to insource a material portion of its wind blade production requirements, it could materially harm our business and 
results of operations. 

We have experienced in the past, and our future wind blade production could be affected by, operating problems 
at our facilities, which may materially harm our operating results and financial condition. 

Our wind blade manufacturing processes and production capacity have in the past been, and could in the 

future be, disrupted by a variety of issues, including: 

• 

• 

production outages to conduct maintenance activities that cannot be performed safely during operations; 

prolonged power failures or reductions; 

21 

• 

• 

• 

• 

• 

• 

breakdowns, failures or substandard performance of machinery and equipment; 

our inability to comply with material environmental requirements or permits; 

inadequate transportation infrastructure, including problems with railroad tracks, bridges, tunnels or 
roads; 

supply shortages of key raw materials and components; 

damage or production delays caused by earthquakes, fires, floods, tornadoes, hurricanes, extreme 
weather conditions such as windstorms, hailstorms, drought, temperature extremes, typhoons or other 
natural disasters or terrorism or health epidemics such as the coronavirus; and 

labor unrest or shortages in skilled labor. 

For example, we announced in the first quarter of 2020 that we were shutting down our Newton, Iowa 
transportation facility due to operational challenges primarily relating to our inability to hire enough skilled 
personnel to manufacture our transportation products at this facility. In addition, the cost of repeated or prolonged 
interruptions, reductions in production capacity, or the repair or replacement of complex and sophisticated tooling 
and equipment may be considerable and could result in damages under or the termination of our long-term supply 
agreements or penalties for regulatory non-compliance, any of which could 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. 

We currently operate manufacturing facilities in the United States, China, Mexico and Turkey, and we 
commenced operations at our manufacturing facility in Chennai, India in the first quarter of 2020. Since the third 
quarter of 2016, we have commenced operations at four new manufacturing facilities in Mexico, one in Turkey, one 
in Yangzhou, China, one in Chennai, India and one in Iowa. For the years ended December 31, 2019, 2018 and 
2017, approximately 88%, 84% and 80%, respectively, of our net sales were derived from our international 
operations and we expect that a substantial portion of our projected revenue growth will be derived from those 
operations. Our overall success depends, in part, upon our ability to succeed in differing legal, regulatory, economic, 
social and political conditions. The global nature of our operations is subject to a variety of risks, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

difficulties in staffing and managing multiple international locations; 

increased exposure to foreign currency exchange rate risk or currency exchange controls imposed by 
foreign countries; 

the risk of import, export and transportation regulations and tariffs on foreign trade and investment, 
including boycotts and embargoes; 

taxation and revenue policies or other restrictions, including royalty and tax increases, retroactive tax 
claims and the imposition of unexpected taxes;  

the imposition of, or rapid or unexpected adverse changes in, foreign laws, regulatory requirements or 
trade policies; 

restrictions on repatriation of earnings or capital or transfers of funds into or out of foreign countries; 

limited protection for intellectual property rights in some jurisdictions; 

inability to obtain adequate insurance; 

difficulty administering internal controls and legal and compliance practices in countries with different 
cultural norms and business practices; 

the possibility of being subjected to the jurisdiction of foreign courts in connection with legal disputes 
and the possible inability to subject foreign persons to the jurisdiction of courts in the United States; 

22 

 
• 

• 

• 

the misinterpretation of local contractual terms, renegotiation or modification of existing long-term 
supply agreements and enforcement of contractual terms in disputes before local courts; 

the inability to maintain or enforce legal rights and remedies at a reasonable cost or at all; and 

the potential for political unrest, expropriation, nationalization, revolution, war or acts of terrorism in 
countries in which we operate. 

In particular, our operations in China are subject to a variety of specific risks, which may adversely affect our 

business, including: 

• 

• 

• 

• 

the imposition by the United States of tariffs on certain wind turbine components, including wind 
turbine blades, being imported into the United States; 

the deterioration of the diplomatic and political relationships between the United States and China 
resulting from such factors as the opposition of the United States to censorship and other policies of the 
Chinese government, China’s growing trade surpluses with the United States and the introduction by the 
United States of trade restrictions that would impact Chinese imports and any retaliatory measures that 
could ensue; 

the uncertainty of the Chinese legal regime generally, and in particular in protecting intellectual 
property and contractual rights, in securing future land use rights, and the recent adoption of new labor, 
environmental and tax laws, the impacts of which are not yet fully understood; and 

various restrictions on our ability to repatriate profits from China to other jurisdictions. See “Risk 
Factors—Risks Related to our Business as a Whole—We may have difficulty making distributions and 
repatriating earnings from our Chinese manufacturing operations, which may also occur in some of our 
other locations.” 

We also operate in developing markets, which have, in the past, experienced, and may in the future 

experience, social and political unrest. For example, Turkey has experienced problems with domestic terrorist and 
ethnic separatist groups and attempted military coups. The issue of civil rights for Kurdish citizens remains a 
potential source of political instability, which may be exacerbated by continuing instability in the Middle East. 

In addition, the locations of our manufacturing facilities in Juárez, Mexico and Matamoros, Mexico are, and 
have been in the past, subject to violence related to drug trafficking, including kidnappings and killings as well as 
labor unrest. These factors and events could negatively impact our ability to hire and retain personnel, especially 
senior U.S. managers, to continue to work at these facilities, or disrupt our operation in other ways, which could 
materially harm our business. 

As we continue to operate our business globally, our success will depend, in part, on our ability to anticipate 

and effectively manage these and other related risks. We may be unsuccessful in developing and implementing 
policies and strategies that will be effective in managing these risks in each country where we do business or 
conduct operations. Our failure to manage these risks successfully could materially harm our business, operating 
results and financial condition. 

We may not achieve the long-term growth we anticipate if wind turbine OEMs do not continue to shift from in-
house production of wind blades to outsourced wind blade suppliers and if we do not expand our customer 
relationships and add new customers. 

Many wind turbine OEMs rely on in-house production of wind blades for some or all of their wind turbines. 

Our growth strategy depends in large part on the continued expansion of our relationships with our current wind 
blade customers, and the addition of new key customers. All of our customers possess the financial, engineering and 
technical capabilities to produce their own wind blades and many source wind blades from multiple suppliers. Our 
existing customers may not expand their wind energy operations or, if they do, they may not choose us to supply 
them with new or additional quantities of wind blades. Our collaborative dedicated supplier model for the 
manufacture of wind blades is a significant departure from traditional vertically integrated methods. As is typical for 
rapidly evolving industries, customer demand for new business models is highly uncertain. Although we have 

23 

 
entered into long-term supply agreements with customers that also produce wind blades for their wind turbines in-
house, we may not be able to maintain these customer relationships or enter into similar arrangements with new 
customers that produce wind blades in-house in the future. In addition, although GE Wind historically outsourced all 
of their wind blade production requirements prior to its acquisition of LM, we expect that GE Wind will continue to 
utilize LM for a substantial percentage of its wind blade production in the future. Our business and growth strategies 
depend in large part on the continuation of the trend toward outsourcing manufacturing. If that trend does not 
continue or we are unsuccessful in persuading wind turbine OEMs to shift from in-house production to the 
outsourcing of their wind blade manufacturing, we may not achieve the long-term growth we anticipate and our 
market share could be limited. 

A drop in the price of energy sources other than wind energy, or our inability to deliver wind blades that compete 
with the price of other energy sources, may materially harm our business, financial condition and results of 
operations. 

We believe that the decision to purchase wind energy is, to a significant degree, driven by the relative cost of 

electricity generated by wind turbines compared to the applicable price of electricity from the utility grid and the 
cost of traditional and other renewable energy sources. Decreases in the prices of electricity from the relevant utility 
grid or from renewable energy sources other than wind energy, such as solar, would harm the market for wind 
energy. In particular, a drop in natural gas prices could lessen the appeal of wind-generated electricity. 
Technological advancements or the construction of a significant number of power generation plants, including 
nuclear, coal, natural gas or power plants utilizing other renewable energy technologies, government support for 
other forms of renewable energy or construction of additional electric transmission and distribution lines could 
reduce the price of electricity produced by competing methods, thereby making the purchase of wind energy less 
attractive. For example, in 2017, the current President signed an executive order that is intended to promote the 
domestic coal industry, which may make the cost of electricity generated from coal more cost competitive. The 
ability of energy conservation technologies, public initiatives and government incentives to reduce electricity 
consumption or support other forms of renewable energy could also lead to a reduction in the price of electricity, 
which would undermine the attractiveness of wind energy and thus wind turbines, and, ultimately wind blades. If 
prices for electricity generated by wind turbines are not competitive, our business, financial condition and results of 
operations may be materially harmed. 

If any precision molding and assembly systems needed for our manufacturing process contains a defect or is not 
fabricated and delivered in a timely manner, our ongoing manufacturing operations, business, financial 
condition and results of operation may be materially harmed. 

We custom fabricate many of the precision molding and assembly systems used in our facilities. Our 
customers also have the option of using third-party manufacturers to produce their custom tooling. If any piece of 
equipment fails, is determined to produce nonconforming or defective products or is not fabricated and delivered in 
a timely manner, whether produced by us or a third party, our wind blade production could be interrupted and we 
could be subject to contractual penalties, warranty claims, loss of revenues and damage to our customer 
relationships, among other consequences. 

The long sales cycle involved in attracting new customers may make the timing of our revenue difficult to predict 
and may cause our operating results to fluctuate. 

The complexity, expense and long-term nature of our supply agreements generally require a lengthy customer 

education, evaluation and approval process. It can take us from several months to years to identify and attract new 
customers, if we are successful at all. This long sales cycle for attracting and retaining new customers subjects us to 
a number of significant risks that may materially harm our business, results of operations and financial condition 
over which we have limited control, including fluctuations in our quarterly operating results. In addition, we may 
incur substantial expenses and devote significant management effort to develop potential relationships that do not 
result in agreements or revenue and may prevent us from pursuing other opportunities. 

24 

We encounter intense competition for limited customers from other wind blade manufacturers, as well as in-
house production by wind turbine OEMs, which may make it difficult to enter into long-term supply agreements, 
keep existing customers and potentially get new customers. 

We face significant competition from other wind blade manufacturers, and this competition may intensify in 

the future. The wind turbine market is characterized by a relatively small number of large OEMs. In addition, a 
significant percentage of wind turbine OEMs, including all of our current customers, produce some of their own 
wind blades in-house. As a result, we compete for business from a limited number of customers that outsource the 
production of wind blades. We also compete with a number of wind blade manufacturers in China, who are growing 
in terms of their technical capability and aspire to expand outside of China. Some of our competitors have more 
experience in the wind energy industry, as well as greater financial, technical or human resources than we do, which 
may limit our ability to compete effectively with them and maintain or improve our market share. Additionally, our 
long-term supply agreements dedicate capacity at our facilities to our customers, which may also limit our ability to 
compete if our facilities cannot accommodate additional capacity. If we are unable to compete effectively for the 
limited number of customers that outsource production of wind blades, our ability to enter into long-term supply 
agreements with potential new and existing customers may be materially harmed. 

We could be affected by increasing competition from new and existing industry participants and industry 
consolidation. 

The markets in which we operate are increasingly competitive and any failure on our part to compete 

effectively on an ongoing basis could materially harm our business, results of operations or financial condition. The 
key factors affecting competition in the wind energy industry are the capacity and quality of products, technology, 
price, the ability to fulfill local market requirements and the scope, cost and location of manufacturing facilities.  

Competition in the wind energy industry has intensified in recent years as a result of a number of factors, 

including international expansion by existing industry participants exploiting new markets, particularly as political 
will around the issues of global warming and the environment become more prominent to the political agenda in 
those new markets. There has also been increasing pressure from Asian manufacturers improving the quality and 
reliability of their technologies, and considering moving out of their local markets and into international cross border 
transactions. Western wind turbine OEMs have now started using Asian manufacturers for a portion of their wind 
blades. Market entry by certain large industrial groups, including those previously unconnected to the wind energy 
market, through acquisitions and license agreements and numerous greenfield establishments in certain markets, also 
poses a competition risk.  

The competitive environment in the wind energy industry may become more challenging in the years ahead, 

particularly in the event of greater consolidation in the industry, leading to greater market power and “economies of 
scale” by such market players which translate into being able to offer greater “cost of energy” savings to wind power 
plant customers. For example, GE completed its acquisition of LM in 2017 and also acquired Alstom S.A.’s power 
business in 2015; Nordex completed its acquisition of Acciona in 2016 and Gamesa merged with Siemens’ Wind 
Power in 2017. These transactions or further consolidation in the wind energy industry may have an adverse impact 
on our business in the future, including, without limitation, reduced demand for our products and services, product 
innovation, changes in pricing and similar factors, including any competitor’s attempt to duplicate our collaborative 
dedicated supplier model. Such events could materially harm our business, results of operations, financial condition 
or prospects. 

Significant increases in the prices of raw materials or components that cannot be reflected in the price of our 
products could negatively affect our operating margins. 

The prices of our raw materials and components are subject to price fluctuations resulting from volatility of 
supply and demand in world markets. Under our long-term supply agreements, our customers generally commit to 
purchase minimum annual volumes and prices for wind blades are generally set as of the date of our supply 
agreements and adjusted quarterly, for the cost of raw material and our operating expenses in certain cases. As a 
result, the competitive nature of the wind blade market and our long-term supply agreements with our customers 
may delay or prevent us from passing cost increases in raw materials and components on to our customers. 
Significant increases in the price of raw materials or components used in our manufactured wind blades that cannot 

25 

be reflected in the price of our products, could negatively affect our operating margins and materially harm our 
business, operating results or financial condition. 

GE’s acquisition of LM Wind Power, our largest competitor, may materially harm our business, financial 
condition and results of operations and may cause the price of our common stock to decline. 

In 2017, GE completed its acquisition of LM Wind Power, our largest competitor. By the end of 2016, we had 
entered into five supply agreements with GE Wind providing for the supply of wind blades from our Iowa, Mexico, 
Turkey and our Taicang Port, China facilities. In 2016, we entered into (i) an amended and restated supply 
agreement for the continued supply of wind blades from our Iowa facility through December 31, 2020, (ii)  an 
amendment to our existing supply agreement for the continued supply of wind blades from our original Juárez, 
Mexico facility through December 31, 2020 and (iii) a new supply agreement with GE Wind for the supply of 
incremental wind blades from our second manufacturing facility in Juárez, Mexico through December 31, 2020. GE 
Wind elected not to renew or extend the Turkey and Taicang Port, China supply agreements, which both expired on 
December 31, 2017. We expect that GE Wind will utilize LM for a substantial percentage of its wind blade 
production in the future. As such, GE Wind may not continue to purchase wind blades from us at similar volumes or 
on as favorable terms in the future. In August 2018, GE Wind did agree to extend our existing supply agreement in 
one of our Mexico plants by two years to 2022 and increased the number of wind blade manufacturing lines in that 
facility from three to five. In addition, GE Wind has agreed to transition to a larger blade model in our Newton, 
Iowa plant in early 2019 and to eliminate its option to terminate their supply agreement at this location prior to its 
December 2020 expiration. Unless otherwise terminated or renewed, our supply agreements with GE Wind are in 
effect until the end of 2020 for our Iowa and one of our Mexico facilities and until the end of 2022 for our other 
Mexico facility. GE Wind may terminate the Mexico supply agreements with no advance notice and paying us 
termination fees as set forth in the applicable agreement. In addition, either party may terminate these supply 
agreements upon a material breach by the other party which goes uncured for 30 days after written notice has been 
provided. If GE Wind elects to utilize LM or another supplier for more of its wind blade production, reduce the 
volumes of wind blades it purchases from us or terminates any of our supply agreements, it may materially harm our 
business, financial condition and results of operations. 

Certain of our long-term supply agreements are highly dependent upon a limited number of suppliers of raw 
materials. 

Our ability to perform under certain of our long-term supply agreements is currently, and may continue to be 
in the future, highly dependent on a limited number of suppliers of raw materials. For instance, our agreements with 
certain customers require us or our customers to purchase raw materials from a single supplier unless additional 
suppliers are evaluated and found to satisfy the requirements set out in those agreements. In 2015, for example, our 
ability to supply wind blades to one of our customers was constrained because our customer, who under our 
agreement was required to procure a sufficient supply of a specific type of material, was unable to procure the 
material from a single source supplier. Should any of these suppliers of raw materials experience production delays 
or shortages, have their operations interrupted or otherwise cease or curtail their operations, this may disrupt or 
materially harm our business, operating results and financial condition. 

Significant increases in the cost of transporting the wind blades we manufacture could negatively affect the 
demand for our products. 

A significant portion of our customers’ costs relate to the costs necessary to transport the wind blades we 

manufacture to their customers’ wind farms. Demand for our products could be negatively affected if the costs our 
customers bear to transport the wind blades we manufacture materially increase. 

The nature of our manufacturing processes and unanticipated changes to those processes could significantly 
reduce our manufacturing yields and product reliability, which could materially harm our business, operating 
results and financial condition. 

The manufacturing of our wind blades involves highly complex and precise processes which may be 

dictated by our customers’ requests requiring production in highly controlled environments. Changes in our 
manufacturing processes or that are required by our customers could affect product reliability. Furthermore, many 

26 

of our processes are manual to facilitate production flexibility and compliance with customer requirements. A 
manually dependent manufacturing process can limit capacity and increase production costs. In some cases, 
existing manufacturing techniques may be insufficient to achieve the volume or cost targets of our customers. For 
example, our manufacturing processes may at times require a quantity of raw materials greater than the quantity 
for which we have contracted, making it difficult for us to achieve the targeted cost levels negotiated with our 
customers. In order to achieve targeted volume and cost levels, we may need to increase the quantity of raw 
materials for which we contract or develop new manufacturing processes and techniques. While we continue to 
devote substantial efforts to the improvement of our manufacturing techniques and processes, we may not achieve 
manufacturing volumes and cost levels in our manufacturing activities that will fully satisfy customer demands, 
which could materially harm our business, operating results and financial condition. 

Our reserves for warranty expenses might not be sufficient to cover all future costs. 

We provide warranties for all of the wind blades and precision molding and assembly systems we produce, 

including parts and labor, for periods that typically range from two to five  years depending on the product sold. If a 
wind blade is found to be defective during the warranty period as a result of a defect in workmanship or materials, or 
if we are required to cover remediation expenses or other potential remedies, in addition to our regular warranty 
coverage we may need to repair or replace the wind blade (which could include significant transportation, 
installation and erection costs) at our sole expense. Our estimate of warranty expense requires us to make 
assumptions about matters that are highly uncertain, including future rates of product failure, repair costs, shipping 
and handling and de-installation and re-installation costs at customers’ sites. Our assumptions could be materially 
different from the actual performance of our products and these remediation expenses in the future. The expenses 
associated with wind blade repair and remediation activities can be substantial and may include changes to our 
manufacturing processes. If our estimates prove materially incorrect, we could incur warranty expenses that exceed 
our reserves and be required to make material unplanned cash expenditures, which could materially harm our 
business, operating results and financial condition. 

We may not be able to meet our customers’ future wind blade supply demands, which may hinder our customer 
relationships and reputation. 

Historically, our existing customers’ demand and MW capacity goals have mirrored the anticipated growth of 

the wind energy industry. Given the importance of wind energy capture, turbine reliability and cost to power 
producers, the size, quality and performance of wind blades have become highly strategic to our OEM customers. If 
we are unable to maintain future manufacturing capacity at levels that meet our customers’ increasing demands, 
including with respect to volume, technical specifications, or commercial terms, our existing customers may seek 
relationships with, or give priority to, other wind blade manufacturers or may use or develop their own internal 
manufacturing capabilities to meet their increased demand, which could materially harm our business, operating 
results and financial condition. In addition, our reputation could be materially harmed if we are unable to satisfy the 
requirements of our customers. 

We rely on our research and development efforts to remain competitive, and we may fail to develop on a timely 
basis new wind blade manufacturing technologies that are commercially attractive or permit us to keep up with 
customer demands. 

The market for wind blades is subject to evolving customer needs and expectations. Our research and 
development is invested in developing faster and more efficient manufacturing processes in order to build the new 
wind blades designed by our customers that more effectively capture wind energy and are adaptable to new growth 
segments of the wind energy market. Research and development activities are inherently uncertain and the results of 
our in-house research and development may not be successful. In addition, our competition may adopt more 
advanced technologies or develop wind blades that are more effective or commercially attractive. We believe that 
our future success will depend in large part upon our ability to be at the forefront of technological innovation in the 
wind energy industry and to rapidly and cost-effectively adapt our wind blade manufacturing processes to keep pace 
with changing technologies, new wind blade design and changing customer needs. If we are unable to do so, our 
business, operating results, financial condition and reputation could be materially harmed. 

27 

We depend on third parties for certain construction, maintenance, engineering, transportation, warehousing and 
logistics services, and failures of those third parties to perform their obligations may in turn impede our ability to 
perform our obligations. 

We contract with third parties for certain services relating to the design, construction and maintenance of 
various components of our production facilities and other systems. If these third parties fail to comply with their 
obligations: 

• 

• 

• 

• 

we may experience delays in the completion of new facilities or expansion of existing facilities; 

the facilities may not operate as intended; 

we may be required to recognize impairment charges; or 

we could experience production delays, which could cause us to miss our production capacity targets 
and breach our long-term supply agreements, which could damage our relationships with our customers 
and subject us to contractual penalties and contract termination. 

Any of these events could have a material adverse effect on our business, operating results or financial 
condition. Our customers also contract with third parties for the transportation of the products we manufacture. In 
particular, a significant portion of the goods we manufacture are transported to different countries, which requires 
customized shipping cradles, sophisticated warehousing, logistics and other resources. If our customers fail to 
contract with third parties for certain construction, maintenance, engineering, transportation, warehousing and 
logistics services, or there are any disruptions, delays or failures in these services, this could have a material adverse 
effect on our business, operating results or financial condition. 

Various legislation, regulations and incentives that are expected to support the growth of wind energy in the 
United States and around the world may not be extended or may be discontinued, phased out or changed, or may 
not be successfully implemented, which could materially harm wind energy programs and materially decrease 
demand for the wind blades we manufacture. 

The U.S. wind energy industry is dependent in part upon governmental support through certain incentives 
including federal tax incentives and RPS programs and may not be economically viable absent such incentives. 
Government-sponsored tax incentive programs including the PTC, and to a lesser extent, the Investment Tax Credit, 
are expected to support the U.S. growth of wind energy. The PTC provided the owner of a wind turbine placed in 
operation before January 1, 2015 with a ten year credit against its U.S. federal income tax obligations based on the 
amount of electricity generated by the wind turbine. 

The PTC was extended in 2015 for wind power projects through December 31, 2019, and was phased down 
over the term of the PTC extension. Specifically, the PTC was kept at the same rate in effect at the end of 2014 for 
wind power projects that either commenced construction or met certain safe harbor requirements by the end of 2016, 
and thereafter was reduced by 20% per year in 2017, 2018 and 2019, respectively. In December 2019, Congress 
extended the PTC through the end of 2020 and increased the rate from 40% to 60% for projects that commenced 
construction or met certain safe harbor requirements by the end of 2020 and are commissioned by the end of 2024.   

In June 2019, the EPA issued the Affordable Clean Energy Rule, which replaced the Clean Power Plan, which 
was designed to promote renewable energy.  The Clean Power Plan, which was established by the EPA in 2015, set 
national standards for states to reduce carbon emissions from power plants. Specifically, the Clean Power Plan 
required states to reduce carbon emissions from power plants 32% below 2005 levels by 2030.  In general, the 
Affordable Clean Energy Rule, provides for efficiency improvements at power plants and directs individual States to 
choose how they want to regulate power plant emissions.   Unlike the Clean Power Plan, the Affordable Clean 
Energy Rule, does not set specific standards or limits for carbon emissions.  

In addition, many state governments have adopted measures designed to promote wind energy. For example, 

according to the American Wind Energy Association (AWEA), at the state level, as of December 31, 2019, 29 
states, as well as the District of Columbia and Puerto Rico, have implemented RPS programs that mandate that a 
specific percentage of electricity sales in a state come from renewable energy within a specified period. However, 
some RPS programs have been challenged and all of them may not continue going forward. These programs have 
spurred significant growth in the wind energy industry in the United States and a corresponding increase in the 

28 

demand for our manufactured wind blades. However, although the U.S. government and several state governments 
have adopted these various programs that are expected to help drive the growth of wind energy, they may approve 
new or additional programs that might hinder the wind energy industry and therefore negatively impact our business, 
operating results or financial condition.  

China implemented its 13th 5-Year Plan with a goal of 15% energy from non-fossil fuel sources and targeting 

210 GWs of grid-connected wind capacity by 2020, according to its National Development and Reform 
Commission, and employs preferential feed-in tariff schemes, in addition to local tax-based incentives. Mexico has 
established strict targets, aiming for 35% renewable energy by 2024 and 50% by 2050, according to WoodMac, 
which it is facilitating through tax incentives. Large European Union members have renewable energy targets for 
2020 of between 10% and 49% of all energy use derived from renewable energy sources, according to the European 
Commission. Turkey enacted Law No. 5346 in 2005 to promote renewable-based electricity generation within its 
domestic electricity market by introducing tariffs and purchase obligations for distribution companies requiring 
purchases from certified renewable energy producers. The World Bank also provided to Turkey an aggregate of 
$600 million of loan proceeds to encourage investors to construct generation plants with renewable energy 
resources. These programs have spurred significant growth in the wind energy industry internationally and a 
corresponding increase in the demand for our manufactured wind blades. However, although foreign governments 
have adopted various programs that are expected to drive the growth of wind energy, they may approve new or 
additional programs going forward that might hinder the wind energy industry and therefore negatively impact our 
business as a result. For example, foreign governments may decide to reduce or eliminate these economic incentives 
for political, financial or other reasons. They may also favor other forms of energy, including current and new 
sources of energy such as solar, nuclear and hydropower. Foreign governments may also cancel or delay scheduled 
tender offers or auctions for wind energy projects.  For example, the Mexican government recently canceled the 
country’s fourth energy tender which was in the final stages to contract a minimum 5% of national power by 2021.  

Because of the long lead times necessary to develop wind energy projects, any uncertainty or delay in 
adopting, extending or renewing these incentives beyond their current or future expiration dates could negatively 
impact potential wind energy installations and result in industry volatility. There can be no assurance that the PTC, 
tender offers, auctions or other governmental programs or subsidies for renewable energy will remain in effect in 
their present form or at all, and the elimination, reduction, or modification of these programs or subsidies could 
materially harm wind energy programs in the United States and international markets and materially decrease 
demand for the wind blades we manufacture and, in turn, materially harm our business, operating results and 
financial condition. 

We may not be able to obtain, or agree on acceptable terms and conditions for, government tax credits, grants, 
loans and other incentives for which we have in the past applied or may in the future apply, which may materially 
harm our business, operating results and financial condition. 

We have in the past and may in the future rely, in part, on tax credits, grants, loans and other incentives under 

U.S. and foreign governmental programs to support the construction of new plants and expansion of existing 
manufacturing facilities. We may not be successful in obtaining these tax credits, grants, loans and other incentives, 
and the tax and other incentives that have already been approved may not be continued in the future. Our ability to 
obtain funds or incentives from government sources is subject to the availability of funds under applicable 
governmental programs and approval of our applications to participate in these programs. The application process 
for these funds and other incentives is and will be highly competitive. We may not be able to satisfy the 
requirements and milestones imposed by the granting authority as conditions to receipt of the funds or other 
incentives, the timing of the receipt of the funds may not meet our needs, and, even if obtained, we may be unable to 
successfully execute on our business plan. Moreover, not all of the terms and conditions associated with these 
incentive funds have been disclosed to us, and once disclosed, there may be terms and conditions with which we are 
unable to comply or that are commercially unacceptable to us. Further, participation in certain programs may require 
us to notify the federal government of certain intellectual property we develop and comply with applicable 
regulations in order to protect our interests in that intellectual property. In addition, these federal governmental 
programs may require us to spend a portion of our own funds for every incentive dollar we receive or are permitted 
to borrow from the government and may impose time limits during which we must use the funds awarded to us that 
we may be unable to achieve. If we are unable to obtain or comply with the terms of these tax credits, grants, loans 
or other incentives, our business, operating results and financial condition may be harmed. 

29 

Adverse weather conditions could impact the wind energy industry in some regions and could materially harm 
our business, operating results and financial condition. 

Our business may be subject to fluctuations in sales volumes due to adverse weather conditions that could 

delay the erection of wind turbines, the installation of wind blades and the ability of wind turbines to generate 
electricity efficiently. Moreover, any remediation efforts we could be required to undertake pursuant to wind blade 
warranties could be delayed or otherwise adversely impacted by poor weather. Although our customer base and 
manufacturing footprint is geographically diversified, enduring weather patterns or seasonal variations may impact 
the expansion of the wind energy industry in certain regions. A resulting reduction or delay in demand for the wind 
blades we manufacture for our customers could materially harm our business, operating results and financial 
condition. 

Our long-term growth and success is dependent upon retaining our senior management and attracting and 
retaining qualified personnel. 

Our growth and success depends to a significant extent on our ability to attract and retain highly qualified 

research and development, management, manufacturing and other key personnel including engineers in our various 
locations. In addition, we rely heavily on our management team, including Steven C. Lockard, our Chief Executive 
Officer; William E. Siwek, our President; Ramesh Gopalakrishnan, our Chief Operating Officer - Wind; Bryan 
Schumaker, our Chief Financial Officer; and other senior management. Although we have executed an employment 
agreement with each of these executives, these executives and other senior management can resign with little or no 
notice to us. The inability to recruit and retain key personnel or the unexpected loss of key personnel may materially 
harm our business, operating results and financial condition. Hiring those persons may be especially difficult 
because of the specialized nature of our business and our international operations. If we cannot attract and retain 
qualified personnel, or if we lose the services of Messrs. Lockard, Siwek, Gopalakrishnan, or Schumaker, other key 
members of senior management or other key personnel, and we do not have adequate succession plans in place, our 
ability to successfully execute our business plan, market and develop our products and serve our customers could be 
materially and adversely affected. In addition, because of our reliance on our management team, our future success 
depends, in part, on its ability to identify and develop talent to succeed its senior management. The retention of key 
personnel and appropriate senior management succession planning will continue to be critical to the successful 
implementation of our future strategies. 

Risks Related to our Transportation Business  

Our efforts to expand our transportation business and enter into other strategic markets may not be successful. 

While our primary focus has been to manufacture composite wind blades, our strategy is to expand our 
transportation business and to enter into other strategic markets. In 2018, we expanded our relationship with Proterra 
and began supplying bus bodies from a new manufacturing facility in Newton, Iowa in addition to our 
manufacturing facility in Warren, Rhode Island. We experienced startup challenges and incurred significant losses 
in connection with the supply of bus bodies to Proterra from our Newton, Iowa manufacturing facility.  As result, we 
are planning to close our Newton, Iowa bus body manufacturing facility in the first quarter of 2020 and plan to 
consolidate our bus body manufacturing operation into our Warren, Rhode Island manufacturing facility. The 
expansion of our transportation business and our entry into other strategic markets will require improved execution 
in terms of our start up activity and ongoing manufacturing performance as well as significant levels of investment. 
There can be no assurance that our transportation business or other strategic markets will develop as anticipated or 
that we will have success in any such markets, and if we do not, we may be unable to recover our investment, which 
could adversely impact our business, financial condition and results of operations, including potentially impairing 
the value of our goodwill. 

We may incur material losses and costs as a result of product liability and warranty claims, litigation and other 
disputes and claims.  

We are exposed to warranty and product liability claims if our transportation products fail to perform as 
expected. We may in the future be required to participate in a recall of these products or the vehicles incorporating 
our products. If public safety concerns are raised, we may have to participate in a recall even if our products are 
ultimately found not to be defective. Vehicle manufacturers have experienced increasing recall campaigns in recent 
years. Our customers may look to us for contribution when faced with recalls and product liability claims. If our 

30 

customers demand higher warranty-related cost recoveries, or if our transportation products fail to perform as 
expected, our business, financial condition and results of operations could materially suffer.  

We may also be exposed to product liability claims, warranty claims and damage to our reputation if our 
transportation products actually or allegedly fail to perform as expected or the use of our products results, or is 
alleged to result, in bodily injury or property damage. Recalls may also cause us to lose additional business from our 
customers. Material product defect issues may subject us to recalls of those products and restrictions on bidding on 
new customer programs.  

Risks Related to Our Business as a Whole 

Our facilities or operations could be adversely affected by health epidemics such as the Coronavirus or other 
events outside of our control. 

We may be impacted by health epidemics, such as the Coronavirus, or other events outside of our control, 

such as wars or natural disasters. For example, as a result of the recent Coronavirus quarantine and movement 
restrictions being imposed in China, we do not expect our China manufacturing facilities to be back at full 
production until the second quarter of 2020 and we may not be able to produce the number of wind blade sets in our 
China manufacturing facilities that we originally projected for calendar year 2020. In addition, our global supply 
chain may be adversely affected by the Coronavirus epidemic, other health epidemics, wars, natural disasters or 
other events outside our control. If the Coronavirus epidemic or other events outside of our control persist for an 
extended period of time, they may have an adverse impact on our business, financial condition and results of 
operations.   

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

We expect to continue to expand our business to meet our current and expected future contractual obligations 
and to satisfy anticipated increased demand for our products. To manage our anticipated expansion, we believe we 
must scale our internal infrastructure, including establishing additional facilities, improve our operational systems 
and procedures and manufacturing capabilities, continue to enhance our compliance and quality assurance systems, 
train and manage our growing employee base, and retain and add to our current executives and management 
personnel. Rapid expansion of our operations could place a significant strain on our senior management team, 
support teams, manufacturing lines, information technology platforms and other resources. Difficulties in effectively 
managing the budgeting, forecasting and other process control issues presented by any rapid expansion could 
materially harm our business, prospects, results of operations or financial condition. Our inability to implement 
operational improvements, generate and sustain increased revenue and manage and control our cost of goods sold 
and operating expenses could impede our future growth and materially harm our business, operating results and 
financial condition. 

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

Our quarterly revenue, operating results, profitability and cash flows have varied in the past and are likely to 

vary significantly from quarter to quarter in the future. For example, our quarterly results have ranged from an 
operating profit of $21.0 million for the three months ended September 30, 2017 to an operating loss of $11.7 
million for the three months ended March 31, 2019. The factors that are likely to cause these variations include: 

• 

• 

• 

• 

• 

operating and startup costs of new manufacturing facilities; 

wind blade model transitions; 

differing quantities of wind blade production; 

unanticipated contract or project delays or terminations; 

changes in the costs of raw materials or disruptions in raw material supply; 

31 

 
 
• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

scrap of defective products; 

payment of liquidated damages to our customers for late deliveries of our products; 

warranty expense; 

availability of qualified personnel; 

employee wage levels; 

costs incurred in the expansion of our existing manufacturing capacity; 

volume reduction requests from our customers pursuant to our customer agreements;  

damage or production delays caused by earthquakes, fires, floods, tornadoes, hurricanes, extreme 
weather conditions such as windstorms, hailstorms, drought, temperature extremes, typhoons or other 
natural disasters or terrorism or health epidemics such as the coronavirus; 

general economic conditions; and  

the complexity of the financial assumptions we must use for forecasting our revenue, profitability and 
operating results under ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and the 
impact that unanticipated blade transitions have on those estimates.   

As a result, our revenue, operating results, profitability and cash flows for a particular period are difficult to 

predict and may decline in comparison to corresponding prior periods regardless of the strength of our business. It is 
also possible that in some future periods our revenue, operating results and profitability may not meet the 
expectations of securities analysts or investors. If this occurs, the trading price of our common stock could fall 
substantially, either suddenly or over time, and our business, operating results and financial condition would be 
materially harmed. 

