TGLS 10-Q
Tecnoglass Holdings Inc. (TGLS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| 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:
(Exact Name of Registrant as Specified in Its Charter)
(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)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
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).
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.:
| 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 May 1, 2024, there were ordinary shares, $0.0001 par value per share, outstanding.
TECNOGLASS INC.
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2024
TABLE OF CONTENTS
| 2 |
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)
March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments | ||||||||
| Trade accounts receivable, net | ||||||||
| Due from related parties | ||||||||
| Inventories | ||||||||
| Contract assets – current portion | ||||||||
| Other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Long-term assets: | ||||||||
| Property, plant and equipment, net | $ | $ | ||||||
| Deferred income taxes | ||||||||
| Contract assets – non-current | ||||||||
| Intangible assets | ||||||||
| Goodwill | ||||||||
| Long-term investments | ||||||||
| Other long-term assets | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term debt and current portion of long-term debt | $ | $ | ||||||
| Trade accounts payable and accrued expenses | ||||||||
| Due to related parties | ||||||||
| Dividends payable | ||||||||
| Contract liability – current portion | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | $ | $ | ||||||
| Long-term liabilities: | ||||||||
| Deferred income taxes | $ | $ | ||||||
| Contract liability – non-current | ||||||||
| Long-term debt | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred shares, $ par value, shares authorized, shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | $ | $ | ||||||
| Ordinary shares, $ par value, shares authorized, and shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | ||||||||
| Legal Reserves | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
Tecnoglass Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Income
(In thousands, except share and per share data)
(Unaudited)
| Three months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating revenues: | ||||||||
| External customers | $ | $ | ||||||
| Related parties | ||||||||
| Total operating revenues | ||||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expense | ( | ) | ( | ) | ||||
| General and administrative expense | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating income | ||||||||
| Non-operating income, net | ||||||||
| Equity method income | ||||||||
| Foreign currency transactions (loss) gains | ( | ) | ( | ) | ||||
| Interest expense and deferred cost of financing | ( | ) | ( | ) | ||||
| Income before taxes | ||||||||
| Income tax provision | ( | ) | ( | ) | ||||
| Net income | $ | $ | ||||||
| Income attributable to non-controlling interest | ( | ) | ||||||
| Income attributable to parent | $ | $ | ||||||
| Basic income per share | $ | $ | ||||||
| Diluted income per share | $ | |||||||
| Basic weighted average common shares outstanding | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustments | ||||||||
| Change in fair value of derivative contracts | ( | ) | ||||||
| Other comprehensive income | ||||||||
| Total comprehensive income | $ | $ | ||||||
| Income attributable to non-controlling interest | ( | ) | ||||||
| Total comprehensive income attributable to parent | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
Tecnoglass Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Allowance for credit losses | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes | ||||||||
| Equity method income | ( | ) | ( | ) | ||||
| Realized gain on derivative instruments | ( | ) | ||||||
| Deferred cost of financing | ||||||||
| Other non-cash adjustments | ( | ) | ||||||
| Unrealized currency translation (gains) loss | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ( | ) | ||||
| Trade accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Taxes payable | ||||||||
| Labor liabilities | ( | ) | ( | ) | ||||
| Other liabilities | ( | ) | ||||||
| Contract assets and liabilities | ( | ) | ||||||
| Related parties | ||||||||
| CASH PROVIDED BY OPERATING ACTIVITIES | $ | $ | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of investments | ( | ) | ( | ) | ||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| CASH USED IN INVESTING ACTIVITIES | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Cash dividend | ( | ) | ( | ) | ||||
| Proceeds from debt | ||||||||
| Repayments of debt | ( | ) | ||||||
| CASH USED IN FINANCING ACTIVITIES | $ | ( | ) | $ | ( | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | $ | ( | ) | $ | ||||
| NET INCREASE IN CASH | ||||||||
| CASH - Beginning of period | ||||||||
| CASH - End of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income Tax | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Assets acquired under credit or debt | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 5 |
Tecnoglass Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(Amounts in thousands, except share and per share data)
(Unaudited)
| 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, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Dividend ( per share) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Derivative financial instruments | - | |||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
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, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Dividend ( per share) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Derivative financial instruments | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
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, aluminum, and vinyl, office partitions and interior divisions, floating facades and commercial window showcases. The Company sells to customers in North, Central and South America, and exports more than 95% of its production to foreign countries.
The Company manufactures glass, aluminum, and vinyl 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. Its newly installed vinyl assembling lines manufacture and distributes cutting-edge vinyl windows for new and existing customers.
The Company also designs, manufactures, markets and installs architectural systems for high, medium and low-rise construction, glass, aluminum and vinyl 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, 2023. The year-end condensed balance sheet data was derived from the audited financial statements in the Annual Report on 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
| 7 |
Principles of Consolidation
These unaudited condensed consolidated financial statements consolidate TGI and its subsidiaries Tecnoglass S.A.S (“TG”), C.I. Energía Solar S.A.S E.S. Windows (“ES”), ES Windows LLC (“ESW LLC”), 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 and if we are not, 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 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 shareholders’ equity.
