UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35436

TECNOGLASS INC.

(Exact Name of Registrant as Specified in Its Charter)

Cayman Islands

98-1271120

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

Avenida Circunvalar a 100 mts de la Via 40, Barrio Las Flores Barranquilla, Colombia

(Address of principal executive offices)

(+57) (605) 373 4000

(Issuer’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report):

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares		TGLS		The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 requirement 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 definition of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐	Accelerated filer ☒
Non-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 ☒

As of July 31, 2022, there were 47,674,773 ordinary shares, $0.0001 par value per share, outstanding.

TECNOGLASS INC.

FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page
Part I. Financial Information
	Item 1. Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Other Comprehensive Income	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Shareholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	7

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	24

	Item 4. Controls and Procedures	25

Part II. Other Information
	Item 1. Legal Proceedings	26

	Item 5. Other Information	26

	Item 6. Exhibits	26
Signatures		27

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

	June 30,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	98,620		$	85,011
Investments		2,407			1,977
Trade accounts receivable, net		114,218			110,539
Due from related parties		1,669			2,252
Inventories		111,914			84,975
Contract assets – current portion		16,310			18,667
Other current assets		23,554			22,854
Total current assets	$	368,692		$	326,275
Long-term assets:
Property, plant and equipment, net	$	183,594		$	166,629
Deferred income taxes		2,526			596
Contract assets – non-current		10,588			11,853
Long-term trade accounts receivable		4,279			3,995
Intangible assets		3,029			3,337
Goodwill		23,561			23,561
Long-term investments		55,059			51,160
Other long-term assets		4,282			4,157
Total long-term assets		286,918			265,288
Total assets	$	655,610		$	591,563
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	591		$	10,700
Trade accounts payable and accrued expenses		89,406			68,087
Due to related parties		4,186			3,857
Dividends payable		3,143			3,141
Contract liability – current portion		58,974			45,213
Other current liabilities		24,379			24,017
Total current liabilities	$	180,679		$	155,015
Long-term liabilities:
Deferred income taxes	$	3,403		$	3,417
Contract liability – non-current		47			78
Long-term debt		184,268			188,355
Total long-term liabilities		187,718			191,850
Total liabilities	$	368,397		$	346,865
SHAREHOLDERS’ EQUITY
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	$	—		$	—
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 47,674,773 and 47,674,773 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		5			5
Legal Reserves		1,458			2,273
Additional paid-in capital		219,290			219,290
Retained earnings		139,709			91,045
Accumulated other comprehensive loss		(74,404	)		(68,751	)
Shareholders’ equity attributable to controlling interest		286,058			243,862
Shareholders’ equity attributable to non-controlling interest		1,155			836
Total shareholders’ equity		287,213			244,698
Total liabilities and shareholders’ equity	$	655,610		$	591,563

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income

(In thousands, except share and per share data)

(Unaudited)