The fluctuation of foreign currency exchange rates could materially harm our financial results. 

Since we conduct a significant portion of our operations internationally, our business is subject to foreign 
currency risks, including currency exchange rate fluctuations. The exchange rates are affected by, among other 
things, changes in political and economic conditions. For example, an increase in our Turkey sales and operations 
will result in a larger portion of our net sales and expenditures being denominated in the Euro and Turkish Lira. 
Significant fluctuations in the exchange rate between the Turkish Lira and the U.S. dollar, the Turkish Lira and the 
Euro or the Euro and the U.S. dollar may adversely affect our revenue, expenses, as well as the value of our assets 
and liabilities. Similarly, an increase in our sales within China may result in a larger portion of our net sales and 
expenditures being denominated in Chinese Renminbi. The Chinese government controls the procedures by which 
the Chinese Renminbi is converted into other currencies, and conversion of the Chinese Renminbi generally requires 
government consent. As a result, the Chinese Renminbi may not be freely convertible into other currencies at all 
times. If the Chinese government institutes changes in currency conversion procedures, or imposes restrictions on 
currency conversion, those actions may materially harm our business, liquidity, financial condition and operating 
results. In addition, significant fluctuations in the exchange rate between the Chinese Renminbi and U.S. dollars 
may adversely affect our revenues, expenses as well as the value of our assets and liabilities. However, in Mexico, 
since all of our net sales and some of our expenditures are denominated in U.S. dollars, an increase in our Mexico 
sales and operations will result in a larger portion of our cost of goods sold being denominated in the Mexican Peso.  
Significant fluctuations in the exchange rate between the Mexican Peso and the U.S. dollar may adversely affect our 
expenses, as well as the value of our assets and liabilities. To the extent our future revenues and expenses are 
generated outside of the United States in currencies other than the U.S. dollar, including the Euro, the Turkish Lira, 
the Chinese Renminbi, Mexican Peso or India Rupee, among others, we will be subject to increased risks relating to 
foreign currency exchange rate fluctuations which could materially harm our business, financial condition and 
operating results. 

Our manufacturing operations and future growth are dependent upon the availability of capital, which may be 
insufficient to support our capital expenditures.     

32 

Our current wind blade manufacturing activities and future growth will require substantial capital investment. 

For the years ended December 31, 2019 and 2018, our capital expenditures were $80.3 million and $74.7 million, 
respectively, including assets acquired under finance leases in 2019 and 2018 of $5.8 million and $22.0 million, 
respectively. We have recently entered into lease agreements with third parties to lease new manufacturing facilities 
in China, India and Mexico. Major projects expected to be undertaken include purchasing equipment for our new 
manufacturing facility in Chennai, India and the continued investment in our Turkey, Mexico and China facilities. 
Our ability to grow our business is predicated upon us making significant additional capital investments to expand 
our existing manufacturing facilities and build and operate new manufacturing facilities in existing and new 
markets. We generally estimate that the startup of a new six-line manufacturing facility requires cash for net 
operating expenses and working capital of between $20 million to $25 million and additional capital expenditures 
primarily for machinery and equipment of between $30 million to $35 million. In addition, we estimate our annual 
maintenance capital expenditures to be between $1 million to $2 million per facility. We may not have the capital to 
undertake these capital investments. In addition, our capital expenditures may be significantly higher if our estimates 
of future capital investments are incorrect and may increase substantially if we are required to undertake actions to 
comply with new regulatory requirements or compete with new technologies. The cost of some projects may also be 
affected by foreign exchange rates if any raw materials or other goods must be paid for in foreign currency. We 
cannot assure you that we will be able to raise funds on favorable terms, if at all, or that future financings would not 
be dilutive to holders of our capital stock. We also cannot assure you that completed capital expenditures will yield 
the anticipated results. If we raise additional funds by obtaining loans from third parties, the terms of those financing 
arrangements may include negative covenants, or other restrictions on our business that could impair our operational 
flexibility, and would require us to fund additional interest expense. If we are unable to obtain sufficient capital at a 
reasonable cost or at all, we may not be able to expand production sufficiently to take advantage of changes in the 
marketplace or may be required to delay, reduce or eliminate some or all of our current operations, which could 
materially harm our business, operating results and financial condition. 

As a U.S. corporation with international operations, we are subject to the U.S. Foreign Corrupt Practices Act of 
1977, which could impact our ability to compete in certain jurisdictions. 

As a U.S. corporation, we are subject to the FCPA, which generally prohibits U.S. companies and their 
intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. 
We have manufacturing facilities in China, Mexico, Turkey and India, countries with a fairly high risk of 
corruption. Those facilities are subject to routine government oversight. In addition, a number of our raw materials 
and components suppliers are state-owned, particularly in China. Moreover, due to our need to import raw materials 
across international borders, we also routinely have interactions, directly or indirectly, with customs officials. In 
many foreign countries, under local custom, businesses engage in practices that may be prohibited by the FCPA or 
other similar laws and regulations. Additionally, we continue to hire employees around the world as we continue to 
expand. Although we have implemented certain procedures and controls designed to ensure compliance with the 
FCPA and similar laws, there can be no guarantee that all of our employees and agents, as well as those companies 
to which we outsource certain of our business operations, have not taken and will not take actions that violate our 
policies and the FCPA, which could subject us to fines, penalties, disgorgement, and loss of business, harm our 
reputation and impact our ability to compete in certain jurisdictions. In addition, these laws are complex and far-
reaching in nature, and, as a result, we may be required in the future to alter one or more of our practices to be in 
compliance with these laws or any changes in these laws or the interpretation thereof. Moreover, our competitors 
may not be subject to the FCPA or comparable legislation, which could provide them with a competitive advantage 
in some jurisdictions. 

33 

We may have difficulty making distributions and repatriating earnings from our Chinese manufacturing 
operations, which may also occur in some of our other locations.  

A material portion of our business is conducted in China. As of December 31, 2019, our China operations had 

unrestricted cash of $9.7 million, most of which will be used to fund our future operations in China. 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 contracts 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 the People’s Republic of China, including retained earnings as 
determined under Chinese-statutory accounting requirements. Until 50% ($26.5 million) of registered capital is 
contributed to a surplus reserve, our Chinese 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, we can pay 
dividends equal to 100% of after-tax profit assuming other conditions are met. At December 31, 2019, the amount of 
the surplus reserve fund was $6.6 million. Any inability to make distributions, repatriate earnings or otherwise 
access funds from our manufacturing operations in China, if and when needed for use outside of China, could 
materially harm our liquidity and our business.  

Effective internal controls are necessary for us to provide reliable financial reports and effectively address fraud 
risks. 

We maintain a system of internal controls to provide reasonable assurance regarding the reliability of financial 

reporting and the preparation of financial statements for external purposes in accordance with U.S. generally 
accepted accounting principles (GAAP). The process of designing and implementing effective internal controls is a 
continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory 
environments and to expend significant resources to establish and maintain a system of internal controls that will be 
adequate to satisfy the reporting obligations of a public company. The effectiveness of our internal controls depends 
in part on the cooperation of senior managers worldwide.  

Any system of controls, however well designed and operated, can provide only reasonable, and not absolute, 
assurance that the objectives of the system are met. Any failure to maintain that system, or consequent inability to 
produce accurate financial statements on a timely basis, could increase our operating costs and harm our business, 
and lead to our becoming subject to litigation, sanctions or investigations by The NASDAQ Global Market 
(NASDAQ), the SEC or other regulatory governmental agencies and bodies. Furthermore, investors’ perceptions 
that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely 
basis may harm our stock price. 

The state of financial markets and the economy may materially harm our sources of liquidity and capital. 

There has been significant recent turmoil and volatility in worldwide financial markets. These conditions have 

resulted in a disruption in the liquidity of financial markets, and could directly impact us to the extent we need to 
access capital markets to raise funds to support our business and overall liquidity position. This situation could 
affect the cost of such funds or our ability to raise such funds. If we were unable to access any of these funding 
sources when needed, it could materially harm our business, operating results and financial condition. 

Our ability to use our net operating loss carry forwards may be subject to limitation and may result in increased 
future tax liability. 

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), contain rules that limit 
the ability of a company that undergoes an “ownership change” to utilize its net operating loss and tax credit carry 
forwards and certain built-in losses recognized in years after the “ownership change”. An “ownership change” is 
generally defined as any change in ownership of more than 50% of a corporation’s stock over a rolling three-year 
period by stockholders that own (directly or indirectly) 5% or more of the stock of a corporation, or arising from a 
new issuance of stock by a corporation. If an ownership change occurs, Section 382 generally imposes an annual 
limitation on the use of pre-ownership change net operating losses (NOLs), credits and certain other tax attributes to 
offset taxable income earned after the ownership change. The annual limitation is equal to the product of the 

34 

applicable long-term tax exempt rate and the value of our common stock immediately before the ownership change. 
This annual limitation may be adjusted to reflect any unused annual limitation for prior years and certain recognized 
built-in gains and losses for the year. In addition, Section 383 generally limits the amount of tax liability in any post-
ownership change year that can be reduced by pre-ownership change tax credit carryforwards. This could result in 
increased U.S. federal income tax liability for us if we generate taxable income in a future period. Limitations on the 
use of NOLs and other tax attributes could also increase our state tax liability. The use of our tax attributes will also 
be limited to the extent that we do not generate positive taxable income in future tax periods. As a result of these 
limitations, we may be unable to offset future taxable income (if any) with losses, or our tax liability with credits, 
before such losses and credits expire. Accordingly, these limitations may increase our federal income tax liability. 

We experienced an “ownership change” in June 2018, and it remains possible that future transactions may 

cause us to undergo one or more ownership changes. As of December 31, 2019, we have U.S. federal NOLs of 
approximately $20.9 million and state NOLs of approximately $158.0 million. The pre-ownership change NOLs 
existing at the date of change of $47.7 million are subject to annual limitation.  We do not believe that the Section 
382 and 383 annual limitation will materially impact our ability to utilize the tax attributes that existed as of the date 
of the ownership change. 

We have U.S. federal and state NOLs. In general, NOLs in one country cannot be used to offset income in any 

other country and NOLs in one state cannot be used to offset income in any other state. Accordingly, we may be 
subject to tax in certain jurisdictions even if we have unused NOLs in other jurisdictions. Also, each jurisdiction in 
which we operate may have its own limitations on our ability to utilize NOLs or tax credit carryovers generated in 
that jurisdiction. These limitations may increase our federal, state, and/or foreign income tax liability. 

Our senior, secured current revolving credit facility contains, and any future loan agreements we may enter into 
may contain, operating and financial covenants that may restrict our business and financing activities. 

As of December 31, 2019, we had a $150.0 million revolving credit facility (the Credit Facility) with 

JPMorgan Chase Bank, N.A. Wells Fargo Bank, N.A., Capital One, N.A. and Bank of America N.A., consisting of a 
$125.0 million revolving credit facility and a $25.0 million letter of credit sub-facility. As of December 31, 2019, 
the aggregate outstanding balance under the Credit Facility was $112.4 million. The Credit Facility is secured by 
substantially all of our assets. In addition, from time to time, we enter into various loan, working capital and 
accounts receivable financing facilities to finance the construction and ongoing operations of our advanced 
manufacturing facilities and other capital expenditures. The Credit Facility contains various financial covenants and 
restrictions on our and our operating subsidiaries’ excess cash flows and ability to make capital expenditures, incur 
additional indebtedness and pay dividends or make distributions on, or repurchase, our stock. The operating and 
financial restrictions and covenants of the Credit Facility, as well as our other existing and any future financing 
agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or 
expand or fully pursue our business strategies. Our ability to comply with these covenants may be affected by events 
beyond our control, and we may not be able to maintain appropriate minimum leverage ratio and fixed charge 
coverage ratio requirements in the future. A breach of any of these covenants could result in a default under the 
applicable loan facility, which could cause all of the outstanding indebtedness under such facility to become 
immediately due and payable by us and/or enable the lender to terminate all commitments to extend further credit. In 
addition, if we were unable to repay the outstanding indebtedness upon a default, our lenders could proceed against 
the assets pledged as collateral to secure that indebtedness.  

In February 2020, we entered into an Incremental Facility Agreement with the current lenders to our Credit 

Agreement and an additional lender, pursuant to which the aggregate principal amount of our revolving credit 
facility under the Credit Agreement was increased from $150.0 million to $205.0 million. All other material terms 
and conditions of the Credit Agreement remained the same.  We did not make any draw downs on the revolving 
credit facility in connection with the execution of the Incremental Facility Agreement.  

35 

 
Our indebtedness may adversely affect our business, results of operations and financial condition. 

Our indebtedness could adversely affect our business, results of operations and financial condition by, among 

other things: 

• 

• 

• 

• 

• 

• 

requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and 
interest on our debt, which would reduce the availability of our cash flow to fund working capital, 
capital expenditures, acquisitions, execution of our growth strategy and other general corporate 
purposes; 

limiting our ability to borrow additional amounts to fund debt service requirements, working capital, 
capital expenditures, acquisitions, execution of our growth strategy and other general corporate 
purposes; 

making us more vulnerable to adverse changes in general economic, industry and regulatory conditions 
and in our business by limiting our flexibility in planning for, and making it more difficult to react 
quickly to, changing conditions; 

placing us at a competitive disadvantage compared with those of our competitors that have less debt and 
lower debt service requirements; 

making us more vulnerable to increases in interest rates since some of our indebtedness is subject to 
variable rates of interest; and 

making it more difficult for us to satisfy our financial obligations. 

In addition, we may not be able to generate sufficient cash flow from our operations to repay our outstanding 

indebtedness when it becomes due and to meet our other cash needs or to comply with the financial covenants set forth 
therein. If we are not able to pay our debts as they become due, we could be in default of the Credit Facility or other 
indebtedness. We might also be required to pursue one or more alternative strategies to repay indebtedness, such as 
selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities. We may not 
be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if 
we must sell assets, it may negatively affect our ability to generate revenues. 

The elimination of LIBOR could adversely affect our business, results of operations or financial condition. 

In July 2017, the head of the United Kingdom Financial Conduct Authority announced plans to phase out 

the use of LIBOR by the end of 2021. Although the impact is uncertain at this time, the elimination of LIBOR 
could have an adverse impact on our business, results of operations, or financial condition.  We may incur 
significant expenses to amend our LIBOR-indexed loans and other applicable financial or contractual obligations, 
including our revolving credit facility, to a new reference rate, which may differ significantly from LIBOR.  
Accordingly, the use of an alternative rate could result in increased costs, including increased interest expense on 
our revolving credit facility, and increased borrowing costs in the future. At this time, no consensus exists as to 
what rate or rates may become acceptable alternatives to LIBOR and we are unable to predict the effect of any 
such alternatives on our business, results of operations or financial condition. 

Much of our intellectual property consists of trade secrets and know-how that is very difficult to protect. If we 
experience loss of protection for our trade secrets or know-how, our business would be substantially harmed. 

We have a variety of intellectual property rights, including patents, trademarks and copyrights, but much of 

our most important intellectual property rights consist of trade secrets and know-how and effective intellectual 
property protection may be unavailable, limited or outside the scope of the intellectual property rights we pursue in 
the United States and in foreign countries such as China where we operate. Although we strive to protect our 
intellectual property rights, there is always a risk that our trade secrets or know-how will be compromised or that a 
competitor could lawfully reverse-engineer our technology or independently develop similar or more efficient 
technology. We have confidentiality agreements with each of our customers, suppliers, key employees and 
independent contractors in place to protect our intellectual property rights, but it is possible that a customer, 
supplier, employee or contractor might breach the agreement, intentionally or unintentionally. For example, we 
believe a key former employee may have shared some of our intellectual property with a competitor in China and 

36 

this former employee or the competitor may use this intellectual property to compete with us in the future. It is also 
possible that our confidentiality agreements with customers, suppliers, employees and contractors will not be 
effective in preserving the confidential nature of our intellectual property rights. The patents we own could be 
challenged, invalidated, narrowed or circumvented by others and may not be of sufficient scope or strength to 
provide us with any meaningful protection or commercial advantage. Once our patents expire, or if they are 
invalidated, narrowed or circumvented, our competitors may be able to utilize the inventions protected by our 
patents. Additionally, the existence of our intellectual property rights does not guarantee that we will be successful 
in any attempt to enforce these rights against third parties in the event of infringement, misappropriation or other 
misuse, which may materially and adversely affect our business. Because our ability to effectively compete in our 
industry depends upon our ability to protect our proprietary technology, we might lose business to competitors and 
our business, revenue, operating results and prospects could be materially harmed if we suffer loss of trade secret 
and know-how protection or breach of our confidentiality agreements. 

If the transfer pricing arrangements we have among our subsidiaries are determined to be inappropriate in one 
or more jurisdictions, our tax liability may increase. 

In many countries, including the United States, we are subject to transfer pricing and other tax regulations 
designed to ensure that appropriate levels of income are reported as earned in each jurisdiction in which we operate. 
These regulations require that any international transaction involving associated enterprises be on substantially the 
same basis as a transaction between unrelated companies dealing at arms’ length and that contemporaneous 
documentation be maintained to support the transfer prices. We have transfer pricing arrangements among our 
subsidiaries in relation to various aspects of our business. We consider the transactions among our subsidiaries to be 
substantially on arm’s-length terms. If, however, a tax authority in any jurisdiction reviews any of our tax returns 
and determines that the transfer prices and terms we have applied are not appropriate, or that other income of our 
affiliates should be taxed in that jurisdiction, we may incur increased tax liability, including accrued interest and 
penalties, which would cause our tax provision to increase, possibly materially. In addition, if the jurisdiction from 
which the income is reallocated does not agree with the reallocation, both jurisdictions could tax the same income, 
resulting in double taxation. If tax authorities were to allocate income to a higher tax jurisdiction, subject our income 
to double taxation, or assess interest and penalties, it would increase our consolidated tax liability, which could 
materially harm our business, operating results and financial condition. 

37 

Our insurance coverage may not cover all risks we face and insurance premiums may increase, which may 
hinder our ability to maintain sufficient coverage to cover losses we may incur. 

We are exposed to risks inherent in the manufacturing of wind blades and other composite structures as well 

as the construction of our facilities, such as natural disasters, breakdowns and manufacturing defects that could harm 
persons and damage property. We maintain insurance coverage with licensed insurance carriers that limits our 
aggregate exposure to certain types of catastrophic losses. In addition, we self-insure for a portion of our claims 
exposure resulting from workers’ compensation and certain events of general liability. We accrue currently for 
estimated incurred losses and expenses, and periodically evaluate and adjust our claims accrued liability amount to 
reflect our experience. However, our insurance coverage may not be sufficient to cover the full amount of potential 
losses. In addition, there are some types of losses such as from warranty, hurricanes, terrorism, wars, or earthquakes 
where insurance is limited and/or not economically justifiable. If we were to sustain a serious uninsured loss or a 
loss exceeding the limits of our insurance policies, the resulting costs could have a material adverse effect on our 
business prospects, results of operations and financial condition. Further, our insurance policies provide for our 
premiums to be adjusted annually. If the premiums we pay for our policies increase significantly, we may be unable 
to maintain the same level of coverage we currently carry, or we will incur significantly greater costs to maintain the 
same level of coverage, including through higher deductibles. 

We may be subject to significant liabilities and costs relating to environmental and health and safety 
requirements. 

We are subject to various environmental, health and safety laws, regulations and permit requirements in the 

jurisdictions in which we operate governing, among other things, health, safety, pollution and protection of the 
environment and natural resources, the handling and use of hazardous substances, the generation, storage, treatment 
and disposal of wastes, and the cleanup of any contaminated sites. In June 2018, Iowa OSHA, a division of the Iowa 
Department of Labor, issued a citation and notification of penalty to us alleging that certain of our workplace 
practices and conditions at our Newton, Iowa wind blade manufacturing facility had violated the Iowa Occupational 
Safety and Health Act. Specifically, the citation cited us for multiple alleged violations and proposed that we pay an 
aggregate penalty of $0.2 million. In March 2019, we entered into a settlement agreement with the Iowa Department 
of Labor pursuant to which we agreed to make a settlement payment of $0.1 million and to implement certain safety 
enhancements at our Newton, Iowa manufacturing facility to fully resolve this matter. 

We have incurred, and expect to continue to incur, capital and operating expenditures to comply with such 
laws, regulations and permit requirements. While we believe that we currently are in material compliance with all 
such laws, regulations and permit requirements, any noncompliance may subject us to a range of enforcement 
measures, including the imposition of monetary fines and penalties, other civil or criminal sanctions, remedial 
obligations, and the issuance of compliance requirements restricting our operations. In addition, the future adoption 
of more stringent laws, regulations and permit requirements may require us to make additional capital and operating 
expenditures. Under certain environmental laws and regulations, liabilities also can be imposed for cleanup of 
currently and formerly owned, leased or operated properties, or properties to which we sent hazardous substances or 
wastes, regardless of whether we directly caused the contamination or violated any law. For example, we could have 
future liability relating to any contamination that remains from historic industrial operations by others at our 
properties. Additionally, some of our facilities have a long history of industrial operations and, in the past, 
contaminants have been detected and remediated at one of our facilities in Izmir, Turkey. 

There can be no assurance that we will not in the future become subject to compliance requirements, 
obligations to undertake cleanup or related activities, or claims or proceedings relating to environmental, health or 
safety matters, hazardous substances or wastes, contaminated sites, or other environmental or natural resource 
damages, that could impose significant liabilities and costs on us and materially harm our business, operating results 
or financial condition. 

Claims that we infringe, misappropriate or otherwise misuse the intellectual property rights of others could 
subject us to significant liability and disrupt our business. 

Our competitors and third party suppliers of components and raw materials used in our products protect their 

intellectual property rights by means such as trade secrets and patents. In the future we may be sued for violations of 

38 

other parties’ intellectual property rights, and the risk of this type of lawsuit will likely increase as our size, 
geographic presence and market share expand and as the number of competitors in our market increases. Any such 
claims or litigation, whether meritorious or not, could: 

• 

• 

• 

• 

• 

• 

• 

• 

be time-consuming and expensive to defend; 

divert the attention of our technical and managerial resources; 

adversely affect our relationships with current or future customers; 

require us to enter into royalty or licensing agreements with third parties, which may not be available on 
terms that we deem acceptable; 

prevent us from operating all or a portion of our business or force us to redesign our manufacturing 
processes or products, which could be difficult, time-consuming and expensive; 

limit the supply or increase the cost of key raw materials and components used in our products; 

subject us to significant liability for damages or result in significant settlement payments; and 

require us to indemnify our customers or suppliers. 

Any of the foregoing could disrupt our business and materially harm our operating results and financial 
condition. In addition, intellectual property disputes have in the past arisen between our customers which negatively 
affected such customers’ demand for wind blades manufactured by us. If such intellectual property disputes 
involving, or between, one or more of our customers should arise in the future, our business could be materially 
harmed. 

We may form joint ventures, or acquire businesses or assets, in the future, and we may not realize the benefits of 
those transactions. 

We have, in the past, entered into joint ventures with third parties for the manufacture of wind blades. For 

example, we entered into joint ventures with third parties in both our Mexico and Turkey locations. We may create 
new or additional joint ventures with third parties, or acquire businesses or assets, in the future that we believe will 
complement or augment our existing business. We cannot assure you that, following any such joint venture or 
acquisition, we will achieve the expected synergies to justify the transaction. We may encounter numerous 
difficulties in manufacturing any new products resulting from a joint venture or acquisition that delay or prevent us 
from realizing their expected benefits or enhancing our business. If we enter into joint ventures or acquire businesses 
or assets with respect to promising markets, we may not be able to realize the benefit of those joint ventures or 
acquired businesses assets if we are unable to successfully integrate them with our existing operations and company 
culture. 

Work disruptions resulting from our collective bargaining agreements could result in increased operating costs 
and materially harm our business, operating results and financial condition.    

Certain of our employees in Turkey and Matamoros, Mexico, which in the aggregate represented 

approximately 37% of our workforce as of December 31, 2019, are covered by collective bargaining arrangements.  
Our collective bargaining arrangement for our certain of our Turkish employees are in effect through the end of 
2021. In March 2018, we entered into a collective bargaining agreement with a labor union for certain of our 
employees in our Matamoros, Mexico facility. In January 2019, thousands of workers employed in dozens of 
manufacturing facilities in Matamoros, Mexico, went on strike.  In general, these workers, who were represented by 
several different labor unions, demanded an increase in their wage rate and an annual bonus. In February 2019, our 
manufacturing production employees in Matamoros, Mexico, who are represented by a labor union, went on strike 
also demanding an increase in their hourly wage rate and the payment of an annual bonus. In February 2019, our 
manufacturing production employees in Matamoros, Mexico, who are represented by a labor union, went on strike 
also demanding an increase in their hourly wage rate and the payment of an annual bonus. During this strike, our 
Matamoros manufacturing facility stopped production for several weeks until we reached a revised agreement with 

39 

our labor union. In the first quarter of 2020, we amended our Matamoros collective bargaining agreement to adjust 
the salaries and bonuses payable to our associates for calendar year 2020 that are covered by this agreement.  

Additionally, our other employees working at other manufacturing facilities may vote to be represented by a 

labor union in the future. There can be no assurance that we will not experience labor disruptions such as work 
stoppages or other slowdowns by workers at any of our facilities. Should significant industrial action, threats of 
strikes or related disturbances occur, we could experience further disruptions of operations and increased labor costs 
in Turkey, Mexico or other locations, which could materially harm our business, operating results or financial 
condition. Any such work stoppage or slow-down at any of our facilities could also result in additional expenses and 
possible loss of revenue for us. 

Our information technology infrastructure could experience serious failures or disruptions, the failure of which 
could materially harm our business, operating results and financial condition. 

Information technology is part of our business strategy and operations. It enables us to streamline operation 

processes, facilitate the collection and reporting of business data, and provide for internal and external 
communications. There are risks that information technology system failures, network disruptions, breaches of data 
security and phishing and ransomware attacks could disrupt our operations. Any significant disruption or breach 
may materially harm our business, operating results or financial condition. 

We incur significant increased costs as a result of operating as a public company, and our management devotes 
substantial time to compliance initiatives. 

As a public company, we incur significant legal, accounting and other expenses. In addition, the Sarbanes-

Oxley Act, as well as rules subsequently implemented by the SEC and NASDAQ, impose various requirements on 
public companies, including requiring establishment and maintenance of effective disclosure controls and internal 
control over financial reporting and changes in corporate governance practices. Our management and other 
personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations 
will increase our legal and financial compliance costs. We estimate that we incur approximately $2 million to 
$3 million in expenses annually in response to these requirements.  

Section 404(a) of the Sarbanes-Oxley Act requires annual management assessment of the effectiveness of our 
internal control over financial reporting. Our testing, or the subsequent testing by our independent registered public 
accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be 
material weaknesses. Our management and other personnel devote a substantial amount of time to these compliance 
initiatives, diverting their attention away from the day-to-day management of our business. We may also need to 
upgrade our financial and operating systems, implement additional financial and management controls, reporting 
systems and procedures, and add additional accounting, auditing and financial staff with appropriate public company 
experience and technical accounting knowledge. We have operations in China, Mexico, Turkey and India and may 
have difficulty hiring and retaining employees in these countries who have the experience necessary to implement 
the kind of management and financial controls that are expected of a U.S. public company. In this regard, for 
example, China has only recently begun to adopt management and financial reporting concepts and practices like 
those in the United States. If we are not able to comply with these requirements in a timely manner or if we or our 
independent registered public accounting firm identify deficiencies in our internal control over financial reporting 
that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to 
sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would require additional 
financial and management resources. 

We are faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay 
additional taxes in various jurisdictions. 

We may be subject to taxation in many jurisdictions in the United States and around the world with 
increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these 
jurisdictions could increase substantially as a result of changes in the applicable tax laws, including increased tax 
rates or revised interpretations of existing tax laws and precedents, which could harm our liquidity and operating 
results. In addition, the taxing authorities in these jurisdictions could review our tax returns, or authorities in 

40 

jurisdictions in which we do not file tax returns could assert that we are subject to tax in those jurisdictions, and in 
either case could impose additional tax, interest and penalties. Further, the authorities could claim that various 
withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us 
or our subsidiaries, any of which could have a material adverse impact on us and the results of our operations. 

Risks Related to Ownership of Our Common Stock 

The price of our common stock may fluctuate substantially and your investment may decline in value. 

The market price of our common stock is likely to be highly volatile and may fluctuate substantially due to 

many factors, including: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

actual or anticipated fluctuations in our results of operations; 

our ability to provide products due to shipments subject to delayed delivery and deferred revenue 
arrangements; 

loss of or changes in our relationship with one or more of our customers; 

failure to meet our earnings estimates; 

conditions and trends in the energy and manufacturing markets in which we operate and changes in 
estimates of the size and growth rate of these markets; 

announcements by us or our competitors of significant contracts, developments, acquisitions, strategic 
partnerships or divestitures; 

availability of equipment, labor and other items required for the manufacture of wind blades; 

changes in governmental policies; 

additions or departures of members of our senior management or other key personnel; 

changes in market valuation or earnings of our competitors; 

sales of our common stock, including sales of our common stock by our directors and officers or by our 
other principal stockholders; 

the trading volume of our common stock; and 

general market and economic conditions. 

In addition, the stock market in general, including NASDAQ, as well as the market for broader energy and 

renewable energy companies in particular, have experienced extreme price and volume fluctuations that have often 
been unrelated or disproportionate to the operating performance of particular companies affected. These broad 
market and industry factors may materially harm the market price of our common stock, regardless of our operating 
performance. In the past, securities class-action litigation has often been instituted against a company following 
periods of volatility in the market price of that company’s securities. Securities class-action litigation, if instituted 
against us, could result in substantial costs or damages and a diversion of management’s attention and resources, 
which could materially harm our business and operating results. 

A significant portion of our total outstanding shares may be sold into the public market in future sales, which 
could cause the market price of our common stock to drop significantly, even if our business is doing well. 

Sales of a substantial number of shares of our common stock in the public market can occur at any time. These 

sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the 
market price of our common stock. As of December 31, 2019, we had 35,180,706 shares of common stock 
outstanding. All shares can now be sold, subject to any applicable volume limitations under federal securities laws.  

In addition, as of December 31, 2019, there were: (i) 2,594,228 shares subject to outstanding options, or 7.4% 

of our outstanding shares; (ii) 354,427 restricted stock units, or 1.0% of our outstanding shares; (iii) 491,718 

41 

performance stock units, or 1.4% of our outstanding shares; and (iv) 6,621,512 shares reserved for future issuance, 
or 18.8% of our outstanding shares under the Amended and Restated 2015 Stock Option and Incentive Plan (the 
2015 Plan) that will become eligible for sale in the public market to the extent permitted by any applicable vesting 
requirements and Rules 144 and 701 under the Securities Act. We also filed a shelf registration statement in 
September 2017 for the resale of up to 19,774,751 shares of common stock by certain of our common stockholders. 
We also have registered all shares of common stock that we may issue under our employee equity incentive plans. 
These shares can be freely sold in the public market upon issuance and subject to the restrictions imposed on our 
affiliates under Rule 144. 

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of 

shares of our common stock issued in connection with an investment or acquisition could constitute a material 
portion of our then-outstanding shares of our common stock. Any issuance of additional securities in connection 
with investments or acquisitions may result in additional dilution to you and may cause the market price of our 
common stock to drop significantly. 

The exercise of options and warrants and other issuances of shares of common stock or securities convertible 
into common stock under our equity compensation plans will dilute your interest. 

Under our existing equity compensation plans, as of December 31, 2019, we had outstanding options to 
purchase 2,594,228 shares of our common stock, 354,427 restricted stock units and 491,718 performance stock units 
to our employees and non-employee directors. From time to time, we expect to grant additional options and other 
stock awards in accordance with the 2015 Plan. The exercise of options and warrants at prices below the market 
price of our common stock could adversely affect the price of shares of our common stock. Additionally, any 
issuance of our common stock that is not made solely to then-existing stockholders proportionate to their interests, 
such as in the case of a stock dividend or stock split, will result in dilution to each stockholder by reducing their 
percentage ownership of the total outstanding shares. If we issue options or warrants to purchase our common stock 
in the future and those options or warrants are exercised or we issue stock, stockholders may experience further 
dilution.  

If equity research analysts issue unfavorable commentary or downgrade our common stock, the price of our 
common stock could decline. 

The trading market for our common stock relies in part on the research and reports that equity research 
analysts publish about us and our business. We do not control the work performed by these analysts. The demand for 
our common stock could decline if one or more equity analysts downgrade our stock or if those analysts issue 
unfavorable or inaccurate commentary. If such analysts cease publishing reports about us or our business, we could 
lose visibility in the market, which in turn could cause our share price and trading volume to decline.  

We do not currently intend to pay dividends on the common stock, which may hinder your ability to achieve a 
return on your investment. 

We have never declared or paid any cash dividends on our common stock. The continued operation and 
expansion of our business will require substantial funding and thus we currently intend to retain any future earnings 
and do not expect to pay any dividends in the foreseeable future. Accordingly, you are not likely to receive any 
dividends on common stock in the foreseeable future, and your ability to achieve a return on your investment will 
therefore depend on appreciation in the price of the common stock. 

Provisions of Delaware law or our charter documents could delay or prevent an acquisition of our company, even 
if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change 
management. 

Provisions of Delaware law and our amended and restated certificate of incorporation and amended and 
restated by-laws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders 
may consider favorable, including transactions in which stockholders might otherwise receive a premium for their 

42 

shares. These provisions may also prevent or delay attempts by stockholders to replace or remove our current 
management or members of our board of directors. These provisions include: 

• 

• 

• 

• 

• 

• 

a classified board of directors; 

limitations on the removal of directors; 

advance notice requirements for stockholder proposals and nominations; 

the inability of stockholders to act by written consent or to call special meetings; 

the ability of our board of directors to make, alter or repeal our amended and restated by-laws; and 

the authority of our board of directors to issue preferred stock with such terms as our board of directors 
may determine. 

The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote, and not less 
than 75% of the outstanding shares of each class entitled to vote thereon as a class, is necessary to amend or repeal 
the above provisions that are contained in our amended and restated certificate of incorporation. In addition, absent 
approval of our board of directors, our amended and restated by-laws may only be amended or repealed by the 
affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote. 

In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which 
limits business combination transactions with stockholders of 15% or more of our outstanding voting stock that our 
board of directors has not approved. These provisions and other similar provisions make it more difficult for 
stockholders or potential acquirers to acquire us without negotiation. These provisions may apply even if some 
stockholders may consider the transaction beneficial to them. 

43 

As a result, these provisions could limit the price that investors are willing to pay in the future for shares of 

our common stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if 
the acquisition proposal or tender offer is at a premium over the then current market price for our common stock. 

Item 1B. Unresolved Staff Comments. 

None. 