Derivative Financial Instruments
The Company recognizes all derivative financial instruments as either assets or liabilities at fair value on the condensed consolidated balance sheet. The unrealized gains or losses arising from changes in fair value of derivative instruments that are designated and qualify as cash flow hedges, are recorded in the condensed consolidated statement of comprehensive income. Amounts in accumulated other comprehensive loss on the condensed consolidated balance sheet are reclassified into the condensed consolidated statement of income in the same period or periods during which the hedged transactions are settled.
| 8 |
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. Investors, lenders, creditors, and other allocators of capital (collectively, “investors”) have observed that segment information is critically important in understanding a public entity’s different business activities. That information enables investors to better understand an entity’s overall performance and assists in assessing potential future cash flows. The amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The Board is issuing the amendments in this Update to enhance the transparency and decision usefulness of income tax disclosures. Investors, lenders, creditors, and other allocators of capital (collectively, “investors”) indicated that the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities. While investors find these disclosures helpful, they suggested possible enhancements to better (1) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This Update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this Update are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements.
Note 3. - Inventories, net
March 31, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Spares and accessories | ||||||||
| Packing material | ||||||||
| Total Inventories, gross | ||||||||
| Less: Inventory allowance | ( | ) | ( | ) | ||||
| Total inventories, net | $ | $ | ||||||
Note 4. – Revenues, Trade Accounts Receivable, Contract Assets and Contract Liabilities
Disaggregation of Total Net Sales
The Company disaggregates its sales with customers by revenue recognition method for its only segment, as the Company believes these factors affect the nature, amount, timing and uncertainty of the Company’s revenue and cash flows.
| Three months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Fixed price contracts | $ | $ | ||||||
| Product sales | ||||||||
| Total Revenues | $ | $ | ||||||
The following table presents geographical information about revenues.
Three months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Colombia | $ | $ | ||||||
| United States | ||||||||
| Panama | ||||||||
| Other | ||||||||
| Total Revenues | $ | $ | ||||||
The following table presents revenues breakdown by market.
| Three months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Residential | $ | $ | ||||||
| Commercial | ||||||||
| Total Revenues | $ | $ | ||||||
| 9 |
Trade Accounts Receivable
In the ordinary course of business, we extend credit to customers on a generally non-collateralized basis. The Company maintains an allowance for expected credit losses which is based on management’s assessments of the amount which may become uncollectible in the future and is determined through consideration of our write-off history, specific identification of uncollectible accounts based in part on the customer’s past due balance (based on contractual terms), and consideration of prevailing economic and industry conditions. Uncollectible accounts are written off after repeated attempts to collect from the customer have been unsuccessful.
Trade accounts receivable consist of the following:
March 31, 2024 | December 31, 2023 | |||||||
| Trade accounts receivable | ||||||||
| Less: Allowance for credit losses | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The changes in the allowance for credit losses for the three months ended March 31, 2024, are:
Three months ended March 31, 2024 | ||||
| Balance at beginning of period | $ | |||
| Provisions for credit losses | ||||
| Deductions and write-offs, net of foreign currency adjustment | ( | ) | ||
| Balance at end of period | $ | |||
Contract Assets and Liabilities
Contract assets represent accumulated incurred costs and earned profits on contracts with customers that have been recorded as sales but have not been billed to customers and are classified as current. In addition, a portion of the amounts billed on certain fixed price contracts that are withheld by the customer as a retainage until a final good receipt of the complete project to the customers satisfaction. Contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue, and represent amounts received in excess of sales recognized on contracts. The Company classifies advance payments and billings in excess of costs incurred as current, and deferred revenue as current or non-current based on the expected timing of sales recognition. Contract assets and contract liabilities are determined on a contract-by-contract basis at the end of each reporting period. The non-current portion of contract liabilities is included in long-term liabilities in the Company’s condensed consolidated balance sheets.
| 10 |
The table below presents the components of net contract assets (liabilities).
March 31, 2024 | December 31, 2023 | |||||||
| Contract assets — current | $ | $ | ||||||
| Contract assets — non-current | ||||||||
| Contract liabilities — current | ( | ) | ( | ) | ||||
| Contract liabilities — non-current | ( | ) | ||||||
| Net contract liability | $ | ( | ) | $ | ( | ) | ||
The components of contract assets are presented in the table below.
March 31, 2024 | December 31, 2023 | |||||||
| Unbilled contract receivables, gross | $ | $ | ||||||
| Retainage | ||||||||
| Total contract assets | ||||||||
| Less: current portion | ||||||||
| Contract Assets – non-current | $ | $ | ||||||
The components of contract liabilities are presented in the table below.