	2022			2021			2022			2021
	Three months ended						Six months ended
	June 30,						June 30,
	2022			2021			2022			2021
Operating revenues:
External customers	$	168,657		$	121,401		$	302,679		$	232,576
Related parties		467			351			993			731
Total operating revenues		169,124			121,752			303,672			233,307
Cost of sales		95,492			72,622			169,707			138,868
Gross profit		73,632			49,130			133,965			94,439
Operating expenses:
Selling expense		(16,616	)		(12,030	)		(29,984	)		(23,113	)
General and administrative expense		(10,851	)		(8,332	)		(21,126	)		(17,125	)
Other professional fees		(678	)		-			(3,402	)		-
Total operating expenses		(28,145	)		(20,362	)		(54,512	))		(40,238	)
Operating income		45,487			28,768			79,453			54,201
Non-operating income (expenses), net		161			(228	)		503			(70	)
Equity method income		1,669			788			3,249			1,879
Foreign currency transactions gains (loss)		2,503			190			(406	)		145
Gain (loss) on debt extinguishment		-			169			-			(10,978	)
Interest expense and deferred cost of financing		(1,715	)		(2,442	)		(3,183	)		(5,964	)
Income before taxes		48,105			27,245			79,616			39,213
Income tax (provision)		(14,692	)		(7,601	)		(25,250	)		(11,289	)
Net income	$	33,413		$	19,644		$	54,366		$	27,924
(Loss) Income attributable to non-controlling interest		(219	)		(51	)		(319	)		(140	)
Income attributable to parent	$	33,194		$	19,593		$	54,047		$	27,784
Comprehensive income:
Net income	$	33,413		$	19,644		$	54,366		$	27,924
Foreign currency translation adjustments		(23,620	)		(1,185	)		(9,987	)		(16,819	)
Change in fair value of derivative contracts		1,710			-			4,332			(159	)
Total comprehensive income	$	11,503		$	18,459		$	48,711		$	10,946
Comprehensive (loss) income attributable to non-controlling interest		(219	)		(51	)		(319	)		(140	)
Total comprehensive income attributable to parent	$	11,284		$	18,408		$	48,392		$	10,806
Basic income per share	$	0.70		$	0.41		$	1.14		$	0.59
Diluted income per share	$	0.70			0.41		$	1.14		$	0.59
Basic weighted average common shares outstanding		47,674,773			47,674,773			47,674,773			47,674,773
Diluted weighted average common shares outstanding		47,674,773			47,674,773			47,674,773			47,674,773

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	2022			2021
	Six months ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	54,366		$	27,924
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Allowance for credit losses		580			748
Depreciation and amortization		10,462			10,515
Deferred income taxes		(1,016	)		424
Equity method income		(3,249	)		(1,879	)
Deferred cost of financing		726			623
Other non-cash adjustments		6			(19	)
Loss on debt extinguishment		-			2,333
Unrealized currency translation losses		911			2,555
Changes in operating assets and liabilities:
Trade accounts receivable		(4,792	)		(6,069	)
Inventories		(31,343	)		(2,082	)
Prepaid expenses		(690	)		(2,015	)
Other assets		1,652			(6,718	)
Trade accounts payable and accrued expenses		16,489			23,375
Accrued interest expense		(1	)		(7,171	)
Taxes payable		2,260			3,389
Labor liabilities		125			(132	)
Other liabilities		(2,047	)		(342	)
Contract assets and liabilities		17,538			14,677
Related parties		1,020			(23	)
CASH PROVIDED BY OPERATING ACTIVITIES	$	62,997		$	60,113

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments		-			166
Proceeds from sale of property and equipment		-			7
Purchase of investments		(933	)		(49	)
Acquisition of property and equipment		(26,250	)		(18,325	)
CASH USED IN INVESTING ACTIVITIES	$	(27,183	)	$	(18,201	)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend		(6,196	)		(2,621	)
Loss on debt extinguishment - call premium		-			(8,610	)
Deferred financing transaction costs		-			(88	)
Proceeds from debt		241			221,146
Repayments of debt		(15,367	)		(216,676	)
CASH USED IN FINANCING ACTIVITIES	$	(21,322	)	$	(6,849	)

Effect of exchange rate changes on cash and cash equivalents	$	(883	)	$	(2,334	)

NET INCREASE IN CASH		13,609			32,729
CASH - Beginning of period		85,011			67,668
CASH - End of period	$	98,620		$	100,397

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	2,387		$	12,286
Income Tax	$	7,552		$	9,471

NON-CASH INVESTING AND FINANCING ACTIVITES:
Assets acquired under credit or debt	$	5,835		$	937

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Amounts in thousands, except share and per share data)

(Unaudited)

	Shares		Amount		Capital		Reserve			Earnings			Loss			Equity			Interest		Interest
	Ordinary Shares, $0.0001 Par Value				Additional Paid in		Legal			Retained			Accumulated Other Comprehensive			Total Shareholders’			Non-Controlling		Total Shareholders’ Equity and Non-Controlling
	Shares		Amount		Capital		Reserve			Earnings			Loss			Equity			Interest		Interest
Balance at December 31, 2021	47,674,773		5		219,290		2,273			91,045			(68,751)			243,862			836		244,698


