Evergreen Solar Reports First Quarter Financial Results

Evergreen Solar, Inc. (NasdaqCM: ESLR), a manufacturer of String Ribbon® solar power products with its proprietary, low-cost silicon wafer technology, today announced financial results for the first quarter ended April 2, 2011.

Revenues for the first quarter of 2011 were $35.3 million, down 60.4% sequentially compared to fourth quarter of 2010 revenues of $89.3 million. Shipments for the first quarter of 2011 were approximately 17.8 megawatts, compared to fourth quarter of 2010 shipments of 46.6 megawatts. Average selling price for the first quarter of 2011 was $1.86 per watt, down approximately 2% from $1.90 per watt recorded in the fourth quarter of 2010.

Gross margin for the first quarter of 2011 was -62.5% compared to -84% in the fourth quarter of 2010. Gross margin in the first quarter of 2011 was impacted by the decline in average selling prices, lower sales volume, an estimated lower of cost or market adjustment of approximately $17.2 million recorded to the cost basis of our inventory and inefficiencies associated with the shut down of our Devens facility. Gross margin in the fourth quarter of 2010 was primarily impacted by a write-down of prepaid inventory resulting from the decision to close the Company’s Devens, Massachusetts manufacturing facility.

Operating loss for the first quarter of 2011 was $46.2 million, compared to $399.1 million for the fourth quarter of 2010. Operating loss in the fourth quarter of 2010 was impacted by an inventory write-down and impairment of long-lived assets totaling $377.5 million in connection with the Company’s decision to close its Devens manufacturing facility.

Net loss for the first quarter of 2011 was $33.4 million compared to $411.0 million in the fourth quarter of 2010.

Cash and cash equivalents, including restricted cash, as of April 2, 2011 were approximately $38.5 million and were approximately $33 million at April 30, 2011, after making the Company’s scheduled interest payment of $10.75 million on April 15, 2011 to holders of the Company’s 13% Convertible Senior Secured Notes due 2015.

As previously disclosed, the Company’s near-term liquidity has been negatively impacted as a result of its low year-to-date sales volume and potentially slower sales for the remainder of this year combined with expected increased pricing pressure. Furthermore, cash to be realized through the reduction in accounts receivable and inventory from the recently closed Devens facility will be less than previously expected and will take longer than expected to realize. Accordingly, the Company believes it will need to secure additional sources of cash sooner than expected and has retained financial and legal advisors to actively evaluate restructuring alternatives. In light of ongoing discussions and negotiations with certain noteholders, the Company has cancelled the previously scheduled conference call that had been arranged for Friday, May 13, 2011 at 8:30a.m. ET. For additional financial information and disclosure regarding Evergreen Solar’s 2011 first quarter results and risks associated with the Company’s liquidity position and restructuring efforts, investors can refer to the Form 10-Q report filed with the Securities and Exchange Commission on May 12, 2011. A copy of this 10-Q can be accessed on the Company’s website at www.evergreensolar.com.

Focusing on Evergreen Solar’s future as a supplier of low cost, high performance standard size solar wafers, Mr. Michael El-Hillow, President and Chief Executive Officer, notes, “The success of a high volume solar panel manufacturer will be best reflected in its ability to decrease its total cost profile. We expect to achieve a total wafer cost of about $0.25 per watt by 2013 using our proprietary furnace technology. We also believe that String Ribbon technology provides a significant step function decrease in silicon and non-silicon wafer costs to enable a total silicon-based panel cost that will be significantly lower than $1 per watt within the next few years. Our initial pilot furnaces are now producing standard size wafers in Massachusetts. After extensive testing, we have begun sending sample lots from these furnaces to potential customers who are engaged in the evaluation of our standard size String Ribbon wafers.”

About Evergreen Solar, Inc.

Evergreen Solar, Inc. develops, manufactures and markets String Ribbon solar power products using its proprietary, low-cost silicon wafer technology. The Company's patented wafer manufacturing technology uses significantly less polysilicon than conventional processes. Evergreen Solar's products provide reliable and environmentally clean electric power for residential and commercial applications globally. For more information about the Company, please visit www.evergreensolar.com. Evergreen Solar and String Ribbon are registered trademarks of Evergreen Solar, Inc.

Safe Harbor Statement

This press release includes statements regarding expectations, beliefs, strategies, goals, outlook and other non-historical matters. Any such statements are forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include but are not limited to statements about expected lower sales and increased price pressure for the remainder of the year, the Company’s pursuit of opportunities to address its capital structure, including restructuring its debt, the Company’s strategy of developing and supplying the lowest cost industry sized wafers, and the Company’s per watt cost goal. These forward-looking statements are neither promises nor guarantees and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the Company’s current expectations. Factors that could cause or contribute to such differences include, but are not limited to the risk that the Company is unable to restructure its debt in an out-of-court restructuring, in which case it may have to restructure its debt through a bankruptcy proceeding, the risk that stockholders will lose all or most of their investment in the Company as a result of such restructuring; the complexity of forecasting product pricing and customer demand in a volatile and uncertain market for the Company’s products; unexpected materials shortages or price increases; the uncertainty involved in forecasting the cost benefits from new technologies, new operational strategies and operational scaling; the possibility that the Company may be unable to fund future wafer manufacturing expansions; potentially higher than expected costs associated with the shutdown of the Company’s Devens facility; the significant additional work required to develop and commercialize our industry standard size and high performance low cost String Ribbon wafer; technological challenges and factors beyond our control, such as silicon pricing, that impact our ability to achieve our wafer cost target of $0.25 per watt in 2013; the difficulty we face in raising funding for our pilot production line operation and the significant further funding required to accomplish our commercial manufacturing expansion; our potential inability to supply the significant volumes of wafers required in the near-term for potential customers and partners to qualify our new industry standard size String Ribbon wafers; and the uncertainty for the entire PV solar industry in light of significant worldwide capacity expansions which may exceed worldwide demand for PV solar products as a result of various factors including potential significant reductions in subsidies in key markets like Germany. Further details regarding these and other important risk factors can be found in the Company’s public filings with the SEC ( www.sec.gov), including its Form 10-K for the fiscal year ended December 31, 2010, its Form 10-Q for the quarter ended April 2, 2011, and its Registration Statement on Form S-4 (as amended) originally filed on December 6, 2010. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statements, except as may be required by law.
           