Item 2. Properties 

Our headquarters is located in Scottsdale, Arizona, and we own or lease various other facilities in the United 
States, China, Mexico, Turkey, India, Denmark and Germany. We believe that our properties are generally in good 
condition, are well maintained and are generally suitable and adequate to carry out our business at expected capacity 
for the foreseeable future. The table below lists the locations and square footage for our facilities as of February 27, 
2020: 

Location 
Newton, IA, United States 
Newton, IA, United States 
Dafeng, China 
Dafeng, China 
Taicang Port, China 
Yangzhou, China 
Juárez, Mexico 
Juárez, Mexico 
Juárez, Mexico 
Juárez, Mexico 
Matamoros, Mexico 
Izmir, Turkey 
Izmir, Turkey 
Warren, RI, United States 

Description of Use 

   Year 
  Leased or    Approximate      
  Commenced    Owned    Square Footage     
  Leased     
   2008 
  Leased     
   2018 
  Leased     
   2013 
  Leased     
   2015 
  Owned     
   2007 
  Leased     
   2018 
  Leased     
   2013 
  Leased     
   2016 
  Leased     
   2017 
  Leased     
   2018 
  Leased     
   2017 
  Leased     
   2012 
  Leased     
   2015 
Leased 
2004 

337,922     Wind Blade Manufacturing Facility 
114,078     Transportation Manufacturing Facility 
381,102     Wind Blade Manufacturing Facility 
446,034     Wind Blade Manufacturing Facility 
208,445     Precision Molding Facility 
934,133     Wind Blade Manufacturing Facility 
345,984     Wind Blade Manufacturing Facility 
453,096     Wind Blade Manufacturing Facility 
339,386     Wind Blade Manufacturing Facility 
300,277     Precision Molding Manufacturing Facility 
527,442     Wind Blade Manufacturing Facility 
343,000     Wind Blade Manufacturing Facility 
817,078     Wind Blade Manufacturing Facility 
Precision Molding Development and 
108,750   
Manufacturing and Research and Development 
Facility, Transportation Manufacturing Facility 

Santa Teresa, NM, United States     2014 
   2015 
Scottsdale, AZ, United States 
   2018 
Kolding, Denmark 
   2019 
Chennai, India 
   2019 
Berlin, Germany 

  Leased     
  Leased     
  Leased     
  Leased     
  Leased     

503,710     Wind Blade Storage Facility 

22,508     Corporate Headquarters 
2,583     Advanced Engineering Center 

776,280     Wind Blade Manufacturing Facility 

4,982     Engineering Center 

Item 3. 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 are 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. 

Item 4. Mine Safety Disclosures 

Not applicable. 

44 

  
  
  
  
  
  
  
  
 
PART II 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of 
Equity Securities 

Market Information 

On July 22, 2016, our common stock began trading on the NASDAQ Global Market under the symbol 

“TPIC.” Prior to that time, there was no public market for our stock.  

Stock Performance Graph 

The following graph and table illustrate the total stockholder return from July 22, 2016 through December 31, 

2019, on our common stock, the Russell 2000 Index, the S&P Small Cap 600 Energy (Sector) Index and the 
NASDAQ Clean Edge Green Energy Index, assuming an investment of $100.00 on July 22, 2016 including the 
reinvestment of dividends.   

COMPARISON OF CUMULATIVE 
RETURN

$220

$190

$160

$130

$100

$70

$40
7 / 2 2 / 1 6

1 2 / 3 0 / 1 6

6 / 3 0 / 1 7

1 2 / 2 9 / 1 7

6 / 2 9 / 1 8

1 2 / 3 1 / 1 8

6 / 2 8 / 1 9

1 2 / 3 1 / 1 9

TPI Composites, Inc.

Russell 2000

S&P Small Cap 600 Energy (Sector)

NASDAQ Clean Edge Green Energy

Base 
Period        

TPI Composites, Inc. 
Russell 2000 
S&P Small Cap 600 Energy (Sector) 
NASDAQ Clean Edge Green Energy 

  7/22/16      12/30/16       6/30/17      12/29/17       6/29/18      12/31/18       6/28/19      12/31/19    
  $ 100.00     $ 118.29     $ 136.28     $ 150.88     $ 215.63     $ 181.27     $ 182.30     $ 136.50   
  $ 100.00     $ 111.89     $ 116.69     $ 126.60     $ 135.47     $ 111.19     $ 129.16     $ 137.56   
  $ 100.00     $ 133.11     $  84.00     $  97.60     $ 107.35     $  55.64     $  57.15     $  47.19   
  $ 100.00     $ 102.59     $ 119.52     $ 134.16     $ 128.63     $ 116.50     $ 139.39     $ 163.93   

Holders 

As of January 31, 2020, there were five stockholders of record of our common stock, although there is a much 

larger number of beneficial owners. 

Dividends 

We have never declared or paid any cash dividends on shares of our capital stock. 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. Any payment of any future dividends will be at the discretion of the 
board of directors, subject to compliance with certain covenants in our loan agreements, after taking into account 
various factors, including our financial condition, operating results, capital requirements, restrictions contained in 

45 

 
 
 
 
  
  
        
        
        
        
          
        
  
  
 
any future financing instruments, growth plans and other factors the board deems relevant. See “Management’s 
Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” 
included in Part II, Item 7. 

Certain of our subsidiaries are limited in their ability to declare dividends without first meeting statutory 

restrictions of the People’s Republic of China, including retained earnings as determined under Chinese-statutory 
accounting requirements. Until 50% ($26.5 million) of registered capital is contributed to a surplus reserve, our 
Chinese 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, we can pay dividends equal to 100% of after-tax profit 
assuming other conditions are met. At December 31, 2019, the amount of the surplus reserve fund was $6.6 million. 
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and 
Capital Resources” included in Part II, Item 7. 

Securities Authorized for Issuance under Equity Compensation Plans  

The information required in response to Item 201(d) of Regulation S-K is set forth in Part III, Item 12 of this 

Annual Report on Form 10-K which is incorporated herein by reference. 

Recent Sales of Unregistered Securities 

None.    

Use of Proceeds from Registered Securities 

None 

Issuer Purchases of Equity Securities 

None 

46 

 
Item 6. Selected Financial Data 

The following selected consolidated financial data should be read in conjunction with the information 

contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in 
Part II, Item 7 of this Annual Report on Form 10-K and the consolidated financial statements and related notes 
included in Part II, Item 8 of this Annual Report on Form 10-K, in order to understand the factors that may affect the 
comparability of the financial data presented below.    

Consolidated Statement of Operations Data: 
Net sales 
Cost of sales 
Startup and transition costs 

Total cost of goods sold 
Gross profit 

General and administrative expenses 
Realized loss on sale of assets and asset 
    impairments 
Restructuring charges, net 

Income from operations 

Other income (expense): 
Interest income 
Interest expense 
Loss on extinguishment of debt 
Realized loss on foreign currency 
   remeasurement 
Miscellaneous income 
Total other expense 
Income before income taxes 

Income tax benefit (provision) 
Net income (loss) 
Net income attributable to preferred 
   stockholders(2) 
Net income (loss) attributable to 
   common stockholders 

Weighted-average common shares outstanding: 

Basic(3) 
Diluted(3) 

Net income (loss) per common share: 

Basic 
Diluted 

Consolidated Balance Sheet Data: 
Cash and cash equivalents 
Total assets 
Total debt, net of debt issuance costs and discount 
Total liabilities 
Total convertible and senior redeemable preferred 
   shares and warrants 
Total stockholders’ equity (deficit) 

2018 

2019 

Year Ended December 31, 
      2016 (1) 
      2017 (1) 
(in thousands, except per share data) 
  $ 1,436,500     $ 1,029,624     $  955,198      $  769,019     $  585,852   
    1,290,619        882,075        804,099         664,026        528,247   
74,708        40,628         18,127        15,860   
    1,358,652        956,783        844,727         682,153        544,107   
72,841        110,471         86,866        41,745   
43,542        40,373         33,892        14,126   

77,848       
39,916       

68,033       

2015 

18,117       
3,927       
15,888       

157       
(8,179 )     
—       

(4,107 )     
3,648       
(8,481 )     
7,407       
(23,115 )     
(15,708 )     

4,581       
—       

—   
—   
24,718        70,098         52,974        27,619   

—        
—        

—       
—       

95        

181       

161   
(10,417 )      (12,381 )       (17,614 )      (14,565 ) 
—   

(3,397 )     

(4,487 )     

344       

—        

(757 )     
238       

(4,471 )      
1,191        

(13,489 )     
4,650       

(1,802 ) 
246   
(22,472 )      (15,566 )       (22,276 )      (15,960 ) 
2,246        54,532         30,698        11,659   
(3,977 ) 
(3,654 )     
3,033        (15,798 )      
7,682   
5,279        38,734         27,044       

—       

—       

—        

5,471       

9,423   

  $ 

(15,708 )   $ 

5,279     $  38,734      $  21,573     $ 

(1,741 ) 

35,062       
35,062       

34,311        33,844         17,530       
36,002        34,862         17,616       

4,238   
4,238   

  $ 
  $ 

(0.45 )   $ 
(0.45 )   $ 

0.15     $ 
0.15     $ 

1.14      $ 
1.11      $ 

1.23     $ 
1.22     $ 

(0.41 ) 
(0.41 ) 

December 31, 

2019 

2018 

      2017 (1) 

      2016 (1) 

2015 

(in thousands) 
  $  70,282      $  85,346      $  148,113      $  119,066      $  45,917   
     826,677         604,855         545,737         436,833         329,920   
     141,389         137,623         121,385         123,155         129,346   
     621,627         383,898         325,183         265,433         322,287   

—        

—         198,830   
     205,050         220,957         220,554         171,400         (191,197 ) 

—        

—        

47 

 
  
  
  
  
  
     
     
  
  
  
    
    
    
    
    
    
    
        
        
         
        
    
    
    
    
    
    
    
    
    
    
    
  
    
        
        
         
        
    
    
        
        
         
        
    
    
    
    
        
        
         
        
    
 
  
  
  
  
  
     
     
  
  
  
    
Other Financial Information: 
Total billings(4) 
EBITDA(4) 
Adjusted EBITDA(4) 
Capital expenditures 
Free cash flow(4) 
Total debt, net of debt issuance costs and discount 
Net cash (debt)(4) 

Other Operating Information: 
Sets(5) 
Estimated megawatts(6) 
Dedicated manufacturing lines(7) 
Manufacturing lines installed(8) 
Manufacturing lines in startup(9) 
Manufacturing lines in transition(10) 

2018 

2019 

2015 

     2016 (1) 

Year Ended December 31, 
      2017 (1) 
(in thousands, except other operating information) 
  $ 1,387,235     $ 1,006,541      $  941,565      $  764,424     $  600,107   
42,308      $  88,516      $  65,641     $  37,479   
  $ 
68,173      $  100,111      $  76,300     $  39,281   
  $ 
52,688      $  44,828      $  30,507     $  26,361   
  $ 
4,932   
(55,946 )    $  29,772      $  29,335     $ 
  $ 
  $  141,389     $  137,623      $  121,385      $  123,155     $  129,346   
(6,379 )   $  (90,667 ) 
  $ 

54,009     $ 
81,914     $ 
74,408     $ 
(17,324 )   $ 

(53,155 )    $  24,557      $ 

(71,779 )   $ 

3,178       
9,324       
52       
48       
14       
10       

2,423        
6,560        
55        
43        
16        
15        

2,736        
6,602        
48        
41        
9        
—        

2,154       
4,920       
44       
33       
3       
3       

1,609   
3,595   
34   
30   
10   
11   

(1)  Reflects the impact of the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts 

with Customers, (Topic 606) effective January 1, 2018. See Note 1 - Recently Issued Accounting 
Pronouncements - Revenue from Contracts with Customers of the Notes to Consolidated Financial Statements 
included in Part II, Item 8 of this Annual Report on Form 10-K for a further discussion. Prior period 
information for 2015 has not been restated and is, therefore, not comparable to the 2019, 2018, 2017 and 2016 
information.  

(2)  Represents the accrual of dividends on our convertible and senior redeemable preferred shares, the accretion 
to redemption amounts on our convertible preferred shares and warrant fair value adjustments. Immediately 
prior to the closing of the IPO, all preferred shares were converted into shares of our common stock and as a 
result, the accrual of dividends ceased.   

(3)  For the years ended December 31, 2017 and 2016, the weighted-average diluted shares outstanding include the 

conversion on a net issuance basis of our common warrants and the stock options issued under the 2015 Plan 
and the 2008 Stock Option and Grant Plan. For the year ended December 31, 2015, the weighted-average 
common shares outstanding are the same under the basic and diluted per share calculations as we incurred a 
net loss in that year.  

(4)  See “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 this Annual Report on Form 10-
K for more information and the reconciliations of total billings, EBITDA, adjusted EBITDA, free cash flow 
and net cash (debt) to net sales, net income (loss), net income (loss), net cash provided by (used in) operating 
activities and total debt, net of debt issuance costs and discount, respectively, the most directly comparable 
financial measures calculated and presented in accordance with GAAP. 

(5)  Number of wind blade sets (which consist of three wind blades) invoiced worldwide in the period. See 

“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 this Annual Report on Form 10-
K for more information. 

48 

 
  
  
  
  
  
     
     
  
  
  
  
    
        
         
         
        
    
    
        
         
         
        
    
    
    
    
    
    
    
 
(6)  Estimated megawatts of energy capacity to be generated by wind blade sets invoiced in the period. See 

“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 this Annual Report on Form 10-
K for more information. 

(7)  Number of wind blade manufacturing lines that are dedicated to our customers under long-term supply 

agreements at the end of the period. For the year ended December 31, 2017, includes seven manufacturing 
lines for GE Wind that were not extended beyond 2017. Dedicated manufacturing lines may be greater than 
total manufacturing line capacity in instances where we have signed new supply agreements for 
manufacturing facilities that are under construction or have not yet been built. See “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 this Annual Report on Form 10-K for more information.  

(8)  Number of wind blade manufacturing lines installed and either in operation, startup or transition at the end of 
the period. For the year ended December 31, 2017, includes four manufacturing lines for GE Wind that were 
not extended beyond 2017.  See “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 
this Annual Report on Form 10-K for more information.  

(9)  Number of wind blade manufacturing lines that were in a startup phase during the pre-production and 

production ramp-up period. See “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 
this Annual Report on Form 10-K for more information. 

(10)  Number of wind blade manufacturing lines that were being transitioned to a new wind blade model during the 
period. See “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 this Annual Report on 
Form 10-K for more information. 

49 

Item 7. 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 consolidated financial statements and the related notes included in Part II, Item 8 of this Annual 
Report on Form 10-K and other financial information appearing elsewhere in this Annual Report on Form 10-K. 
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on 
Form 10-K, including information with respect to plans and strategy for our business and related financing, 
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 Annual Report on Form 10-K, particularly those under “Risk Factors” 
included in Part I, Item 1A of this Annual Report on Form 10-K.  

OVERVIEW 

Our Company 

We are the only independent manufacturer of composite wind blades for the wind energy market with a global 

manufacturing footprint. We enable many of the industry’s leading wind turbine original equipment manufacturers 
(OEM), who have historically relied on in-house production, to outsource the manufacturing of some of their wind 
blades through our global footprint of advanced manufacturing facilities strategically located to serve large and 
growing wind markets in a cost-effective manner. Given the importance of wind energy capture, turbine reliability 
and cost to power producers, the size, quality and performance of wind blades have become highly strategic to our 
OEM customers. As a result, we have become a key supplier to our OEM customers in the manufacture of wind 
blades and related precision molding and assembly systems. We have entered into long-term supply agreements 
pursuant to which we dedicate capacity at our facilities to our customers in exchange for their commitment to 
purchase minimum annual volumes of wind blade sets (which consist of three wind blades). This collaborative 
dedicated supplier model provides us with contracted volumes that generate significant revenue visibility, drive 
capital efficiency and allow us to produce wind blades at a lower total delivered cost, while ensuring critical 
dedicated capacity for our customers.   

We also leverage our advanced composite technology and history of innovation to supply high strength, 
lightweight and durable composite products to the transportation market.  In November 2017, we signed a five- year 
supply agreement with Proterra Inc. (Proterra) to supply Proterra Catalyst® composite bus bodies. In February 2018, 
we entered into an agreement with Navistar, Inc. (Navistar) to design and develop an all composite Class 8 tractor 
cab. This collaborative development project was entered into in connection with Navistar’s recent award under the 
Department of Energy’s (DOE) Super Truck II investment program, which is designed to promote fuel efficiency in 
commercial vehicles. In 2019, we also agreed to develop prototype composite body delivery vehicles for Workhorse 
Group. In November 2018, we announced a capital investment of approximately $11.5 million in 2019 to develop a 
highly automated pilot manufacturing line for the electric vehicle market within our Warren, Rhode Island facility, 
and we plan to commence operating this pilot line later this year. We expect this investment will enable us to further 
develop our technology, create defensible product and process IP and demonstrate our capability to manufacture 
composite components cost effectively at automotive volume rates. We also expect this pilot line will also help our 
current and potential customers to de-risk the decision-making process to commit to TPI for high-volume 
manufacturing programs in the future. 

Our wind blade and precision molding and assembly systems manufacturing businesses accounted for 
approximately 96%, 95% and 96% of our total net sales for each of the years ended December 31, 2019, 2018 and 
2017, respectively. As of February 27, 2020, our long-term wind and transportation supply agreements provide for 
minimum aggregate volume commitments from our customers of approximately $2.8 billion and encourage our 
customers to purchase additional volume up to, in the aggregate, a total contract value of approximately $5.2 billion 
through the end of 2023. In recent years, we have experienced significant growth in our OEM customer base, as 
according to data from WoodMac, our OEM customers collectively accounted for approximately 55% of the global 
onshore wind energy market and approximately 87% of that market excluding China over the three years ended 
December 31, 2018, based on MWs of energy capacity installed. Additionally, our customers represented 99% of 
the U.S. onshore wind turbine market over the three years ended December 31, 2018, based on MWs of energy 
capacity installed. We believe these figures demonstrate the leading position of our existing OEM customers, as well 
as our opportunity to develop relationships with new OEM customers as additional OEMs seeking to capitalize on 

50 

 
 
the benefits of outsourced wind blade manufacturing while maintaining high quality customization and dedicated 
capacity. We believe that these trends will help us to strengthen our current customer base, grow our business 
worldwide, increase our revenue and improve our business prospects. 

We divide our business operations into four geographic operating segments—the United States (U.S.), Asia, 

Mexico and Europe, the Middle East, Africa and India (EMEAI), as follows: 

• 

• 

• 

• 

Our U.S. segment includes (1) the manufacturing of wind blades at our Newton, Iowa plant, (2) the 
manufacturing of precision molding and assembly systems used to manufacture wind blades at our 
Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the transportation 
industry at our Rhode Island facility, (4) wind blade inspection and repair services in North America, (5) 
our advanced engineering center in Kolding, Denmark, which provides technical and engineering 
resources to our manufacturing facilities, (6) our engineering center in Berlin, Germany which we 
purchased in July 2019 and (7) our corporate headquarters, the costs of which are included in general 
and administrative expenses.  

Our Asia segment includes (1) the manufacturing of wind blades at our facilities in Dafeng, China and 
Yangzhou, China, the latter of which commenced operations in March 2019, (2) the manufacturing of 
precision molding and assembly systems at our Taicang Port, China facility and (3) wind blade 
inspection and repair services.  

Our Mexico segment manufactures wind blades from three facilities in Juárez, Mexico and a facility in 
Matamoros, Mexico at which we commenced operations in July 2018. In November 2018, we entered 
into a new lease agreement with a third party for a new precision molding and assembly systems 
manufacturing facility in Juárez, Mexico and we commenced operations at this facility in March 2019. 
This segment also performs wind blade inspection and repair services.  

Our EMEAI segment manufactures wind blades from two facilities in Izmir, Turkey and also performs 
wind blade inspection and repair services. In February 2019, we entered into a new lease agreement 
with a third party for a new manufacturing facility that was built in Chennai, India and we commenced 
operations at this facility in the first quarter of 2020. This segment also performs wind blade inspection 
and repair services. 

Key Trends Affecting our Business   

We have identified the following material trends affecting our business:  

• 

• 

• 

Our business seeks to capitalize on two major global trends: (i) increasing worldwide demand for 
renewable energy; and (ii) increasing worldwide demand for electric vehicles.  

The wind power generation industry has grown rapidly and expanded worldwide over the last five years 
to meet global demand for electricity and the expanded use of renewable energy. Our sales of wind 
blades to our wind turbine customers have grown rapidly over the last several years in response to these 
trends. In 2019, our net sales grew to $1.44 billion compared to net sales of $1.03 billion in 2018. We 
expect our revenue to continue to grow in 2020 but at a slower rate than in 2019.   

During the last several years, wind turbine OEMs generally have increasingly outsourced the production 
of wind blades and other key components to specialized manufacturers to meet this increasing global 
demand for wind energy in a cost-effective manner in new and growing markets. That shift, together 
with the overall expansion of the wind power generation industry, has increased our addressable market. 
Given our growth in production, we have hired several thousand new employees globally in the past two 
years. In addition, we have expanded our wind turbine OEM customer base from one to five OEM 
customers since 2012, capitalizing on the growth and expansion of the wind energy generation industry 
generally as well as the specific trend of most wind turbine OEMs increasing the outsourcing of the 
manufacturing of wind blades for growth and diversification.  

51 

• 

Changing customer demands, including shifts to bigger wind turbines with larger wind blades, have 
driven some of our customers to require us to transition to new wind blade models one or two times 
during the term of a long-term supply agreement. Although we generally receive transition payments to 
compensate us for certain costs incurred during these transitions, these payments generally do not fully 
cover the transition costs and lost margin. In 2019, we had a significant number of our manufacturing 
lines in transition to larger wind blade models and we also had a significant number of lines starting up 
in our new manufacturing facilities in Matamoros, Mexico and Yangzhou, China.  This large number of 
transitions and startups had an adverse impact on our results of operations and profitability in 2019.  In 
2020,  we expect to continue to have a significant number of lines in transition and startup which will 
have an adverse impact on our results of operations for 2020, but we expect this to provide a foundation 
for longer term revenue growth and profitability as these lines ramp up to full production levels.   

•  We expect our new manufacturing facilities to generally generate operating losses in their first 18 
months of operations due to production and overhead expenses as they initially operate far below 
capacity during the pre-production and production ramp up periods. As a result, this generally has a 
negative impact on our results of operations during these ramp-up periods. In addition, construction of 
new facilities and expansion of existing facilities, including the fabrication of precision molding and 
assembly systems to outfit those facilities, is complex and involves inherent risks. For planning 
purposes, we generally estimate that the startup of a new six-line manufacturing facility requires cash 
for net operating expenses and working capital of between $20 million to $25 million. We also estimate 
that capital expenditures, primarily for machinery and equipment, of between $30 million to $35 million 
will be required. We expect to incur significant startup costs and expenses during 2020 in connection 
with the recent startup of our new manufacturing facility in Chennai, India.  

•  Many governments are shifting from feed-in tariffs to auction-based tenders as a means of promoting 

the development and growth of renewable energy sources such as wind energy.  As a result of this shift, 
our wind turbine OEM customers have experienced intense pricing pressure with respect to the sale of 
their turbines together with increased competitive pricing from solar energy.  As a result of these pricing 
pressures, the financial performance of certain smaller wind turbine OEMs has deteriorated over the last 
twelve months. In 2019, one of our former customers, Senvion, entered into insolvency proceedings in 
Germany and Senvion’s insolvency had an adverse impact on our results of operations in 2019.  In 
addition, ENERCON, one of our current customers, announced in 2019 that it was entering into 
financial restructuring discussions with its lenders.  To date, our financial performance has not been 
impacted by ENERCON’s announced restructuring although if ENERCON’s financial positions 
deteriorates further in 2020, it could have an adverse impact on our results of operations in 2020. 

52 

• 

• 

• 

The long-term supply agreements we sign with our customers provide us with significant visibility of 
future production demands due in part to the annual minimum purchase commitments of our customers 
contained in those agreements. These annual minimum purchase commitments generally require our 
customers to purchase a negotiated percentage of the manufacturing capacity that we have agreed to 
dedicate to them. Generally, this percentage begins at 100% of the manufacturing capacity for the first 
few years of the supply agreement, and the percentage declines over time in subsequent years according 
to the terms of the agreement, but generally remains above 50%. It is our experience that our customers 
will generally order wind blades from us in a volume that exceeds (sometimes substantially) the annual 
minimum purchase commitments contained in our supply agreements, particularly in the later years of a 
supply agreement when the annual minimum purchase commitment percentage declines. As of February 
27, 2020, our long-term wind and transportation supply agreements provide for minimum aggregate 
volume commitments from our customers of approximately $2.8 billion and encourage our customers to 
purchase additional volume up to, in the aggregate, a total contract value of approximately $5.2 billion 
through the end of 2023. As noted elsewhere in this Annual Report on Form 10-K, some of our long-
term supply agreements are subject to early termination by our customers if our customers pay an early 
termination fee. Additionally, some of our contracts allow our customers to reduce the number of lines 
under contract without penalty, prior to the end of the contact term. We caution investors that the annual 
minimum purchase commitments in our long-term supply agreements can understate the forecasted net 
sales that we are likely to generate in a given period or periods if all of our long-term supply agreements 
remain in place and pricing remains materially unchanged, and they could potentially overstate the 
forecasted net sales that we are likely to generate in a given period or periods if one or more of our 
agreements were to be terminated by our customers for any reason due to market conditions our plants 
are underutilized. See “Business—Wind Blade Long-Term Supply Agreements” included in Part 1, Item 
1A of this Annual Report on Form 10-K for additional information.  

As the global vehicle electrification trend continues, reducing the weight of these vehicles is critical to 
expanding range and/or providing more room for additional batteries or reducing the number of 
batteries. We believe there is an increasing demand for composites products for electric vehicles. As 
part of our diversification strategy, we have made significant investments to expand our transportation 
business during the last several years. In 2018 and 2019, we experienced significant losses relating to 
our transportation business and experienced operational challenges as we are expanding this business.  
Specifically, we experienced extended startup delays and challenges with respect to our Newton, Iowa 
transportation facility, which had an adverse impact on our results of operations in 2019.  We plan to 
cease manufacturing composite bus bodies from our Newton, Iowa manufacturing facility in the first 
quarter of 2020 and consolidate these operations into our Warren, Rhode Island manufacturing facility.  
We expect our transportation business results of operations will improve substantially in 2020 compared 
to 2019 although we expect it will continue to operate at a loss in 2020.   

The Coronavirus will have an adverse impact on our business, particularly our manufacturing facilities 
in China. We expect that the impact of the Coronavirus will have an adverse impact on our net sales, net 
income and Adjusted EBITDA for the first quarter of 2020 and also may have an adverse impact on our 
financial condition and results of operations for the rest of 2020. Although we are currently attempting 
to take all reasonable steps to mitigate the impact of the Coronavirus, including taking steps to make up 
the anticipated lost wind blade volume later this year, we currently estimate that the Coronavirus will 
negatively impact our net income and Adjusted EBITDA in 2020 by up to approximately $10 million. 
In addition, if we experience any additional unexpected delays in the resumption of our full production 
capacity at our China manufacturing facilities or incur additional unanticipated costs and expenses as a 
result of the Coronavirus, such production delays and unanticipated costs and expenses will have a 
further adverse impact on our business, financial condition and results of operations in 2020. 

COMPONENTS OF RESULTS OF OPERATIONS 

Net Sales   

We recognize revenue from manufacturing services over time as our customers control the product as it is 
produced, and we may not use or sell the product to fulfill other customers’ contracts. Net sales include amounts 
billed to our customers for our products, including wind blades, precision molding and assembly systems and other 

53 

products and services, as well as the progress towards the completion of the performance obligation for products in 
progress, which is determined on a ratio of direct costs incurred to date in fulfillment of the contract to the total 
estimated direct costs required to complete the performance obligation. 

Cost of Goods Sold  

Cost of goods sold includes the costs we incur at our production facilities to make products saleable on both 

products invoiced during the period as well as products in progress towards the completion of each performance 
obligation. Cost of goods sold includes such items as raw materials, direct and indirect labor and facilities costs, 
including purchasing and receiving costs, plant management, inspection costs, production process improvement 
activities, product engineering and internal transfer costs. In addition, all depreciation associated with assets used in 
the production of our products is also included in cost of goods sold. Direct labor costs consist of salaries, benefits 
and other personnel related costs for employees engaged in the manufacturing of our products and services. 

Startup and transition costs are primarily unallocated fixed overhead costs and underutilized direct labor costs 
incurred during the period production facilities are transitioning wind blade models and ramping up manufacturing. 
All direct labor costs are included in the measure of progress towards completion of the relevant performance 
obligation when determining revenue to be recognized during the period. The cost of sales for the initial wind blades 
from a new model manufacturing line is generally higher than when the line is operating at optimal production 
volume levels due to inefficiencies during ramp-up related to labor hours per blade, cycle times per blade and raw 
material usage. Additionally, these costs as a percentage of net sales are generally higher during the period in which 
a facility is ramping up to full production capacity due to underutilization of the facility. Manufacturing overhead at 
each of our facilities includes virtually all indirect costs (including share-based compensation costs) incurred at the 
plants, including engineering, finance, information technology, human resources and plant management. 

General and Administrative Expenses  

General and administrative expenses primarily relate to the unallocated portion of costs incurred at our 
corporate headquarters and our research facilities and include salaries, benefits and other personnel related costs for 
employees engaged in research and development, engineering, finance, internal audit, information technology, 
human resources, business development, global operational excellence, global supply chain, in-house legal and 
executive management. Other costs include outside legal and accounting fees, risk management (insurance), share-
based compensation and certain other administrative and global resources costs.  

The research and development expenses incurred at our Warren, Rhode Island location as well as at our 

Kolding, Denmark advanced engineering center and our Berlin, Germany engineering center are also included in 
general and administrative expenses. For the years ended December 31, 2019, 2018 and 2017, total research and 
development expenses totaled $1.0 million, $0.8 million and $1.6 million, respectively.  

Realized Loss on Sale of Assets and Asset Impairments 

Realized loss on sale of assets represents the realized losses on the sale of certain receivables, on a non-
recourse basis under supply chain financing arrangements with our customers, to financial institutions and realized 
losses on the sale of other assets at our corporate and manufacturing facilities. Asset impairments represent the 
realized losses on the impairment of our assets at our corporate and manufacturing facilities.  

Restructuring Charges 

Restructuring charges primarily consist of employee severance, one-time termination benefits and ongoing 

benefits related to the reduction of our workforce and other costs associated with exit activities, which may include 
costs related to leased facilities to be abandoned and facility and employee relocation costs.  

54 

Other Income (Expense) 

Other income (expense) consists primarily of interest expense on our debt borrowings and the amortization of 

deferred financing costs on such borrowings. Other income (expense) also includes realized gains and losses on 
foreign currency remeasurement, interest income, losses on extinguishment of debt and miscellaneous income and 
expense. 

Income Taxes  

Income taxes consists of federal, state, provincial, local and foreign taxes based on income in jurisdictions in 

which we operate, including in the U.S., China, Mexico, Turkey and India. The composite income tax rate, tax 
provisions, deferred tax assets and liabilities vary according to the jurisdiction in which the income or loss arises. 
Tax laws are complex and subject to different interpretations by management and the respective governmental 
taxing authorities, and require us to exercise judgment in determining our income tax provision, our deferred tax 
assets and liabilities and the valuation allowance recorded against our net deferred tax assets.  

KEY METRICS USED BY MANAGEMENT TO MEASURE PERFORMANCE 

In addition to measures of financial performance presented in our consolidated financial statements in 
accordance with GAAP, we use certain other financial measures and operating metrics to analyze our performance. 
These “non-GAAP” financial measures consist of total billings, EBITDA, adjusted EBITDA, free cash flow and net 
cash (debt), which help us evaluate growth trends, establish budgets, assess operational efficiencies, oversee our 
overall liquidity, and evaluate our overall financial performance. The key operating metrics consist of wind blade 
sets invoiced, estimated megawatts of energy capacity to be generated by wind blade sets invoiced, utilization, 
dedicated manufacturing lines, manufacturing lines installed, manufacturing lines in operation, manufacturing lines 
in startup and manufacturing lines in transition, which help us evaluate our operational performance. We believe that 
these measures are useful to investors in evaluating our performance. 

Key Financial Measures 

2019 

2017 

Year Ended December 31, 
2018 
(in thousands) 
  $ 1,436,500     $ 1,029,624     $  955,198   
  $ 1,387,235     $ 1,006,541     $  941,565   
5,279     $  38,734   
  $ 
42,308     $  88,516   
  $ 
68,173     $  100,111   
  $ 
52,688     $  44,828   
  $ 
(55,946 )   $  29,772   
  $ 
  $  141,389     $  137,623     $  121,385   
(53,155 )   $  24,557   
  $ 

(15,708 )   $ 
54,009     $ 
81,914     $ 
74,408     $ 
(17,324 )   $ 

(71,779 )   $ 

Net sales 
Total billings(1) 
Net income 
EBITDA(1) 
Adjusted EBITDA(1) 
Capital expenditures 
Free cash flow(1) 
Total debt, net of debt issuance costs and discount 
Net cash (debt)(1) 

55 

  
  
  
  
  
  
     
     
  
  
  
  
 
Key Operating Metrics (2) 

Year Ended December 31, 
2018 

2017 

2019 

Sets 
Estimated megawatts 
Utilization 
Dedicated manufacturing lines 
Manufacturing lines installed 
Manufacturing lines in operation 
Manufacturing lines in startup 
Manufacturing lines in transition 

3,178   
9,324   

2,423   
6,560   

2,736   
6,602   

79 %     
52   
48   
24   
14   
10   

71 %     
55   
43   
12   
16   
15   

86 % 
48   
41   
32   
9   
—   

(1)  See below for more information and a reconciliation of total billings, EBITDA, adjusted EBITDA, free cash 
flow and net cash (debt) to net sales, net income (loss), net income (loss), net cash provided by (used in) 
operating activities and total debt, net of debt issuance costs, respectively, the most directly comparable 
financial measures calculated and presented in accordance with GAAP. 

(2)  See below for more information on each of our key operating metrics. 

Key Financial Measures 

Total billings 

We define total billings, a non-GAAP financial measure, as the total amounts we have invoiced our customers 

for products and services for which we are entitled to payment under the terms of our long-term supply agreements 
or other contractual agreements. We monitor total billings, and believe it is useful to present to investors as a 
supplement to our GAAP measures, because we believe it more directly correlates to sales activity and operations 
based on the timing of actual transactions with our customers, which facilitates comparison of our performance 
between periods and provides a more timely indication of trends in sales. Under GAAP, total net sales recognized on 
products in production represents the total amount that we have recognized as revenue under the cost-to-cost method 
for services performed during the period under our long-term supply agreements. Services performed but unbilled 
include procurement of raw materials and production of work in process and undelivered finished goods. Under our 
long-term supply agreements with our customers, we invoice our customers for wind blades once the blades pass 
certain acceptance procedures and title passes to our customers. Our customers generally pay us for the wind blades 
between 5 to 25 days after receipt of the invoice based on negotiated payment terms and when considering our 
supply chain financing arrangements.  

Our use of total billings has limitations as an analytical tool, and you should not consider it in isolation or as a 

substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

• 

• 

Total billings includes wind blades that have not been delivered and for which we are responsible if 
damage occurs to them while we hold them; and 

Other companies, including companies in our industry, may define total billings differently, which 
reduces its usefulness as a comparative measure. 

EBITDA and adjusted EBITDA 

We define EBITDA, a non-GAAP financial measure, as net income or 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, plus or minus any realized gains 
or losses from foreign currency remeasurement, plus or minus any gains or losses from the sale of assets. Adjusted 
EBITDA is the primary metric used by our management and our board of directors to establish budgets and 
operational goals for managing our business and evaluating our performance. In addition, our credit agreement (the 
Credit Agreement) that we entered into in April 2018 contains minimum EBITDA (as defined in the Credit 
Agreement) covenants with which we must comply. We monitor adjusted EBITDA as a supplement to our GAAP 

56 

  
  
  
  
  
  
  
  
  
  
  
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
measures, and believe it is useful to present to investors, because we believe that it facilitates evaluation of our 
period-to-period operating performance by eliminating items that are not operational in nature, allowing comparison 
of our recurring core business operating results over multiple periods unaffected by differences in capital structure, 
capital investment cycles and fixed asset base. In addition, we believe adjusted EBITDA and similar measures are 
widely used by investors, securities analysts, ratings agencies, and other parties in evaluating companies in our 
industry as a measure of financial performance and debt-service capabilities. 