March 31, 2024 | December 31, 2023 | |||||||
| Billings in excess of costs | $ | |||||||
| Advances from customers on uncompleted contracts | ||||||||
| Total contract liabilities | ||||||||
| Less: current portion | ||||||||
| Contract liabilities – non-current | $ | |||||||
During
the three months ended March 31, 2024, the Company recognized $
Remaining Performance Obligations
As
of March 31, 2024, the Company had $
| 11 |
Note 5. Intangible Assets
Intangible assets include Miami-Dade County Notices of Acceptances (NOA’s), which are certificates issued for approved products and required to market hurricane-resistant glass in Florida. Intangibles assets also include the intangibles acquired during the acquisition of GM&P.
| March 31, 2024 | ||||||||||||
| Gross | Acc. Amort. | Net | ||||||||||
| Notice of Acceptances (NOAs), product designs and other intellectual property | ( | ) | ||||||||||
| December 31, 2023 | ||||||||||||
| Gross | Acc. Amort. | Net | ||||||||||
| Notice of Acceptances (NOAs), product designs and other intellectual property | ( | ) | ||||||||||
The
weighted average amortization period is
During
the three months ended March 31, 2024, the amortization expense amounted to $
The estimated aggregate amortization expense for each of the five succeeding years as of March 31, 2024, is as follows:
| Year ending | (in thousands) | |||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| $ | ||||
| 12 |
Note 6. Supplier Finance Program
Tecnoglass has established payment terms to suppliers for the purchase of goods and services, which normally range between 30 and 60 days. In the normal course of business, suppliers may require liquidity and manage, through third parties, the advanced payment of invoices. The Company allows its suppliers the option to payments in advance of an invoice due date, through a third-party finance provider or intermediary, with the purpose of allowing suppliers to obtain the required liquidity. For these purposes, suppliers present to Tecnoglass the third-party finance provider or intermediary with whom they will carry out the finance program and establish an agreement, through which the invoices will be paid by the third-party finance provider or intermediary once Tecnoglass has confirmed the invoices as valid. Once the Company confirms the invoices are valid, the third-party finance provider or intermediary proceeds with the payment to the supplier. Subsequently, Tecnoglass pays the invoices for goods or services to the third-party finance provider or intermediary selected by the supplier. Payment times do not vary from those initially agreed with the supplier, as stated in the invoices factored by the supplier (i.e. between 30 and 60 days). Pursuant to the supplier finance programs, the Company has not been required to pledge any assets as security nor to provide any guarantee to third-party finance provider or intermediary.
As
of March 31, 2024, the obligations outstanding related to the supplier finance program amounted to $
Note 7. Debt
The Company’s debt is comprised of the following:
March 31, 2024 | December 31, 2023 | |||||||
| Revolving lines of credit | $ | $ | ||||||
| Finance lease | ||||||||
| Other current debt | ||||||||
| Senior Secured Credit Facility | ||||||||
| Less: Deferred cost of financing | ( | ) | ( | ) | ||||
| Total obligations under borrowing arrangements | ||||||||
| Less: Current portion of long-term debt and other current borrowings | ||||||||
| Long-term debt | $ | $ | ||||||
In
November 2021, the Company amended its Senior Secured Credit Facility to
Maturities of long-term debt and other current borrowings are as follows as of March 31, 2024:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total | $ |
The
Company’s loans have maturities ranging from a
| 13 |
Note 8. Hedging Activity and Fair Value Measurements
Hedging Activity
During the quarter ended March 31, 2022, we entered into several interest rate swap contracts to hedge the interest rate fluctuations related to our outstanding debt. The effective date of the contract is December 31, 2022 and, thus, we shall have payment dates each quarter, commencing March, 31 2023. During the quarter ended December 31, 2022, we entered into several foreign currency non-delivery forward contracts to hedge the fluctuations in the exchange rate between the Colombian Peso and the U.S. Dollar. Our contracts are designated as cash flow hedges since they are highly effective in offsetting changes in the cash flows attributable to forecasted LIBOR and Colombian Peso denominated costs and expenses, respectively.
We record our hedge contracts at fair value and consider our credit risk for contracts in a liability position, and our counter-party’s credit risk for contracts in an asset position, in determining fair value. We assess our counter-party’s risk of non-performance when measuring the fair value of financial instruments in an asset position by evaluating their financial position, including cash on hand, as well as their credit ratings.