Dividend		-		-		-		-			(3,099	)		-			(3,099	)		-		(3,099	)

Derivative financial instruments		-		-		-		-			-			2,622			2,622			-		2,622

Foreign currency translation		-		-		-		-			-			13,635			13,635			-		13,635

Net income		-		-		-		-			20,853			-			20,853			100		20,953

Balance at March 31, 2022		47,674,773		5		219,290		2,273			108,799			(52,494	)		277,873			936		278,809


Dividend		-		-		-		-			(3,099	)		-			(3,099	)		-		(3,099	)

Legal Reserves		-		-		-		(815	)		815			-			-			-		-

Derivative financial instruments		-		-		-		-			-			1,710			1,710			-		1,710

Foreign currency translation		-		-		-		-			-			(23,620	)		(23,620	)		-		(23,620	)

Net income		-		-		-		-			33,194			-			33,194			219		33,413

Balance at June 30, 2022		47,674,773		5		219,290		1,458			139,709			(74,404	)		286,058			1,155		287,213

	Ordinary Shares, $0.0001 Par Value				Additional Paid in		Legal		Retained			Accumulated Other Comprehensive			Total Shareholders’			Non-Controlling		Total Shareholders’ Equity and Non-Controlling
	Shares		Amount		Capital		Reserve		Earnings			Loss			Equity			Interest		Interest
Balance at December 31, 2020	47,674,773		5		219,290		2,273		29,927			(43,512)			207,983			560		208,543


Dividend		-		-		-		-		(1,311	)		-			(1,311	)		-		(1,311	)

Derivative financial instruments		-		-		-		-		-			(159	)		(159	)		-		(159	)

Foreign currency translation		-		-		-		-		-			(15,634	)		(15,634	)		-		(15,634	)

Net income		-		-		-		-		8,192			-			8,192			89		8,281

Balance at March 31, 2021		47,674,773		5		219,290		2,273		36,808			(59,305	)		199,071			649		199,720


Stock dividend						-		-		-			-			-			-		-
Dividend						-		-		-			-			-			-		-

Reserva legal								-		(1,312	)					(1,312	)				(1,312	)
Legal Reserves								-		(1,312	)					(1,312	)				(1,312	)

Instrumentos financieros													-			-					-
Derivative financial instruments													-			-					-
																0					0
Foreign currency translation		-		-		-		-		-			(1,185	)		(1,185	)				(1,185	)

Net income		-		-		-		-		19,593			-			19,593			51		19,644

Balance at June 30, 2021		47,674,773		5		219,290		2,273		55,089			(60,490	)		216,167			700		216,867

The accompanying notes are an integral part of these condensed consolidated financial statements.

Tecnoglass Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Amounts in thousands, except share and per share data)

(Unaudited)

Note 1. General

Business Description

Tecnoglass Inc., a Cayman Islands exempted company (the “Company”, “Tecnoglass,” “TGI,” “we, “us” or “our”), manufactures hi-specification, architectural glass and windows for the global residential and commercial construction industries. Currently the Company offers design, production, marketing, and installation of architectural systems for buildings of high, medium and low elevation size. Products include windows and doors in glass and aluminum, office partitions and interior divisions, floating facades and commercial window showcases. The Company exports most of its production to foreign countries, selling to customers in North, Central and South America.

The Company manufactures both glass and aluminum products. Its glass products include tempered glass, laminated glass, thermo-acoustic glass, curved glass, silk-screened glass, acoustic glass and digital print glass. Its Alutions plant produces mill finished, anodized, painted aluminum profiles and rods, tubes, bars and plates. Alutions’ operations include extrusion, smelting, painting and anodizing processes, and exporting, importing and marketing aluminum products.