Our use of adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or 

as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; 

adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual 
commitments; 

adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service 
interest or principal payments on our indebtedness; 

adjusted EBITDA does not reflect losses on extinguishment of debt relating to prepayment penalties, 
termination fees and the write off of any remaining debt discount and debt issuance costs upon the 
repayment or refinancing of our debt; 

adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; 

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized 
may have to be replaced in the future, and adjusted EBITDA does not reflect capital expenditure 
requirements relating to the future need to augment or replace those assets; 

adjusted EBITDA does not reflect the realized gains or losses from foreign currency remeasurement in 
our international operations; 

adjusted EBITDA does not reflect share-based compensation expense on equity-based incentive awards 
to our officers, employees, directors and consultants; 

adjusted EBITDA does not reflect the realized gains or losses on the sale of assets and asset 
impairments; and 

other companies, including companies in our industry, may calculate EBITDA and adjusted EBITDA 
differently, which reduces their usefulness as comparative measures. 

In evaluating EBITDA and adjusted EBITDA, you should be aware that in the future, we will incur expenses 

similar to the adjustments noted in this presentation. Our presentations of EBITDA and adjusted EBITDA should 
not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-
recurring items. When evaluating our performance, you should consider EBITDA and adjusted EBITDA alongside 
other financial performance measures, including our net income (loss) and other GAAP measures. 

Free cash flow 

We define free cash flow as net cash provided by (used in) operating activities less capital expenditures. We 

believe free cash flow is a useful measure for investors because it portrays our ability to generate cash from our 
business for purposes such as repaying maturing debt and funding business acquisitions.  

Net cash (debt) 

We define net cash (debt) as total unrestricted cash and cash equivalents less the total principal amount of debt 

outstanding. The total principal amount of debt outstanding is comprised of the long-term debt and current 
maturities of long-term debt as presented in our consolidated balance sheets adding back any debt issuance costs. 
We believe that the presentation of net cash (debt) provides useful information to investors because our management 
reviews net cash (debt) as part of our oversight of overall liquidity, financial flexibility and leverage. Net cash (debt) 
is important when we consider opening new plants and expanding existing plants, as well as for capital expenditure 
requirements. 

57 

The following table reconciles our non-GAAP key financial measures to the most directly comparable GAAP 

measures: 

Total billings, EBITDA and adjusted EBITDA are reconciled as follows: 

Net sales 

Change in gross contract assets 
Foreign exchange impact(1) 

Total billings 

Net income (loss) 
Adjustments: 

2019 

2017 

Year Ended December 31, 
2018 
(in thousands) 
  $ 1,436,500     $ 1,029,624     $  955,198   
(13,437 ) 
(196 ) 
  $ 1,387,235     $ 1,006,541     $  941,565   

(43,405 )     
(5,860 )     

(15,011 )     
(8,072 )     

  $ 

(15,708 )   $ 

5,279     $  38,734   

Depreciation and amortization 
Interest expense (net of interest income) 
Loss on extinguishment of debt 
Income tax provision (benefit) 

EBITDA 

Share-based compensation expense 
Realized loss on foreign currency remeasurement      
Realized loss on sale of assets and asset 
impairments 
Adjusted EBITDA 

  $ 

38,580       
8,022       
—       
23,115       
54,009       
5,681       
4,107       

26,429       
10,236       
3,397       
(3,033 )     
42,308       
7,795       
13,489       

21,698   
12,286   
—   
15,798   
88,516   
7,124   
4,471   

18,117       
81,914     $ 

4,581       
—   
68,173     $  100,111   

(1)  Represents the effect of the difference in the exchange rates used by our various foreign subsidiaries when 

converted to U.S. dollars on the net sales and contract assets as of period-end. 

Free cash flow is reconciled as follows: 

2019 

Year Ended December 31, 
2018 
(in thousands) 

2017 

Net cash provided by (used in) operating activities 
Less capital expenditures 
Free cash flow 

Net cash (debt) is reconciled as follows: 

Cash and cash equivalents 
Less total debt, net of debt issuance costs 
Less debt issuance costs 
Net cash (debt) 

  $  57,084     $ 
(74,408 )     

(3,258 )   $  74,600   
(44,828 ) 
  $  (17,324 )   $  (55,946 )   $  29,772   

(52,688 )     

2019 

2017 

December 31, 
2018 
(in thousands) 
  $  70,282     $  85,346     $  148,113   
     (141,389 )      (137,623 )      (121,385 ) 
(2,171 ) 
  $  (71,779 )   $  (53,155 )   $  24,557   

(878 )     

(672 )     

Key Operating Metrics 

Key operating metrics consist of sets invoiced, estimated megawatts of energy capacity for wind blade sets 

invoiced, utilization, dedicated manufacturing lines, manufacturing lines installed, manufacturing lines in operation, 
manufacturing lines in startup and manufacturing lines in transition.  

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Sets represents the number of wind blade sets (which consist of three wind blades) which we invoiced 
worldwide during the period. We monitor sets and believe that presenting sets to investors is helpful because we 
believe that it is the most direct measurement of our manufacturing output during the period. Sets primarily impact 
net sales and total billings 

Estimated megawatts are the energy capacity to be generated by wind blade sets invoiced in the period. Our 
estimate is based solely on name-plate capacity of the wind turbine on which the wind blades we manufacture are 
expected to be installed. We monitor estimated megawatts and believe that presenting estimated megawatts to 
investors is helpful because we believe that it is a commonly followed measurement of energy capacity across our 
industry and provides an indication of our share of the overall wind blade market. 

Utilization represents the percentage of wind blades invoiced during a period compared to the total potential 

wind blade capacity of the manufacturing lines installed at the end of the period. We monitor utilization because we 
believe it helps investors to better understand how close we are to operating at maximum production capacity. 

Dedicated manufacturing lines are the number of wind blade manufacturing lines that we have dedicated to 

our customers pursuant to our long-term supply agreements at the end of the period. We monitor dedicated 
manufacturing lines and believe that presenting this metric to investors is helpful because we believe that the 
number of dedicated manufacturing lines is the best indicator of demand for the wind blades we manufacture for 
customers under our long-term supply agreements in any given period. We believe that dedicated manufacturing 
lines provide an understanding of additional capacity within an existing facility. Dedicated manufacturing lines 
primarily impacts our net sales and total billings. 

Manufacturing lines installed represents the number of wind blade manufacturing lines installed and either in 
operation, startup or transition at the end of the period. We believe that total manufacturing lines installed provides 
an understanding of the number of manufacturing lines installed and either in operation, startup or transition.  

Manufacturing lines in operation is the number of wind blade manufacturing lines installed less the number of 

manufacturing lines in startup and in transition. We monitor manufacturing lines in operation because we believe it 
helps investors understand the number of our manufacturing lines that are operating in a mature state of production.  

Manufacturing lines in startup is the number of wind blade manufacturing lines that were in a startup phase 
during the pre-production and production ramp up period, pursuant to the opening of a new manufacturing facility, 
the expansion of an existing manufacturing facility or the addition of new manufacturing lines in an existing 
manufacturing facility. We monitor and present this metric because we believe it helps investors to better understand 
the impact of the startup phase of our new manufacturing facilities on our gross profit and net income.  

Manufacturing lines in transition is the number of wind blade manufacturing lines that were being 

transitioned to a new wind blade model during the period. We monitor and present this metric because we believe it 
helps investors to better understand the impact of these transitions on our gross profit and net income.   

59 

RESULTS OF OPERATIONS 

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018 

The following table summarizes certain information relating to our operating results (in thousands) and related 

percentage of net sales for the years ended December 31 that have been derived from our consolidated financial 
statements:  

2019 

2018 

Net sales 
Cost of sales 
Startup and transition costs 
Total cost of goods sold 
Gross profit 
General and administrative expenses 
Realized loss on sale of assets and asset 
impairments 
Restructuring charges, net 
Income from operations 
Other expense 
Income before income taxes 
Income tax benefit (provision) 
Net income (loss) 

  $ 1,436,500        100.0 %    $ 1,029,624        100.0 % 
85.7 % 
     1,290,619       
7.2 % 
68,033       
92.9 % 
     1,358,652       
7.1 % 
77,848       
4.2 % 
39,916       

882,075       
74,708       
956,783       
72,841       
43,542       

89.8 %      
4.8 %      
94.6 %      
5.4 %      
2.8 %      

18,117       
3,927       
15,888       
(8,481 )     
7,407       
(23,115 )     
(15,708 )     

1.3 %      
0.2 %      
1.1 %      
(0.6 )%     
0.5 %      
(1.6 )%     
(1.1 )%   $ 

4,581       
—       
24,718       
(22,472 )     
2,246       
3,033       
5,279       

0.5 % 
0.0 % 
2.4 % 
(2.2 )% 
0.2 % 
0.3 % 
0.5 % 

  $ 

Net sales for the year ended December 31, 2019 increased by $406.9 million or 39.5% to $1,436.5 million 

compared to $1,029.6 million in the same period in 2018. Net sales of wind blades increased by 42.4% to $1,328.7 
million for the year ended December 31, 2019 as compared to $933.3 million in the same period in 2018. The 
increase was primarily driven by a 31% increase in the number of wind blades produced during the year ended 
December 31, 2019 compared to the same period in 2018 largely as a result of increased production at our Turkey, 
Mexico and China facilities. The increase was also due to a higher average sales price due to the mix of wind blade 
models produced during the year ended December 31, 2019 compared to the same period in 2018. Net sales from the 
manufacturing of precision molding and assembly systems during the year ended December 31, 2019 were $48.7 
million as compared to $48.9 million in the same period in 2018. Additionally, there was a $11.6 million increase in 
transportation and other sales during the year ended December 31, 2019 as compared to the same period in 2018. 
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 and total billings for the year ended December 31, 2019 was a net 
decrease of 2.1% and 2.2%, respectively, as compared to 2018.    

Total cost of goods sold for the year ended December 31, 2019 was $1,358.7 million and included $48.5 

million related to 14 lines in startup and $19.5 million related to 10 lines in transition during the period. This 
compares to total cost of goods sold for the year ended December 31, 2018 of $956.8 million and included $61.9 
million related to startup costs and $12.8 million related to transition costs. Cost of goods sold as a percentage of net 
sales increased by approximately two percentage points during the year ended December 31, 2019 as compared to 
the same period in 2018, driven primarily by the extended startup of our Newton, Iowa transportation facility, 
significant underutilization of labor in Matamoros, Mexico due to the strike, partially offset by a $6.7 million 
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 3.1% for the year ended December 31, 2019 as compared to 2018.  

60 

  
  
  
  
  
  
    
    
    
    
    
    
    
    
    
 
General and administrative expenses for the year ended December 31, 2019 totaled $39.9 million, or 2.8% of 
net sales, compared to $43.5 million, or 4.2% of net sales, for the same period in 2018. The decrease as a percentage 
of net sales was primarily driven by lower incentive compensation and a reduction in the performance assumptions 
related to certain of our share-based plans.   

Realized loss on sale of assets and asset impairments for the year ended December 31, 2019 totaled $18.1 

million, comprised of $8.1 million of realized losses on the sale of receivables under supply chain financing 
arrangements with our customers, $5.3 million of realized losses on the sale of assets at our corporate and 
manufacturing facilities and $4.7 million of asset impairment charges primarily related to the shutdown of our 
second Newton, Iowa Facility. Realized loss on sale of assets and asset impairments for the year ended 
December 31, 2018 totaled $4.6 million, comprised of $2.5 million of realized losses on the sale of assets at our 
corporate and manufacturing facilities and $2.1 million of realized losses on the sale of receivables under supply 
chain financing arrangements with our customers. There were no asset impairment charges for the year ended 
December 31, 2018.  

Restructuring charges, net, for the year ended December 31, 2019 totaled $3.9 million. These charges 

primarily related to the closing of our Taicang City, China manufacturing facility, comprised of $3.3 million of 
severance benefits to terminated employees and $0.6 million of other charges, primarily related to exit costs. There 
were no corresponding charges for the same period in 2018.  

Other expense totaled $8.5 million for the year ended December 31, 2019 as compared to $22.5 million for the 

same period in 2018. The $14.0 million decrease was primarily due to a $9.4 million decrease in realized losses on 
foreign currency remeasurement and a $5.6 million decrease in interest expense, primarily related to the loss on the 
extinguishment of debt of $3.4 million in the 2018 period. These decreases were partially offset by a $1.0 million 
decrease in miscellaneous income.  

Income taxes reflected a provision of $23.1 million for the year ended December 31, 2019 as compared to a 
benefit of $3.0 million for the same period in 2018. The increase in taxes was primarily due to the benefit for the 
reversal of the valuation allowance related to our U.S. federal deferred tax assets in the three months ended 
September 30, 2018 and the earnings mix by jurisdiction in the year ended December 31, 2019  as compared to the 
same period in 2018. 

Net loss for the year ended December 31, 2019 was $15.7 million as compared to net income of $5.3 million 

in the same period in 2018. The decrease was primarily due to the reasons set forth above. The net loss per share 
was $0.45 for the year ended December 31, 2019, compared to diluted income per share of $0.15 for the year ended 
December 31, 2018.  

Segment Discussion 

The following table summarizes our net sales and income (loss) from operations by our four geographic 

operating segments for the years ended December 31: 

Net Sales 
U.S. 
Asia 
Mexico 
EMEAI 
Total net sales 

2019 

2018 

(in thousands) 
  $  169,317     $  163,716   
     393,809        306,255   
     435,606        268,756   
     437,768        290,897   
  $ 1,436,500     $ 1,029,624   

61 

  
  
  
    
  
  
  
Income (Loss) from Operations 
U.S. 
Asia 
Mexico 
EMEAI 
Total income from operations 

2019 

2018 

(in thousands) 

  $ 

  $ 

(78,278 )   $ 
24,132       
3,533       
66,501       
15,888     $ 

(67,357 ) 
28,147   
12,154   
51,774   
24,718   

U.S. Segment 

Net sales in the year ended December 31, 2019 increased by $5.6 million or 3.4% to $169.3 million compared 

to $163.7 million in the same period in 2018. Net sales of wind blades decreased to $120.1 million during the year 
ended December 31, 2019 from $126.3 million in the same period of 2018. The decrease was primarily due to a 19% 
reduction in the number of wind blades produced in the year ended December 31, 2019 as compared to the same 
period in 2018 because of wind blade model transitions, partially offset by a higher average sales price due to the 
mix of wind blade models produced in both periods. Net sales from the manufacturing of precision molding and 
assembly systems during the year ended December 31, 2019 were $3.8 million compared to $5.0 million during the 
same period in 2018. Additionally, there was a $13.1 million increase in transportation and other sales during the 
year ended December 31, 2019 as compared to the same period in 2018.   

The loss from operations in the U.S. segment for the year ended December 31, 2019 was $78.3 million as 

compared to a loss of $67.4 million in the same period in 2018. As previously discussed, the loss amounts include 
corporate general and administrative costs of $39.9 million and $43.5 million for the years ended December 31, 
2019 and 2018, respectively. The 2019 operating results were unfavorably impacted by the extended startup at our 
Newton, Iowa transportation facility, the asset impairment charges related to the shutdown of our Newton, Iowa 
transportation facility, the transition costs at our Newton, Iowa blade facility and the lower wind blade volume 
discussed above.     

Asia Segment 

Net sales in the year ended December 31, 2019 increased by $87.6 million or 28.6% to $393.8 million 
compared to $306.3 million in the same period in 2018. Net sales of wind blades were $366.2 million in the year 
ended December 31, 2019 as compared to $264.4 million in the same period of 2018. The increase in the net sales of 
wind blades was primarily due to an increase in the year over year number of wind blades still in the production 
process at the end of the period, an increase in the average sales price of wind blades due to a change in the mix of 
wind blades between the two periods and a 20% net increase in overall wind blade volume, notwithstanding the 
reduced production in Taicang, China as a result of Senvion’s insolvency. Net sales from the manufacturing of 
precision molding and assembly systems totaled $25.2 million during the 2019 period compared to $36.6 million 
during the 2018 period. The impact of the fluctuating U.S. dollar against the Chinese Renminbi had an unfavorable 
impact of 1.5% on net sales during the year ended December 31, 2019 as compared to the same period in 2018.  

Income from operations in the Asia segment for the year ended December 31, 2019 was $24.1 million as 
compared to $28.1 million in the same period in 2018. This decrease was driven by the insolvency of a customer as 
noted above and the resultant revenue reduction relating to our contract with that customer and the related 
restructuring charges in Taicang, partially offset by a decrease in startup and transition costs. This was partially 
offset by the fluctuating U.S. dollar against the Chinese Renminbi which had a favorable impact of 2.8% on cost of 
goods sold for the year ended December 31, 2019 as compared to the 2018 period. 

Mexico Segment 

Net sales in the year ended December 31, 2019 increased by $166.9 million or 62.1% to $435.6 million 

compared to $268.8 million in the same period in 2018. The increase reflects a 44% net increase in overall wind 
blade volume, an increase in the average sales price of wind blades due to a change in the mix of wind blades 

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between the two periods and an increase in the year over year number of wind blades still in the production process 
at the end of the period. Net sales from the manufacturing of precision molding and assembly systems during the 
year ended December 31, 2019 were $19.7 million compared to $7.2 million during the same period in 2018. 

Income from operations in the Mexico segment for the year ended December 31, 2019 was $3.5 million as 

compared to $12.2 million in the same period in 2018. The decrease was due primarily to a significant 
underutilization of labor in Matamoros as well as increased startup and transition costs, partially offset by the overall 
increase in wind blade volume noted above as well as from savings in raw material costs. The fluctuating U.S. dollar 
relative to the Mexican Peso had a favorable impact of 0.1% on cost of goods sold for the year ended December 31, 
2019 as compared to 2018.  

EMEAI Segment 

Net sales during the year ended December 31, 2019 increased by $146.9 million or 50.5% to $437.8 million 
compared to $290.9 million in the same period in 2018. The increase was driven by a 70% increase in wind blade 
production at our two Turkey plants. This increase was partially offset by a decrease in the average sales price of 
wind blades delivered in the comparative periods. The fluctuating U.S. dollar relative to the Euro had an unfavorable 
impact of 5.3% on net sales during the year ended December 31, 2019. 

Income from operations in the EMEAI segment for the year ended December 31, 2019 was $66.5 million as 

compared to $51.8 million in the same period in 2018. The increase was primarily driven by the increased wind 
blade production at our two Turkey plants, lower startup and transition costs at our Turkey plants and the favorable 
impact on cost of goods sold of the fluctuation of the U.S. dollar relative to the Turkish Lira and Euro of 8.5% for 
the year ended December 31, 2019 as compared to 2018, partially offset by higher material costs related to a new 
product at our second Turkey plant and startup costs related to our new plant in India.  

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017 

For a comparison of our results of operations for the years ended December 31, 2018 and 2017, see 

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” 
included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the 
SEC on March 5, 2019 incorporated herein by reference. 

LIQUIDITY AND CAPITAL RESOURCES 

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 and debt service costs. Our capital expenditures have 
been primarily related to machinery and equipment for new facilities or facility expansions. 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. During the years ended December 31, 2019, 2018 
and 2017, we had net repayments of financing arrangements of $2.1 million, $8.9 million and $8.1 million, 
respectively. As of December 31, 2019 and 2018, we had $142.1 million and $138.5 million in outstanding 
indebtedness, excluding debt issuance costs, respectively. As of December 31, 2019, we had an aggregate of $100.4 
million of remaining capacity and $40.9 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 as well as the increased level of transitions. 
Based upon current and anticipated levels of operations, we believe that cash on hand, available credit facilities and 
cash flow 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 December 31, 2019 and 
2018, we had unrestricted cash, cash equivalents and short-term investments totaling $70.3 million and 
$85.3 million, respectively. The December 31, 2019 balance includes $24.5 million of cash located outside of the 
United States, including $9.9 million in Turkey, $9.7 million in China, $2.4 million in India, $2.1 million in Mexico 

63 

  
and $0.4 million in Denmark. In February 2020, we entered into an Incremental Facility Agreement with the current 
lenders to our Credit Agreement and an additional lender, pursuant to which the aggregate principal amount of our 
revolving credit facility under the Credit Agreement was increased from $150.0 million to $205.0 million. 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 the People’s Republic of China, including retained earnings as 
determined under Chinese-statutory accounting requirements. Until 50% ($26.5 million) of registered capital is 
contributed to a surplus reserve, our Chinese 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 Chinese 
operations can pay dividends equal to 100% of after-tax profit assuming other conditions are met. At December 31, 
2019, the amount of the surplus reserve fund was $6.6 million. 

Operating Cash Flows 

2019 

Year Ended December 31, 
2018 
(in thousands) 

2017 

Net income (loss) 
Depreciation and amortization 
Realized loss on sale of assets and asset impairments      
Share-based compensation expense 
Restructuring charges, net 
Other non-cash items 
Changes in assets and liabilities 
Net cash provided by (used in) operating activities 

  $  (15,708 )   $ 
38,580       
18,117       
5,681       
3,927       
5,157       
1,330       
  $  57,084     $ 

5,279     $  38,734   
21,698   
26,429       
334   
4,581       
7,124   
7,795       
—   
—       
2,223   
(11,179 )     
4,487   
(36,163 )     
(3,258 )   $  74,600   

Net cash provided by operating activities totaled $57.1 million for the year ended December 31, 2019 and was 

primarily the result of the net loss, adjusted for non-cash items (depreciation and amortization, realized loss on the 
sale of assets and asset impairments, share-based compensation expense, restructuring charges, net and other non-
cash items) which generated $55.8 million of operating cash flow and net changes in working capital generated $1.3 
million of operating cash flow. The key components of the net change in working capital include a $80.7 million 
increase in accounts payable and accrued expenses, a $10.9 million increase in accrued warranty, a $7.0 million 
decrease in operating lease right of use assets and operating lease labilities and a $2.8 million increase in other 
noncurrent liabilities. This was mostly offset by a $57.6 million increase in contract assets and liabilities, a $19.4 
million increase in accounts receivable, a $13.7 million increase in other current assets, a $7.2 million increase in 
other noncurrent assets, a $1.1 million increase in prepaid expenses and a $1.1 million increase in inventories. The 
working capital changes in contract assets and liabilities, accounts receivable, accounts payable and accrued 
expenses and accrued warranty are primarily the result of the timing of production in the year ended December 31, 
2019.   

Net cash used in operating activities totaled $3.3 million for the year ended December 31, 2018 and was 
primarily the result of a $36.2 million decrease in working capital and $6.6 million of other non-cash items, mostly 
offset by non-cash depreciation and amortization charges totaling $26.4 million, share-based compensation costs of 
$7.8 million and net income of $5.3 million. The key components of the decrease in working capital include a $59.2 
million increase in accounts receivable, a $7.9 million increase in contract assets and labilities, a $5.2 million 
increase in other noncurrent assets, and a $2.0 million decrease in other noncurrent liabilities. This was partially 
offset by a $32.3 million increase in accounts payable and accrued expenses and a $6.3 million increase in accrued 
warranty. The working capital changes in contract assets and liabilities, accounts receivable, accounts payable and 
accrued expenses and accrued warranty are primarily the result of the timing of production in the year ended 
December 31, 2018.  

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Investing Cash Flows 

Purchase of property and equipment 
Acquisition of a business 
Proceeds from sale of assets 
Net cash used in investing activities 

2019 

2017 

Year Ended December 31, 
2018 
(in thousands) 
  $  (74,408 )   $  (52,688 )   $  (44,828 ) 
—   
850   
  $  (75,510 )   $  (52,688 )   $  (43,978 ) 

(1,102 )     
—       

—       
—       

Net cash flows used in investing activities totaled $75.5 million and $52.7 million in the years ended 

December 31, 2019 and 2018, respectively, driven primarily by capital expenditures for new facilities and expansion 
or improvements at existing facilities. The capital expenditures for the year ended December 31, 2019 primarily 
related to our new manufacturing facilities in Yangzhou, China and Chennai, India, our second manufacturing 
facility in Turkey, our new tooling facility and the expansion of one of our blade manufacturing facilities in Juárez, 
Mexico and continued investments in our other existing facilities. The capital expenditures for the year ended 
December 31, 2018 primarily related to our new wind blade plants in Matamoros, Mexico and Yangzhou, China, the 
expansion and improvements at our Taicang, China facility, our second wind blade plant in Turkey, our second 
facility in Newton, Iowa and costs to enhance our information technology systems. The above capital expenditure 
amounts do not include the amounts which we financed primarily through finance leases totaling $5.8 million and 
$22.0 million in the years ended December 31, 2019 and 2018, respectively.  

We anticipate fiscal year 2020 capital expenditures of between $80 million to $90 million and we estimate that 

the cost that we will incur after December 31, 2019 to complete our current projects in process will be 
approximately $18.3 million. We have used, and will 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 purchasing equipment for our new manufacturing facility in Chennai, India and the 
continued investment in our Turkey, Mexico and China facilities.  

Financing Cash Flows 

2019 

Year Ended December 31, 
2018 
(in thousands) 

2017 

Net proceeds from (repayments of) revolving and 
term loans 
Net proceeds from (repayments of) accounts 
receivable financing 
Net repayments of working capital loans 
Principal repayments of finance leases 
Net proceeds from (repayments of) other debt 
Debt issuance costs 
Proceeds from exercise of stock options 
Repurchase of common stock including shares 
   withheld in lieu of income taxes 
Net cash provided by (used in) financing activities 

  $  22,000     $  14,463     $ 

(3,750 ) 

(10,719 )     
—       
(9,128 )     
(4,286 )     
—       
5,223       

424       
—       
—       
(23,763 )     
(281 )     
4,284       

(1,020 ) 
(4,638 ) 
—   
1,313   
(454 ) 
1,430   

(2,120 )     
970     $ 

(2,859 )     
(7,732 )   $ 

(1,264 ) 
(8,383 ) 

  $ 

Net cash flows provided by financing activities for the year ended December 31, 2019 totaled $1.0 million. 

The net cash flows used in financing activities totaled $7.7 million for the year ended December 31, 2018. Net cash 
provided by financing activities for the year ended December 31, 2019 primarily reflects the net proceeds from 
revolving and term loans and the proceeds from the exercise of stock options, mostly offset by the net repayment of 
accounts receivable financing and other debt, principal repayments of finance leases and the repurchase of common 
stock including shares withheld in lieu of income taxes. Net cash used in financing activities for the year ended 
December 31, 2018 primarily reflects the net repayment of other debt and the repurchase of common stock 

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associated with taxes on the vesting of share-based awards, mostly offset by the net proceeds from revolving and 
term loans and the proceeds from the exercise of stock options.  

Description of Our Indebtedness  

Refer to Note 12 - Long-Term Debt, Net of Debt Issuance Costs and Current Maturities of the Notes to 
Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a description of our 
indebtedness. 

Other Contingencies 

As of December 31, 2019, we were not involved in any material litigation. In the future, however, we may 
become involved in various claims and legal actions arising in the ordinary course of business which may have a 
material adverse effect on our consolidated financial position, results of operations or liquidity. 

The wind blades and other composite structures that we produce are subject to warranties against defects in 

workmanship and materials, generally for a period of two to five years. We are not responsible for the fitness for use 
of the wind blade or the overall wind turbine system. If a wind blade is found to be defective during the warranty 
period as a result of a defect in workmanship or materials, among other potential remedies, we may need to repair or 
replace the wind blade (which could include significant transportation and installation costs) at our sole expense. At 
December 31, 2019 and 2018, we had accrued warranty reserves totaling $47.6 million and $36.8 million, 
respectively.  

As of December 31, 2019, we had no material operating expenditures for environmental matters, including 

government imposed remedial or corrective actions, during the year ended December 31, 2019. 

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 consolidated financial statements and related notes. 

Our Mexico segment has an existing accounts receivable assignment agreement with a financial institution 
under which the financial institution buys, on a non-recourse basis, the accounts receivable amounts related to one of 
our Mexico segment’s customers at a discount calculated based on an effective annual rate of LIBOR plus 2.75%.  

In September 2018, our U.S. and Mexico segments entered into an accounts receivable assignment agreement, 

as amended, with a financial institution. Under this agreement, the financial institution buys, on a non-recourse 
basis, the accounts receivable amounts related to one of our U.S. (Iowa location) and Mexico segment’s customers 
at a discount calculated based on LIBOR plus 1.25%.  

In the fourth quarter of 2018, our EMEAI segment entered into an accounts receivable assignment agreement 

with a financial institution. Under this agreement, the financial institution may buy, on a non-recourse revolving 
basis, up to 15.0 million Euro (approximately $16.8 million as of December 31, 2019) of the accounts receivable 
amounts related to one of our EMEAI segment’s customers at a discount calculated based on EURIBOR plus 2.65%.  

In the fourth quarter of 2018, our EMEAI segment entered into an accounts receivable assignment agreement 

with a financial institution. Under this agreement, the financial institution buys, on a non-recourse basis, the 
accounts receivable amounts related to one of our EMEAI segment’s customers at a discount calculated based on 
EURIBOR plus 0.75%.  

In the first quarter of 2019, our Asia and Mexico segments entered into separate accounts receivable purchase 
agreements, as amended, with a financial institution. Under these agreements, the financial institution may buy, on a 
non-recourse basis, and hold outstanding at any time up to $60.0 million of a customer’s accounts receivable 
amounts in our Asia segment and up to $30.0 million of a customer’s accounts receivable amounts in our Mexico 
segment at a discount calculated based on the three month LIBOR plus 1.0% and the number of days from the date 
of purchase to maturity. 

66 

In the second quarter of 2019, our Asia segment entered into an accounts receivable purchase agreement with 

a financial institution. Under this agreement, the financial institution may buy, on a non-recourse basis, and hold 
outstanding at any time up to $20.0 million of a customer’s accounts receivable amounts in our Asia segment at a 
discount calculated based on the three month LIBOR plus 1.0% and the number of days from the date of purchase to 
maturity.  

In the fourth quarter of 2019, our Asia segment entered into an accounts receivable purchase agreement with a 

financial institution. Under this agreement, the financial institution may buy, on a non-recourse basis, and hold 
outstanding at any time an unlimited amount of a customer’s accounts receivable amounts in our Asia segment at a 
discount calculated based on a fixed rate of 4.2% and the number of days from the date of purchase to maturity. 

As the receivables are purchased by the financial institutions under the agreements as described in the 
preceding paragraphs, the receivables were removed from our consolidated balance sheet. During the years ended 
December 31, 2019 and 2018, $776.2 million and $214.6 million of receivables were sold under the accounts 
receivable assignment agreements described above, respectively.     

Contractual Obligations 

The following table summarizes certain of our contractual obligations as of December 31, 2019:  

Payments Due by Period 

Less than 1 
year 

      1-3 years 

      3-5 years 

(in thousands) 

More than 5 
years 

      Total 

Long-term debt obligations(1) 
Operating lease obligations(2) 
Purchase obligations 
Estimated interest payments(3) 
Total contractual obligations 

  $  13,501      $  14,649      $  113,911      $ 
     25,425         44,287         38,497        
1,429        
1,887        

—      $  142,061   
66,584         174,793   
—        
7,895   
—         14,540   
  $  46,371      $  70,610      $  155,724      $  66,584      $  339,289   

3,668        
8,006        

2,798        
4,647        

(1)  See “—Description of Our Indebtedness” above. 

(2)  Our operating lease obligations represent the contractual payments due for the lease of our corporate office in 

Scottsdale, Arizona in addition to our facilities in Iowa, Rhode Island, New Mexico, China, Mexico, Turkey 
and Denmark.  
Includes interest on variable rate debt based on interest rates as of December 31, 2019. See “—Description of 
Our Indebtedness” above. 

(3) 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

Our discussion and analysis of our financial condition and results of operations are based upon our 
consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these 
consolidated financial statements requires us to make estimates and judgments that affect the reported amount of our 
assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. We evaluate our 
estimates on an ongoing basis, including those related to income taxes and warranty expense. We base our estimates 
on our historical experience and on various other assumptions that we believe to be reasonable under the 
circumstances, the results of which form the basis for making the judgments we make about the carrying values of 
our assets and liabilities that are not readily apparent from other sources. Because these estimates can vary 
depending on the situation, actual results may differ from the estimates. 

We believe the following critical accounting policies affect our more significant judgments used in the 

preparation of our consolidated financial statements. 

Revenue Recognition. The majority of our revenue is generated from long-term contracts associated with 

manufacturing of wind blades and related services.  We account for a long-term contract when it has the approval 
from both parties, the rights of the parties are identified, payment terms are established, the contract has commercial 
substance and the collectability of consideration is probable.  

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To determine the proper revenue recognition method for each long-term contract, we evaluate whether the 
original contract should be accounted for as one or more performance obligations. This evaluation requires judgment 
and the decisions reached could change the amount of revenue and gross profit recorded in a given period. As most 
of our contracts contain multiple performance obligations, we allocate the total transaction price to each 
performance obligation based on the estimated relative standalone selling prices of the promised goods or services 
underlying each performance obligation. Our manufacturing services are customer specific and involve production 
of items that cannot be sold to other customers due to the customers’ protected intellectual property; therefore, we 
allocate the total transaction price under our contracts with multiple performance obligations using the contractually 
stated prices, as these prices represent the relative standalone selling price based on an expected cost plus margin 
model.   

Revenue is primarily recognized over time as we have an enforceable right to payment upon termination and 

we may not use or sell the product to fulfill other customers’ contracts.  In addition, the customer does not have 
return or refund rights for items produced that conform to the specifications included in the contract. Because 
control transfers over time, revenue is recognized based on the extent of progress towards the completion of the 
performance obligation. We use the cost-to-cost input measure of progress for our contracts as this method provides 
the best representation of the production progress towards satisfaction of the performance obligation as the materials 
are distinct to the product being manufactured because of customer specifications provided for in the contract, the 
costs incurred are proportional to the progress towards completion of the product, and the products do not involve 
significant pre-fabricated component parts. Under the cost-to-cost method, progress and the related revenue 
recognition is determined by a ratio of direct costs incurred to date in fulfillment of the performance obligation to 
the total estimated direct costs required to complete the performance obligation.  

Determining the revenue to be recognized for services performed under our manufacturing contracts involves 
judgments and estimates relating to the total consideration to be received and the expected direct costs to complete 
the performance obligation. As such, revenue recognized reflects our estimates of future contract volumes and the 
direct costs to complete the performance obligation. The judgments and estimates relating to the total consideration 
to be received include the amount of variable consideration as our contracts typically provide the customer with a 
range of production output options from guaranteed minimum volume obligations to the production capacity of the 
facility, and customers will provide periodic non-cancellable commitments for the number of wind blades to be 
produced over the term of the agreement. The total consideration also includes payments expected to be received 
associated with wind blade model transitions. We use historical experience, customer commitments and forecasted 
future production based on the capacity of the plant to estimate the total revenue to be received to complete the 
performance obligation.  In addition, the amount of revenue per unit produced may vary based on the costs of 
production of the wind blades as we may be able to change the price per unit based on changes in the cost of 
production.  Further, some of our contracts provide opportunities for us to share in labor and material cost savings as 
well as absorb some additional costs as an incentive for more efficient production, both of which impact the margin 
realized on the contract and ultimately the total amount of revenue to be recognized.  Additionally, certain of our 
customer contracts provide for us to make concessions, such as in the form of liquidated damages, for missed 
production deadlines which are paid over a negotiated timeline.   