Due
to the Libor discontinuance, on June 21, 2023, the Company amended the Interest Rate Swap contract from Libor 1 Month plus spread to
SOFR 3 Months plus spread. The settlements of the instruments remain under the existing conditions; however, the fixed leg goes from
As
of March 31, 2024, the fair value of our interest rate swap was in a net asset position of $
We
assess the effectiveness of our interest rate swap contracts by comparing the change in the fair value of the interest rate swap contracts
to the change in the expected cash to be paid for the hedged item. The effective portion of the gain or loss on our interest rate swap
contracts is reported as a component of accumulated other comprehensive income and is reclassified into earnings in the same line item
in the income statement as the hedged item in the same period or periods during which the transaction affects earnings. The amount of
gains, net, recognized in the “accumulated other comprehensive income” line item in the accompanying consolidated balance
sheet as of March 31, 2024, that we expect will be reclassified to earnings within the next twelve months, is $
The fair value of our interest rate swap hedges is classified in the accompanying consolidated balance sheets, as of March 31, 2024, as follows:
| Derivative Assets | Derivative Liabilities | |||||||||||
| March 31, 2024 | March 31, 2024 | |||||||||||
| Derivatives
designated as hedging instruments under Subtopic 815-20: |
Balance
Sheet Location |
Fair Value | Balance
Sheet Location |
Fair Value | ||||||||
| Derivative instruments: | ||||||||||||
| Interest rate swap contracts | Other current assets | $ | Accrued liabilities | $ | ||||||||
| Total derivative instruments | Total derivative assets | $ | Total derivative liabilities | $ | ||||||||
The
ending accumulated balance for the interest rate swap contracts included in accumulated other comprehensive income was $
The following table presents the gains (losses) on derivative financial instruments, and their classifications within the accompanying consolidated financial statements, for the quarter ended March 31, 2024:
| Derivatives in Cash Flow Hedging Relationships | ||||||||||||||||||
| Amount of Gain or (Loss) Recognized in OCI (Loss) on Derivatives | Location of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income | Amount of Gain or (Loss) Reclassified from Accumulated OCI (Loss) into Income | ||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||
| March 31, | March 31, | March 31, | March 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||
| Interest Rate Swap and foreign currency non-delivery forwards Contracts | $ | $ | ( | ) | Interest expense and operating income | $ | $ | |||||||||||
| 14 |
Fair Value Measurements
The Company accounts for financial assets and liabilities in accordance with accounting standards that define fair value and establish a framework for measuring fair value. The hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and advances from customers approximate their fair value due to their relatively short-term maturities. The Company bases its fair value estimate for long term debt obligations on its internal valuation that all debt is floating rate debt based on current interest rates in Colombia.
The fair values of derivatives used to manage interest rate risks are based on SOFR rates and interest rate swap curves. Measurement of our derivative assets and liabilities is considered a level 2 measurement. To carry out the swap valuation, the definition of the fixed leg (obligation) and variable leg (right) is used. Once the projected flows are obtained in both fixed and variable rates, the regression analysis is performed for prospective effectiveness test. The projection curve contains the forward interest rates to project flows at a variable rate and the discount curve contains the interest rates to discount future flows, using the one-month USD Libor curve.
As of March 31, 2024, financial instruments carried at amortized cost that do not approximate fair value consist of long-term debt. See Note 7 – Debt. The fair value of long-term debt was calculated based on an analysis of future cash flows discounted at current market rates, which are level 2 inputs.
The following table summarizes the fair value and carrying amounts of our long-term debt:
March 31, 2024 | December 31, 2023 | |||||||
| Fair Value | ||||||||
| Carrying Value | ||||||||
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Note 9. Income Taxes
The Company files income tax returns for TG, ES and ES Metals in the Republic of Colombia. GM&P, Componenti and ESW LLC are U.S. entities based in Florida subject to U.S. federal and state income taxes. Tecnoglass as well as all the other subsidiaries in the Cayman Islands do not currently have any tax obligations.
The components of income tax expense are as follows:
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Current income tax | ||||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Colombia | ( | ) | ( | ) | ||||
| Panama | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Deferred income Tax | ||||||||
| United States | ( | ) | ( | ) | ||||
| Colombia | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| Total income provision | $ | ( | ) | $ | ( | ) | ||
| Effective tax rate | % | % | ||||||
The
effective income tax rate for 2024 and 2023, was
Note 10. Related Parties
The following is a summary of assets, liabilities, and income transactions with all related parties:
March 31, 2024 | December 31, 2023 | |||||||
| Due from related parties: | ||||||||
| Studio Avanti SAS | ||||||||
| Alutrafic Led SAS | ||||||||
| Prisma Glass LLC | ||||||||
| Due from other related parties | ||||||||
| Total due from related parties | $ | $ | ||||||
| Due to related parties: | ||||||||
| Vidrio Andino | ||||||||
| Incantesimo SAS | ||||||||
| Due to other related parties | ||||||||
| Total due to related parties | $ | $ | ||||||
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Sales to related parties: | ||||||||
| Studio Avanti SAS | ||||||||
| Prisma-Glass SAS | ||||||||
| Alutrafic Led SAS | ||||||||
| Sales to other related parties | ||||||||
| $ | $ | |||||||
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Alutrafic Led SAS
In
the ordinary course of business, we sell products to Alutrafic Led SAS (“Alutrafic”), a fabricator of electrical lighting
equipment. Affiliates of Jose Daes and Christian Daes, the Company’s Chief Executive Officer and Chief Operating Officer, respectively,
have an ownership stake in Alutrafic. During the three months ended March 31, 2024, we sold $
Fundacion Tecnoglass-ESWindows
Fundacion
Tecnoglass-ESWindows is a non-profit organization set up by the Company to carry out social causes in the communities around where we
operate. We made charitable contributions during the three months ended March 31, 2024 of $
Incantesimo SAS
On
November 10, 2023, we acquired the
Prisma-Glass LLC
In
the ordinary course of business, we sell products to Prisma-Glass LLC a distributer and installer of architectural systems in Florida
that. is owned and controlled by family members of Christian Daes. We sold $
Santa Maria del Mar SAS
In
the ordinary course of business, we purchase fuel for use at our manufacturing facilities from Estación Santa Maria del Mar SAS,
a gas station located in the vicinity of our manufacturing campus which is owned by affiliates of Jose Daes and Christian Daes. During
the three months ended March 31, 2024, we purchased $
Studio Avanti SAS
In
the ordinary course of business, we sell products to Studio Avanti SAS (“Avanti”), a distributer and installer of architectural
systems in Colombia. Avanti is owned and controlled by Alberto Velilla, who is director of Energy Holding Corporation, the controlling
shareholder of the Company. As of March 31, 2024, and December 31, 2023, the Company had outstanding accounts receivable from Avanti
of $
Vidrio Andino Joint Venture
On
May 3, 2019, we consummated a joint venture agreement with Saint-Gobain, a world leader in the production of float glass, a key component
of our manufacturing process, whereby we acquired a
The
land will serve the purpose of developing a second float glass plant nearby our existing manufacturing facilities which we expect will
carry significant efficiencies for us once it becomes operative, in which we will also have a
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In
the ordinary course of business, we purchased $
Zofracosta SA
We
have an investment in Zofracosta SA, a real estate holding company located in the vicinity of the proposed glass plant being built through
our Vidrio Andino joint venture, recorded at $
Note 11. Shareholders’ Equity
Dividends
On February 29, 2024, the Company declared a regular quarterly dividend of $ per share, or $ per share on an annualized basis. The dividend was paid on April 30, 2024, to shareholders of record as of the close of business on March 29, 2024.
