Canadian Solar Reports 1Q10 Unaudited Financial Results and FY09 Audited Financial Results

2010-08-20 02:20 1221
    ONTARIO, Canada, Aug. 20 /PRNewswire-Asia/ --

    The Company previously released its 4Q09 unaudited financial results in its press release dated March 3, 2010 and subsequently disclosed in its press release dated June 1, 2010 that it may revise such numbers. This release supersedes the March 3, 2010 release. The 4Q09 results disclosed herein are referred to as "revised" results.

    1Q10 Highlights
    -- Net revenues of $336.9 million for 1Q10, compared to revised net
       revenues of $254.2 million for 4Q09.
    -- Shipments of 185.0 MW for 1Q10, compared to revised shipments of 141.2
       MW for 4Q09.
    -- Gross margin of 12.4% for 1Q10 compared to revised gross margin of 9.5%
       for 4Q09.
    -- Net income of $0.04 per diluted share for 1Q10, compared to revised net
       loss of $0.38 per diluted share for 4Q09.

    Canadian Solar Inc. (the "Company", "we" or "Canadian Solar") (Nasdaq: CSIQ), one of the world's largest solar companies, today announced its audited financial results for 2009, its unaudited financial results for the first quarter ended March 31, 2010 and its outlook for the second quarter and full year 2010.

    Net revenues for the first quarter of 2010 were $336.9 million, compared to net revenues of $254 million for the fourth quarter of 2009 and net revenues of $49.5 million for the first quarter of 2009.

    Net income for the first quarter of 2010 was $1.5 million, or $0.04 per diluted share, compared to a net loss of $15.6 million, or $0.38 per diluted share, for the fourth quarter of 2009 and a net loss of $4.8 million, or $0.13 per diluted share, for the first quarter of 2009.

    Shipments for the first quarter of 2010 were 185.0 MW, compared to shipments of 141.2 MW for the fourth quarter of 2009 and shipments of 18.0 MW for the first quarter of 2009. The Company's sales came from the key solar industry markets worldwide, with Europe continuing to be the Company's largest contributing geographic market.

    1Q10 unaudited financial results and 2009 audited financial results include the following major changes, provisions and allowances compared with the results announced on March 3, 2010:

    1. Provision for loss on firm purchase commitment under a wafer supply
       agreement: In 4Q09, we recorded a contingent liability for a loss of
       $13.8 million on firm purchase commitment under our wafer supply
       agreement with Deutsche Solar AG for 2009 and 2010. We are in
       discussions with Deutsche Solar to amend the terms of this contract.
       For 1Q10, we accrued a further contingent liability for a loss of $2.0
       million on this purchase commitment. These loss provisions were
       recorded as a component of cost of revenues.
    2. Allowance for advances to suppliers under long-term wafer supply
       agreements: We have given notice to terminate our two long-term wafer
       supply agreements with LDK Solar Co. Ltd. and in July 2010 we initiated
       arbitration proceedings to recover the outstanding $8.8 million advance
       payments we made to LDK under these contracts. In 4Q09, we made a
       provision against the outstanding balance and recorded it as a
       component of 4Q09 operating expenses.
    3. Increase in allowance for doubtful accounts: We recorded an allowance
       for doubtful accounts of $18.0 million as of December 31, 2009 mainly
       due to subsequent events involving two customers after the Company's
       4Q09 press announcement on March 3, 2010. However, we also recorded a
       receivable from a credit insurance company amounting to $7.1 million as
       of December 31, 2009 and a corresponding reduction in bad debt expense
       in 4Q09. The net increase in bad debt expense after the Company's 4Q09
       pre-announcement on March 3, 2010 is $7.9 million.
    4. Changes in 4Q09 revenue, gross profit and operating income: For certain
       customers from whom collection of payment could not be reasonably
       assured as of December 31, 2009, we will only recognize revenue on the
       date that such collection can be assured. As a result, we expect that
       $21.0 million of products shipped in 4Q09 will be recognized in future
       quarters when cash is collected.
    5. Sales Return Reserve: In 4Q09, we began accruing a sales return reserve
       against our revenues. For 4Q09, we accrued 3.3% of revenues, or $8.5
       million, and for 1Q10 we accrued 3.3% of revenues, or $10.7 million, in
       sales return reserves.
    6. Tax Provisions: In 4Q09, we had a tax benefit of $5.7 million, mainly
       due to the above items.
    7. In summary, including the above our 4Q09 net revenues were reduced by
       $32.8 million and our 4Q09 net income by $30.4 million.
    8. Foreign Exchange Loss (Gain): In 1Q10, we incurred a foreign exchange
       loss (net of hedging effects) of $15.9 million, less than our original
       guidance of $18 million to $20 million.