We estimate variable consideration at the most likely amount to which we expect to be entitled. We include 

estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative 
revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our 
estimates of variable consideration and determination of whether to include estimated amounts in the transaction 
price are based largely on an assessment of our anticipated performance and all information available to us at the 
time of the estimate and may materially change as additional information becomes known. 

Our contracts may be modified to account for changes in specifications of products and changing 

requirements. If the contract modifications are for goods or services that are not distinct from the existing contract, 
they are accounted for as if they were part of the original contract. The effect of a contract modification on the 
transaction price and the measure of progress for the performance obligation to which it relates is recognized as an 
adjustment to revenue on a cumulative catch-up basis. If contract modifications are for goods and services that are 
distinct from the existing contract and increases the amount of consideration reflecting the standalone sale price of 
the additional goods or services, then the contract modification is accounted for as a separate contract and is 
evaluated for one or more performance obligations.   

68 

Each reporting period, we evaluate the progress towards satisfaction of each performance obligation based on 
any contract modifications that have occurred, cost incurred to date, and an estimate of the expected future revenue 
and costs to be incurred to complete the performance obligation. Based on this analysis, any changes in estimates of 
revenue, cost of sales, contract assets and liabilities and the related impact to operating income are recognized on a 
cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current 
and prior periods based on the percentage of completion of the performance obligation. 

Wind blade pricing is based on annual commitments of volume as established in our customer contracts and 

orders less than committed volume may result in a higher price per wind blade to our customers. Orders in excess of 
annual commitments may result in discounts to our customers from the contracted price for the committed volume. 
Our customers typically provide periodic purchase orders with the price per wind blade given the current cost of the 
bill of materials, labor requirements and volume desired.  We record an allowance for expected utilization of early 
payment discounts which are reported as a reduction of the related revenue.  

Precision molding and assembly systems included in a customer’s contract are based upon the specific 

engineering requirements and design determined by the customer and are specific to the wind blade design and 
function desired. From the customer’s engineering specifications, a job cost estimate is developed along with a 
production plan, and the desired margin is applied based on the location the work is to be performed and complexity 
of the customer’s design. Precision molding and assembly systems are generally built to produce wind blades which 
may be manufactured by us in production runs specified in the customer contract. 

Contract assets primarily relate to our rights to consideration for work completed but not billed at the reporting 

date on manufacturing services contracts.  The majority of the contract asset balance relates to materials procured 
based on customer specifications. The contract assets are transferred to accounts receivable when the rights become 
unconditional, which generally occurs when customers are invoiced upon the determination that a product conforms 
to the contract specifications and invoices are due based on each customer’s negotiated payment terms, which, when 
factoring in supply chain financing arrangements, range from 5 to 25 days. We apply the practical expedient that 
allows us to exclude payment terms under one year from the transfer of a promised good or service from 
consideration of a significant financing component in its contracts. With regards to the production of precision 
molding and assembly systems, our contracts generally call for progress payments to be made in advance of 
production. Generally, payment is made at certain percentage of completion milestones with the final payment due 
upon delivery to the manufacturing facility. These progress payments are recorded within contract liabilities as 
current liabilities in the consolidated balance sheets and are reduced as we record revenue over time. We evaluate 
indications that a customer may not be able to meet the obligations under our long-term supply agreements to 
determine if an account receivable or contract asset may be impaired. 

 Our customers may request, in situations where they do not have space available to receive products or do not 
want to take possession of products immediately for other reasons, that their finished products be stored by us in one 
of our facilities. Most of our contracts provide for a limited number of wind blades to be stored during the period of 
the contract with any additional wind blades stored subject to additional storage fees, which are included in the wind 
blade product revenue.   

Revenue related to non-recurring engineering and freight services provided under our customer contracts is 
recognized at a point in time following the transfer of control of the promised services to the customer. Customers 
usually pay the carrier directly for the cost of shipping associated with items produced.  When we pay the shipping 
costs, we apply the practical expedient that allows us to account for shipping and handling as a fulfillment costs and 
include the revenue in the associated performance obligation and the costs are included in cost of goods sold. 

Taxes assessed by a governmental authority that are both imposed on and concurrent with specific revenue-

producing transactions, that are collected by us from a customer, are excluded from revenue. 

Income Taxes. In connection with preparing our consolidated financial statements, we are required to estimate 

our income taxes in each of the jurisdictions in which we operate. This process involves our assessment of any net 
operating loss carryforwards, as well as estimating our actual current tax liability together with assessing temporary 
differences resulting from differing treatment of items, such as reserves and accrued liabilities, for tax and 
accounting purposes. We also have to assess whether any portion of our earnings generated in one taxing 
jurisdiction might be claimed as earned by income tax authorities in a differing tax jurisdiction. Significant judgment 

69 

is required in determining our annual tax rate, the allocation of earnings to various jurisdictions and in the evaluation 
of our tax positions. 

Additionally, we record the estimated future tax effects of temporary differences between the tax basis of 

assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating 
loss and tax credit carryforwards. We then assess the likelihood that our deferred income tax assets will be realized 
by evaluating all available positive and negative evidence in order to determine if it is more-likely-than-not that the 
deferred tax assets will be realized. To the extent we believe that the realization of our deferred tax assets is not 
more-likely-than-not, we are required to establish a valuation allowance. In doing so we considered our recent 
operating history, taxpaying history and future reversals of deferred tax liabilities based upon future operating 
projections. Historically, as a result of cumulative losses in the United States, we determined that a valuation 
allowance for all of our U.S. deferred tax assets was appropriate. During the third quarter of 2018, we reversed a 
portion of the United States valuation allowance, based on the available evidence at that time. During the first 
quarter of 2019, a full valuation allowance was recorded in Taicang due to cumulative losses in Taicang. We also 
maintain a full valuation allowance in India due to cumulative losses. We periodically evaluate all available positive 
and negative evidence regarding the future recoverability of our deferred tax assets and, when we determine that the 
recoverability of deferred tax assets meets the criteria of more-likely-than-not, we reduce the valuation allowance 
against our deferred tax assets. The effect of a change in judgment concerning the realizability of deferred tax assets 
is included in provision for income taxes.  

As of December 31, 2019, we have U.S. federal NOLs of approximately $20.9 million, state NOLs of 

approximately $158.0 million, foreign NOLs of approximately $31.3 million and foreign tax credits of 
approximately $1.9 million available to offset future taxable income in the U.S., China and India.  

On December 22, 2017, the current President signed into law Tax Reform, which significantly revised U.S. 
tax law by, among other things, lowering the statutory federal corporate income tax rate from 35% to 21% for tax 
years beginning after December 31, 2017, eliminating certain deductions, imposing a mandatory one-time transition 
tax, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. Tax Reform also 
includes many new provisions, such as changes to bonus depreciation, changes to deductions for executive 
compensation, interest expense limitations, net operating loss deduction limitations, tax on GILTI earned by foreign 
corporate subsidiaries, the BEAT, and a deduction for FDII.   

At December 31, 2018, we completed the accounting for the enactment-date income tax effects of Tax 
Reform, which resulted in an immaterial impact to the financial statements. Upon further analyses of certain aspects 
of Tax Reform, and refinement of calculations during 2018, we increased our provisional amount of previously 
untaxed foreign earnings by $13.8 million, to $88.1 million. This resulted in no change to our U.S. federal income 
tax expense due to the impact of foreign tax credits. In addition, the provisional net tax expense, which was 
estimated at approximately $0.1 million, primarily attributable to the reduction in the federal tax rate, was 
unchanged. Additionally, we have made a policy election to account for any impacts of GILTI tax in the period in 
which it is incurred.   

Income tax expense or benefit, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits 
reflect our best estimate of current and future taxes to be paid. We are subject to income taxes in both the U.S. and 
numerous foreign jurisdictions in which we operate, principally, China, Mexico, and Turkey. Significant judgements 
and estimates are required in determining our consolidated income tax expense. The statutory federal corporate 
income tax rate in the U.S. decreased from 35% to 21% beginning in January 2018, while the tax rates in China and 
Mexico are 25% and 30%, respectively. During the fourth quarter of 2017, Turkey also modified its statutory 
corporate income tax rate from 20% to 22% for 2018, 2019, and 2020. Our second Turkey facility is located in a 
tax-free zone and is not subject to income taxes for its earnings recognized from its manufacturing activities.  

Warranty Expense. As discussed above, the wind blades we manufacture are subject to warranties against 
defects in workmanship and materials, generally for a period of two to five years. We are not responsible for the 
fitness for use of the wind blade in the overall wind turbine system. If a wind blade is found to be defective during 
the warranty period as a result of a defect in workmanship or materials, among other potential remedies, we may 
need to repair or replace the wind blade at our sole expense. We provide warranties for all of our products with 
terms and conditions that vary depending on the product sold. We record warranty expense based upon our estimate 

70 

of future repairs using a probability-based methodology that considers previous warranty claims, identified quality 
issues and industry practices. Once the warranty period has expired, any remaining unused warranty accrual for the 
specific products is reversed against the current year warranty expense amount. 

Our estimate of warranty expense requires us to make assumptions about matters that are highly uncertain, 

including future rates of product failure, repair costs, availability of materials, shipping and handling, and de-
installation and re-installation costs at customers’ sites, among others. When a potential or actual warranty claim 
arises, we may accrue additional warranty reserves for the estimated cost of remediation or proposed settlement. We 
have not experienced any material warranty expenses beyond the provision described above in the years ended 
December 31, 2019, 2018 and 2017. However, changes in warranty reserves could have a material effect on our 
consolidated financial statements.  

Recent Accounting Pronouncements 

For a discussion of recent accounting pronouncements, see Note 1 – Summary of Significant Accounting 

Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. 

Item 7A. Quantitative 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.  

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 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 
$10.9 million and $7.4 million for the years ended December 31, 2019 and 2018, respectively.  

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 our key raw 
materials for 12 months which protects us from price increases within that period. As many of our raw material 
supply agreements have meet or release clauses, if raw materials prices go down, 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 

40% of the resin and resin systems we use are purchased under contracts controlled 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. We believe that a 10% change in the 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 $9.3 million 
and $7.6 million for the years ended December 31, 2019 and 2018, respectively. Furthermore, this amount does not 
include the portion of any increase or decrease that would be shared with our customers under our long-term supply 
agreements, which is generally 70%. 

Interest Rate Risk. As of December 31, 2019, our EMEAI segment has one general credit agreement with a 

Turkish financial institution outstanding which is tied to EURIBOR. This agreement had collateralized financing of 
capital expenditures outstanding as of December 31, 2019 of $7.9 million. In addition, as of December 31, 2019, our 
Credit Agreement includes interest on the unhedged principal amount of $37.4 million which is tied to LIBOR. The 
one EMEAI general credit agreement and our Credit Agreement noted above are the only variable rate debt that we 
had outstanding as of December 31, 2019 as all remaining working capital loans, accounts receivable, 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 December 31, 2019, a 10% 

71 

change in the LIBOR or EURIBOR rate would not have had a material impact on our future earnings, fair values or 
cash flows.   

Item 8. Financial Statements and Supplementary Data 

The financial statements required to be filed pursuant to this Item 8 are appended to this Report. An index of 

those financial statements is found in Item 15. 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 

None  

Item 9A. Controls 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 
December 31, 2019 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 December 31, 2019. 

Management’s Report on Internal Control Over Financial Reporting  

As required by Rules 13a-15(f) promulgated under the Exchange Act, our management is responsible for 
establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance 
regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in 
accordance with U.S. generally accepted accounting principles.  Management assessed the effectiveness of our 
internal control over financial reporting as of December 31, 2019.  Management based its assessment on criteria 
established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations 
of the Treadway Commission (COSO). Management's assessment included evaluation of elements such as the 
design and operating effectiveness of key financial reporting controls, process documentation, accounting policies 
and our overall control environment. Based on this assessment, management has concluded that our internal control 
over financial reporting was effective as of December 31, 2019 to provide reasonable assurance regarding the 
reliability of financial reporting and the preparation of financial statements for external reporting purposes in 
accordance with U.S. generally accepted accounting principles. We reviewed the results of management's 
assessment with the Audit Committee of our Board of Directors. 

Our internal control over financial reporting as of December 31, 2019 has been audited by KPMG LLP, an 

independent registered public accounting firm, as stated in their report which is included herein. 

Changes in Internal Control Over Financial Reporting 

There have been no changes in our internal control over financial reporting during the three months ended 

December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control 
over financial reporting.  

Item 9B. Other Information 

Not applicable. 

72 

PART III 

Item 10. Directors, Executive Officers and Corporate Governance 

The information required by this Item is incorporated by reference to “Business – Information about our 
Executive Officers” included in Part 1, Item 1 of this Annual Report on Form 10-K and the information that will be 
contained in our proxy statement related to the 2020 Annual Meeting of Stockholders, which we intend to file with 
the SEC within 120 days of the fiscal year ended December 31, 2019.  

Item 11. Executive Compensation 

The information required by this Item is incorporated by reference to the information that will be contained in 

our proxy statement related to the 2020 Annual Meeting of Stockholders, which we intend to file with the SEC 
within 120 days of the fiscal year ended December 31, 2019.  

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 
Matters 

The information required by this Item is incorporated by reference to the information that will be contained in 

our proxy statement related to the 2020 Annual Meeting of Stockholders, which we intend to file with the SEC 
within 120 days of the fiscal year ended December 31, 2019.  

Item 13. Certain Relationships and Related Transactions, and Director Independence 

The information required by this Item is incorporated by reference to the information that will be contained in 

our proxy statement related to the 2020 Annual Meeting of Stockholders, which we intend to file with the SEC 
within 120 days of the fiscal year ended December 31, 2019.  

Item 14. Principal Accounting Fees and Services 

The information required by this Item is incorporated by reference to the information that will be contained in 

our proxy statement related to the 2020 Annual Meeting of Stockholders, which we intend to file with the SEC 
within 120 days of the fiscal year ended December 31, 2019.  

73 

Item 15. Exhibits, Financial Statement Schedules 

(a)  Financial Statements and Schedules 

PART IV 

The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as 

part of this Annual Report on Form 10-K. 

(b)  Exhibits 

See Exhibit Index. 

Item 16. Form 10-K Summary 

Not applicable. 

74 

 
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 

  Page 
F-2 
F-5 
F-6 

F-7 

F-8 
F-9 
F-
10 

Report of Independent Registered Public Accounting Firm .................................................................................   
Consolidated Balance Sheets as of December 31, 2019 and 2018 .......................................................................   
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 .......................   
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 
2017 .................................................................................................................................................................  

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 

2019, 2018 and 2017 ........................................................................................................................................  
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 ......................   
Notes to Consolidated Financial Statements ........................................................................................................   

F-1 

  
 
 
 
Report of Independent Registered Public Accounting Firm 

To the Stockholders and Board of Directors 
TPI Composites, Inc.: 

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting  

We have audited the accompanying consolidated balance sheets of TPI Composites, Inc. and 
subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of 
operations, comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for 
each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, 
the consolidated financial statements). We also have audited the Company’s internal control over 
financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated 
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.   

In our opinion, the consolidated financial statements referred to above present fairly, in all material 
respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its 
operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in 
conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company 
maintained, in all material respects, effective internal control over financial reporting as of December 31, 
2019 based on criteria established in Internal Control – Integrated Framework (2013) issued by the 
Committee of Sponsoring Organizations of the Treadway Commission. 

Adoption of New Accounting Pronouncement 

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2019, the Company 
changed its method of accounting for leases due to the adoption of Financial Accounting Standards 
Board Accounting Standard Codification Topic 842, Leases.  

Basis for Opinions  

The Company’s management is responsible for these consolidated financial statements, for maintaining 
effective internal control over financial reporting, and for its assessment of the effectiveness of internal 
control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal 
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s 
consolidated financial statements and an opinion on the Company’s internal control over financial 
reporting based on our audits. We are a public accounting firm registered with the Public Company 
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to 
the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations 
of the Securities and Exchange Commission and the PCAOB. 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that 
we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatement, whether due to error or fraud, and whether effective internal 
control over financial reporting was maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of 
material misstatement of the consolidated financial statements, whether due to error or fraud, and 
performing procedures that respond to those risks. Such procedures included examining, on a test basis, 
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also 
included evaluating the accounting principles used and significant estimates made by management, as 
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal 
control over financial reporting included obtaining an understanding of internal control over financial 
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and 
operating effectiveness of internal control based on the assessed risk. Our audits also included 

F-2 

 
performing such other procedures as we considered necessary in the circumstances. We believe that our 
audits provide a reasonable basis for our opinions. 

Definition and Limitations of Internal Control Over Financial Reporting  

A company’s internal control over financial reporting is a process designed to provide reasonable 
assurance regarding the reliability of financial reporting and the preparation of financial statements for 
external purposes in accordance with generally accepted accounting principles. A company’s internal 
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance 
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the 
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to 
permit preparation of financial statements in accordance with generally accepted accounting principles, 
and that receipts and expenditures of the company are being made only in accordance with 
authorizations of management and directors of the company; and (3) provide reasonable assurance 
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 
assets that could have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect 
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk 
that controls may become inadequate because of changes in conditions, or that the degree of compliance 
with the policies or procedures may deteriorate. 

Critical Audit Matter 

The critical audit matter communicated below is a matter arising from the current period audit of the 
consolidated financial statements that was communicated or required to be communicated to the audit 
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial 
statements and (2) involved our especially challenging, subjective, or complex judgment. The 
communication of a critical audit matter does not alter in any way our opinion on the consolidated 
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, 
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it 
relates. 

Evaluation of variable consideration and direct costs to complete performance obligations for 
wind blade manufacturing revenue 

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company generates 
the majority of its revenue from long-term contracts associated with manufacturing custom wind 
blades. Revenue from manufacturing wind blades is primarily recognized over time based on 
progress towards the completion of the performance obligation in the contract. Progress is 
determined by the ratio of direct costs incurred to date in fulfillment of the performance obligation 
to the total estimated direct costs required to complete the performance obligation. The Company 
recognizes variable consideration for wind blade manufacturing revenue that includes estimates 
of future contract volumes. Wind blade manufacturing revenue under long-term contracts was 
$1,328,717 thousand compared to consolidated revenue of $1,436,500 thousand in fiscal 2019.  

We identified the evaluation of future contract volumes and direct costs to complete performance 
obligations for wind blade manufacturing revenue as a critical audit matter. Evaluating these 
estimates requires a high degree of auditor judgment as changes to the inputs can have a 
significant effect on the Company’s revenue. Each wind blade contract contains variable 
consideration that includes estimates of future contract volumes.  Each wind blade contract also 
requires a measure of progress that includes estimates of direct costs to complete the 
performance obligations.    

F-3 

The primary procedures we performed to address this critical audit matter included the following. 
We tested certain internal controls over the Company’s revenue recognition process, including 
controls related to estimates of future contract volumes and direct costs to complete the 
performance obligation. We read a sample of long-term customer contracts, and observed that 
terms, conditions, and key elements of the contracts were included in the Company’s estimate of 
future contract volumes. We evaluated the Company’s ability to estimate future contract volumes 
and direct costs to complete the performance obligations by comparing these estimates to 
historical results. We evaluated estimated future contract volumes by assessing (1) 
manufacturing plant capacity, (2) historical production volume, and (3) customer purchase 
commitments. We evaluated estimated direct costs to complete the performance obligations by 
examining the estimated amounts agreed upon with the customer and comparing them to 
historical prices. We compared the future direct cost per blade to historical direct costs per blade 
and assessed future manufacturing efficiencies. Further, we evaluated historical labor utilization 
and rate per hour by wind blade type and manufacturing plant, and analyzed jurisdiction-specific 
inflation rates based on publicly available government data. We assessed current period revenue 
based upon the estimated consideration, the ratio of direct costs incurred to date in fulfillment of 
the performance obligations to the total estimated direct costs required to complete the 
performance obligations, and revenue recognized in previous periods for the performance 
obligations. 

We have served as the Company’s auditor since 2008.  

Phoenix, Arizona 
February 28, 2020 

/s/ KPMG LLP 

F-4 

 
 
 
 
 
 
 
 
 
 
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES 

Consolidated Balance Sheets 
(In thousands, except par value data) 

Assets 
Current assets: 

Cash and cash equivalents 
Restricted cash 
Accounts receivable 
Contract assets 
Prepaid expenses 
Other current assets 
Inventories 

Total current assets 
Property, plant and equipment, net 
Operating lease right of use assets 
Goodwill 
Intangible assets and deferred costs, net 
Other noncurrent assets 
Total assets 

Liabilities and Stockholders’ Equity 
Current liabilities: 

Accounts payable and accrued expenses 
Accrued warranty 
Current maturities of long-term debt 
Current operating lease liabilities 
Contract liabilities 

Total current liabilities 

Long-term debt, net of debt issuance costs and current maturities 
Noncurrent operating lease liabilities 
Other noncurrent liabilities 
Total liabilities 

Commitments and contingencies 
Stockholders’ equity: 

Common shares, $0.01 par value, 100,000 shares authorized and 35,326 
   shares issued and 35,181 shares outstanding at December 31, 2019; 
   100,000 shares authorized and 34,745 shares issued and 34,678 shares 
   outstanding at December 31, 2018 
Paid-in capital 
Accumulated other comprehensive loss 
Accumulated deficit 
Treasury stock, at cost, 145 shares at December 31, 2019; 67 shares at 
  December 31, 2018 

Total stockholders’ equity 
Total liabilities and stockholders’ equity 

December 31, 

2019 

2018 

70,282      $ 
992        
184,012        
166,515        
10,047        
29,843        
6,731        
468,422        
205,007        
122,351        
2,807        
4,170        
23,920        
826,677      $ 

293,104      $ 
47,639        
13,501        
16,629        
3,008        
373,881        
127,888        
113,883        
5,975        
621,627        

85,346   
3,555   
176,815   
116,708   
9,219   
16,819   
5,735   
414,197   
159,423   
—   
2,807   
4,458   
23,970   
604,855   

199,078   
36,765   
27,058   
—   
7,143   
270,044   
110,565   
—   
3,289   
383,898   

353        
322,906        
(23,612 )      
(90,689 )      

(3,908 )      
205,050        
826,677      $ 

347   
311,771   
(14,392 ) 
(74,981 ) 

(1,788 ) 
220,957   
604,855   

  $ 

  $ 

  $ 

  $ 

See accompanying notes to consolidated financial statements. 

F-5 

 
  
  
  
  
  
     
  
  
    
  
       
  
  
    
         
  
  
    
         
    
    
    
    
    
    
    
    
    
    
    
    
    
    
         
    
    
         
    
    
    
    
    
    
    
    
    
    
    
         
    
    
         
    
    
    
    
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES 

Consolidated Statements of Operations 
(In thousands, except per share data) 

Net sales 
Cost of sales 
Startup and transition costs 

Total cost of goods sold 
Gross profit 

General and administrative expenses 
Realized loss on sale of assets and asset impairments 
Restructuring charges, net 

Income from operations 

Other income (expense): 
Interest income 
Interest expense 
Loss on extinguishment of debt 
Realized loss on foreign currency remeasurement 
Miscellaneous income 
Total other expense 
Income before income taxes 

Income tax benefit (provision) 
Net income (loss) 

Weighted-average common shares outstanding: 

Basic 
Diluted 

Net income (loss) per common share: 

Basic 
Diluted 

Year Ended December 31, 
2018 

2019 

  $  1,436,500      $  1,029,624      $ 
882,075        
74,708        
956,783        
72,841        
43,542        
4,581        
—        
24,718        

1,290,619        
68,033        
1,358,652        
77,848        
39,916        
18,117        
3,927        
15,888        

157        
(8,179 )      
—        
(4,107 )      
3,648        
(8,481 )      
7,407        
(23,115 )      
(15,708 )    $ 

181        
(10,417 )      
(3,397 )      
(13,489 )      
4,650        
(22,472 )      
2,246        
3,033        
5,279      $ 

  $ 

2017 
955,198   
804,099   
40,628   
844,727   
110,471   
40,373   
—   
—   
70,098   

95   
(12,381 ) 
—   
(4,471 ) 
1,191   
(15,566 ) 
54,532   
(15,798 ) 
38,734   

35,062        
35,062        

34,311        
36,002        

33,844   
34,862   

  $ 
  $ 

(0.45 )    $ 
(0.45 )    $ 

0.15      $ 
0.15      $ 

1.14   
1.11   

See accompanying notes to consolidated financial statements. 

F-6 

 
  
  
  
  
  
     
     
  
    
    
    
    
    
    
    
    
    
         
         
    
    
    
    
    
    
    
    
    
  
    
         
         
    
    
         
         
    
    
    
  
    
         
         
    
    
         
         
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES 

Consolidated Statements of Comprehensive Income (Loss) 
(In thousands) 

Net income (loss) 
Other comprehensive income (loss): 

  $ 

Year Ended December 31, 
2018 

2017 

5,279      $ 

38,734   

2019 
(15,708 )    $ 

Foreign currency translation adjustments 
Unrealized gain (loss) on hedging derivatives, net of taxes 
     of $(585) and $158 for the years ended December 31, 2019 
     and 2018 

Comprehensive income (loss) 

(7,026 )      

(14,428 )      

3,304   

(2,194 )      
(24,928 )    $ 

594        
(8,555 )    $ 

—   
42,038   

  $ 

See accompanying notes to consolidated financial statements. 

F-7 

 
  
  
  
  
  
     
     
  
    
         
         
    
    
    
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) 
(In thousands) 

Balance at December 31, 2016 

Cumulative-effect adjustment of the 
   adoption of ASU 2016-09 on 
   January 1, 2017 
Net income 
Other comprehensive income 
Common stock repurchased 
Issuances under share-based 
   compensation plan 
Share-based compensation expense 

Balance at December 31, 2017 

Net income 
Other comprehensive loss 
Common stock repurchased 
Issuances under share-based 
   compensation plan 
Share-based compensation expense 

Balance at December 31, 2018 

Net loss 
Other comprehensive loss 
Common stock repurchased 
Issuances under share-based 
   compensation plan 
Share-based compensation expense 

Balance at December 31, 2019 

   Common 
     Paid-in 
  Shares      Amount      capital 
    33,737     $  337     $ 292,833     $ 

comprehensive     Accumulated     
    income (loss)       deficit 

(3,862 )   $  (117,908 )   $  —     $  171,400   

Treasury 
stock, 
     at cost      

Total 
stockholders' 
equity 
(deficit) 

Accumulated 
other 

     —        —       
     —        —       
     —        —       
     —        —       

1,072       
—       
—       
—       

—       
—       
3,304       
—       

(1,086 )      —       
38,734        —       
—        —       
—       (1,264 )     

(14 ) 
38,734   
3,304   
(1,264 ) 

     312       
3       
674       
6,964       
     —        —       
    34,049        340       301,543       
—       
     —        —       
—       
     —        —       
—       
     —        —       

2,695       
     696       
7       
     —        —       
7,533       
    34,745        347       311,771       
—       
     —        —       
—       
     —        —       
—       
     —        —       

—       
—       
(558 )     
—       
(13,834 )     
—       

—       
—       
(14,392 )     
—       
(9,220 )     
—       

(80,260 )     

—       
753       
—        —       

1,430   
6,964   
(511 )      220,554   
5,279   
(13,834 ) 
(2,859 ) 

5,279        —       
—        —       
—       (2,859 )     

—        1,582       
—        —       

4,284   
7,533   
(74,981 )     (1,788 )      220,957   
(15,708 ) 
(15,708 )      —       
(9,220 ) 
—        —       
(2,120 ) 
—       (2,120 )     

5,291       
     581       
6       
     —        —       
5,844       
    35,326     $  353     $ 322,906     $ 

—       
—       
(23,612 )   $ 

—       
—        —       

5,297   
5,844   
(90,689 )   $ (3,908 )   $  205,050   

See accompanying notes to consolidated financial statements. 

F-8 

 
 
  
    
    
  
  
  
        
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES 

Consolidated Statements of Cash Flows 
(In thousands) 

2019 

Year Ended December 31, 
2018 

2017 

  $ 

(15,708 )    $ 

5,279   

  $ 

38,734   

Cash flows from operating activities: 

Net income (loss) 
Adjustments to reconcile net income (loss) to net cash provided by (used in) 
   operating activities: 

Depreciation and amortization 
Realized loss on sale of assets and asset impairments 
Restructuring charges, net 
Share-based compensation expense 
Amortization of debt issuance costs 
Loss on extinguishment of debt 
Deferred income taxes 
Changes in assets and liabilities: 

Accounts receivable 
Contract assets and liabilities 
Operating lease right of use assets and operating lease liabilities 
Inventories 
Prepaid expenses 
Other current assets 
Other noncurrent assets 
Accounts payable and accrued expenses 
Accrued warranty 
Other noncurrent liabilities 

Net cash provided by (used in) operating activities 

Cash flows from investing activities: 

Purchases of property, plant and equipment 
Acquisition of a business 
Proceeds from sale of assets 

Net cash used in investing activities 

Cash flows from financing activities: 

Proceeds from revolving and term loans 
Repayments of revolving and term loans 
Net proceeds from (repayments of) accounts receivable financing 
Proceeds from working capital loans 
Repayments of working capital loans 
Principal repayments of finance leases 
Net proceeds from (repayments of) other debt 
Debt issuance costs 
Proceeds from exercise of stock options 
Repurchase of common stock including shares withheld in lieu of income 
    taxes 

Net cash provided by (used in) financing activities 
Impact of foreign exchange rates on cash, cash equivalents and restricted cash 

Net change in cash, cash equivalents and restricted cash 

Cash, cash equivalents and restricted cash, beginning of year 
Cash, cash equivalents and restricted cash, end of year 

Supplemental disclosures of cash flow information: 

Cash paid for interest 
Cash paid for income taxes, net 

Supplemental disclosures of noncash investing and financing activities: 

Accrued capital expenditures in accounts payable 

  $ 

  $ 

38,580   
18,117   
3,927   
5,681   
206   
—   
4,951   

(19,366 )      
(57,583 )      
6,953   
(1,145 )      
(1,052 )      
(13,692 )      
(7,177 )      
80,720   
10,874   
2,798   
57,084   

(74,408 )      
(1,102 )      
—   
(75,510 )      

22,000   
—   
(10,719 )      
3,535   
(3,535 )      
(9,128 )      
(4,286 )      
—   
5,223   

(2,120 )      
970   
(171 )      
(17,627 )      
89,376   
71,749   

  $ 

8,190   
18,640   

  $ 

26,429   
4,581   
—   
7,795   
336   
3,397   
(14,912 )      

(59,200 )      
(7,898 )      
—   
(1,685 )      
1,318   
(132 )      
(5,167 )      
32,263   
6,346   
(2,008 )      
(3,258 )      

(52,688 )      
—   
—   
(52,688 )      

89,435   
(74,972 )      
424   
—   
—   
—   
(23,763 )      
(281 )      
4,284   

(2,859 )      
(7,732 )      
617   
(63,061 )      
152,437   
89,376   

  $ 

  $ 

9,904   
7,246   

14,644   

5,139   

21,698   
334   
—   
7,124   
573   
-   
1,650   

(54,227 ) 
(4,423 ) 
—   
964   
(1,724 ) 
4,874   
2,816   
51,474   
9,330   
(4,597 ) 
74,600   

(44,828 ) 
—   
850   
(43,978 ) 

—   
(3,750 ) 
(1,020 ) 
9,936   
(14,574 ) 
—   
1,313   
(454 ) 
1,430   

(1,264 ) 
(8,383 ) 
335   
22,574   
129,863   
152,437   

11,803   
17,263   

5,725   

See accompanying notes to consolidated financial statements. 

F-9 

 
 
  
  
  
  
  
  
  
  
  
  
  
    
  
  
    
  
  
    
  
  
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Note 1. Summary of Operations and Significant Accounting Policies 

(a) Description of Business   

TPI Composites, Inc. is the holding company that conducts substantially all of its business operations through 

its direct and indirect subsidiaries (collectively, the Company or we). The Company was founded in 1968 and has 
been producing composite wind blades since 2001. The Company’s knowledge and experience of composite 
materials and manufacturing originates with its 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 the boat building business in 2004, the Company reorganized in 
Delaware as LCSI Holding, Inc. and then changed its corporate name to TPI Composites, Inc. in 2008. Today, the 
Company is headquartered in Scottsdale, Arizona and has expanded its global footprint to include domestic facilities 
in Newton, Iowa; Warren, Rhode Island and Santa Teresa, New Mexico and international facilities in Dafeng, 
China; Taicang Port, China; Yangzhou, China, Juárez, Mexico; Matamoros, Mexico; Izmir, Turkey; Chennai, India, 
Kolding, Denmark and Berlin, Germany.  

(b) Basis of Presentation 

We divide our business operations into four geographic operating segments—the United States (U.S.), Asia, 

Mexico and Europe, the Middle East, Africa and India (EMEAI), as follows: 

• 

• 

• 

• 

Our U.S. segment includes (1) the manufacturing of wind blades at our Newton, Iowa plant, (2) the 
manufacturing of precision molding and assembly systems used to manufacture wind blades at our 
Warren, Rhode Island facility, (3) the manufacturing of composite solutions for the transportation 
industry, which we also conduct at our Rhode Island facility, (4) wind blade inspection and repair 
services in North America, (5) our advanced engineering center in Kolding, Denmark, which provides 
technical and engineering resources to our manufacturing facilities, (6) our engineering center in Berlin, 
Germany which we purchased in July 2019 and (7) our corporate headquarters, the costs of which are 
included in general and administrative expenses.  

Our Asia segment includes (1) the manufacturing of wind blades at our facilities in Dafeng, China and 
Yangzhou, China, the latter of which commenced operations in March 2019, (2) the manufacturing of 
precision molding and assembly systems at our Taicang Port, China facility and (3) wind blade 
inspection and repair services.  

Our Mexico segment manufactures wind blades from three facilities in Juárez, Mexico and a facility in 
Matamoros, Mexico at which we commenced operations in July 2018. In November 2018, we entered 
into a new lease agreement with a third party for a new precision molding and assembly systems 
manufacturing facility in Juárez, Mexico and we commenced operations at this facility in March 2019. 
This segment also performs wind blade inspection and repair services.  

Our EMEAI segment manufactures wind blades from two facilities in Izmir, Turkey and also performs 
wind blade inspection and repair services. In February 2019, we entered into a new lease agreement 
with a third party for a new manufacturing facility that was built in Chennai, India and we commenced 
operations at this facility in the first quarter of 2020. This segment also performs wind blade inspection 
and repair services. 

The accompanying consolidated financial statements include the accounts of TPI Composites, Inc. and all 

majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain 
prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to 
conform to the current period’s presentation. 

(c) Public Offering 

In May 2017, we completed a secondary public offering of 5,075,000 shares of our common stock at a price of 

$16.35 per share, which included 575,000 shares issued pursuant to the underwriters’ option to purchase additional 

F-10 

 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

shares. All of the shares were sold by existing stockholders and certain of our executive officers. The selling 
stockholders received all of the net proceeds of $78.8 million from the secondary public offering. We did not sell 
any shares and did not receive any of the proceeds from the offering and the costs paid by us in connection with the 
offering of $0.8 million were recorded in general and administrative costs in the accompanying consolidated 
statement of operations. 

(d) Revenue Recognition   

The majority of our revenue is generated from long-term contracts associated with manufacturing of wind 
blades and related services.  We account for a long-term contract when it has the approval from both parties, the 
rights of the parties are identified, payment terms are established, the contract has commercial substance and the 
collectability of consideration is probable.  