Earnings per Share
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator for basic and diluted earnings per share | ||||||||
| Net income attributable to parent | $ | $ | ||||||
| Denominator | ||||||||
| Denominator for basic earnings per ordinary share - weighted average shares outstanding | ||||||||
| Effect of dilutive securities and stock dividend | ||||||||
| Denominator for diluted earnings per ordinary share - weighted average shares outstanding | ||||||||
| Basic earnings per ordinary share | $ | $ | ||||||
| Diluted earnings per ordinary share | $ | $ | ||||||
| 18 |
Note 12. Commitments and Contingencies
Commitments
As
of March 31, 2024, the Company had outstanding obligations to purchase an aggregate of at least $
On
May 3, 2019, we consummated a joint venture agreement with Saint-Gobain whereby we acquired a
The
joint venture agreement includes plans to build a new plant in Galapa, Colombia that will be located approximately 20 miles from our
primary manufacturing facility, in which we will also have a
General Legal Matters
From time to time, the Company is involved in legal matters arising in the regular course of business. Some disputes are derived directly from our construction projects, related to supply and installation, and even though deemed ordinary, they may involve significant monetary damages. We are also subject to other type of litigations arising from employment practices, worker’s compensation, automobile claims and general liability. It is very difficult to predict precisely what the outcome of these litigations might be. However, with the information at our disposition as this time, there are no indications that such claims will result in a material adverse effect on the business, financial condition or results of operations of the Company.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us” or “our” are to Tecnoglass Inc., except where the context requires otherwise. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.
Overview
We are experienced and highly skilled in the vertical integration of architectural glass manufacturing, distribution, and professional fitting. Our expertise extends to the production of top-quality windows, as well as the supply of aluminum, vinyl, and other components. Our dedicated and knowledgeable team serves a diverse range of commercial and residential construction projects worldwide, guaranteeing outstanding products and seamless installation services. With a focus on innovation, combined with providing highly specified products with the highest quality standards at competitive prices, we have earned #1 spot in the Forbe’s list of America’s 100 most successful small-cap companies for 2024, and developed a leadership position in each of our core markets. In the United States, which is our largest market, we were ranked as the third largest glass fabricator serving the United States in 2023 by Glass Magazine. In addition, we believe we are the leading glass transformation company in Colombia. Our customers, which include developers, general contractors or installers for hotels, office buildings, shopping centers, airports, universities, hospitals and multi-family and residential buildings, look to us as a value-added partner based on our product development capabilities, our high-quality products and our unwavering commitment to exceptional service.
With over 40 years of experience in architectural glass and aluminum assembly, we specialize in transforming various glass products. Our offerings include tempered safety glass, double thermo-acoustic glass, and laminated glass. Our wide range of finished glass products are utilized in diverse buildings for floating facades, curtain walls, windows, doors, handrails, as well as interior and bathroom spatial dividers. In addition to glass, we manufacture aluminum and vinyl products such as profiles, rods, bars, plates, and other hardware specifically designed for window manufacturing.
Our products are manufactured in a 5.6 million square foot, state-of-the-art manufacturing complex in Barranquilla, Colombia that provides easy access to North, Central and South America, the Caribbean and the Pacific. Our products can be found on some of the most distinctive buildings in these regions, including 100 Hood Park Drive (Boston), 601 West 29th St (New York). Norwegian Cruise Line Terminal B (Miami), Paramount Miami Worldcenter (Miami), Via 57 West (New York), One65 Main (Cambridge), AE’O Tower (Honolulu), Salesforce Tower (San Francisco), and One Thousand Museum (Miami). Our track record of successfully delivering high profile projects has earned us an increasing number of opportunities across the United States, evidenced by our expanding backlog and overall revenue growth.