    Revenue by Geography

                           Revenue by Geography

    Region                         1Q 2010         1Q 2009    4Q 2009(revised)
                                US$M     %      US$M     %      US$M     %   
    Europe                     298.2   88.5%    36.0   72.7%   233.3   91.8%
    America                     19.1    5.7%     2.7    5.5%     5.3    2.1%
    Asia and others             19.6    5.8%    10.8   21.8%    15.6    6.1%
    Total                      336.9  100.0%    49.5  100.0%   254.2  100.0%

    Region                   FY 2009(revised)      FY 2008
                                US$M     %       US$M    %
    Europe                     523.0   82.9%    631.1  89.5%
    America                     37.0    5.9%     32.3   4.6%
    Asia and others             71.0   11.3%     42.0   5.9%
    Total                      631.0  100.0%    705.0 100.0%

    Recent Developments

    -- Audit Committee Investigation: The Company's audit committee has
       conducted an investigation into certain transactions identified in the
       subpoena issued to the Company by the Securities and Exchange
       Commission (the "SEC"). The audit committee has concluded that the
       transactions identified in the SEC subpoena were properly accounted for
       in the Company's annual report on Form 20-F for the year ended December
       31, 2009 filed with the SEC. Absent new information coming to light,
       the audit committee investigation has been concluded.
    -- Ontario Module Plant: The Company has selected the site for our 200 MW
       module plant in Guelph, Ontario. Production is expected to begin at
       this site early next year.
    -- Resignations: The Company announces the resignations of Mike Miskovsky,
       V.P., U.S. Sales and Greg Ashley, Acting President for our U.S.
       subsidiary. The Company sincerely appreciates their contributions and
       wishes them success in their future careers.

    Business Outlook

    The outlook below is based on the Company's current views with respect to operating and market conditions, and its current order book and customer' forecasts, which are subject to change. The risks to our outlook also include changes in foreign exchange, product and materials pricing and the project financing environment.

    -- 2Q10 Guidance: For 2Q10, we expect shipments of approximately 173 MW to
       177 MW, with margins of approximately 13.5% to 14.5%. Although we
       hedged approximately 90% of our 2Q10 cash flow, we expect a foreign
       exchange loss for the quarter (net of hedging effects) in the range of
       approximately $10 million to $12 million.
    -- 2H10 Guidance: We believe that margins may improve in the second half
       of 2010 due to our increased vertical integration and improvements in
       our processing costs, provided that there is no further depreciation in
       the Euro or further increases in raw materials prices.
    -- Full-year Guidance: For the full year 2010, we are reiterating our
       shipments guidance of approximately 700 MW to 800 MW.
    -- Increased internal cell production to reduce costs and increase
       visibility: We are ramping up our new cell lines to reach our 3Q10
       target of 720 MW of cell production capacity. In 4Q10, we plan to
       increase our internal cell capacity from 720 MW to 800 MW through
       process improvements. In 2011, we expect to further increase our cell
       production capacity by 500 MW, of which 200 MW will be enhanced
       selective emitter capacity and 300 MW will be high conversion
       efficiency multicrystalline cell lines. This will bring our total cell
       production capacity to 1.3 GW. We expect the higher efficiency cells to
       result in lower processing costs and greater customer interest. We
       expect the addition of cell production capacity to have a significant
       beneficial impact on our gross margins.
    -- Wafer Capacity: We believe we have resolved the issues with respect to
       our ingot and wafer operation. In recent months, we have been
       approaching industry leading processing costs and yields. As a result,
       we plan to expand our ingot capacity from 300 MW and our wafering 
       capacity from 150 MW to approximately 350 MW each in 2011.

