Array Technologies Inc
For the period ended Dec 31, 2023. Filed Feb 28, 2024.
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FY2023 · Filed Feb 28, 2024
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Item 9B. Other Information
Immaterial Correction of Interim Condensed Consolidated Financial Statements
Capped Calls
In connection with the pricing of the Convertible Notes, we entered into capped call transactions with the Option Counterparties. At issuance the Company concluded that the Capped Calls met the criteria for equity classification because they are indexed to the Company’s common stock and the Company has discretion to settle the Capped Calls in shares or cash. As a result, the amount paid for the Capped Calls was recorded as a reduction to additional paid-in capital. When the Company entered into the Capped Calls, the Company executed certain side letters (the “Side Letters”) with the counterparties that replaced some of the terms described in the primary contract including the volatility inputs used to value the Capped Calls under certain circumstances. Upon further evaluation of the accounting during the three months ended March 31, 2023, the Company concluded that the modification to the volatility inputs in the side letters precluded the Capped Calls from being accounted for as an equity instrument indexed to its own stock and should be accounted for as a freestanding derivative instrument asset recognized at fair value, with subsequent changes in fair value recognized in earnings. During the three months ended March 31, 2023, the Company began to account for the Capped Calls as derivative assets, with subsequent changes in fair value being recorded through earnings. During the three months ended December 31, 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity classification accounting treatment was acceptable. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction to equity and reversed the related mark to market adjustments recognized during the interim periods of 2023.
Redeemable Perpetual Preferred Stock
At issuance, the Company evaluated the accounting for the instruments issued pursuant to the SPA and determined the Series A Shares and common stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Put Option are freestanding instruments that are classified in equity. During the first quarter of 2023, the Company reconsidered the provisions of the Put Option and concluded that it should be accounted for as a freestanding derivative instrument asset accounted for at fair value with subsequent fair value adjustments recognized in earnings. During the fourth quarter of 2023, after consultation with the staff of the Office of the Chief Accountant of the SEC, the Company concluded that the original equity accounting classification was correct. As a result, the Company reclassified the derivative asset recognized during the interim periods of 2023 as a reduction of equity and also reversed the related fair value adjustments.
Management evaluated the above misstatements and concluded they were not material to the interim periods of 2023, individually or in aggregate. As a result, the Company plans to prospectively correct the relevant prior period condensed consolidated financial statements and related footnotes for these misstatements.
The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated interim financial statements to be presented as comparative in the Form 10-Q for the nine months ended September 30, 2024:
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||
|---|---|---|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected | As Previously Reported | Adjustments | As Corrected |
| Change in fair value of derivative assets | $116 | $(116) | $— | $(1,140) | $1,140 | $— |
| Total other income (expense) | (9,762) | (116) | (9,878) | (30,242) | 1,140 | (29,102) |
| Income (loss) before income tax expense | 30,443 | (116) | 30,327 | 153,662 | 1,140 | 154,802 |
| Income tax expense (benefit) | 7,229 | — | 7,229 | 39,508 | (2,604) | 36,904 |
| Net income (loss) | 23,214 | (116) | 23,098 | 114,154 | 3,744 | 117,898 |
| Net income (loss) to common shareholders | $10,123 | $(116) | $10,007 | $75,795 | $3,744 | $79,539 |
| Income per common share | ||||||