To determine the proper revenue recognition method for each long-term contract, we evaluate whether the 
original contract should be accounted for as one or more performance obligations. This evaluation requires judgment 
and the decisions reached could change the amount of revenue and gross profit recorded in a given period. As most 
of our contracts contain multiple performance obligations, we allocate the total transaction price to each 
performance obligation based on the estimated relative standalone selling prices of the promised goods or services 
underlying each performance obligation. Our manufacturing services are customer specific and involve production 
of items that cannot be sold to other customers due to the customers’ protected intellectual property; therefore, we 
allocate the total transaction price under our contracts with multiple performance obligations using the contractually 
stated prices, as these prices represent the relative standalone selling price based on an expected cost plus margin 
model.   

Revenue is primarily recognized over time as we have an enforceable right to payment upon termination and 

we may not use or sell the product to fulfill other customers’ contracts.  In addition, the customer does not have 
return or refund rights for items produced that conform to the specifications included in the contract. Because 
control transfers over time, revenue is recognized based on the extent of progress towards the completion of the 
performance obligation. We use the cost-to-cost input measure of progress for our contracts as this method provides 
the best representation of the production progress towards satisfaction of the performance obligation as the materials 
are distinct to the product being manufactured because of customer specifications provided for in the contract, the 
costs incurred are proportional to the progress towards completion of the product, and the products do not involve 
significant pre-fabricated component parts. Under the cost-to-cost method, progress and the related revenue 
recognition is determined by a ratio of direct costs incurred to date in fulfillment of the performance obligation to 
the total estimated direct costs required to complete the performance obligation.  

Determining the revenue to be recognized for services performed under our manufacturing contracts involves 
judgments and estimates relating to the total consideration to be received and the expected direct costs to complete 
the performance obligation. As such, revenue recognized reflects our estimates of future contract volumes and the 
direct costs to complete the performance obligation. The judgments and estimates relating to the total consideration 
to be received include the amount of variable consideration as our contracts typically provide the customer with a 
range of production output options from guaranteed minimum volume obligations to the production capacity of the 
facility, and customers will provide periodic non-cancellable commitments for the number of wind blades to be 
produced over the term of the agreement. The total consideration also includes payments expected to be received 
associated with wind blade model transitions. We use historical experience, customer commitments and forecasted 
future production based on the capacity of the plant to estimate the total revenue to be received to complete the 
performance obligation.  In addition, the amount of revenue per unit produced may vary based on the costs of 
production of the wind blades as we may be able to change the price per unit based on changes in the cost of 
production.  Further, some of our contracts provide opportunities for us to share in labor and material cost savings as 
well as absorb some additional costs as an incentive for more efficient production, both of which impact the margin 
realized on the contract and ultimately the total amount of revenue to be recognized.  Additionally, certain of our 
customer contracts provide for us to make concessions, such as in the form of liquidated damages, for missed 
production deadlines which are paid over a negotiated timeline.   

We estimate variable consideration at the most likely amount to which we expect to be entitled. We include 

estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative 
revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our 

F-11 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

estimates of variable consideration and determination of whether to include estimated amounts in the transaction 
price are based largely on an assessment of our anticipated performance and all information available to us at the 
time of the estimate and may materially change as additional information becomes known. 

Our contracts may be modified to account for changes in specifications of products and changing 

requirements. If the contract modifications are for goods or services that are not distinct from the existing contract, 
they are accounted for as if they were part of the original contract. The effect of a contract modification on the 
transaction price and the measure of progress for the performance obligation to which it relates is recognized as an 
adjustment to revenue on a cumulative catch-up basis. If contract modifications are for goods and services that are 
distinct from the existing contract and increases the amount of consideration reflecting the standalone sale price of 
the additional goods or services, then the contract modification is accounted for as a separate contract and is 
evaluated for one or more performance obligations.   

Each reporting period, we evaluate the progress towards satisfaction of each performance obligation based on 
any contract modifications that have occurred, cost incurred to date, and an estimate of the expected future revenue 
and costs to be incurred to complete the performance obligation. Based on this analysis, any changes in estimates of 
revenue, cost of sales, contract assets and liabilities and the related impact to operating income are recognized on a 
cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current 
and prior periods based on the percentage of completion of the performance obligation. 

Wind blade pricing is based on annual commitments of volume as established in our customer contracts and 

orders less than committed volume may result in a higher price per wind blade to our customers. Orders in excess of 
annual commitments may result in discounts to our customers from the contracted price for the committed volume. 
Our customers typically provide periodic purchase orders with the price per wind blade given the current cost of the 
bill of materials, labor requirements and volume desired.  We record an allowance for expected utilization of early 
payment discounts which are reported as a reduction of the related revenue.  

Precision molding and assembly systems included in a customer’s contract are based upon the specific 

engineering requirements and design determined by the customer and are specific to the wind blade design and 
function desired. From the customer’s engineering specifications, a job cost estimate is developed along with a 
production plan, and the desired margin is applied based on the location the work is to be performed and complexity 
of the customer’s design. Precision molding and assembly systems are generally built to produce wind blades which 
may be manufactured by us in production runs specified in the customer contract. 

Contract assets primarily relate to our rights to consideration for work completed but not billed at the reporting 

date on manufacturing services contracts.  The contract assets are transferred to accounts receivable when the rights 
become unconditional, which generally occurs when customers are invoiced upon the determination that a product 
conforms to the contract specifications and invoices are due based on each customer’s negotiated payment terms, 
which, when factoring in supply chain financing arrangements, range from 5 to 25 days.  We apply the practical 
expedient that allows us to exclude payment terms under one year from the transfer of a promised good or service 
from consideration of a significant financing component in its contracts. With regards to the production of precision 
molding and assembly systems, our contracts generally call for progress payments to be made in advance of 
production. Generally, payment is made at certain percentage of completion milestones with the final payment due 
upon delivery to the manufacturing facility. These progress payments are recorded within contract liabilities as 
current liabilities in the consolidated balance sheets and are reduced as we record revenue over time. We evaluate 
indications that a customer may not be able to meet the obligations under our long-term supply agreements to 
determine if an account receivable or contract asset may be impaired. 

Our customers may request, in situations where they do not have space available to receive products or do not 
want to take possession of products immediately for other reasons, that their finished products be stored by us in one 
of our facilities. Most of our contracts provide for a limited number of wind blades to be stored during the period of 
the contract with any additional wind blades stored subject to additional storage fees, which are included in the wind 
blade product revenue.   

Revenue related to non-recurring engineering and freight services provided under our customer contracts is 
recognized at a point in time following the transfer of control of the promised services to the customer. Customers 

F-12 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

usually pay the carrier directly for the cost of shipping associated with items produced.  When we pay the shipping 
costs, we apply the practical expedient that allows us to account for shipping and handling as a fulfillment costs and 
include the revenue in the associated performance obligation and the costs are included in cost of goods sold. 

Taxes assessed by a governmental authority that are both imposed on and concurrent with specific revenue-

producing transactions, that are collected by us from a customer, are excluded from revenue. 

(e) Cost of Goods Sold 

Cost of goods sold includes the costs we incur at our production facilities to make products saleable on both 

products invoiced during the period as well as products in progress towards the completion of each performance 
obligation. Cost of goods sold includes such items as raw materials, direct and indirect labor and facilities costs, 
including purchasing and receiving costs, plant management, inspection costs, production process improvement 
activities, product engineering and internal transfer costs. In addition, all depreciation associated with assets used in 
the production of our products is also included in cost of goods sold. Direct labor costs consist of salaries, benefits 
and other personnel related costs for employees engaged in the manufacture of our products and services. 

Startup and transition costs are primarily unallocated fixed overhead costs and underutilized direct labor costs 
incurred during the period production facilities are transitioning wind blade models and ramping up manufacturing. 
All direct labor costs are included in the measure of progress towards completion of the relevant performance 
obligation when determining revenue to be recognized during the period. The cost of sales for the initial wind blades 
from a new model manufacturing line is generally higher than when the line is operating at optimal production 
volume levels due to inefficiencies during ramp-up related to labor hours per blade, cycle times per blade and raw 
material usage. Additionally, these costs as a percentage of net sales are generally higher during the period in which 
a facility is ramping up to full production capacity due to underutilization of the facility. Manufacturing overhead at 
each of our facilities includes virtually all indirect costs (including share-based compensation costs) incurred at the 
plants, including engineering, finance, information technology, human resources and plant management. 

(f) General and Administrative Expenses 

General and administrative expenses primarily relate to the unallocated portion of costs incurred at our 
corporate headquarters and our research facilities and include salaries, benefits and other personnel related costs for 
employees engaged in research and development, engineering, finance, internal audit, information technology, 
human resources, business development, global operational excellence, global supply chain, in-house legal and 
executive management. Other costs include outside legal and accounting fees, risk management (insurance), share-
based compensation and certain other administrative and global resources costs.  

The research and development expenses incurred at our Warren, Rhode Island location as well as at our 

Kolding, Denmark advanced engineering center and our Berlin, Germany engineering center are also included in 
general and administrative expenses. For the years ended December 31, 2019, 2018 and 2017, total research and 
development expenses totaled $1.0 million, $0.8 million and $1.6 million, respectively.  

F-13 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

(g) Realized Loss on Sale of Assets and Asset Impairments  

For the year ended December 31, 2019, the realized loss on the sale of certain receivables, on a non-recourse 

basis under supply chain financing arrangements with our customers, to financial institutions, the realized loss on 
the sale of other assets at our corporate and manufacturing facilities and asset impairment charges totaled $18.1 
million. For the year ended December 31, 2018, the realized loss on the sale of certain receivables, on a non-
recourse basis under supply chain financing arrangements with our customers, to financial institutions and the 
realized loss on the sale of other assets at our manufacturing facilities totaled $4.6 million. There were no asset 
impairment charges for the year ended December 31, 2018.  

(h) Cash and Cash Equivalents and Restricted Cash 

Cash and cash equivalents include highly liquid investments that are readily convertible to known amounts of 
cash with original maturities of three months or less. The carrying value of cash and cash equivalents approximates 
fair value. 

As of December 31, 2019 and 2018, our China locations collectively had unrestricted cash totaling $9.7 
million and $28.9 million, respectively, in bank accounts in China. The Chinese government imposes certain 
restrictions on transferring cash out of China. The local governments in Turkey and Mexico impose no such 
restrictions on transferring cash out of the respective country.  

As of December 31, 2019 and 2018, we had provided for cash deposits for letters of guarantee used for 
customs clearance related to our China locations totaling $1.0 million and $3.5 million, respectively.  These amounts 
are reported as restricted cash in our consolidated balance sheets.  

As of December 31, 2019 and 2018, we maintained a long-term deposit in interest bearing accounts, related to 

fully cash-collateralized letters of credit in connection an equipment lessor in Iowa, totaling $0.5 million. See 
Note 9, Other Noncurrent Assets.   

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the 

consolidated balance sheets which total the same such amounts in the consolidated statements of cash flows: 

December 31, 

2019 

2018 

2017 

2016 

(in thousands) 

Cash and cash equivalents 
Restricted cash 
Restricted cash included within other noncurrent assets 

  $ 

70,282      $ 
992        
475        

85,346      $  148,113      $  119,066   
2,259   
3,555        
8,538   
475        

3,849        
475        

Total cash, cash equivalents and restricted cash shown 
   in the consolidated statements of cash flows 

  $ 

71,749      $ 

89,376      $  152,437      $  129,863   

(i) Accounts Receivable 

Trade accounts receivable are recorded at the invoiced amount and generally do not bear interest. We follow 

the allowance method of recognizing uncollectible accounts receivable, which recognizes bad debt expense based on 
a review of the individual accounts outstanding and prior history of uncollectible accounts receivable. Credit is 
extended based on evaluation of each of our customer’s financial condition and is generally unsecured. Accounts 
receivable are generally due within 30 days and are stated net of an allowance for doubtful accounts in the 
consolidated balance sheets. Accounts are considered past due if outstanding longer than contractual payment terms. 
We record an allowance based on consideration of a number of factors, including the length of time trade accounts 
are past due, previous loss history, the credit-worthiness of individual customers, economic conditions affecting 
specific customer industries, and economic conditions in general. We charge-off accounts receivable after all 
reasonable collection efforts have been exhausted. We credit payments subsequently received on such receivables to 
bad debt expense in the period payment is received. We record delinquent finance charges on outstanding accounts 
receivables only if they are collected. We wrote off no receivables during 2019, $0.2 million during 2018 and $0.2 

F-14 

 
  
  
  
  
  
     
     
     
  
  
  
  
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

million during 2017, and do not have any off-balance-sheet credit exposure related to our customers. See Note 5, 
Accounts Receivable.  

(j) Inventories 

Inventories represent materials purchased that are not restricted to fulfillment of a specific contract and are 
measured at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling prices in 
the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Cost is 
determined using the first-in, first-out method for such raw materials. Write-downs to reduce the carrying cost of 
obsolete, slow-moving, and unusable inventory to net realizable value are recognized in cost of goods sold. The 
effect of these write-downs establishes a new cost basis in the related inventory, which is not subsequently written 
up.  

(k) Property, Plant and Equipment 

Property, plant and equipment are stated at cost. Depreciation and amortization of property, plant, and 
equipment is calculated on the straight-line method over the estimated useful lives of the assets. See Note 7, 
Property, Plant and Equipment, Net. 

Machinery and equipment 
Buildings 
Leasehold improvements 

Office equipment and software 
Furniture 
Vehicles 

Estimated 
useful lives 
7–10 years 
20 years 
5 to 10 years, or the term 
of the lease, if shorter 
3 to 5 years 
3 to 5 years 
5 years 

(l) Recoverability of Long-Lived Assets 

We review property, plant and equipment and other long-lived assets in order to assess recoverability based on 
expected future undiscounted cash flows whenever events or circumstances indicate that the carrying value may not 
be recoverable. If the sum of the expected future net cash flows is less than the carrying value, an impairment loss is 
recognized. The impairment loss is measured as the amount by which the carrying value exceeds the fair value of 
the asset. 

(m) Goodwill, Intangible Assets and Deferred Costs 

Goodwill represents the excess of the acquisition cost of Composite Solutions, Inc. from True North Partners, 
LLC in 2004 over the fair value of identifiable assets acquired and liabilities assumed. Goodwill, which is entirely in 
the U.S. segment, is evaluated for impairment annually on October 31 and whenever events or circumstances make 
it likely that impairment may have occurred. In determining whether impairment has occurred, one compares the fair 
value of the related reporting unit (calculated using the discounted cash flow method) to its carrying value. If the 
carrying value exceeds the fair value, impairment is recognized for the difference. We may first assess qualitative 
factors to determine whether it is necessary to perform the quantitative goodwill impairment test. We performed our 
annual goodwill impairment test during 2019 and determined that it is more-likely-than-not that its fair value 
exceeds its carrying amount. 

Our patents, licenses, trademarks and development tools were acquired in business acquisitions and provide 

contractual or legal rights, or other future benefits that could be separately identified. Our valuation of identified 
intangible assets was based upon discounted cash flow estimates that require significant management judgment with 
respect to revenue and expense growth rates, changes in working capital, and the selection and use of the appropriate 
discount rate. The intangible assets are amortized over their estimated useful life. Intangible assets with indefinite 
lives are evaluated at least annually for impairment or whenever events or circumstances make it likely that 
impairment may have occurred.  

F-15 

 
 
  
  
  
  
  
  
  
  
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

As a result of our adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with 
Customers, (Topic 606), we recognized an asset for deferred costs incurred to fulfill a contract when such costs meet 
certain criteria.  These deferred costs are amortized over their estimated useful life. See Note 2, Revenue From 
Contracts with Customers for a further discussion of those deferred costs recognized as a result of the adoption of 
Topic 606. See Note 8, Intangible Assets and Deferred Costs, Net. 

(n) Warranty Expense 

We provide a limited warranty for our mold and wind blade products, including materials and workmanship, 

with terms and conditions that vary depending on the product sold, generally for periods that range from two to 
five years. We also provide a limited warranty for our transportation products, including materials and 
workmanship, with terms and conditions that vary depending on the product sold, generally for a period of 
approximately two years. Warranty expense is recorded based upon estimates of future repairs using a probability-
based methodology that considers previous warranty claims, identified quality issues and industry practices. Once 
the warranty period has expired, any remaining unused warranty accrual for the specific products is generally 
reversed against the current year warranty expense amount. See Note 10, Accrued Warranty.  

(o) Treasury Stock 

Common stock purchased for treasury is recorded at historical cost. Transactions in treasury shares relate to 

share-based compensation plans and are recorded at weighted-average cost.  

(p) Foreign Currency Translation and Remeasurements 

Foreign currency-denominated assets and liabilities are translated into U.S. dollars at exchange rates existing 
at the respective balance sheet dates. Results of operations of our foreign subsidiaries are translated at the average 
exchange rates during the respective periods. Translation adjustments are reported in accumulated other 
comprehensive loss in our consolidated balance sheets. Currency translation adjustments for the years ended 
December 31, 2019, 2018 and 2017 amounted to an other comprehensive loss of $7.0 million, an other 
comprehensive loss of $14.4 million and an other comprehensive gain of $3.3 million, respectively. 

Our reporting currency is the U.S. dollar. However, we have non-U.S. operating subsidiaries in our U.S., 

Mexico, Turkey, China and India operations. 

• 

• 

• 

• 

• 

• 

• 

The U.S. parent companies of our China and Mexico operations, which are wholly-owned subsidiaries 
of TPI Composites, Inc., maintain their books and records in U.S. dollars. 

Our Mexico operations maintain their books and records through multiple legal entities that are 
denominated in the local Mexican currency, the Peso. 

Our Turkey operations maintain their books and records in the local Turkish currency, the Lira. 

Our China operations maintain their books and records in the local Chinese currency, the Renminbi. 

Our Chennai, India operation maintains its books and records in the local India currency, the Rupee. 

Our Kolding, Denmark operation, which is a wholly-owned subsidiary of TPI Composites, Inc., 
maintains its books and records denominated in the local Danish currency, the Krone.  

Our Berlin, Germany operation, which is a wholly-owned subsidiary of TPI Composites, Inc., maintains 
its books and records in their official currency, the Euro. 

Foreign currency transaction gains and losses are reported in realized loss on foreign currency remeasurement 

in our consolidated statements of operations. 

(q) Share-Based Compensation 

We maintain two active incentive compensation plans: the 2008 Stock Option and Grant Plan and the 
Amended and Restated 2015 Stock Option and Incentive Plan (the 2015 Plan). In May 2015, our board of directors 
and stockholders adopted and approved the 2015 Plan, which provides for the issuance of incentive stock options, 
non-qualified stock options, stock appreciation rights, restricted stock units (RSUs), restricted stock awards, 

F-16 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

unrestricted stock awards, cash-based awards, performance-based restricted stock units (PSUs) and dividend 
equivalent rights to certain of our employees, non-employee directors and consultants. The term of stock options 
issued under the 2015 Plan may not exceed ten years from the date of grant. Under the 2015 Plan, incentive stock 
options and non-qualified stock options are granted at an exercise price that is not to be less than 100% of the fair 
market value of our common stock on the date of grant, as determined by the Compensation Committee of our board 
of directors. Stock options become vested and exercisable at such times and under such conditions as determined by 
the Compensation Committee on the date of grant. Upon approval of the 2015 Plan, no future grants will be made 
from the 2008 Stock Option and Grant Plan. 

We use the Black Scholes valuation model, unless the awards are subject to market conditions, in which case 
we utilize a binomial-lattice model (i.e., Monte Carlo simulation model), to determine the fair value of stock options 
and certain PSUs granted pursuant to the 2015 Plan. The Monte Carlo simulation model utilizes multiple input 
variables to determine the share-based compensation expense. For grants with market conditions made in the year 
ended December 31, 2019, we utilized a volatility of 28.3%, a 0% dividend yield and a risk-free interest rate of 
2.5%. The volatility was based on the most recent comparable period for the Company and the peer group. The 
stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is 
mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free 
interest rate is equal to the yield, as of the measurement date, of the zero-coupon U.S. Treasury bill that is 
commensurate with the remaining performance measurement period.   

The determination of the grant date fair value using an option-pricing model and simulation model requires 
judgment as well as assumptions regarding a number of other complex and subjective variables. These variables 
include our closing market price at the grant date as well as the following assumptions: 

Expected Volatility. As our common stock had not been publicly traded prior to July 2016, the expected 
volatility assumption reflects an average of volatilities of publicly traded peer group companies with a period equal 
to the expected life of the options.  

Expected Life (years). We use the simplified method to estimate the expected term of stock options. The 
simplified method for estimating expected term is to use the mid-point between the vesting term and the contractual 
term of the option. We elected to use the simplified method because we did not have historical exercise data to 
estimate the expected term due to the limited time period our common stock had been publicly traded.  

Risk-Free Interest Rate. The risk-free interest rate assumption is based upon the U.S. constant maturity 
treasury rates as the risk-free rate interpolated between the years commensurate with the expected life of the options.  

Dividend Yield. The dividend yield assumption is zero since we do not expect to declare or pay dividends in 

the foreseeable future.  

Forfeitures. Share-based compensation expense is reversed when the service-based award is forfeited. 

Expected Vesting Period. We amortize the share-based compensation expense over the requisite service 

period.  

Share-based compensation expense related to RSUs and PSUs are expensed over the vesting period using the 

straight-line method for our employees and our board of directors. The RSUs and PSUs do not have voting rights. 
We calculate the fair value of our share-based awards on the date of grant for our employees and directors.  

(r) Leases 

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right 
of use (ROU) assets, current operating lease liabilities, and noncurrent operating lease liabilities in the consolidated 
balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, 
and long-term debt, net of debt issuance costs and current maturities in the consolidated balance sheets.  

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of future 

minimum lease payments over the lease term at commencement date. Variable payments are not included in ROU 

F-17 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

assets or lease liabilities and can vary from period to period based on asset usage or our proportionate share of 
common costs. The implicit rate within our leases is generally not determinable and, therefore, the incremental 
borrowing rate at lease commencement is utilized to determine the present value of lease payments. We estimate our 
incremental borrowing rate based on third-party lender quotes to obtain secured debt in a like currency for a similar 
asset over a timeframe similar to the term of the lease. The ROU asset also includes any lease prepayments made 
and any initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or 
terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease 
payments is recognized on a straight-line basis over the lease term. We have elected not to recognize ROU assets or 
lease liabilities for leases with a term of 12 months or less.  

We have lease agreements with lease and non-lease components. We have elected to apply the practical 
expedient to account for these components as a single lease component for all classes of underlying assets. See 
section (x) Recently Issued Accounting Pronouncements - Accounting Pronouncements Adopted in 2019 – Leases 
for more details on leases.   

(s) Financial Instruments 

Interest Rate Swap 

We use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with our 

credit agreement (the Credit Agreement) that we entered into in April 2018. We do not use such swap contracts for 
speculative or trading purposes. 

To offset the variability of future interest payments on the Credit Agreement arising from changes in the 
London Interbank Offered Rate (LIBOR), in April 2018, we entered into an interest rate swap agreement with a 
financial institution for a notional amount of $75.0 million with an expiration date of April 2023. This interest rate 
swap effectively hedges $75.0 million of the future variable rate LIBOR interest expense to a fixed rate interest 
expense. The derivative instrument qualified for accounting as a cash flow hedge in accordance with Financial 
Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 815, Derivatives and 
Hedging, and we designated it as such.  

The settlement value of the interest rate swap is $2.7 million as of December 31, 2019 and is included in other 
noncurrent liabilities in the consolidated balance sheet. The unrealized loss on the swap of $2.2 million, net of tax, is 
included in the consolidated statement of other comprehensive income (loss). The settlement value of the interest 
rate swap was $0.8 million as of December 31, 2018 and is included in other noncurrent assets in the consolidated 
balance sheet. The unrealized gain on the swap of $0.6 million, net of tax, was included in the consolidated 
statement of other comprehensive income (loss).   

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. In September 2019, we 
entered into the first of these foreign exchange forward contracts. We do not use such forward contracts for 
speculative or trading purposes.  

We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other 

than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our 
subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to 
receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward 
contracts to hedge a portion of these forecasted cash flows. As of December 31, 2019, these foreign exchange 
forward contracts hedged our forecasted cash flows for periods up to nine months. These foreign exchange forward 
contracts qualified for accounting as cash flow hedges in accordance with ASC Topic 815, and we designated them 
as such.  

As of December 31, 2019, the notional values associated with our foreign exchange forward contracts 
qualifying as cash flow hedges were approximately 1.1 billion Mexican Peso. The fair value of the foreign exchange 
forward contracts is $0.7 million as of December 31, 2019 and includes $0.8 million in other current assets and $0.1 
million in accounts payable and accrued expenses in the consolidated balance sheet.  The unrealized gain on the 

F-18 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

foreign exchange forward contracts of $0.5 million, net of tax, as of December 31, 2019 is included in the 
consolidated statement of other comprehensive income (loss).     

Forward Contract on Intercompany Debt 

We use forward contracts to mitigate our exposure associated with fluctuations in foreign currency exchange 

rates. We do not use such forward contracts for speculative or trading purposes.  

In August 2018, we provided a Turkish Lira denominated intercompany loan to an EMEAI subsidiary of 

$15.0 million converted at the spot rate on the transaction date to 96.6 million Turkish Lira to fund their working 
capital requirements. We entered into a forward contract, with the same expiration as that of the intercompany loan’s 
maturity in October 2018, for a notional amount of 101.5 million Turkish Lira to reduce our exposure to currency 
fluctuations from the settlement of this Turkish Lira denominated intercompany loan. The derivative instrument 
qualifies for accounting as a cash flow hedge in accordance with ASC Topic 815, and we designated it as such. The 
forward contract was settled in October 2018.   

(t) Income Taxes 

Income taxes are accounted for under the asset and liability method in accordance with FASB ASC Topic 740, 

Income Taxes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable 
income in the years in which those differences are projected to be recovered or settled. Realization of deferred tax 
assets is dependent on our ability to generate sufficient taxable income of an appropriate character in future periods. 
A valuation allowance is established if it is determined to be more-likely-than-not that a deferred tax asset will not 
be realized.  

(u) Net Income (Loss) Per Common Share Calculation 

The basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted-
average number of common shares outstanding during a period. Diluted net income per common share is computed 
by dividing the net income by the weighted-average number of common shares outstanding plus potentially dilutive 
securities using 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 earnings per 
common share for the years ended December 31:    

Basic weighted-average shares outstanding 
Effect of dilutive awards 
Diluted weighted-average shares outstanding 

2017 

2019 

2018 
(in thousands) 
     35,062        34,311        33,844   
1,018   
     35,062        36,002        34,862   

1,691       

—       

Share-based compensation awards of 28,000 shares were excluded from the computation of net loss per share 

for the year ended December 31, 2019 because their effect would be anti-dilutive. Further, we had 1,176,000 
potentially dilutive shares outstanding for the year ended December 31, 2019 which were excluded due to the net 
loss for the year. Share-based compensation awards of 30,000 shares were excluded from the computation of diluted 
net income per share for the year ended December 31, 2018 because their effect would be anti-dilutive.  In addition, 
since 2018, certain performance-based restricted stock units have been excluded from the computation of diluted 
shares outstanding for the 2019 and 2018 periods presented as the performance conditions had not yet been met. We 
did not have any potential dilutive securities which were excluded from the computation of diluted net income per 
share for the year ended December 31, 2017. 

(v) Use of Estimates 

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting 

principles (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 consolidated financial 

F-19 

 
 
  
  
     
     
  
  
  
  
    
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

statements and the reported amounts of revenues and expenses during the reporting period. Actual results could 
differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of 
property, plant and equipment, realizability of intangible assets, deferred costs and deferred tax assets, standalone 
selling prices and cost assumptions for revenue recognition, fair value of stock options, performance-based restricted 
stock units and warrants, warranty reserves and other contingencies. 

(w) Fair Value of Financial Instruments 

FASB ASC Topic 820, Fair Value Measurements, defines fair value as the price that would be received to sell 
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 
Topic 820 also specifies a fair value hierarchy that requires an entity to maximize the use of observable inputs and 
minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs 
that may be used to measure fair value is follows: 

Level 1: Quoted prices in active markets for identical assets or liabilities; 

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; 
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by 
observable market data for substantially the full term of the assets or liabilities; and 

Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable 
in the market. These unobservable assumptions reflect our own estimate of assumptions that market 
participants would use in pricing the asset or liability. 

The carrying amounts of cash and cash equivalents, trade accounts receivable, income taxes receivable, 
accounts payable and accrued expenses and income taxes payable approximate fair value because of the short-term 
nature of these financial instruments. The carrying amount of working capital loans approximates fair value due to 
their short term nature and the loans carry a current market rate of interest, a level 2 input. The carrying value of 
long-term debt approximates fair value based on its variable rate index or based upon market interest rates available 
to us for debt of similar risk and maturities, both of which are level 2 inputs. 

(x) Recently Issued Accounting Pronouncements 

Accounting Pronouncements Adopted in 2019  

Leases  

In February 2016, the FASB established Topic 842, Leases, by Accounting Standards Update (ASU) No. 
2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing 
arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for 
Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-
11, Targeted Improvements. The new standard established a right of use model that required a lessee to recognize a 
ROU asset and related lease liability on the consolidated balance sheet for all leases with a term longer than 12 
months. Leases were to be classified as either finance or operating, with classification affecting the pattern and 
classification of expense recognition in the consolidated statement of operations. 

We adopted this new standard on January 1, 2019 and used the effective date as our date of initial application. 

Consequently, we have not provided financial information and the disclosures required under the new standard for 
periods before January 1, 2019.   

The adoption of this standard had a material effect on our financial statements, the most significant of which 

related to the recognition of ROU assets and lease liabilities on our consolidated balance sheet for our real estate, 
equipment and auto operating leases and providing significant new disclosures about our leasing activities.  

We elected the package of practical expedients, which allowed us to retain conclusions related to lease 
identification and classification under legacy GAAP. The new standard also provided practical expedients for an 
entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. 
Accordingly, for those leases that qualified, we did not recognize ROU assets or lease liabilities, and this includes 

F-20 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

not recognizing ROU assets or lease liabilities for existing short-term leases. We also elected the practical expedient 
to not separate lease and non-lease components for all of our leases. See Note 13, Leases.  

Income Taxes 

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated 
Other Comprehensive Income, which allowed a reclassification from accumulated other comprehensive income to 
retained earnings stranded tax effects resulting from the Tax Reform Act. We adopted this standard on January 1, 
2019 and it did not have a material impact on our consolidated financial statements.   

Share-Based Compensation 

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment 
Accounting, which expanded the scope of Topic 718, Compensation-Stock Compensation, to include share-based 
payment transactions for acquiring goods and services from nonemployees.  We adopted this standard on January 1, 
2019 and it did not have a material impact on our consolidated financial statements.  

In July 2018, the FASB issued ASU 2018-09, Codification Improvements, which contained amendments that 

affected a wide variety of Topics in the Codification, including amendment to Subtopic 718-40, Compensation-
Stock Compensation-Income Taxes, that clarified the timing of when an entity should recognize excess tax benefits. 
We adopted this standard on January 1, 2019 and it did not have a material impact on our consolidated financial 
statements.          

Internal Use Software  

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal Use Software 

(Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement 
That Is a Service Contract, which allowed for the capitalization of implementation costs incurred to develop or 
obtain internal-use software (and hosting arrangements that include an internal use software license). We adopted 
this standard on January 1, 2019 and it did not have a material impact on our consolidated financial statements.          

Goodwill 

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying 

the Test for Goodwill Impairment, which eliminated Step 2 from the goodwill impairment test. We adopted this 
standard during 2019 when we performed our annual impairment tests and it did not have a material impact on our 
consolidated financial statements.      

Accounting Pronouncements Not Yet Adopted 

Financial Instruments 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): 
Measurement of Credit Losses on Financial Instruments.  The new standard is intended to provide financial 
statement users with more decision-useful information about the expected credit losses on financial instruments and 
other commitments to extend credit held at each reporting date.   

This standard is effective for all public business entities for annual and interim periods beginning after 
December 15, 2019, with early adoption permitted. We will adopt this standard as of January 1, 2020 and we do not 
expect the adoption of this standard to have a material effect on our consolidated financial statements. 

Fair Value Measurement 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure 

Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure 
requirements in Topic 820.  

F-21 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

This standard is effective for all public business entities for annual and interim periods beginning after 
December 15, 2019, with early adoption permitted. We will adopt this standard as of January 1, 2020 and we are 
currently evaluating the impact of the adoption of this standard on our consolidated financial statements.  

Income Taxes 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for 

Income Taxes, which primarily removes specific exemptions to the general principles in Topic 740 in GAAP and 
improves the financial statement preparers’ application of income tax-related guidance and simplifies GAAP.  

This standard is effective for all public business entities for annual and interim periods beginning after 
December 15, 2020, with early adoption permitted. We will adopt this standard as of January 1, 2021 and we are 
currently evaluating the impact of the adoption of this standard on our consolidated financial statements.  

There have been no other recent accounting pronouncements or changes in accounting pronouncements during 

the current year that are of significance, or potential significance, to us.   

Note 2 – Revenue From Contracts with Customers 

The following tables represents the disaggregation of our net sales revenue by product for each of our 

reportable segments: 

Wind blade sales 
Precision molding and 
   assembly systems sales 
Transportation sales 
Other sales 
Total net sales 

Wind blade sales 
Precision molding and 
   assembly systems sales 
Transportation sales 
Other sales 
Total net sales 

Wind blade sales 
Precision molding and 
   assembly systems sales 
Transportation sales 
Other sales 
Total net sales 

Year Ended December 31, 2019 

U.S. 

Asia 

      Mexico 

EMEAI 

Total 

  $ 

120,125      $ 

366,206      $ 

410,337      $ 

432,049      $  1,328,717     

(in thousands) 

3,774        
28,523        
16,895        
169,317      $ 

25,203        
—        
2,400        
393,809      $ 

19,703        
347        
5,219        
435,606      $ 

—        
—        
5,719        

48,680     
28,870     
30,233     
437,768      $  1,436,500     

  $ 

U.S. 

Asia 

      Mexico 

EMEAI 

Total 

Year Ended December 31, 2018 

(in thousands) 

  $ 

126,335      $ 

264,417      $ 

256,101      $ 

286,414      $ 

933,267   

5,034        
29,254        
3,093        
163,716      $ 

36,616        
—        
5,222        
306,255      $ 

7,203        
—        
5,452        
268,756      $ 

—        
—        
4,483        

48,853   
29,254   
18,250   
290,897      $  1,029,624   

  $ 

U.S. 

Asia 

      Mexico 

EMEAI 

Total 

Year Ended December 31, 2017 

(in thousands) 

  $ 

164,870      $ 

346,200      $ 

200,355      $ 

179,100      $ 

890,525   

8,445        
14,020        
3,690        
191,025      $ 

18,408        
—        
7,912        
372,520      $ 

760        
—        
5,448        
206,563      $ 

—        
—        
5,990        
185,090      $ 

27,613   
14,020   
23,040   
955,198   

  $ 

In addition, most of our net sales are made directly to our customers, primarily large multi-national wind 

turbine manufacturers, under our long-term contracts which are typically five years in length.  

F-22 

 
 
  
  
    
  
  
     
     
     
    
  
  
    
    
    
    
 
  
  
  
  
  
     
     
     
  
  
  
  
    
    
    
 
  
  
  
  
  
     
     
     
  
  
  
  
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

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 consolidated balance sheets. Contract 
liabilities consist of advance payments in excess of revenue earned. These amounts were historically recorded as 
customer deposits which usually relate to progress payments received as precision molding and assembly systems 
were being manufactured. The contract liabilities are recorded as current liabilities in the consolidated balance 
sheets and are reduced as we record revenue over time.   