Our structural competitive advantage is underpinned by our low-cost manufacturing footprint, vertically integrated business model and geographic location. Our integrated facilities in Colombia and distribution and services operations in Florida provide us with a significant cost advantage in both manufacturing and distribution, and we continue to invest in these operations to expand our operational capabilities. Our lower cost manufacturing footprint allows us to offer competitive prices for our customers, while also providing innovative, high quality and high value-added products, together with consistent and reliable service. We have historically generated high margin organic growth based on our position as a value-added solutions provider for our customers.
We have a strong presence in the Florida market, which represents a substantial portion of our revenue stream and backlog. Our success in Florida has primarily been achieved through sustained organic growth, with further penetration now taking place into other highly populated areas of the United States. As part of our strategy to become a fully vertically integrated company, we have supplemented our organic growth with some acquisitions that have allowed us added control over our supply chain allowed for further vertical integration of our business and will act as a platform for our future expansion in the United States. In 2016, we completed the acquisition of ESW, which gave us control over the distribution of products into the United States from our manufacturing facilities in Colombia. In March 2017, we completed the acquisition of GM&P, a consulting and glazing installation business that was previously our largest installation customer.
| 20 |
On May 3, 2019, we consummated the joint venture agreement with Saint-Gobain, acquiring a 25.8% minority ownership interest in Vidrio Andino, a Colombia-based subsidiary of Saint-Gobain, solidifying our vertical integration strategy by acquiring an interest in the first stage of our production chain, while securing ample glass supply for our expected production needs. Additionally, in April 2019, we acquired a 70% equity interest in ESMetals, which has been consolidated in our financial statements since. In November 2023, we acquired the remaining 30% equity interest in ESMetals. ESMetals is a Colombian entity that serves as a metalwork contractor to supply us with steel accessories used in the assembly of certain architectural systems as part of our vertical integration strategy.
The continued diversification of the group’s presence and product portfolio is a core component of our strategy. In particular, we are actively seeking to expand our presence in United States outside of Florida. We also launched a residential window offering which, we believe, will help us expand our presence in the United States and generate additional organic growth. We believe that the quality of our products, coupled with our ability to price competitively given our structural advantages on cost, will allow us to generate further growth in the future.
We have focused on working with The Power of Quality, always making sure that our vision of sustainability is immersed into every aspect of our business, including social, environmental, economic and governance variables, that help us make decisions and create value for our stakeholders. We carry out a series of initiatives based on our global sustainability strategy, which is supported on three fundamental pillars: promoting an ethical and responsible continuous growth, leading eco-efficiency and innovation, and empowering our environment. As part of this strategy we have voluntarily adhered to UN Global Compact Principles since 2017 and in pursuit of our cooperation with the attainment of the SDGs joined in 2021 a program to dynamize, strengthen and make visible the management of greenhouse gas emissions as a carbon neutral strategy set out by the Colombian government for 2050.
RESULTS OF OPERATIONS
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating Revenues | $ | 192,627 | $ | 202,639 | ||||
| Cost of sales | (117,967 | ) | (94,884 | ) | ||||
| Gross profit | 74,660 | 107,755 | ||||||
| Operating expenses | (33,638 | ) | (34,075 | ) | ||||
| Operating income | 41,022 | 73,680 | ||||||
| Non-operating income and expenses, net | 1,080 | 1,287 | ||||||
| Equity method income | 1,046 | 1,449 | ||||||
| Foreign currency transactions losses | (153 | ) | (1,100 | ) | ||||
| Interest Expense and deferred cost of financing | (2,106 | ) | (2,273 | ) | ||||
| Income tax provision | (11,159 | ) | (24,671 | ) | ||||
| Net income | 29,730 | 48,372 | ||||||
| Income attributable to non-controlling interest | - | (137 | ) | |||||
| Income attributable to parent | $ | 29,730 | $ | 48,235 | ||||
Comparison of quarterly periods ended March 31, 2024, and 2023
Revenues
Operating revenues during the quarter ended March 31, 2024, was $192.6 million, compared to $202.6 million during the quarter ended March 31, 2023, a decrease of $10.0 million or 4.9%, year over year. The decrease was driven by seasonally slow single family residential revenues, down $10.4 million, or 12.5% year over year, impacted by high interest and mortgage rates. Despite the aforementioned higher rates, the commercial market actually grew slightly year over year as the Company continues to execute on its growing backlog.
Gross profit
Gross profit during the three months ended March 31, 2024, was $74.7 million, a decrease of $33.1 million, or 30.7%, from $107.8 million during the three months ended March 31, 2023. The gross profit margin during the three months ended March 31, 2024, of 38.8% was down from 53.2% during the first quarter of 2023, primarily related to a 17.8% appreciation of the Colombian Peso impacting our costs denominated in Colombian Pesos against our predominantly US Dollar revenue stream, accounting for an estimated 308-basis points year over year decrease on margin. Additionally, this unfavorable FX dynamic impacted inventories that were recorded into the balance sheet at a weaker Peso and then accounted for under raw material costs at a much stronger Peso, translating into more US Dollars at the time the revenues are recognized. This effect contributed to a 197-basis point decrease year-over-year when assessing the same effect during the comparable period. Finally, margins were impacted by our revenue mix which included more installation and stand-alone product sales during the current period. Installation revenues increased to 16.9% of total revenue, compared with 14.4% during the prior year quarter, and stand-alone architectural glass and frames sales increased to 10.9% of total sales, in comparison with 8.3%, as a result of recent manufacturing capacity expansion unlocking the opportunity to sell stand-alone product.