| Basic | $0.07 | $— | $0.07 | $0.50 | $0.02 | $0.52 |
| Diluted | $0.07 | $— | $0.07 | $0.50 | $0.02 | $0.52 |
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||
|---|---|---|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected | As Previously Reported | Adjustments | As Corrected |
| Net income (loss) | $23,214 | $(116) | $23,098 | $114,154 | $3,744 | $117,898 |
| Comprehensive income (loss) | $719 | $(116) | $603 | $129,443 | $3,744 | $133,187 |
| Three Months Ended September 30, 2023 | |||
|---|---|---|---|
| (in thousands) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity |
| As Previously Reported | |||
| Balance at June 30, 2023 | $417,624 | $(176,530) | $287,454 |
| Net income | — | 23,214 | 23,214 |
| Balance at September 30, 2023 | 407,916 | (153,316) | 278,465 |
| Adjustments | |||
| Balance at June 30, 2023 | (52,914) | 3,860 | (49,054) |
| Net loss | — | (116) | (116) |
| As Corrected | |||
| Balance at June 30, 2023 | 364,710 | (172,670) | 238,400 |
| Net income | — | 23,098 | 23,098 |
| Balance at September 30, 2023 | $355,002 | $(149,572) | $229,295 |
| Nine Months Ended September 30, 2023 | |||
|---|---|---|---|
| (in thousands) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity |
| As Previously Reported | |||
| Balance at December 31, 2022 | $383,176 | $(267,470) | $124,281 |
| Correction of the Capped Call and Put Option errors | 52,914 | — | 52,914 |
| Net income | — | 114,154 | 114,154 |
| Balance at September 30, 2023 | 407,916 | (153,316) | 278,465 |
| Adjustments | |||
| Correction of the Capped Call and Put Option errors | (52,914) | — | (52,914) |
| Net income | — | 3,744 | 3,744 |
| As Corrected | |||
| Balance at December 31, 2022 | 383,176 | (267,470) | 124,281 |
| Correction of the Capped Call and Put Option errors | — | — | — |
| Net income | — | 117,898 | 117,898 |
| Balance at September 30, 2023 | $355,002 | $(149,572) | $229,295 |
| Nine Months Ended September 30, 2023 | |||
|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected |
| Net income | $114,154 | $3,744 | $117,898 |
| Deferred tax expense (benefit) | 284 | (2,612) | (2,328) |
| Change in fair value of derivative assets | 1,140 | (1,140) | — |
| Income tax payable | $(738) | $8 | $(730) |
The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for six months ended June 30, 2024:
| Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |||||
|---|---|---|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected | As Previously Reported | Adjustments | As Corrected |
| Change in fair value of derivative assets | $694 | $(694) | $— | $(1,256) | $1,256 | $— |
| Total other income (expense) | (9,030) | (694) | (9,724) | (20,480) | 1,256 | (19,224) |
| Income (loss) before income tax expense | 87,211 | (694) | 86,517 | 123,219 | 1,256 | 124,475 |
| Income tax expense (benefit) | 22,403 | (1,051) | 21,352 | 32,279 | (2,604) | 29,675 |
| Net income | 64,808 | 357 | 65,165 | 90,940 | 3,860 | 94,800 |
| Net income to common shareholders | $52,024 | $357 | $52,381 | $65,672 | $3,860 | $69,532 |
| Income per common share | ||||||
| Basic | $0.34 | $— | $0.34 | $0.44 | $0.03 | $0.47 |
| Diluted | $0.34 | $— | $0.34 | $0.43 | $0.03 | $0.46 |
| Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |||||
|---|---|---|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected | As Previously Reported | Adjustments | As Corrected |
| Net income | $64,808 | $357 | $65,165 | $90,940 | $3,860 | $94,800 |
| Comprehensive income | $88,720 | $357 | $89,077 | $128,724 | $3,860 | $132,584 |
| Three Months Ended June 30, 2023 | |||
|---|---|---|---|
| (in thousands) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity |
| As Previously Reported | |||
| Balance at March 31, 2023 | $426,221 | $(241,338) | $207,330 |
| Net income | — | 64,808 | 64,808 |
| Balance at June 30, 2023 | 417,624 | (176,530) | 287,454 |
| Adjustments | |||
| Balance at March 31, 2023 | (52,914) | 3,503 | (49,411) |
| Net income | — | 357 | 357 |
| As Corrected | |||
| Balance at March 31, 2023 | 373,307 | (237,835) | 157,919 |
| Net income | — | 65,165 | 65,165 |
| Balance at June 30, 2023 | $364,710 | $(172,670) | $238,400 |
| Six Months Ended June 30, 2023 | |||
|---|---|---|---|
| (in thousands) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity |
| As Previously Reported | |||
| Balance at December 31, 2022 | $383,176 | $(267,470) | $124,281 |
| Correction of the Capped Call and Put Option errors | 52,914 | — | 52,914 |
| Net income | — | 90,940 | 90,940 |
| Balance at June 30, 2023 | 417,624 | (176,530) | 287,454 |
| Adjustments | |||
| Correction of the Capped Call and Put Option errors | (52,914) | — | (52,914) |
| Net income | — | 3,860 | 3,860 |
| As Corrected | |||
| Balance at December 31, 2022 | 383,176 | (267,470) | 124,281 |
| Correction of the Capped Call and Put Option errors | — | — | — |
| Net income | — | 94,800 | 94,800 |
| Balance at June 30, 2023 | $364,710 | $(172,670) | $238,400 |
| Six Months Ended June 30, 2023 | |||
|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected |
| Net income | $90,940 | $3,860 | $94,800 |
| Deferred tax expense (benefit) | 816 | (2,612) | (1,796) |
| Change in fair value of derivative assets | 1,256 | (1,256) | — |
| Income tax payable | $9,830 | $8 | $9,838 |
The following tables reflect the effects of the correction on all affected line items of the Company’s previously reported condensed consolidated financial statements to be presented as comparative in the Form 10-Q for three months ended March 31, 2024:
| Three Months Ended March 31, 2023 | |||
|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected |
| Change in fair value of derivative assets | $(1,950) | $1,950 | $— |
| Total other income (expense) | (11,450) | 1,950 | (9,500) |
| Income before income tax benefit | 36,008 | 1,950 | 37,958 |
| Income tax expense (benefit) | 9,876 | (1,553) | 8,323 |
| Net income | 26,132 | 3,503 | 29,635 |
| Net income to common shareholders | $13,648 | $3,503 | $17,151 |
| Income per common share | |||
| Basic | $0.09 | $0.02 | $0.11 |
| Diluted | $0.09 | $0.02 | $0.11 |
| Three Months Ended March 31, 2023 | |||
|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected |
| Net income | $26,132 | $3,503 | $29,635 |
| Comprehensive income | $40,004 | $3,503 | $43,507 |
| Three Months Ended March 31, 2023 | |||
|---|---|---|---|
| (in thousands) | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity |
| As Previously Reported | |||
| Balance at December 31, 2022 | $383,176 | $(267,470) | $124,281 |
| Correction of the Capped Call and Put Option errors | 52,914 | — | 52,914 |
| Net income | — | 26,132 | 26,132 |
| Balance at March 31, 2023 | 426,221 | (241,338) | 207,330 |
| Adjustments | |||
| Correction of the Capped Call and Put Option errors | (52,914) | — | (52,914) |
| Net income | — | 3,503 | 3,503 |
| As Corrected | |||
| Balance at December 31, 2022 | 383,176 | (267,470) | 124,281 |
| Correction of the Capped Call and Put Option errors | — | — | — |
| Net income | — | 29,635 | 29,635 |
| Balance at March 31, 2023 | $373,307 | $(237,835) | $157,919 |
| Three Months Ended March 31, 2023 | |||
|---|---|---|---|
| (in thousands) | As Previously Reported | Adjustments | As Corrected |
| Net income | $26,132 | $3,503 | $29,635 |
| Deferred tax expense (benefit) | 4,555 | (1,553) | 3,002 |
| Change in fair value of derivative assets | $1,950 | $(1,950) | $— |
Trading Arrangements
During the fiscal quarter ended December 31, 2023, certain of our directors and officers (as defined in Rule 16a-1(f) under the Exchange Act) entered into contracts, instructions or written plans for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information. We refer to these contracts, instructions, and written plans as “Trading Plans” and each one as a “Trading Plan.”
| Director/Officer | Action & Date of Action | Commencement of Trading Period | Scheduled Termination of Trading Period (1) | Security Covered | Maximum Number of Securities to be Purchased or Sold Pursuant to the Rule 10b5-1 Trading Plan (2) | Covers Purchase or Sale? |
|---|---|---|---|---|---|---|
| Travis Rose, Chief Revenue Officer | Adoption November 16, 2023 | February 20, 2024 | December 31, 2024 | Common Stock | 11,500 | Sale |
We maintain a website at www.arraytechinc.com. The contents of our website are not incorporated in, or otherwise to be regarded as part of, this Annual Report on Form 10-K. We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we file or furnish them electronically with the SEC.
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