These contract assets and liabilities are reported on the consolidated balance sheets net on a contract-by-

contract basis at the end of each reporting period, as demonstrated in the table below. 

Contract assets and contract liabilities consisted of the following:  

December 31, 

Gross contract assets 
Less: reclassification from contract liabilities 
Contract assets 

2019 

      $ Change 

2018 
(in thousands) 
  $  170,973     $  127,568     $  43,405   
6,402   
  $  166,515     $  116,708     $  49,807   

(10,860 )     

(4,458 )     

Gross contract liabilities 
Less: reclassification to contract assets 
Contract liabilities 

December 31, 

2019 

2018 

      $ Change 

(in thousands) 

  $ 

  $ 

7,466     $  18,003     $  (10,537 ) 
6,402   
(10,860 )     
(4,458 )     
(4,135 ) 
7,143     $ 
3,008     $ 

Contracts assets increased by $49.8 million from December 31, 2018 to December 31, 2019 due to 

incremental unbilled production during the year ended December 31, 2019. Contracts liabilities decreased by $4.1 
million from December 31, 2018 to December 31, 2019 due to the revenue earned related to precision molding and 
assembly systems and wind blades being produced exceeding the amounts billed to customers during the year ended 
December 31, 2019. 

The time it takes to produce a single blade is typically between 5 to 7 days. The time it takes to produce a 

mold is typically between 3 to 6 months.   

For the year ended December 31, 2019, we recognized $7.1 million of revenue 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. As discussed in Note 1, Summary of Operations and Significant 
Accounting Policies, 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. 

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TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

For the year ended December 31, 2019, net revenue recognized from our performance obligations satisfied in 

previous periods decreased by $19.3 million. This primarily relates to changes in certain of our estimated total 
contract values and related percentage of completion estimates.  

As of December 31, 2019, the aggregate amount of the transaction price allocated to the remaining 

performance obligations to be satisfied in future periods was approximately $4.1 billion. We estimate that we will 
recognize the remaining performance obligations as revenue as follows: 38 percent in 2020, 31 percent in 2021, 18 
percent in 2022 and the remaining 13 percent in 2023. The transaction price allocated to the remaining performance 
obligations excludes approximately $295.5 million of variable consideration over the contractual guaranteed 
minimum volume obligations under current contracts with customers which has been constrained primarily due to 
uncertainty associated with production volume during the remaining term of the agreements. We estimate the 
constraint will be resolved in subsequent periods when our customers provide additional information relevant to 
forecasted future production. 

Pre-Production Investments 

We recognize an asset for deferred costs incurred to fulfill a contract when those costs meet all of the 
following criteria:  (a) the costs relate directly to a contract or to an anticipated contract that we can specifically 
identify; (b) the costs generate or enhance our resources that will be used in satisfying performance obligations in 
the future; and, (c) the costs are expected to be recovered. We capitalize the costs related to training our workforce 
to execute the manufacturing services and other facility set-up costs related to preparing for production of a specific 
contract.  We factor these costs into our estimated cost analysis for the overall contract.  Costs capitalized are 
amortized over the number of units produced during the contract term. As of December 31, 2019, the cost and 
accumulated amortization of such assets totaled $5.6 million and $2.7 million, respectively. As of December 31, 
2018, the cost and accumulated amortization of such assets totaled $5.6 million and $2.1 million, respectively. These 
amounts are included in intangible assets and deferred costs, net in the consolidated balance sheet. See Note 8, 
Intangible Assets and Deferred Costs, Net. 

In applying the practical expedient as permitted under Topic 606, we recognize the incremental costs of 
obtaining contracts as an expense when incurred if the amortization period of the asset that we otherwise would have 
recognized is one year or less.  These costs are included in cost of goods sold. 

Note 3. Significant Risks and Uncertainties 

Our revenues and receivables are from a small number of customers. As such, our production levels are 

dependent on these customers’ orders. See Note 17, Concentration of Customers.  

We have experienced extended startup delays and challenges with respect to our Newton, Iowa transportation 

facility, which had an adverse impact on our results of operations for the year ended December 31, 2019.  See 
Note 20, Subsequent Events. 

We maintain our U.S. cash in bank deposit 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 
during 2019 and 2018. At December 31, 2019 and 2018, we had $45.8 million and $53.7 million, respectively, of 
cash in deposit accounts in high quality U.S. banks, which was in excess of FDIC limits. We have not experienced 
losses in any such accounts. 

We also maintain cash in bank deposit accounts outside the U.S. with no insurance. At December 31, 2019, 
this includes $9.9 million in Turkey, $9.7 million in China, $2.4 million in India, $2.1 million in Mexico and $0.4 
million in Denmark. We have not experienced losses in these accounts. In addition, we have short-term deposits in 
interest bearing accounts of $1.0 million in China, which are reported as restricted cash in our consolidated balance 
sheets. We also have long-term deposits in interest bearing accounts of $0.5 million in Iowa. See Note 9, Other 
Noncurrent Assets. 

F-24 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Certain of our debt agreements are either tied to LIBOR or EURIBOR and certain of them have associated 
interest rate hedges. Due to the relatively low LIBOR and EURIBOR rates in effect as of December 31, 2019, 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.   

Note 4. Related-Party Transactions  

Related party transactions include transactions between us and certain of our affiliates. The following 

transactions were in the normal course of operations and were measured at the exchange amount, which is the 
amount of consideration established and agreed to by the parties. 

We have previously entered into several agreements with subsidiaries of General Electric Company and its 

consolidated affiliates (GE) relating to the operation of its business. As a result of these agreements, GE has been a 
debtor, creditor and holder of both our preferred and common shares. During the second quarter of 2017, GE 
reduced its holdings of our common shares to less than five percent of the total shares outstanding and then 
completely divested of our common shares during the third quarter of 2017. For the six months ended June 30, 2017, 
we recorded related-party sales with GE of $198.6 million.  

We have entered into five separate supply agreements with GE to manufacture wind blades in Newton, Iowa; 

Taicang Port, China; Juárez, Mexico (2) and Izmir, Turkey. The supply agreements in Taicang Port, China and 
Izmir, Turkey expired on December 31, 2017.  

In connection with our secondary offering in May 2017, certain entities associated with Element Partners, 
Angeleno Group, Landmark Partners and NGP Energy Technology Partners, L.P, as well as certain of our executive 
officers sold an aggregate of 5,075,000 shares of our common stock at the public offering price of $16.35 per share.  

Note 5. Accounts Receivable 

Accounts receivable at December 31 consisted of the following:  

Trade accounts receivable 
Other accounts receivable 

Total accounts receivable 

Note 6. Other Current Assets 

Other current assets at December 31 consisted of the following: 

Refundable value-added tax 
Deposits 
Other current assets 

Total current assets 

2019 

2018 

(in thousands) 
  $  180,051     $  172,667   
4,148   
  $  184,012     $  176,815   

3,961       

2019 

2018 

(in thousands) 

  $ 

  $ 

22,687     $ 
6,143       
1,013       
29,843     $ 

11,160   
5,659   
—   
16,819   

F-25 

 
 
  
  
    
  
  
  
  
    
 
 
  
  
    
  
  
  
  
    
    
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Note 7. Property, Plant and Equipment, Net 

Property, plant and equipment, net at December 31 consisted of the following: 

Machinery and equipment 
Buildings 
Leasehold improvements 
Office equipment and software 
Furniture 
Vehicles 
Construction in progress 

Total property, plant and equipment, gross 

Accumulated depreciation 

Total property, plant and equipment, net 

2019 

2018 

14,495       
56,414       
32,284       
22,429       
562       
20,677       

(in thousands) 
  $  159,176     $  119,737   
15,080   
38,747   
26,363   
19,579   
287   
17,390   
     306,037        237,183   
     (101,030 )     
(77,760 ) 
  $  205,007     $  159,423   

As of December 31, 2019, the projects in construction in progress included the construction and outfitting of 

our new manufacturing facility in Chennai, India and continued investments in our other existing manufacturing 
facilities. 

Total depreciation for the years ended December 31, 2019, 2018 and 2017 was $36.7 million, $25.5 million 

and $20.8 million, respectively.  

As of December 31, 2019, the cost and accumulated depreciation of property, plant and equipment that we are 
leasing under finance lease arrangements is $45.0 million and $17.0 million, respectively. As of December 31, 2018, 
the cost and accumulated depreciation of property, plant and equipment that we are leasing under finance lease 
arrangements is $41.3 million and $11.7 million, respectively. See Note 13, Leases for more information related to 
finance leases.   

Note 8. Intangible Assets and Deferred Costs, Net 

Carrying values and estimated useful lives of intangible assets and deferred costs as of December 31, 2019, 

consisted of the following:  

Pre-production investments (1) 
Patents 
Acquired development tools 
Trademarks 
   Total intangible assets and deferred costs, net 

Estimated 
Useful Life    

Cost 

Accumulated 
Amortization      
(in thousands) 

Net 

  $ 

   Various 
   10 years 
   10 years 
  Indefinite      
  $ 

5,639     $ 
112       
980       
150       
6,881     $ 

(2,656 )   $ 
(6 )     
(49 )     
—       
(2,711 )   $ 

2,983   
106   
931   
150   
4,170   

Carrying values and estimated useful lives of intangible assets and deferred costs as of December 31, 2018, 

consisted of the following:   

Estimated 
Useful Life    

Cost 

Accumulated 
Amortization      
(in thousands) 

Net 

Pre-production investments (1) 
License 
Trademarks 
   Total intangible assets and deferred costs, net 

  $ 

   Various 
   5 years 
  Indefinite      
    $ 

5,598     $ 
1,000       
150       
6,748     $ 

(2,111 )   $ 
(179 )     
—       
(2,290 )   $ 

3,487   
821   
150   
4,458   

F-26 

 
 
 
  
  
     
  
  
  
  
    
    
    
    
    
    
 
 
  
  
     
  
  
  
  
  
  
    
    
  
  
 
 
  
  
     
  
  
  
  
  
  
    
  
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

(1)  See Note 2, Revenue From Contracts with Customers, for a further discussion of these pre-production 

investments. 

During the years ended December 31, 2019, 2018 and 2017, we recorded amortization expense for the 

intangible assets and deferred costs of $1.9 million, $0.9 million and $0.9 million, respectively.  

Note 9. Other Noncurrent Assets 

Other noncurrent assets at December 31 consisted of the following: 

Deferred tax assets 
Deposits 
Land use right 
Restricted cash 
Other 

Total other noncurrent assets 

2019 

2018 

(in thousands) 

11,209     $ 
8,437       
1,521       
475       
2,278       
23,920     $ 

15,296   
3,845   
2,378   
475   
1,976   
23,970   

  $ 

  $ 

The historical land use right asset was purchased during 2007 and permits us to use the land where the 
Taicang Port, China facility, owned by us, is situated. Amortization of the land use right began upon the opening of 
the plant in 2008. An additional land use right asset was purchased during 2018 which permits us to use additional 
land where the Taicang Port, China facility is situated. In the fourth quarter of 2019 we determined that we were not 
going to utilize this additional land use right asset and wrote off approximately $0.8 million to depreciation expense 
in our consolidated statement of operations. We are still amortizing the historical land use right asset on a straight-
line basis over its 50 year life. 

As of December 31, 2019 and 2018, we maintained long-term deposits in interest bearing accounts related to 

fully cash-collateralized letter of credit in connection with an equipment lessor in Iowa totaling approximately 
$0.5 million. 

Note 10. Accrued Warranty 

Warranty accrual at December 31 consisted of the following: 

Warranty accrual at beginning of year 
Accrual during the year 
Cost of warranty services provided during the year 
Reduction of reserves 
Warranty accrual at end of year 

2019 

2018 
(in thousands) 

2017 

  $ 

  $ 

36,765      $ 
22,345        
(6,220 )      
(5,251 )      
47,639      $ 

30,419      $ 
14,605        
(4,457 )     
(3,802 )     
36,765      $ 

21,089   
15,443   
(1,986 ) 
(4,127 ) 
30,419   

Note 11. Share-Based Compensation 

Since 2015, we have granted awards of stock options, RSUs and PSUs to certain employees and non-

employee directors under the 2015 Plan. Each award granted prior to the consummation of our IPO included a 
performance condition that required the completion of an initial public offering by us and a required vesting period 
of one to four years commencing upon achievement of the performance condition. As the IPO was consummated in 
July 2016, we began recording compensation expense in July 2016 for the requisite service period from the grant 
date through the IPO date with the balance of the share-based compensation to be expensed over the remaining 
vesting period. 

F-27 

 
 
 
 
 
  
  
    
  
  
  
  
    
    
    
    
 
 
  
  
     
     
  
  
  
  
    
    
    
  
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

The share-based compensation expense recognized in the consolidated statements of operations for the years 

ended December 31 was as follows: 

2019 

2018 
(in thousands) 

2017 

Cost of goods sold 
General and administrative expenses 

Total share-based compensation expense 

  $ 

386     $  1,281     $  1,070   
6,054   
6,514       
  $  5,681     $  7,795     $  7,124   

5,295       

The share-based compensation expense recognized by award type for the years ended December 31 was as 

follows: 

RSUs 
Stock options 
PSUs 

Total share-based compensation expense 

2019 

2017 

2018 
(in thousands) 
  $  3,658     $  4,209     $  2,808   
4,316   
—   
  $  5,681     $  7,795     $  7,124   

1,501       
522       

2,463       
1,123       

The summary of activity for our incentive plans is as follows:  

Stock Options 

RSUs 

PSUs 

Shares 
Available 
for Grant       Shares 

Weighted- 
Average 
Exercise 
Price 

Options 

Exercisable      Shares 

Weighted- 
Average 
Grant 
Date Fair 
Value 

Weighted- 
Average 
Grant 
Date Fair 
Value 

     Shares      

Balance as of December 31, 
2016 

Increase in shares authorized      1,349,475       
Granted 
Exercised/vested 
Forfeited/cancelled 
Balance as of December 
31, 2017 

    3,587,692       3,331,418     $  12.72        25,828       636,120     $  10.90        —       
—        —       
        220,500        22.42        —       
        (218,040 )      10.95        —       
         (25,200 )      10.87        —       

—       
    (433,700 )      213,200        19.70       
—       (138,878 )      10.83       
     227,650       (202,450 )      11.54       

—       

—       

—   
—   
—   
—   
—   

Increase in shares authorized      1,360,826       
Granted 
    (451,212 )     
Exercised/vested 
Forfeited/cancelled 
Balance as of December 
31, 2018 

—       
9,652        22.67       
—       (354,153 )      12.10       
     339,874       (258,095 )      14.72       

—       

    4,731,117       3,203,290        13.34        890,433       613,380        15.02        —       
—        —       

—       

—   
—   
        149,012        23.37       292,548        22.67   
        (298,036 )      13.03        —       
—   
         (38,480 )      21.51       (43,299 )      22.67   

    5,980,605       2,600,694        13.41       1,415,948       425,876        18.75       249,249        22.67   
—   
        196,418        26.99       281,969        29.25   
        (236,187 )      15.42        —       
—   
         (31,680 )      24.91       (39,500 )      25.60   

—       
    (875,557 )      397,170        20.94       
—       (345,475 )      15.14       
     129,341        (58,161 )      15.23       

—        —       

—       

—       

Increase in shares authorized      1,387,123       
Granted 
Exercised/vested 
Forfeited/cancelled 
Balance as of December 
31, 2019 

    6,621,512       2,594,228        14.29       1,697,272       354,427        24.99       491,718        26.20   

F-28 

 
 
  
  
    
    
  
  
  
  
    
 
 
  
  
    
    
  
  
  
  
    
    
   
 
  
    
  
    
    
    
  
  
  
    
    
    
  
        
    
        
    
        
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

The fair value of RSUs which vested during the years ended December 31, 2019 and 2018 was $6.2 million 
and $8.4 million, respectively.  In addition, during 2019 and 2018, we repurchased 79,040 and 100,891 shares for 
$2.1 million and $2.9 million, respectively, related to tax withholding requirements on vested RSU awards.  

The following table summarizes the outstanding and exercisable stock option awards as of December 31, 

2019: 

Range of Exercise Prices: 
$8.49 
$10.87 
$11.00 to $16.53 
$18.70 
$18.77 to $29.26 
$8.49 to $29.26 

     Options Exercisable 

Options Outstanding 
Weighted- 
Average 
Remaining 
Contractual Life 
(in years) 
0.6 
5.4 
6.1 
6.5 
8.9 
6.4 

   Shares 
     16,397       
    1,470,972       
     320,001       
     188,560       
     598,298       
    2,594,228       

Weighted- 
Average 

Exercise Price      Shares 
    $ 

Weighted- 
Average 
Exercise Price   
8.49   
10.87   
16.02   
18.70   
19.99   
12.90   

8.49        16,397     $ 
10.87       1,169,598       
15.95        249,800       
18.70        150,081       
20.59        111,396       
14.29       1,697,272       

The following table contains additional information pertaining to stock options for the years ended 

December 31: 

Total intrinsic value of stock options outstanding 
Total intrinsic value of stock options exercisable 
Cash received from the exercise of stock options 
Fair value of stock options vested 

  $  12,219     $  29,045     $ 
15,949       
4,284       
4,566       

9,718       
5,223       
8,796       

22,804   
6,688   
1,430   
4,931   

2019 

2018 
(in thousands) 

2017 

As of December 31, 2019, the unamortized cost of the outstanding RSUs and PSUs was $4.2 million and $2.4 
million, respectively, which we expect to recognize in the consolidated financial statements over weighted-average 
periods of approximately 1.8 years and 1.9 years, respectively. Additionally, the total unrecognized cost related to 
non-vested stock option awards was $2.3 million, which we expect to recognize in the consolidated financial 
statements over a weighted-average period of approximately 1.8 years. 

The fair value of the stock options granted during the years ended December 31 were calculated using the 

Black-Scholes option pricing model with the following assumptions: 

Weighted-average fair value 
Expected volatility 
Expected life 
Risk-free interest rate 
Dividend yield 

   2019 
  $ 

   2018 
6.80      $  10.36      $ 
42.8 %     
28.0 %     

   2017 

9.10   
45.0 % 

  6.3 years      6.3 years      6.3 years   

1.9 %     
0.0 %     

2.7 %     
0.0 %     

1.5 % 
0.0 % 

F-29 

 
 
  
  
  
 
    
    
    
      
      
      
      
      
 
 
  
  
     
     
  
  
  
  
    
    
    
 
 
  
  
  
  
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Note 12. Long-Term Debt, Net of Debt Issuance Costs and Current Maturities  

Long-term debt, net of debt issuance costs and current maturities, as of December 31 consisted of the 

following:  

2019 

2018 

(in thousands) 

Senior revolving loan—US 
Accounts receivable financing—EMEAI 
Equipment financing—EMEAI 
Equipment finance lease—U.S. 
Equipment finance lease—EMEAI 
Equipment finance lease—Mexico 

Total debt - principal 
Less: Debt issuance costs 

Total debt, net of debt issuance costs 
Less: Current maturities of long-term debt 

Long-term debt, net of debt issuance costs 
   and current maturities 

  $  112,414     $ 
3,805       
7,903       
288       
5,732       
11,919       

90,414   
14,524   
12,197   
111   
6,738   
14,517   
     142,061        138,501   
(878 ) 
     141,389        137,623   
(27,058 ) 

(13,501 )     

(672 )     

  $  127,888     $  110,565   

Senior Financing Agreements (U.S.): 

In April 2018, we entered into a new credit agreement, the Credit Agreement, with four lenders consisting of a 

multi-currency, revolving credit facility in an aggregate principal amount of $150.0 million, including a $25.0 
million letter of credit sub-facility. On the closing date, we drew down $75.4 million on the revolving credit facility 
in connection with the closing of the transactions contemplated by the Credit Agreement and used the proceeds to 
pay all outstanding amounts due and payable under our previous credit agreement, various fees and expenses and 
accrued interest. All borrowings and amounts outstanding under the Credit Agreement are scheduled to mature in 
April 2023. In May 2019, the Credit Agreement was further amended to revise the definition of Consolidated 
EBITDA as utilized in certain of the financial covenants of the Credit Agreement. 

In connection with the Credit Agreement, in the second quarter of 2018 we expensed $2.0 million of deferred 

financing costs associated with the previous credit agreement and a $1.4 million prepayment penalty within the 
caption “Loss on extinguishment of debt” in the accompanying consolidated statements of operations. In addition, 
we incurred debt issuance costs related to the Credit Agreement totaling $1.0 million which will be amortized to 
interest expense over the five-year term of the Credit Agreement using the effective interest method. 

Interest accrues at a variable rate equal to LIBOR plus a margin of 1.75% (3.3% as of December 31, 2019), 
which may vary based on our total net leverage ratio as defined in the Credit Agreement. Interest is paid monthly 
and we are not obligated to make any principal repayments prior to the maturity date provided we are not in default 
under the Credit Agreement. We may prepay the borrowings under the Credit Agreement without penalty.  

In April 2018, we also entered into an interest rate swap arrangement to fix a notional amount of $75.0 million 

of the Credit Agreement at an effective interest rate of 4.2% for a period of five years.  See Note 1, Summary of 
Operations and Significant Accounting Policies - (s) Financial Instruments, for more details on this interest rate 
swap arrangement.  

As of December 31, 2019 and 2018, there was $112.4 million and $90.4 million outstanding under the Credit 

Agreement, respectively.   

F-30 

 
 
  
  
     
  
  
  
  
    
    
    
    
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Due to the revolving credit facility’s variable interest rate of LIBOR plus a competitive spread, we estimate 

that fair-value approximates the face value of these notes. 

Accounts Receivable, Secured and Unsecured Financing: 

EMEAI: During 2014, we renewed a general credit agreement, as amended, with a financial institution in 

Turkey to provide up to 21.0 million Euro of short-term collateralized financing on invoiced accounts receivable of 
one of our customers in Turkey. Interest originally accrued annually at a fixed rate of 9.1% and was paid quarterly. 
In December 2014, and later amended, we obtained an additional $8.0 million of unsecured financing in Turkey 
under the credit agreement with interest accruing annually at a fixed rate of 2.0% and payable at the end of the term 
when the loan is repaid. All other credit agreement terms remained the same. The credit agreement does not have a 
maturity date, however the limits are reviewed in September of each year. During the fourth quarter of 2018, we 
replaced the accounts receivable financing facility with the accounts receivable assignment agreement discussed 
below. As of December 31, 2019 and 2018, there were no amounts outstanding under the unsecured financing 
facility.  

In 2014, we entered into a credit agreement with a Turkish financial institution to provide up to $16.0 million 
of short-term financing of which $10.0 million is collateralized financing on invoiced accounts receivable of one of 
our customers in Turkey, $5.0 million is unsecured financing and $1.0 million is related to letters of guarantee. 
Interest accrues at a variable rate of the three month Euro Interbank Offered Rate (EURIBOR) plus 6.5%. During 
the first quarter of 2018, the collateralized financing on invoiced accounts receivables and unsecured financing 
facilities were retired and the letters of guarantee limit was adjusted, later amended to 1.4 million Euro 
(approximately $1.6 million as of December 31, 2019). No amounts were outstanding under this letter of guarantee 
agreement as of December 31, 2019 or 2018.    

In 2016, we entered into a general credit agreement, as amended, with a Turkish financial institution to 
provide up to 39.0 million Euro (approximately $43.7 million as of December 31, 2019) of short-term financing of 
which 28.0 million Euro (approximately $31.4 million as of December 31, 2019) is collateralized financing based on 
invoiced accounts receivables of one of our customers in Turkey, 10.0 million Euro (approximately $11.2 million as 
of December 31, 2019) for the collateralized financing of capital expenditures and 1.0 million Euro (approximately 
$1.1 million as of December 31, 2019) related to letters of guarantee. Interest on the collateralized financing based 
on invoiced accounts receivables of one of our customers in Turkey accrues at a fixed rate of 2.75% as of December 
31, 2019 and is paid quarterly with a maturity date equal to four months from the applicable invoice date. Interest on 
the collateralized capital expenditures financing accrues at the one month EURIBOR plus 6.75% (6.75% as of 
December 31, 2019) with monthly principal repayments beginning in October 2017 with a final maturity date of 
December 2021. Interest on the letters of guarantee accrues at 2.00% annually with an amended final maturity date 
of July 2020. As of December 31, 2019 and 2018, there was $7.9 million and $12.2 million outstanding under the 
collateralized financing of capital expenditures line, respectively. Additionally, as of December 31, 2019 and 2018, 
there was $3.8 million and $14.5 million, respectively, outstanding under the collateralized financing based on 
invoiced accounts receivables.  

In the fourth quarter of 2018, we entered into a credit agreement, as amended, with a Turkish financial 
institution to provide up to 118.6 million Turkish Lira (approximately $20.6 million as of June 30, 2019) of 
collateralized financing on invoiced accounts receivable of one of our customers in Turkey. Interest accrued at a 
fixed rate of 3.9% and was to be paid quarterly. The credit agreement did not have a maturity date, however the limit 
would be reviewed in October of each year. In September 2019 this credit agreement was cancelled. No amounts 
were outstanding under this agreement as of December 31, 2018. 

In the fourth quarter of 2019, we entered into a credit agreement with a Turkish financial institution to provide 

up to $10.0 million Euro (approximately $11.2 million as of December 31, 2019) of unsecured financing. Interest 
accrues at a fixed rate of 2.5% and is payable at the end of the term when the loan is repaid. No amounts were 
outstanding under this agreement as of December 31, 2019.  

Due to the short-term nature of the unsecured financings in the EMEAI segment, we estimate that fair-value 

approximates the face value of the notes. 

F-31 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Asia: In February 2017, we entered into a credit agreement, as amended, with a Chinese financial institution 

to provide an unsecured credit line of up to 210.0 million Renminbi (approximately $30.5 million as of June 30, 
2019) which can be used for the purpose of domestic and foreign currency loans, issuing customs letters of 
guarantee or other transactions approved by the lender. Interest on the credit line accrues at the Chinese central bank 
interest rate plus an applicable margin (4.8% as of June 30, 2019) and can be paid monthly, quarterly or at the time 
of the debt’s maturity (extended to January 2020). In August 2019, except as noted below, we replaced this credit 
agreement with the credit agreement discussed below. In connection with the August 2019 transaction, the financial 
institution agreed to allow the working capital loans which were then outstanding, totaling 5.0 million Renminbi (or 
approximately $0.7 million as of September 30, 2019) to be repaid on their due date of October 1, 2019. As of 
December 31, 2018, there were 92.8 million Renminbi (approximately $13.5 million) of letters of guarantee used for 
customs clearance outstanding. As of December 31, 2018, there were no working capital loan amounts outstanding.  

In August 2019, we entered into a credit agreement with a Chinese financial institution to provide an 

unsecured credit line of up to 315.0 million Renminbi (approximately $45.2 million as of December 31, 2019) 
related to two of our China facilities which can be used for the purpose of issuing customs letters of guarantee and 
covering the related deposits on such letters of guarantee, project financing and certain other transactions approved 
by the lender. Interest on the credit line accrues at the Chinese central bank interest rate plus an applicable margin 
(4.8% as of December 31, 2019) and can be paid monthly, quarterly or at the time of the debt’s maturity (August 
2021). As of December 31, 2019, there were 25.7 million Renminbi (approximately $3.7 million) of letters of 
guarantee and related deposits used for customs clearance outstanding.  

In March 2018, we entered into a credit agreement, as amended, with a Chinese financial institution to provide 

an unsecured credit line of up to 100.0 million Renminbi (approximately $14.3 million as of December 31, 2019) 
which can be used as customs letters of guarantee. Interest on the credit line accrues at the Chinese central bank 
interest rate plus an applicable margin (4.8% at December 31, 2019) and can be paid monthly, quarterly or at the 
time of the debt’s maturity (in March 2023).  As of December 31, 2019, there were 71.9 million Renminbi 
(approximately $10.3 million) of letters of guarantee used for customs clearance outstanding. As of December 31, 
2018, there were no amounts outstanding under this credit agreement.  

Equipment Leases and Other Arrangements:  

U.S.: In 2014, we entered into a lease agreement, as amended, with a leasing company for the lease of up to 

$5.4 million of machinery and equipment at our Iowa facility. The lease included an implied effective interest rate of 
4.3% annually and required monthly payments during each 24 month term. The amounts outstanding under this 
agreement as of December 31, 2019 and 2018, were $0.1 million and $0.1 million, respectively.   

EMEAI: In 2013, we entered into a finance lease agreement with a financial institution in Turkey for the 

initial lease of up to $4.9 million of machinery, equipment and building improvements at our first Turkey facility. 
The term of the lease was for four years at an effective interest rate of 6.0%. The loan was to be repaid in monthly 
installments through 2017. The financing agreement was subsequently amended in 2017 to include our second 
Turkey facility and increase the amount of machinery, equipment and building improvements available for lease to 
$10.0 million. As a result of the amendment, and subsequent amendments, the loan is to be repaid in monthly 
installments through 2023 at an effective interest rate of 8.0%. All other financing agreement terms remained the 
same. The balance outstanding as of December 31, 2019 and 2018 was $5.6 million and $6.7 million, respectively. 

Mexico: In 2016, we entered into a lease agreement, as amended, with a leasing company for the lease of up 
to $10.0 million of machinery and equipment at our second Mexico facility. The lease includes an implied effective 
interest rate of 4.3% annually and requires monthly payments during each 24 month term. There were no amounts 
outstanding under this agreement as of December 31, 2019. The amount outstanding under this agreement as of 
December 31, 2018 was $0.7 million.  

In March 2017, we entered into a sale-lease agreement with a leasing company for the initial lease of up to 

$12.0 million of machinery and equipment at our third Mexico facility. The lease includes an implied effective 
interest rate of 4.3% annually and requires monthly payments during each 24 month term. There were no amounts 
outstanding under this agreement as of December 31, 2019. The amount outstanding under this agreement as of 
December 31, 2018 was $3.2 million.    

F-32 

 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

In March 2018, we entered into a sale-lease agreement with a leasing company for the initial lease of up to 

$15.0 million of machinery and equipment at our Matamoros, Mexico facility. The lease includes an implied 
effective interest rate of 6.7% annually and requires monthly payments during each 48 month term. The amount 
outstanding under this agreement as of December 31, 2019 and 2018 was $10.9 million and $10.5 million, 
respectively. 

Costs associated with the issuance of debt are presented net of the related debt and are amortized over the term 

of the debt using the effective interest rate method. For the years ended December 31, 2019, 2018 and 2017, $0.2 
million, $0.3 million and $0.6 million of debt issuance costs were amortized to interest expense in our consolidated 
statements of operations, respectively.   

The average interest rate on our short-term borrowings as of December 31, 2019 and 2018 was approximately 

5.7% and 7.7%, respectively.     

The future aggregate annual principal maturities of debt at December 31, 2019, are as follows (in thousands): 

2020 
2021 
2022 
2023 
2024 
  Total debt - principal 

  $ 

13,501   
9,519   
5,130   
113,720   
191   
  $  142,061   

Note 13. 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. 

The components of lease cost were as follows: 

Operating lease cost 

Finance lease cost 
  Amortization of assets under finance leases 
  Interest on finance leases 
Total finance lease cost 

2019 
  (in thousands)   
30,957   
  $ 

  $ 

  $ 

6,351   
1,414   
7,765   

Future minimum lease payments under noncancelable leases as of December 31, 2019 were as follows: 

F-33 

 
 
    
    
    
    
 
 
 
 
 
 
  
  
  
  
  
    
    
    
    
    
 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Year Ending December 31, 
2020 
2021 
2022 
2023 
2024 
Thereafter 
  Total future minimum lease payments 
Less: interest 
  Total lease liabilities 

Total lease liabilities as of December 31, 2019 were as follows: 

Current operating lease liabilities 
Current maturities of long-term debt 
Noncurrent operating lease liabilities 
Long-term debt, net of debt issuance costs and current 
maturities 
   Total lease liabilities 

   Operating 

Leases 

Finance 

Leases 

(in thousands) 

  $ 

  $ 

25,425      $ 
22,669        
21,618        
20,978        
17,519        
66,584        
174,793        
(44,281 )     
130,512      $ 

6,744   
6,419   
5,653   
822   
200   
—   
19,838   
(1,900 ) 
17,938   

   Operating 

Leases 

Finance 
Leases 

(in thousands) 

  $ 

16,629     $ 
—       
113,883       

—   
5,744   
—   

—       
130,512     $ 

12,194   
17,938   

  $ 

See Note 7, Property, Plant and Equipment, Net for a discussion of the cost and accumulated depreciation of 

assets financed through finance leases. 

Other information related to leases was as follows: 

2019 
   (in thousands) 

Supplemental Cash Flow Information 
Cash paid for amounts included in the measurement of lease liabilities: 
  Operating cash flows from operating leases 
  Operating cash flows from finance leases 
  Financing cash flows from finance leases 

  $ 

Right of use assets obtained in exchange for new lease obligations: 
  Operating leases 
  Finance leases 

29,845   
1,414   
9,128   

15,855   
5,811   

Weighted-Average Remaining Lease Term (In Years): 
  Operating leases 
  Finance leases 

Weighted-Average Discount Rate: 
  Operating leases 
  Finance leases 

F-34 

   December 31, 

2019 

7.6   
3.2   

7.5 % 
6.4 % 

 
  
    
  
  
  
     
  
  
  
  
    
         
    
    
    
    
    
    
    
    
 
 
  
    
  
  
  
     
  
  
  
  
    
    
    
 
 
 
  
  
  
  
  
    
    
    
    
    
    
  
    
    
    
    
    
    
  
    
  
  
  
  
  
  
  
    
    
    
    
  
    
    
    
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

As of December 31, 2019, we have an additional lease related to our new manufacturing facility in Chennai, 
India of approximately $60 million which has not yet commenced, but which we expect will commence in the first 
half of 2020 with an initial term of ten years.  

Note 14. Commitments and Contingencies 

(a) Operating Leases  

We lease various facilities and equipment under noncancelable operating leases with terms ranging from 

12 months to 120 months. Scheduled rent increases are recorded on a straight-line basis over the entire term of the 
lease. 

Rental expense charged under all operating leases (including leases with terms of less than one year) was 
$31.0 million, $25.5 million and $19.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. 
See Note 13, Leases for a listing of the future minimum lease payments under noncancelable operating leases with 
terms of one year or more as of December 31, 2019.   

(b) Legal Proceedings  

From time to time, we may be involved in disputes or litigation relating to claims arising out of its operations. 

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 are 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.   

(c) Insurance/Self-Insurance  

We use a combination of insurance and self-insurance for a number of risks, including claims related to our 

employee health care, workers’ compensation and general liability. Liabilities associated with these risks are 
estimated based on, among other things, historical claims experience, severity factors, and other actuarial 
assumptions. Our loss exposure related to self-insurance is limited by stop loss coverage on a per occurrence and 
aggregate basis. We regularly analyze our reserves for incurred but not reported claims, and for reported but not paid 
claims related to our self-funded insurance programs.  While we believe our reserves are adequate, significant 
judgment is involved in assessing these reserves such as assessing historical paid claims, average lags between the 
claims’ incurred date, reported dates and paid dates, and the frequency and severity of claims.  There may be 
differences between actual settlement amounts and recorded reserves and any resulting adjustments are included in 
expense once a probable amount is known.   

(d) Dividend Restrictions 

Certain of our subsidiaries are limited in their ability to declare dividends without first meeting statutory 

restrictions of the People’s Republic of China, including retained earnings as determined under Chinese-statutory 
accounting requirements. Until 50% ($26.5 million) of registered capital is contributed to a surplus reserve, our 
Chinese 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, we can pay dividends equal to 100% of after-tax profit 
assuming other conditions are met. At December 31, 2019, the amount of the surplus reserve fund was $6.6 million. 

