Evergreen Solar Inc. (ESLR) filed Quarterly Report for the period ended 2009-10-03.
Evergreen Solar Inc. develops, manufactures and markets solar power cells, panels and systems that provide reliable and environmentally clean electric power throughout the world. The company's sales are composed of primarily solar panels. The company is preparing to begin large-scalemanufacturing of its solar power products in its manufacturing facility. The company believes the proprietary and patented solar power technologiesthat the company has developed and are currently developing will give the company significant cost and product design advantages. Evergreen Solar Inc. has a market cap of $299.6 million; its shares were traded at around $1.44 with and P/S ratio of 2.7.
Highlight of Business Operations:
Revenues. Our product revenues for the quarter ended October 3, 2009 were $75.5 million, an increase of $57.6 million, or 324%, from $17.8 million for the quarter ended September 27, 2008. The increase in product revenues is primarily the result of increased sales volume which was generated from our new Devens facility which began shipping product in the third quarter of 2008. During the quarter ended October 3, 2009 we shipped approximately 31.3 MW compared to 4.8 MW for the quarter ended September 27, 2008 from our now closed Marlboro facility, an increase of 548%. This increase in volume was primarily offset by lower average selling prices of approximately 33.6% that resulted from continued price declines in the market place and, to a lesser extent, a slightly stronger U.S. dollar during the third quarter of 2009 compared to the third quarter of 2008. In addition, we believe that third quarter 2009 sales continued to be negatively impacted by the credit constraints being experienced in the current economic downturn. Royalty revenue and marketing and selling fees earned from Sovello for the quarter ended October 3, 2009 were $2.2 million, a decrease of $2.1 million, or 48%, from $4.3 million for the quarter ended September 27, 2008. The decrease in royalty revenue and marketing and selling fees was due mainly to substantially lower sales volume at Sovello of 46%.
International product revenues accounted for 76% and 43% of total product revenues for the quarters ended October 3, 2009 and September 27, 2008, respectively. As we increase our capacity driven by the completion of our Devens facility, we expect that we will continually adjust our distribution strategy as markets for solar energy rapidly develop and change.
Total cost estimated for the initial 100 MW wafer manufacturing facility is expected to be approximately $55 to $60 million, the majority of which is for quad wafer furnaces. When our China facility reaches full capacity of 25 MW per quarter we expect production costs for completed panels will be in the $1.35 to $1.45 per watt range at a silicon price of about $75 per kilogram. We believe that as additional efficiencies are realized and the price of silicon approaches $50 per kilogram we can reduce panel cost to about $1.00 per watt.
Until December 31, 2008, we marketed and sold all solar panels manufactured by Sovello under the Evergreen Solar brand, and managed customer relationships and contracts related to the sale of Sovello manufactured product. We receive selling fees from Sovello and do not report gross revenue or cost of goods sold resulting from the sale of Sovello’s solar panels. In addition, we receive royalty payments for our ongoing technology license to Sovello. Combined, the sales and marketing fee and royalties earned totaled approximately $4.3 million and $13.6 million for the quarter and year-to-date periods ended September 27, 2008, respectively. For 2009, we, Q-Cells and REC, our one-third partners in the Sovello joint venture, agreed to have Sovello begin marketing and selling its products under its own brand. Sovello will continue to manufacture some Evergreen Solar-branded product in 2009 and 2010 but, with its independent sales and marketing team now in place, our involvement in marketing and selling Sovello product will decrease. In light of the sales transition, our selling fee for Sovello product sold under the Evergreen Solar brand has been reduced to 0.5% for 2009 from 1.6% in 2008 and will eventually be eliminated once the transition is complete. For the quarter and year-to-date periods ended October 3, 2009, the sales and marketing fee and royalties earned totaled approximately $2.2 million and $4.7 million, respectively.
For the quarters ended September 27, 2008 and October 3, 2009, we recorded approximately $31,000 and $(7,000), respectively, for reimbursement of research and development costs, and other support costs from Sovello. For the year-to-date periods ended September 27, 2008 and October 3, 2009, we recorded approximately $370,000 and $6,000, respectively, for reimbursement of research and development costs, and other support costs from Sovello.
Research and development expenses. Our research and development expenses for the quarter ended October 3, 2009 were approximately $4.4 million, a decrease of approximately $1.1 million or 20%, from $5.5 million, net of $31,000 of reimbursements from Sovello, for the quarter ended September 27, 2008. The decrease is primarily attributable to lower depreciation expense of approximately $620,000 that resulted from the write-off of research and development equipment in December 2008 that supported now-obsolete technologies, lower allocated manufacturing support costs of approximately $225,000 and slightly lower compensation costs.
Selling, general and administrative expenses. Our selling, general and administrative expenses for the quarter ended October 3, 2009 were approximately $5.9 million, a decrease of $302,000, or 4.9%, from $6.2 million for the quarter ended September 27, 2008. In general, the decline in our selling, general and administrative expenses was primarily attributable to lower compensation costs of $377,000 due mainly to general organization wide salary reductions and lower incentive compensation accruals during the third quarter 2009, lower sales and marketing costs of approximately $305,000 due to decreases in trade shows and advertising, and decreases in travel and related expenses of $112,000. These decreases were offset by higher legal fees of $305,000 in support of our ongoing operations, higher professional fees of $62,000 and slightly higher insurance costs.
Other income (expense), net. Other net expense of $4.8 million for the quarter ended October 3, 2009 was comprised of approximately $7.4 million in net interest expense, offset by approximately $2.5 million in net foreign exchange gains. Other net expense of $4.1 million for the quarter ended September 27, 2008 consisted of approximately $5.0 million of net foreign exchange losses and $3.3 million of net interest expense offset by $4.2 million of interest income. The increase in net foreign exchange gains was due primarily to the timing of our Euro denominated transactions against a weaker U.S. dollar. The decrease in interest income is attributable to lower interest rates in addition to our lower average cash balance that resulted primarily from our use of cash for the construction of the Devens and Midland facilities, and our operational requirements driven by the growth of our business. The higher interest expense for the quarter ended October 3, 2009 is primarily attributable to lower capitalized interest costs that resulted from the substantial completion of our Devens facility. In addition, we incurred interest expense on the loan received from HSTIC during the third quarter of 2009 associated with our expansion into China.
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