    Dr. Shawn Qu, Chairman and CEO of Canadian Solar, remarked: "Demand remains very strong in key solar markets worldwide and we continue to gain share or take a leadership position in many new, developing markets. Given current events, we are taking the opportunity to further strengthen our internal controls and procedures to better match our current global market position and to support the ongoing growth we expect from large, well-established customers as well as newer industry participants. Our management also remains focused on our internal cell and wafer expansion. This expansion is consistent with our broader efforts to focus on higher margin products, while also striving to reduce our processing costs. Overall, we are very optimistic looking forward and expect continued growth in revenues, and improvement in gross margins and profitability."

    Investor Conference Call / Webcast Details

    The Company will hold a conference call to discuss its financial results for the first quarter of 2010, audited financial results for 2009 and business outlook. The conference call will be held Thursday, August 19, 2010 at 5:00 p.m. U.S. Eastern Time (5:00 a.m. August 20, 2010 in Hong Kong). The dial-in phone number is +1-617-213-8842, with passcode 56014742. A live webcast of the conference call will also be available on Canadian Solar's website at .

    A replay of the call will be available approximately one hour after the conclusion of the live call through 7:00 p.m. on August 26, 2010, U.S. Eastern Time (7:00 a.m., August 27, 2010 in Hong Kong) by telephone at +1-617-801-6888. To access the replay, use passcode 29237944. A webcast replay will also be available at .

    About Canadian Solar Inc. (NASDAQ: CSIQ)

    Canadian Solar Inc. is one of the world's largest solar companies. As a leading vertically integrated provider of ingot, wafer, solar cell, solar module and other solar applications, Canadian Solar designs, manufactures and delivers solar products and solar system solutions for on-grid and off-grid use to customers worldwide. With operations in North America, Europe and Asia, Canadian Solar provides premium quality, cost-effective and environmentally-friendly solar solutions to support global, sustainable development. For more information, visit .

    Safe Harbor/Forward-Looking Statements:

    Certain statements in this press release including statements regarding our expected revenue recognition, expected future shipment volumes, gross and net margins, manufacturing capacities and cell conversion efficiencies, are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the "Safe Harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimates," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include the risks regarding the previously disclosed SEC and internal investigations as well as general business and economic conditions and the state of the solar industry; governmental support for the deployment of solar power; future available supplies of high-purity silicon; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in demand from major markets such as Germany; changes in customer order patterns; changes in product mix; capacity utilization; level of competition; pricing pressure and declines in average selling prices; delays in new product introduction; continued success in technological innovations and delivery of products with the features customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange rate fluctuations; litigation and other risks as described in the Company's SEC filings, including its annual report on Form 20-F filed on August 19, 2010. Although the Company believes that the expectations reflected in the forward looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and Canadian Solar undertakes no duty to update such information, except as required under applicable law.

                               Canadian Solar Inc.
            Unaudited Condensed Consolidated Statements of Operations
    (In Thousands of U.S. Dollars, Except Share And Per Share Data And Unless
                               Otherwise Stated)

    Item                                      2010 Q1     2009 Q1     2009 Q4
    Net revenues                              336,931      49,465     254,194
    Cost of revenues                          295,018      53,360     230,008
    Gross profit (loss)                        41,913      (3,895)     24,186
    Selling expenses                           10,698       1,881      10,415
    General and administrative expenses         8,174       4,518      28,069
    Research and development expenses           1,834         470       1,217
    Total operating expenses                   20,706       6,869      39,701
    Income (loss) from operations              21,207     (10,764)    (15,515)
    Interest expenses                          (3,862)     (2,254)     (2,794)
    Interest income                             1,395         563         916
    Gain on debt extinguishment                    --          --          --
    Debt conversion expenses                       --          --          --
    Investment income                              --          --       1,788
    Gain on change in fair value of
     derivatives                                  536      11,366         935
    Exchange (loss) gain                      (16,438)     (2,875)     (5,146)
    Income (loss) before taxes                  2,838      (3,964)    (19,816)
    Income tax expenses (benefit)               1,454         820      (4,388)
    Net income (loss)                           1,384      (4,784)    (15,428)
    Less: Net income (loss) attributable
     to Non-controlling interest                 (113)         --         157
    Net income (loss) attributable to CSI       1,497      (4,784)    (15,585)