The Company also designs, manufactures, markets and installs architectural systems for high, medium and low-rise construction, glass and aluminum windows and doors, office dividers and interiors, floating facades and commercial display windows.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting purposes. The results reported in these unaudited condensed consolidated financial statements are not necessarily indicative of results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The year-end condensed balance sheet data was derived from the audited financial statements in the Form 10-K but does not include all disclosures required by US GAAP.

The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Actual results may differ from these estimates under different assumptions and conditions. Estimates utilized in the preparation of these unaudited condensed consolidated financial statements relate to the collectability of account receivables, the valuation of inventories, estimated earnings on uncompleted contracts, useful lives and potential impairment of long-lived assets. Changes in estimates are reflected in the periods during which they become known. Actual amounts may differ from these estimates and could differ materially. These financial statements reflect all adjustments that in the opinion of management are necessary for a fair statement of the financial position, results of operations and cash flows for the period presented, and are of a normal, recurring nature.

The Company has one operating segment, Architectural Glass and Windows, which is also its reporting segment, comprising the design, manufacturing, distribution, marketing and installation of high-specification architectural glass and window product sold to the construction industry.

Principles of Consolidation

These unaudited condensed consolidated financial statements consolidate TGI, its subsidiaries Tecnoglass S.A.S (“TG”), C.I. Energía Solar S.A.S E.S. Windows (“ES”), ES Windows LLC (“ESW LLC”), Tecnoglass LLC (“Tecno LLC”), Tecno RE LLC (“Tecno RE”), GM&P Consulting and Glazing Contractors (“GM&P”), Componenti USA LLC, ES Metals SAS (“ES Metals”), and Ventanas Solar S.A (“VS”), which are entities in which we have a controlling financial interest because we hold a majority voting interest. To determine if we hold a controlling financial interest in an entity, we first evaluate if we are required to apply the variable interest entity (“VIE”) model to the entity, otherwise the entity is evaluated under the voting interest model. All significant intercompany accounts and transactions are eliminated in consolidation, including unrealized intercompany profits and losses. The equity method of accounting is used for investments in affiliates and other joint ventures over which the Company has significant influence but does not have effective control.

TGI and certain wholly owned subsidiaries with functional currency different than the U.S. dollar have long-term intercompany loan balances denominated in foreign currencies that are remeasured at the current exchange rate in effect at the balance sheet date. Such loan balances are not expected to be settled in the foreseeable future. Any gains and losses relating to these loans are included in the accumulated other comprehensive income (loss), which is reflected as a separate component of stockholders’ equity.

Recast of Prior Year Period Financial Statements

On November 8, 2021, we announced that we entered into a purchase agreement with Ventanas Solar S.A. (“VS”), a Panama domiciled company that acts as an importer and distributor of the Company’s products in the Republic of Panama. VS was affiliated with family members of Jose M. Daes, the Company’s Chief Executive Officer, and Christian T. Daes, the Company’s Chief Operating Officer. Pursuant to the Agreement, the Company through ES acquired 95% of the shares of VS for $4.0 million, which were paid for through the capitalization of certain accounts receivable of ES from previous sales to VS. The transaction was consummated in December 2021 and is part of the Company’s continued strategy to vertically integrate its operations. As of June 30, 2022, the remaining 5% interest was contributed to the Company, and now is a fully owned subsidiary of the Company.

The acquisition of VS was deemed to be a transaction between entities under common control. As a result, the assets and liabilities were transferred at the historical cost of VS, with prior periods retroactively adjusted to include the historical financial results of the acquired company for the period they were controlled by the previous owners of VS in the Company’s financial statements.

The following table includes the financial information as originally reported and the net effect of the VS acquisition after elimination of intercompany transactions:

Three months ended June 30, 2021

Six months ended June 30, 2021

Prior to

Effect of

After

Prior to

Effect of

After

acquisition

Acquisition

Total Sales

SEC Form 10-Q filed by Tecnoglass Inc.