(e) Collective Bargaining Agreements  

In 2016, we entered into a three-year collective bargaining agreement with certain of our employees at our 
first Turkey facility. The agreement resulted in an average increase in pay of approximately 20% for employees 
covered by the agreement. In addition, beginning in July 2017, this collective bargaining arrangement also covered 
similarly situated employees at our second Turkey facility. In 2019, the collective bargaining agreement with the 
Turkey facilities was renewed. In March 2018, we entered into a collective bargaining agreement with a labor union 
for certain of our employees at the Matamoros, Mexico facility. In the first quarter of 2020, we amended our 

F-35 

 
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Matamoros collective bargaining agreement to adjust the salaries and bonuses payable to our associates for calendar 
year 2020 that are covered by this agreement. Currently, there are no other employees covered by collective 
bargaining agreements. We believe that our relations with employees are generally good.  

Note 15. Defined Contribution Plan 

We maintain a 401(k) plan for all of our U.S. employees. Under the 401(k) plan, eligible employees may 
contribute, subject to statutory limitations, a percentage of their salaries. We currently match 50 percent of the 
participants’ contributions up to eight percent of eligible compensation. 

Participant vesting occurs in our matching contributions according to the schedule below: 

Years of service 
1-year anniversary 
2-year anniversary 
3-year anniversary 

Vesting 
Percentage    

34 % 
66 % 
100 % 

Our matching contributions to the 401(k) plan were $0.6 million, $0.6 million and $0.6 million for the years 

ended December 31, 2019, 2018 and 2017, respectively. Our matching contributions are accrued and recorded as 
expense during each payroll period. Effective January 1, 2017, we changed the 401(k) plan to include an auto 
enrollment feature, increased our match from 25% of the first 8% to 50% of the first 8% and reduced the vesting 
period from six years to three years. 

In Mexico, we maintain an annual savings fund, which matches the employee contribution each week, based 

on the Mexican statutory maximum of 13% of actual minimum salary rates. The savings fund period runs from 
November to October each year, and is distributed to employees in full, during the first week of November each 
year. For the years ended December 31, 2019, 2018 and 2017, we incurred matched savings expense of $2.7 million, 
$1.8 million and $1.3 million, respectively. 

In Turkey, we maintain a retirement fund that is based on a formula of annual salary multiplied by the number 
of years of service with us. We accrue a retirement fund liability for this each month. As of December 31, 2019 and 
2018, we accrued $2.0 million and $1.0 million, respectively, based on the service periods of eligible employees 
greater than one year.      

Note 16. Income Taxes 

Geographic sources of income (loss) before income taxes are as follows for the years ended December 31: 

2019 

2018 
(in thousands) 

2017 

United States 
China 
Turkey 
Mexico 
India 
Other 
  Total income before income taxes 

2017 Tax Reform  

  $  (41,255 )   $  (33,034 )   $ 
(4 )     
31,955       
3,329       
—       
—       

6,272   
44,563   
56   
3,641   
—   
—   
2,246     $  54,532   

(3,777 )     
47,579       
8,434       
(3,970 )     
396       
7,407     $ 

  $ 

During the fourth quarter of 2017, we recorded a net tax expense of $0.1 million (net of valuation allowance) 
related to the enactment of the Tax Cuts and Jobs Act (Tax Reform). The expense was primarily related to applying 
the federal income tax rate change to certain of our deferred tax liabilities, and the realization of a benefit from our 

F-36 

 
  
  
    
    
    
 
 
  
  
     
     
  
  
  
  
    
    
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

alternative minimum tax credit carryover.  This provisional amount was subject to adjustment during the 
measurement period of up to one year following the December 2017 enactment of Tax Reform, as provided by SEC 
guidance.   

As of December 31, 2018, we completed the accounting for the enactment-date income tax effects of Tax 
Reform, which resulted in an immaterial impact to our financial statements. Upon further analyses of certain aspects 
of Tax Reform, and refinement of calculations during 2018, we increased our provisional amount of previously 
untaxed foreign earnings by $13.8 million, to $88.1 million. This resulted in no change to our U.S. federal income 
tax expense due to the impact of foreign tax credits. In addition, the provisional net tax expense discussed above was 
unchanged. 

Tax Reform enacted a new minimum tax on U.S. companies’ foreign operations called Global Intangible Low 

Tax Income (GILTI). Beginning in 2018, GILTI provisions will be applied providing an incremental tax on low 
taxed foreign income. The GILTI provisions require us to include in our U.S. income tax return foreign subsidiary 
earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. We have made a policy election 
to account for any ongoing impacts of GILTI tax in the period in which it is incurred. At December 31, 2019, we 
recorded $15.7 million of federal income tax impacts of GILTI.   

Undistributed earnings of certain of our foreign subsidiaries amounted to approximately $181.9 million at 

December 31, 2019, and we consider those earnings reinvested indefinitely. As a result of the deemed mandatory 
repatriation provision pursuant to Tax Reform, we included undistributed earnings in income subject to U.S. tax at 
reduced tax rates in 2017. In addition, we recognized GILTI income reduced by net operating losses in 2018 and 
2019 as part of the changes from Tax Reform. As a result, we do not have material basis differences related to 
cumulative unremitted earnings for U.S. income tax purposes.    

The income tax provision includes U.S. federal, state, and local taxes, Turkey, China and Mexico taxes 
currently payable and those deferred because of temporary differences between the financial statement and the tax 
bases of assets and liabilities. The components of the income tax provision for the years ended December 31 are as 
follows:  

Current: 
U.S. federal 
U.S. state and local taxes 
Foreign 
  Total current 
Deferred: 
U.S. federal 
U.S. state and local taxes 
Foreign 
  Total deferred 
Total income tax provision (benefit) 

2019 

2018 
(in thousands) 

2017 

  $ 

—     $ 
(7 )     
18,171       
18,164       

—     $ 
4       
11,875       
11,879       

(49 ) 
(3 ) 
14,200   
14,148   

6,277       
(950 )     
(376 )     
4,951       
  $  23,115     $ 

(7,596 )     
(36 )     
(7,280 )     
(14,912 )     

(20 ) 
—   
1,670   
1,650   
(3,033 )   $  15,798   

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TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

The following is a reconciliation from the U.S. statutory income tax rate to our effective income tax rate for 

the years ended December 31:  

United States statutory income tax rate 
Foreign rate differential 
Foreign permanent differences 
Tax rate change 
Withholding taxes 
Foreign tax credits 
Subpart F / GILTI income 
IRC Section 965 dividend 
Foreign tax credits - 965 dividend 
Share-based compensation 
Valuation allowance 
State taxes 
Deferred tax adjustments 
Research and development 
Turkey incentive credits 
Foreign currency / inflationary adjustments 
Other 
Effective income tax rate 

2019 

2018 

2017 

21.0 %     
(40.8 )      
2.9   
(0.3 )      
24.5   
—   
212.3   
—   
—   
(9.1 )      

115.5   
(10.2 )      
2.1   
(13.4 )      
—   
(0.5 )      
8.1   
312.1 %     

21.0 %      
(14.4 ) 
31.7   
—   
27.3   
—   
539.8   
—   
—   
(89.0 ) 
(483.1 ) 
(1.7 ) 
4.6   
(59.8 ) 
—   
(90.6 ) 
(20.8 ) 
(135.0 )%     

35.0 % 
(7.2 ) 
1.2   
10.3   
5.2   
(5.2 ) 
—   
21.1   
(13.7 ) 
—   
(16.6 ) 
—   
3.8   
(1.2 ) 
(5.5 ) 
—   
1.8   
29.0 % 

The following is a summary of the components of deferred tax assets and liabilities at December 31:  

2019 

2018 
(in thousands) 

2017 

  $  23,065     $  17,360     $  18,913   
178   
9,860   
3,489   
—   
390   
320   
—   
4,760   
3,424   
41,334   
(18,680 ) 
22,654   

1,792       
16,111       
3,274       
1,062       
—       
—       
—       
1,931       
4,480       
51,715       
(18,505 )     
33,210       

149       
10,850       
3,607       
—       
—       
—       
1,452       
2,212       
4,548       
40,178       
(8,520 )     
31,658       

(17,081 )     
(4,196 )     
(32 )     
(827 )     
(22,136 )     

(13,781 )     
(2,636 )     
—       
(406 )     
(16,823 )     
  $  11,074     $  14,835     $ 

(15,564 ) 
(3,489 ) 
—   
(1,972 ) 
(21,025 ) 
1,629   

Deferred tax assets: 
Net operating loss and credit carry forwards 
Deferred revenue 
Non-deductible accruals 
Equity compensation 
Lease assets and liabilities 
Equity investment 
Amortization of intangible assets 
Non-deductible interest 
Tax credits 
Other 
  Gross deferred tax assets 
Valuation allowance 
Total deferred tax assets 

Deferred tax liabilities: 
Deferred revenue 
Depreciation 
Lease assets and liabilities 
Other 
  Total deferred tax liabilities 
Net deferred tax assets 

F-38 

 
  
  
  
  
  
  
  
  
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
  
  
  
     
     
  
  
  
  
    
        
        
    
    
    
    
    
    
    
    
    
    
    
    
    
  
    
        
        
    
    
        
        
    
    
    
    
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

The deferred tax valuation allowance at December 31 consisted of the following: 

Allowance at beginning of year 
Benefits obtained (costs accumulated) 
Allowance at end of year 

2019 

2018 
(in thousands) 

2017 

  $ 

(8,520 )   $  (18,680 )   $  (23,618 ) 
10,160       
4,938   
(9,985 )     
(8,520 )   $  (18,680 ) 
  $  (18,505 )   $ 

The valuation allowance as of December 31, 2019 primarily relates to certain state and foreign net operating 

losses (NOLs) that we believe do not meet the more-likely-than-not criteria for recording the related benefits. 

During 2018, we released the valuation allowance recorded against deferred tax assets reported in the United 
States. The release of this valuation allowance resulted in the recognition of a non-cash tax benefit of $10.8 million 
for the year. Additionally, during 2018, there was an increase in the valuation allowance of $0.6 million primarily 
related to state NOLs. During 2019, we increased the valuation allowance recorded against deferred tax assets in 
Taicang, China and India. The increase of this valuation allowance resulted in tax expense of $8.5 million for the 
year. 

We have U.S. federal NOL of approximately $20.9 million, state NOLs of approximately $158.0 million, 
foreign NOLs of approximately $31.3 million and foreign tax credits of approximately $1.9 million available to 
offset future U.S., China and India taxable income. The U.S. federal and state net operating loss carryforwards 
expire in varying amounts through 2039 and the foreign tax credits expire in 2026. We also have foreign NOLs that 
expire in varying amounts through 2027. 

Sections 382 and 383 of the Internal Revenue Code of 1986, contain rules that limit the ability of a company that 

undergoes an “ownership change” to utilize its net operating loss and tax credit carry forwards and certain built-in 
losses recognized in years after the “ownership change.” An “ownership change” is generally defined as any change in 
ownership of more than 50% of a corporation’s stock over a rolling three-year period by stockholders that own (directly 
or indirectly) 5% or more of the stock of a corporation, or arising from a new issuance of stock by a corporation. If an 
ownership change occurs, Section 382 generally imposes an annual limitation on the use of pre-ownership change 
NOLs to offset taxable income earned after the ownership change. The annual limitation is equal to the product of the 
applicable long-term tax exempt rate and the value of our stock immediately before the ownership change. This annual 
limitation may be adjusted to reflect any unused annual limitation for prior years and certain recognized built-in gains 
and losses for the year. In addition, Section 383 generally limits the amount of tax liability in any post-ownership 
change year that can be reduced by pre-ownership change tax credit carryforwards.  

In June of 2018, we experienced an ownership change.  The pre-ownership change NOLs existing at the date of 

change of $47.7 million are subject to an annual limitation. We do not believe that the Section 382 and 383 annual 
limitation will materially impact our ability to utilize the tax attributes that existed as of the date of the ownership 
change. Certain of these NOLs may be at risk of limitation in the event of a future ownership change.  

We recognize the impact of a tax position in its financial statements if that position is more-likely-than-not to 
be sustained on audit, based on the technical merits of the position. We disclose all unrecognized tax benefits, which 
includes the reserves recorded for uncertain tax positions on filed tax returns and the unrecognized portion of 
affirmative claims. Our policy regarding uncertain tax positions is to recognize potential accrued interest and 
penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2019, we 
had not identified any unrecognized tax benefits.  

We operate in and file income tax returns in various jurisdictions in China, Mexico, Turkey, India, U.S., 
Denmark, Germany and Switzerland, which are subject to examination by tax authorities. In the U.S., the federal tax 
returns for 2017 and 2018 remain open to examination. For U.S. state and local taxes as well as in non-U.S. 
jurisdictions, the statute of limitations generally varies between three and ten years. However, to the extent 
allowable by law, the tax authorities may have a right to examine and make adjustment to prior periods when 
amended returns have been filed, or when net operating losses or tax credits were generated and carried forward for 
subsequent utilization. 

F-39 

 
  
  
  
     
     
  
  
  
  
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Note 17. Concentration of Customers 

Revenues from certain customers (in thousands) in excess of 10 percent of total consolidated Company 

revenues for the years ended December 31 are as follows:  

Customer 
Customer 1 - Vestas 
Customer 2 - GE 
Customer 3 - Nordex 
Customer 4 - Siemens Gamesa 

2018 
  Revenues      % of Total   

2017 
  Revenues      % of Total   

2019 
  Revenues      % of Total   
  $ 662,302       
    369,067       
    230,563       
     73,426       

46.1 %   $ 329,472       
25.7 %     325,962       
16.1 %     195,156       
5.1 %     115,779       

32.0 %   $ 266,276       
31.7 %     426,133       
19.0 %     153,227       
11.2 %      92,394       

27.9 % 
44.6 % 
16.0 % 
9.7 % 

Trade accounts receivable from certain customers in excess of 10 percent of total consolidated Company trade 

accounts receivable at December 31 are as follows: 

Customer 
Customer 1 - Vestas 
Customer 3 - Nordex 

Note 18. Segment Reporting 

2019 
  % of Total    

2018 
  % of Total    

41.9 %     
31.3 %     

46.7 % 
25.7 % 

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 
our business, management focuses on growing our revenues and earnings in select geographic areas serving primarily 
the wind energy market. We have operations in the United States, China, Turkey, Mexico and India. Our operating 
segments are defined geographically as the United States, Asia, EMEAI and Mexico. Financial results are aggregated 
into four reportable segments based on quantitative thresholds. All of our segments operate in their local currency 
except for the Mexico and Asia segments, which both include a U.S. parent company.     

F-40 

 
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
    
    
 
TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

The following tables set forth certain information regarding each of our segments for the years ended 

December 31: 

Net sales by segment: 

U.S. 
Asia 
Mexico 
EMEAI 
Total net sales 
Net sales by geographic location(1): 

United States 
China 
Mexico 
Turkey and India 

Total net sales 
Depreciation and amortization: 

U.S. 
Asia 
Mexico 
EMEAI 

Total depreciation and amortization 
Capital expenditures 

U.S. 
Asia 
Mexico 
EMEAI 

Total capital expenditures 
Income (loss) from operations: 

U.S. 
Asia 
Mexico 
EMEAI 

Total income from operations 
Tangible long-lived assets: 

U.S. 
Asia (China) 
Mexico 
EMEAI (Turkey and India) 
Total tangible long-lived assets 
Total assets: 
U.S. 
Asia 
Mexico 
EMEAI 
Total assets 

2019 

2018 
(in thousands) 

2017 

  $  169,317     $  163,716     $  191,025   
     393,809        306,255        372,520   
     435,606        268,756        206,563   
     437,768        290,897        185,090   
  $ 1,436,500     $ 1,029,624     $  955,198   

  $  169,317     $  163,716     $  191,025   
     393,809        306,255        372,520   
     435,606        268,756        206,563   
     437,768        290,897        185,090   
  $ 1,436,500     $ 1,029,624     $  955,198   

  $ 

  $ 

  $ 

  $ 

  $ 

  $ 

9,223     $ 
10,699       
12,577       
6,081       
38,580     $ 

4,822   
6,795     $ 
6,272   
6,765       
5,994   
7,891       
4,978       
4,610   
26,429     $  21,698   

8,321     $ 
22,471       
25,842       
17,774       
74,408     $ 

21,305     $  10,575   
7,000   
11,218       
20,033   
18,928       
1,237       
7,220   
52,688     $  44,828   

(78,278 )   $ 
24,132       
3,533       
66,501       
15,888     $ 

(67,357 )   $  (33,231 ) 
76,332   
28,147       
14,430   
12,154       
51,774       
12,567   
24,718     $  70,098   

  $ 

36,410     $ 
50,603       
81,654       
36,340       

34,825       
31,924       
65,981       
26,693       
  $  205,007     $  159,423       

  $  107,918     $  115,435       
     210,438        194,088       
     275,646        142,412       
     232,675        152,920       
  $  826,677     $  604,855       

(1)  Net sales are attributable to countries based on the location where the product is manufactured or the services 

are performed.   

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TPI COMPOSITES, INC. AND SUBSIDIARIES  

Notes to Consolidated Financial Statements 

Note 19. Selected Quarterly Financial Data (Unaudited)  

The following tables set forth certain unaudited financial information for each quarter of 2019 and 2018. The 
unaudited quarterly information includes all normal recurring adjustments that, in the opinion of management, are 
necessary for the fair presentation of the information for the periods presented. The operating results for any quarter 
are not necessarily indicative of the results for any future period. The unaudited quarterly results are as follows: 

First 
Quarter 

Second 
Quarter 

Third 
Quarter 

Fourth 
Quarter 

2019 

Net sales 
Gross profit (loss) 
Net income (loss) 
Net income (loss) per common share: 

Basic(1) 
Diluted(1) 

Net sales 
Gross profit 
Net income (loss) 
Net income (loss) per common share: 

Basic(1) 
Diluted(1) 

(in thousands, except per share data) 
  $  299,780      $  330,771      $  383,836      $  422,113   
30,802   
(861 ) 

(1,436 )     
(12,104 )     

25,931        
(4,571 )     

22,551        
1,828        

  $ 
  $ 

(0.35 )   $ 
(0.35 )   $ 

0.05      $ 
0.05      $ 

(0.13 )   $ 
(0.13 )   $ 

(0.02 ) 
(0.02 ) 

First 
Quarter 

Second 
Quarter 

Third 
Quarter 

Fourth 
Quarter 

2018 

(in thousands, except per share data) 
  $  253,981      $  230,610      $  254,976      $  290,057   
12,565   
(8,848 ) 

16,967        
9,532        

15,051        
(4,053 )      

28,258        
8,648        

  $ 
  $ 

0.25      $ 
0.24      $ 

(0.12 )    $ 
(0.12 )    $ 

0.28      $ 
0.26      $ 

(0.26 ) 
(0.26 ) 

(1)  The sum of the quarterly net income (loss) per common share amounts may not equal the annual net 

income (loss) per common share amount due to rounding. 

Note 20 – Subsequent Events  

In January 2020, we announced that we are planning to close our Newton, Iowa bus body manufacturing 

facility and plan to consolidate our bus body manufacturing operations into our Warren, Rhode Island 
manufacturing facility. In connection with these plans, we assessed the recoverability of the carrying value of assets 
associated with the Newton, Iowa facility as of December 31, 2019. As a result of this assessment, we recorded $4.4 
million in impairment charges for the year ended December 31, 2019 as follows; $1.7 million associated with 
property, plant and equipment, $1.2 million in impairment of the right of use asset for the manufacturing facility 
lease and certain leased equipment and a $1.5 million write-off of the pre-production related assets. The impairment 
charges are included in realized loss on sale of assets and asset impairments within the consolidated statement of 
operations.   

In February 2020, we entered into an Incremental Facility Agreement with the current lenders to our Credit 

Agreement and an additional lender, pursuant to which the aggregate principal amount of our revolving credit 
facility under the Credit Agreement was increased from $150.0 million to $205.0 million. All other material terms 
and conditions of the Credit Agreement remained the same.  We did not make any draw downs on the revolving 
credit facility in connection with the execution of the Incremental Facility Agreement.  

F-42 

 
 
  
  
  
  
  
     
     
     
  
  
  
  
    
    
    
         
         
         
    
 
  
  
  
  
  
     
     
     
  
  
  
  
    
    
    
         
         
         
    
 
Number 

    3.1 

    3.2 

    4.1 

    4.2 

    4.3 

    4.4 

    4.5* 

  10.1‡ 

  10.2‡ 

  10.3† 

  10.4† 

  10.5† 

  10.6† 

Exhibit Index 

Description 

 Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect 
(incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (File 
No. 333-212093) filed on July 11, 2016) 

 Second Amended and Restated By-laws of the Registrant, as currently in effect (incorporated by 
reference to Exhibit 3.4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-212093) 
filed on July 11, 2016) 

 Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration 
Statement on Form S-1 (File No. 333-212093) filed on July 11, 2016) 

 Third Amended and Restated Investor Rights Agreement by and among the Registrant and the 
investors named therein, dated June 17, 2010, as amended (incorporated by reference to Exhibit 4.2 to 
the Registrant’s Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Form of senior indenture, to be entered into between the Registrant and the trustee designated therein 
(incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-3 (File 
No. 333-220307) filed on September 1, 2017) 

 Form of subordinated indenture, to be entered into between the Registrant and the trustee designated 
therein (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form 
S-3 (File No. 333-220307) filed on September 1, 2017) 

 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Act of 1934 

 2008 Stock Option and Grant Plan, as amended by Amendment No. 1, dated August 14, 2008 and 
Amendment No. 2, dated December 30, 2008, and forms of award agreements thereunder 
(incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

 Amended and Restated 2015 Stock Option and Incentive Plan and forms of award agreements 
thereunder (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on 
Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Amendment No. 5 to Financing Agreement dated as of August 19, 2014, entered into as of December 
30, 2016, by and among the Registrant, certain of its domestic subsidiaries, HPS Investment Partners, 
LLC as Administrative Agent and Collateral Agent, Capital One, N.A., as Revolving Loan 
Representative and the lenders from time to time party thereto, as amended (incorporated by reference 
to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K/A (File No. 001-37839) filed on 
May 5, 2017) 

 Amended and Restated Financing Agreement entered into as of December 30, 2016, by and among 
the Registrant, certain of its domestic subsidiaries, HPS Investment Partners, LLC as Administrative 
Agent and Collateral Agent, Capital One, N.A., as Revolving Loan Representative and the lenders 
from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current 
Report on Form 8-K/A (File No. 001-37839) filed on April 20, 2017) 

 Supply Agreement between General Electric International, Inc. and TPI Mexico III, LLC, entered into 
as of October 4, 2016 (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on 
Form 8-K/A (File No. 001-37839) filed on April 20, 2017) 

 Amended and Restated Supply Agreement between General Electric International, Inc. and TPI Iowa, 
LLC, entered into as of October 4, 2016 (incorporated by reference to Exhibit 10.1 of the Registrant’s 
Current Report on Form 8-K/A (File No. 001-37839) filed on April 20, 2017) 

 
 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Number 

  10.7† 

  10.8† 

  10.9 

  10.10 

  10.11 

  10.12 

  10.13 

  10.14 

  10.15 

  10.16 

  10.17 

  10.18 

  10.19 

  10.20 

Description 

 Supply Agreement between General Electric International, Inc. and TPI Mexico, LLC, entered into as 
of October 18, 2013, as amended (incorporated by reference to Exhibit 10.10 to the Registrant’s 
Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 First Amendment to Supply Agreement between General Electric International, Inc. and TPI Mexico, 
LLC, entered into as of October 4, 2016 (incorporated by reference to Exhibit 10.2 of the Registrant’s 
Current Report on Form 8-K/A (File No. 001-37839) filed on April 20, 2017) 

 Lease between TPI Iowa, LLC and Opus Northwest L.L.C., dated November 13, 2007, as amended 
(incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

 Commencement Date Memorandum between TPI Iowa LLC and Opus Northwest, L.L.C., entered 
into as of July 25, 2008 (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration 
Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Kompozit Kanat Sanayi ve Ticaret A.S. and Med Union Containers A.S., dated 
March 16, 2012 (incorporated by reference to Exhibit 10.13 to the Registrant’s Registration Statement 
on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Wind Blade Dafeng Company Limited and Jiangsu Erhuajie Energy Equipment 
Co., Ltd, dated November 27, 2013, as amended (incorporated by reference to Exhibit 10.14 to the 
Registrant’s Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between the Registrant (f/k/a LCSI Holding, Inc.) and Gainey Center II LLC, dated June 12, 
2007, as amended (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration 
Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI, Inc. (f/k/a TPI Composites, Inc.) and Borden & Remington Fall River LLC, dated 
as of December 1, 2008, as superseded by Standard Industrial Lease between TPI, Inc. and Borden & 
Remington  Fall  River  LLC, dated  June 28, 2010,  as  amended  (incorporated by reference  to  Exhibit 
10.16  to  the  Registrant’s  Registration  Statement  on  Form  S-1  (File  No.  333-212093)  filed  on 
June 17, 2016) 

 Lease between Composite Solutions, Inc. and TN Realty, LLC, dated September 30, 2004, as 
amended (incorporated by reference to Exhibit 10.17 to the Registrant’s Registration Statement on 
Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI-Composites S. de R.L. de C.V. and Deutsche Bank México, S.A. Institución de 
Banca Múltiple, Division Fiduciaria, as Trustee of Trust F/1638, dated April 15, 2013, as amended 
(incorporated by reference to Exhibit 10.18 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

 Amendment Agreement, among Macquarie Mexico Real Estate Management S.A. de. C.V., TPI-
Composites, S. de R.L. de C.V. and TPI Composites, Inc., dated November 27, 2018 (incorporated by 
reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K (File No. 001-37839) 
filed on March 5, 2019) 

 Lease between TPI-Composites S. de R.L. de C.V. and The Bank of New York Mellon, S.A., as 
Trustee in the Trust F/00335, dated September 25, 2013 (incorporated by reference to Exhibit 10.19 to 
the Registrant’s Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Mexico, LLC and Trailer Transfer, Inc., dated October 16, 2013 (incorporated by 
reference to Exhibit 10.20 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
212093) filed on June 17, 2016) 

 Lease between TPI Mexico, LLC and Lanestone 1, LLC, dated April 14, 2014 (incorporated by 
reference to Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
212093) filed on June 17, 2016) 

 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Number 

  10.21 

  10.22‡ 

  10.23 

  10.24 

  10.25 

  10.26 

  10.27 

  10.28 

  10.29 

  10.30 

Description 

 Plant and Equipment Lease between TPI Composites (Taicang) Co., Ltd. and Suzhou Tianneng Power 
Wind Mold Co., Ltd, dated May 1, 2014 (incorporated by reference to Exhibit 10.22 to the 
Registrant’s Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Form of Employment Agreement between the Registrant and each of its executive officers 
(incorporated by reference to Exhibit 10.23 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.24 to the Registrant’s 
Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Contract between TPI Composites (Taicang) Co. Ltd. and Mr. Jun Ji, dated August 4, 2015 
(incorporated by reference to Exhibit 10.25 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Composites, S. de R.L. de C.V. and Vesta Baja California, S. de R.L. de C.V., 
dated November 20, 2015 (incorporated by reference to Exhibit 10.26 to the Registrant’s Registration 
Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Turkey IZBAS, LLC and Dere Konstruksiyon Demir Celik Insaat Taahhut 
Muhendislik Musavirlik Sanayi ve Ticaret Anonim Sirketi, dated December 9, 2015 (incorporated by 
reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
212093) filed on June 17, 2016) 

 Lease between TPI Composites (Taicang) Co., Ltd. and Suzhou Suchen Chemical & Plastics Co., 
Ltd., dated August 5, 2014 (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration 
Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Wind Blade Dafeng Co., Ltd. and Jiangsu Jianhao Transmission Machinery Co., 
Ltd., commencing January 1, 2016 (incorporated by reference to Exhibit 10.29 to the Registrant’s 
Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Lease between TPI Kompozit Kanat San. ve Tic. A.S. and BORO Insaat Yatirim Sanayi ve Ticaret 
A.S., dated October 16, 2015 (incorporated by reference to Exhibit 10.30 to the Registrant’s 
Registration Statement on Form S-1 (File No. 333-212093) filed on June 17, 2016) 

 Sublease between TPI Inc. and Nordex Energy GmbH, dated April 24, 2015 (incorporated by 
reference to Exhibit 10.31 to the Registrant’s Registration Statement on Form S-1 (File No. 333-
212093) filed on June 17, 2016)  

  10.31† 

 Settlement Agreement and Release between the Registrant and Nordex SE, dated June 3, 2016 
(incorporated by reference to Exhibit 10.32 to the Registrant’s Registration Statement on Form S-1 
(File No. 333-212093) filed on June 17, 2016) 

  10.32 

  10.33 

  10.34 

  10.35 

  10.36 

 Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.34 to the 
Registrant’s Registration Statement on Form S-1 (File No. 333-212093) filed on July 11, 2016) 

 Lease between Phoenix Newton LLC and TPI Iowa II, LLC, dated January 5, 2018 (incorporated by 
reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K (File No. 001-37839) 
filed on March 8, 2018) 

 Master Lease Agreement Subject to Condition between TPI Composites II, S. de R.L. de C.V. and 
QVC II, S. de. R.L. de C.V. dated May 25, 2017, as amended (incorporated by reference to Exhibit 
10.34 to the Registrant’s Annual Report on Form 10-K (File No. 001-37839) filed on March 8, 2018) 

 Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to 
Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K (File No. 001-37839) filed on March 
5, 2019) 

 Agreement to Lease between Aarush (Phase III) Logistics Park Private Limited, Aarush (Phase IV) 
Logistics Parks Private Limited, Aarush (Phase V) Logistics Parks Private Limited, Aarush Logistics 

 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Number 

  10.37 

  10.38 

  10.39 

  10.40 

  10.41 

  10.42 

  10.43 

  10.44 

  21.1* 

  23.1* 

  24.1 

  31.1* 

  31.2* 

  32.1** 

  32.2** 

Description 

Parks Private Limited, Aarush (Phase II) Logistics Parks Private Limited and Prospect One 
Manufacturing LLP, dated February 4, 2019 (incorporated by reference to Exhibit 10.36 to the 
Registrant’s Annual Report on Form 10-K (File No. 001-37839) filed on March 5, 2019) 

 Credit Agreement entered into as of April 6, 2018, by and among the Registrant, JPMorgan Chase 
Bank, N.A., as Administrative Agent, and Well Fargo Bank, National Association and Capital One 
National Association, as Co-Syndication Agents, and the lenders from time to time party thereto 
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File 
No. 001-37839) filed on May 3, 2018) 

 Form of Employee Restricted Stock Unit Award (Time-Based Vesting) under the Amended and 
Restated 2015 Stock Option And Incentive Plan (incorporated by reference to Exhibit 10.2 to the 
Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 2018) 

 Form of Executive Restrictive Stock Unit Award (Time-Based Vesting) under the Amended and 
Restated 2015 Stock Option And Incentive Plan (incorporated by reference to Exhibit 10.3 to the 
Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 2018) 

 Form of Employee Restricted Stock Unit Award (Adjusted EBITDA Performance-Based Vesting) 
under the Amended and Restated 2015 Stock Option And Incentive Plan (incorporated by reference to 
Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 
2018) 

 Form of Executive Restricted Stock Unit Award (Adjusted EBITDA Performance-Based Vesting) 
under the Amended and Restated 2015 Stock Option And Incentive Plan (incorporated by reference to 
Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 
2018) 

 Form of Employee Restricted Stock Unit Award (Stock Price Performance-Based Vesting) under the 
Amended and Restated 2015 Stock Option And Incentive Plan (incorporated by reference to Exhibit 
10.6 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 2018) 

 Form of Executive Restricted Stock Unit Award (Stock Price Performance-Based Vesting) under the 
Amended and Restated 2015 Stock Option And Incentive Plan (incorporated by reference to Exhibit 
10.7 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on May 3, 2018)  

 Amendment No. 1 dated as of May 24, 2019 to the Credit Agreement entered into as of April 6, 2018, 
by and among the Registrant, JPMorgan Chase Bank, N.A., as Administrative Agent, and Well Fargo 
Bank, National Association and the lenders party thereto (incorporated by reference to Exhibit 10.1 to 
the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37839) filed on August 7, 2019) 

 List of Subsidiaries 

 Consent of KPMG LLP, Independent Registered Public Accounting Firm 

 Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) 

 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

101.INS* 

101.SCH* 

 XBRL Instance Document 
 XBRL Taxonomy Extension Schema Document 

101.CAL* 

 XBRL Taxonomy Extension Calculation Linkbase Document 

 
 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
Number 

101.DEF* 

101.LAB* 

101.PRE* 

Description 

 XBRL Taxonomy Extension Definition Linkbase Document 
 XBRL Taxonomy Extension Label Linkbase Document 
 XBRL Taxonomy Extension Presentation Linkbase Document 

Filed herewith. 

* 
**  The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on 
Form 10-K 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. 

† 

‡ 

Confidential treatment has been granted for certain provisions of this Exhibit pursuant to Rule 406 
promulgated under the Securities Act of 1933. 

Indicates compensatory plan or arrangement  

 
 
 
 
  
 
  
 
  
 
  
 
 
 
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. 

SIGNATURES 

Date: February 28, 2020 

  TPI COMPOSITES, INC. 

  By:   /s/ Bryan Schumaker 
  Bryan Schumaker 
  Chief Financial Officer 
(Principal Financial and Accounting Officer) 

We, the undersigned officers and directors of TPI Composites, Inc., hereby severally constitute and appoint 

Steven C. Lockard and Bryan Schumaker and each of them singly (with full power to each of them to act alone), our 
true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for 
him or her and, place and stead, and in any and all capacities, to sign conformed for us and in our names in the 
capacities indicated below any and all signatures and amendments to this report, and to file the same, with all 
exhibits thereto, filing date and other documents in connection therewith, with the Securities and Exchange 
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and 
perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all 
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said 
attorneys-infact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be 
done by virtue hereof.   

 
 
 
 
 
    
    
 
   
 
   
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed 

below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. 

Name 

Title 

Date 

/s/ Steven C. Lockard 
Steven C. Lockard 

/s/ Bryan Schumaker 
Bryan Schumaker 

/s/ Stephen B. Bransfield 
Stephen B. Bransfield 

/s/ Michael L. DeRosa 
Michael L. DeRosa 

/s/ Jayshree S. Desai 
Jayshree S. Desai 

/s/ Philip J. Deutch 
Philip J. Deutch 

/s/ Paul G. Giovacchini 
Paul G. Giovacchini 

/s/ Jack A. Henry 
Jack A. Henry 

/s/ James A. Hughes 
James A. Hughes 

/s/ Tyrone M. Jordan 
Tyrone M. Jordan 

/s/ Daniel G. Weiss 
 Daniel G. Weiss 

Chief Executive Officer and Director 
(Principal Executive Officer) 

  February 28, 2020 

Chief Financial Officer 
(Principal Financial and Accounting Officer) 

  February 28, 2020 

Director 

Director 

Director 

Director 

  February 28, 2020 

  February 28, 2020 

  February 28, 2020 

  February 28, 2020 

Director and Chairman of the Board 

  February 28, 2020 

Director 

Director 

Director 

Director 

  February 28, 2020 

  February 28, 2020 

  February 28, 2020 

  February 28, 2020 

 
 
 
 
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
®

TPI Composites, Inc. 

8501 N Scottsdale Road, Suite 100 

Scottsdale, AZ 85253

(480) 305-8910

www.tpicomposites.com