Expenses
Operating expenses decreased $0.4 million, or 1.3%, from $34.1 million to $33.6 million for the quarters ended March 31, 2023, and 2024, respectively. The decrease resulted primarily from $0.8 million decrease in Accounts receivable provision partially offset by mostly flat operating expenses, despite the unfavorable pressure on Colombian Peso denominated cost, as the peso strengthened 17.8% year over year.
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Non-operating income and expenses, net
During the three months ended March 31, 2024, and 2023, the Company recorded non-operating income of $1.1 million and $1.3 million, respectively. Non-operating income is comprised of interest income from short term investments, as well as non-operating expenses related to certain charitable contributions outside of the Company’s direct sphere of influence.
Foreign currency transaction gains and losses
During the three months ended March 31, 2024, the Company recorded a non-operating loss of $0.2 million associated with foreign currency transactions compared to a net non-operating loss of $1.1 million during the three months ended March 31, 2023.
Interest Expense and deferred cost of financing
Interest expense and deferred cost of financing decreased $0.2 million, or 7.3%, to $2.1 million during the quarter ended March 31, 2024, as the Company voluntarily prepaid $15 million to reduce its debt balance and benefited from having a favorable interest rate hedge in place for approximately 75% of its outstanding debt.
Income Taxes
The effective income tax rate for 2024 and 2023, was 27.3% and 33.8%, respectively. The effective income tax rate of 27.3% during the three months ended March 31, 2024, is below the statutory rate as the Colombian subsidiaries which bear a higher corporate income tax rate recorded a proportionally lower share of the consolidated income.
As a result of the foregoing, the Company recorded net income for the three months ended March 31, 2024, of $29.7 million compared to net income of $48.4 million for the three months ended March 31, 2023.
Liquidity
As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of approximately $135.9 million and $129.5 million, respectively. Additionally, we currently have approximately $170.0 million available under different lines of credit.
We anticipate that the Company will continue to generate positive cashflow from operating activities through, at least twelve months from the date of this report, which we believe, in addition to our current liquidity position, provides ample flexibility to service our obligations through the next twelve months.
| 22 |
Capital Resources
We transform glass and aluminum into high specification architectural glass and custom-made aluminum profiles which require significant investments in state-of-the-art technology. During the Three months ended March 31, 2024 and 2023, we made investments primarily in building and construction and machinery and equipment in the amounts of $11.2 million and $20.3 million, respectively. These investments across our vertically-integrated operations include further automating our glass and window assembly production lines, adding glass production lines, expanding our aluminum facilities, putting new vinyl windows lines to penetrate this new product segment and purchasing land to grow beyond current installed capacity. The Company estimates that current manufacturing operating capacity has reached approximately $1.2 billion which does not account for incremental installation revenue capacity. Additionally, the Company expects the resulting increase in output to improve efficiency throughout its operations while reducing material waste and overall lead times.
Cash Flow from Operations, Investing and Financing Activities
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flow provided by Operating Activities | $ | 33,447 | $ | 43,063 | ||||
| Cash Flow used in Investing Activities | (10,192 | ) | (15,688 | ) | ||||
| Cash Flow used in Financing Activities | (16,686 | ) | (3,287 | ) | ||||
| Effect of exchange rates on cash and cash equivalents | (196 | ) | 778 | |||||
| Cash Balance - Beginning of Period | 129,508 | 103,672 | ||||||
| Cash Balance - End of Period | $ | 135,881 | $ | 128,538 | ||||
During the three months ended March 31, 2024, and 2023, operating activities generated approximately $33.4 million and $43.1 million, respectively. The main sources of operating cash during the three months ended March 31, 2024, were driven by an improvement in working capital associated with inventories and trade accounts receivable. Inventories generated $13.7 million, mostly due to a faster raw material and Finished goods turnover during the three months ended March 31, 2024, as main projects are being executed; compared to a net use of $13.0 million during the three months ended March 31, 2023, as we procured materials to meet our growing operations. In addition, Trade Accounts receivable generated $3.8 million, compared with a use of $8.6 million during the three months ended March 31, 2023. The largest use of cash in operating activities were other assets, comprised primarily of prepaid taxes, which used $9.2 million during the three months ended March 31, 2024, resulting from a higher taxable income year over year for fiscal year that will be paid in 2024; and trade accounts payable which used an additional $8.0 million. Comparatively, other assets used $14.3 million during the three months ended March 31, 2023, and Trade accounts receivable used $9.7 million.
| 23 |
We used $10.2 million and $15.7 million in investing activities during the three months ended March 31, 2024, and 2023, respectively. The main use of cash in investing activities during the three months ended March 31, 2024, related to the automation of our architectural system assembly processes further described above in the “Capital Resources” section. During the three months ended March 31, 2024, we paid $9.9 million to acquire property plant and equipment, which in combination with $1.3 million acquired under credit or debt, amount to total capital expenditures of $11.2 million. During the three months ended March 31, 2023, we used $15.5 million for the acquisition of property and equipment. Including assets acquired with debt or supplier credit, total capital expenditures during the period were $20.3 million.
