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Evergreen Solar Inc. Reports Operating Results (10-Q)

November 05, 2010 | About:
gurufocus

10qk

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Evergreen Solar Inc. (ESLR) filed Quarterly Report for the period ended 2010-10-02.

Evergreen Solar Inc. has a market cap of $204.2 million; its shares were traded at around $0.97 with and P/S ratio of 0.8.

Highlight of Business Operations:

When our Wuhan facility reaches full operating metrics by mid-2011, our non-silicon processing costs are expected to be $0.23 per watt. This compares to an estimated $0.25 per watt for our still larger Chinese competitors, and then only the best of breed companies. Assuming silicon costs of $50 per kilogram, we expect to reduce our fully loaded wafer costs to $0.40 per watt, which compares to $0.55 per watt for our much larger competitors consisting of $0.30 per watt for silicon and $0.25 per watt for processing.

Research and development expenses. Our research and development expenses for the quarter ended October 2, 2010 were approximately $5.1 million, an increase of approximately $684,000, or 15%, from $4.4 million for the quarter ended October 3, 2009. The increase is attributable to increased compensation and related expense of approximately $390,000, increased professional fees of approximately $209,000 and higher material and equipment expenses of approximately $111,000 primarily associated with initiatives to increase cell efficiency offset by lower depreciation expense of $84,000.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the quarter ended October 2, 2010 were approximately $13.7 million, an increase of $7.8 million, or 133%, from $5.9 million for the quarter ended October 3, 2009. These increases were primarily attributable to recording a third quarter doubtful account charge of approximately $6.4 million relating to a receivable from a Korean customer, increased compensation and related expenses of approximately $1.1 million associated with higher incentive compensation costs and, to a lesser extent, merit increases and additional personnel in support of our overall expansion of operations, which were partially offset by lower stock compensation costs. In the second quarter of 2009, the Company instituted a general organization wide salary reduction plan in addition to lowering incentive compensation accruals. Also, professional fees increased approximately $142,000, much of which was in support of information technology, sales and marketing, and human resources initiatives, in addition to an increase in marketing communication costs of approximately $130,000. These were partially offset by lower material and equipment expenses of approximately $73,000 and lower legal fees of approximately $77,000.

Other income (expense) net. Other expense, net of $4.5 million for the quarter ended October 2, 2010 was comprised of approximately $0.4 million of interest income and approximately $6.3 million of net foreign exchange gains that resulted from the fluctuation of the Euro exchange rate primarily on our Euro denominated accounts receivable, offset by approximately $11.2 million in interest expense. Other net expense of $5.1 million for the quarter ended October 3, 2009 was comprised of approximately $7.7 million in interest expense which was offset by approximately $2.5 million of net foreign exchange gains and $118,000 in interest income. The higher interest expense for the quarter ended October 2, 2010 is attributable to our higher debt obligations which, in the aggregate, increased by approximately $59 million since October 3, 2009 in addition to higher interest rates on the new debt obligations. The increase in net foreign exchange gains was primarily due to the impact of the strengthening U.S. dollar during the third quarter of 2010 on our Euro denominated accounts receivable. The increase in interest income is primarily attributable to higher interest collected on past due accounts receivable and interest earned on our outstanding loans to Jiawei.

Research and development expenses. Our research and development expenses for the year-to-date period ended October 2, 2010 were approximately $15.1 million an increase of approximately $1.8 million , or 13%, from $13.3 million for the year-to-date period ended October 3, 2009. The increase is attributable to higher material and equipment expenses of approximately $1.5 million primarily associated with initiatives to increase cell efficiency, increased compensation and related costs of approximately $400,000. higher travel expenses of approximately $139,000 and higher professional fess of approximately $122,000. Theses expenses were offset by lower depreciation expense of approximately $306,000.

Selling, general and administrative expenses. Our selling, general and administrative expenses for the year-to-date ended October 2, 2010 were approximately $28.7 million, an increase of $9.7 million, or 51%, from $19.0 million for the year-to-date period ended October 3, 2009. These increases were primarily attributable to recording a third quarter doubtful account charge of approximately $6.4 million relating to a receivable from a Korean customer, increased compensation and related costs of approximately $1.4 million associated with higher incentive compensation costs, merit increases and additional personnel in support of our overall expansion of operations, which were partially offset by lower stock compensation costs. We experienced lower compensation costs in 2009 due to a general organization wide salary reduction and lower incentive compensation accruals during the first three quarters of 2009. We also incurred increased professional fees of approximately $990,000 in support of information technology, sales and marketing and human resources initiatives, increased legal fees of approximately $134,000 in support of our on-going operations and the sale of Sovello, an increase in marketing communication costs of approximately $484,000 and an increase in information technology costs of approximately $307,000 to support the growth of our operations.

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