    Basic earnings (loss) per share             $0.04      $(0.13)     $(0.38)
    Basic weighted average outstanding
     shares                                42,755,446  35,765,185  41,349,901
    Diluted earnings (loss) per share           $0.03      $(0.13)     $(0.38)
    Diluted weighted average outstanding
     shares                                43,974,827  35,765,185  41,349,901

    Item                                    2009 1~12   2008 1~12
    Net revenues                              630,961     705,006
    Cost of revenues                          552,856     633,998
    Gross profit (loss)                        78,105      71,008
    Selling expenses                           22,089      10,608
    General and administrative expenses        46,324      34,510
    Research and development expenses           3,180       1,825
    Total operating expenses                   71,593      46,943
    Income (loss) from operations               6,512      24,065
    Interest expenses                          (9,459)    (12,201)
    Interest income                             5,084       3,531
    Gain on debt extinguishment                    --       2,429
    Debt conversion expenses                       --     (10,170)
    Investment income                           1,788           0
    Gain on change in fair value of
     derivatives                                9,870      14,455
    Exchange (loss) gain                        7,681     (19,989)
    Income (loss) before taxes                 21,476       2,120
    Income tax expenses (benefit)              (1,302)      9,654
    Net income (loss)                          22,778      (7,534)
    Less: Net income (loss) attributable
     to Non-controlling interest                  132          --
    Net income (loss) attributable to CSI      22,646      (7,534)

    Basic earnings (loss) per share             $0.61      $(0.24)
    Basic weighted average outstanding
     shares                                37,102,723  31,566,503
    Diluted earnings (loss) per share           $0.60      $(0.24)
    Diluted weighted average outstanding
     shares                                37,743,464  31,566,503

                               Canadian Solar Inc.
                 Unaudited Condensed Consolidated Balance Sheets
                         (In Thousands of U.S. Dollars)
                                                  March 31,      December 31,
        Item                                        2010        2009(revised)
    Current assets
    Cash and cash equivalents                      174,481           160,111
    Restricted cash                                259,077           179,390
    Accounts receivable, net of allowance
     for doubtful accounts                         224,313           151,549
    Inventories                                    173,299           164,313
    Value added tax recoverable                     30,091            39,495
    Advances to suppliers                           11,242            17,264
    Foreign currency derivative assets                 236                 0
    Prepaid and other current assets                39,667            41,865
    Current assets - subtotal                      912,406           753,987
    Property, plant and equipment, net             223,003           217,136
    Intangible assets                                1,840             1,824
    Advances to suppliers                           35,555            35,210
    Prepaid land use right                          13,184            12,535
    Investments                                      7,102             7,101
    Deferred tax assets - non current               11,398            10,910
    Total assets                                 1,204,488         1,038,703
    Liabilities and equity
    Current liabilities
    Short term borrowings                          375,268           251,702
    Accounts payable                                93,696            92,271
    Notes payable                                  137,988           105,218
    Other payables                                  30,846            34,724
    Advances from customers                          7,695             3,644
    Amounts due to related parties                     261               261
    Foreign currency derivative
     liabilities                                       223               523
    Provision for firm purchase
     commitment                                     15,763            13,823
    Other current liabilities                       13,491            12,775
    Current liabilities - subtotal                 675,231           514,941
    Accrued warranty costs                          20,263            16,900
    Liability for uncertain tax positions           11,116            10,705
    Convertible notes                                  876               866
    Long term borrowings                            27,833            29,290
    Total liabilities                              735,319           572,702
    Common shares                                  500,774           500,322
    Additional paid in capital                     (59,963)          (61,269)
    Retained earnings                               13,039            11,542
    Accumulated other comprehensive
     income                                         15,156            15,121
    Total Canadian Solar Inc.
     stockholders' equity                          469,006           465,716
    Non-controlling interest                           163               285
    Total equity                                   469,169           466,001
    Total liabilities and equity                 1,204,488         1,038,703
Source: Canadian Solar Inc.
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