Evergreen Solar, Inc. (Nasdaq: ESLR)
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
 
 
 
 

December 31,2010
 

April 2,2011
Assets
Current assets:
Cash and cash equivalents $ 61,574 $ 31,441
Accounts receivable, net of allowances for doubtful accounts 76,484 52,687
Inventory 54,941 70,134
Prepaid cost of inventory 13,093 8,300
Assets held for sale - 19,097
Other current assets   11,092     9,615  
Total current assets 217,184 191,274
 
Restricted cash 6,810 7,022
Deferred financing costs 9,527 9,121
Loan receivable from Jiawei and related interest 13,615 13,893
Prepaid cost of inventory 60,483 65,143
Fixed assets, net 116,546 87,211
Other assets   305     308  
 
Total assets $ 424,470   $ 373,972  
 
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses $ 39,559 $ 41,317
Accrued employee compensation 4,718 2,547
Accrued interest 9,157 11,596
Accrued warranty   3,921     4,073  
Total current liabilities 57,355 59,533
 
Convertible notes, net of discount 389,083 355,809
Loan and related interest payable 37,957 38,960
Deferred income taxes   1,204     1,204  
Total liabilities 485,599 455,506
Commitments and contingencies

 
Stockholders' equity (deficit):

Common stock, $0.01 par value, 240,000,000 shares authorized, 34,787,413 and 38,602,580 shares issued and outstanding at December 31, 2010 and April 2, 2011, respectively
 
348 386
Additional paid-in capital 1,034,699 1,047,588
Accumulated deficit (1,096,556 ) (1,129,925 )
Accumulated other comprehensive income   380     417  
Total stockholders' equity (deficit)   (61,129 )   (81,534 )
 
Total liabilities and stockholders' equity (deficit) $ 424,470   $ 373,972  
           
Evergreen Solar, Inc. (Nasdaq: ESLR)
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
 
 
Quarter Ended
April 3, 2010 April 2, 2011
 
Product revenues $ 78,473 $ 34,562
Royalty revenues   -     750  
Total revenues 78,473 35,312
 
Cost of revenues   72,424     57,398  
Gross profit (loss)   6,049     (22,086 )
 
Operating expenses:
Research and development 4,736 5,327
Selling, general and administrative 7,692 6,965
Facility start-up 3,730 1,808
Restructuring charges   3,981     10,014  
Total operating expenses   20,139     24,114  
 
Operating loss (14,090 ) (46,200 )
 
Other income (expense):
Foreign exchange gains (losses), net (2,244 ) 3,644
Interest income 139 407
Interest expense (7,743 ) (11,351 )
Gain on early extinguishment of debt   -     20,131  
Other income (expense), net   (9,848 )   12,831  
 
Net loss $ (23,938 ) $ (33,369 )
 
Net loss per share (basic and diluted) $ (0.70 ) $ (0.93 )
 
Weighted average shares used in computing basicand diluted net loss per share
34,189 35,965
         
Evergreen Solar, Inc. (Nasdaq: ESLR)
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 
 
Quarter Ended
April 3, 2010 April 2, 2011
 
Cash flows from operating activities:
Net loss $ (23,938 ) $ (33,369 )
 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 14,813 12,076
Inventory valuation adjustment - 17,168
Gain on early extinguishment of debt - (20,131 )
Amortization of prepaid cost of inventory 3,686 408
Amortization of deferred debt financing costs 614 740
Loss on disposal of fixed assets - 1
Provision for warranty 393 169
Amortization of debt discount 3,122 2,337
Compensation expense associated with employee equity awards 1,222 534
Changes in operating assets and liabilities:
Accounts receivable (13,256 ) 23,936
Inventory and related prepaid cost of inventory (5,464 ) (32,608 )
Other current assets (1,708 ) 1,077
Accounts payable and accrued expenses 177 (921 )
Interest payable (3,192 ) 3,130
Other   10     (269 )
Net cash used in operating activities   (23,521 )   (25,722 )
 
Cash flows from investing activities:
Purchases of fixed assets and deposits on fixed assets under construction (13,803 ) (2,561 )
Proceeds from the disposal of fixed assets 22 35
Increase in restricted cash (6,788 ) (194 )
Payments associated with Sovello AG (8,075 ) -
Increase in other loans   (2,641 )   -  
Net cash used in investing activities   (31,285 )   (2,720 )
 
Cash flows from financing activities:
Payment associated with share increase (144 ) -
Costs associated with exchange of senior convertible notes - (1,772 )
Proceeds from shares purchased under Employee
Stock Purchase Plan   61     4  
Net cash used in financing activities   (83 )   (1,768 )
Effect of exchange rate changes on cash and cash equivalents - 77
Net decrease in cash and cash equivalents (54,889 ) (30,133 )
Cash and cash equivalents at beginning of period   112,368     61,574  
Cash and cash equivalents at end of period $ 57,479   $ 31,441  

Copyright Business Wire 2010

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