Financing activities used $16.7 million and $3.3 million during the three months ended March 31, 2024 and 2023, respectively. We paid $4.2 million and $3.6 million of dividends to holders of our ordinary shares during the Three months ended March 2024 and 2023, respectively. Additionally, during the three months ended March 31, 2024, we used $15.2 million to repay debt from our Senior Secured Line of Credit.
Off-Balance Sheet Arrangements
None
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to ongoing market risk related to changes in interest rates, foreign currency exchange rates and commodity market prices.
A rise in interest rates could negatively affect the cost of financing for a significant portion of our debt with variable interest rates. If interest rates were to increase over the next 12 months by 100 basis points, net earnings would decrease by approximately $0.3 million based the current composition of our indebtedness. This market risk exposure is net of the effect from interest rate hedging derivative financial instruments further described in the footnotes to the financial statements.
We are subject to market risk due to changes in the value of foreign currencies in relation to our reporting currency, the U.S. dollar. Some of our subsidiaries’ operations are based in Colombia, and primarily transact business in local currency. Approximately 3% of our consolidated revenues and 24% of our costs and expenses are effectively incurred in Colombian pesos, thereby mitigating some of the risk associated with changes in foreign exchange rates. This portion of costs and expenses denominated in Colombian Peso excludes certain items which are transacted in Colombia using Colombian Peso but are priced in U.S. Dollars or are otherwise indexed to U.S. Dollar rates. However, as our costs and expenses in Colombian Pesos exceed, a 5% appreciation of the Colombian Peso relative to the US Dollar would result in our quarter revenues increasing by $0.3 million and our costs and expenses increasing by approximately $2.2 million, resulting in a $1.9 million decrease to net earnings based on results for the three months ended March 31, 2024.
Similarly, a significant portion of the monetary assets and liabilities of these subsidiaries are generally denominated in US Dollars, while their functional currency is the Colombian peso, thereby resulting in gains or losses from remeasurement of assets and liabilities using the end of period spot exchange rate. These subsidiaries have both monetary assets and monetary liabilities denominated in US Dollars, thereby mitigating some of the risk associated with changes in foreign exchange rate. Furthermore, we record a portion of the non-cash foreign currency transaction gains and losses from remeasurement of certain intercompany loans as other comprehensive income. Net of this, the Colombian subsidiaries’ US Dollar denominated monetary liabilities exceed their monetary assets by $29.4 million, such that a 1% devaluation of the Colombian peso will result in a loss of $0.3 million recorded in the Company’s Consolidated Statement of Operations as of March 31, 2024.
Additionally, the results of the foreign subsidiaries must be translated into US Dollars, our reporting currency, in the Company’s consolidated financial statements. The currency translation of the financial statements using different exchange rates, as appropriate, for different parts of the financial statements generates a translation adjustment, which is recorded within other comprehensive income on the Company’s Consolidated Statement of Comprehensive Income and Consolidated Balance Sheet.
| 24 |
We are also subject to market risk exposure related to volatility in the prices of aluminum, one of the principal raw materials used for our manufacturing. The commodities markets, which include the aluminum industry, are highly cyclical in nature, and as a result, prices can be volatile. Commodity costs are influenced by numerous factors beyond our control, including general economic conditions, the availability of raw materials, competition, labor costs, freight and transportation costs, production costs, import duties and other trade restrictions. Our selling prices are also impacted by changes in commodity costs base our pricing of aluminum products based on the quoted price on the London Metals Exchange plus a manufacturing premium with the intention of aligning cost of our raw materials with selling prices to attempt to pass commodity price changes through to our customers.
We cannot accurately estimate the impact a one percent change in the commodity costs of would have on our results of operation, as the change in commodity costs would both impact the cost to purchase materials and our selling prices. The impact to our results of operations depends on the conditions of the market for our products, which could impact our ability to pass commodities costs to our customers.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We performed an evaluation required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of Tecnoglass, Inc.´s design and operating effectiveness of the internal controls over financial reporting as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, were effective as of March 31, 2024, in order to provide reasonable assurance that the information disclosed in our reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
For the quarter ended March 31, 2024, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 25 |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While management believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.
Item 5. Other Information
During
the three months ended March 31, 2024, no director or officer
Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32 | Certification of Chief Executive Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101 | Financial statements from the Quarterly Report on Form 10-Q of Tecnoglass Inc. for the quarter ended March 31, 2024, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statement of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statement of Cash Flows and (v) Notes to Unaudited Condensed Consolidated Financial Statements, as blocks of text and in detail. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 26 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TECNOGLASS INC. | ||
| By: | /s/ Jose M. Daes | |
| Jose M. Daes | ||
| Chief Executive Officer | ||
| (Principal executive officer) | ||
| By: | /s/ Santiago Giraldo | |
| Santiago Giraldo | ||
| Chief Financial Officer | ||
| (Principal financial and accounting officer) | ||
| Date: May 9, 2024 | ||
| 27 |