Canadian Solar Reports First Quarter 2007 Results
Net revenues for the first quarter of 2007 were $17.5 million, including $2.8 million silicon material sales, compared to net revenues of $8.8 million for the first quarter of 2006. The net loss for the first quarter of 2007 was $3.9 million, or $0.14 per diluted share, compared to the net loss of $7.1 million, or $0.46 per diluted share, for the first quarter of 2006. Excluding share-based compensation expenses of $2.2 million and the non-cash tax provision of $0.22 million, the net loss for the first quarter of 2007 would have been $1.4 million, or $0.05 per diluted share.
Dr. Shawn Qu, Chairman and CEO of CSI, commented: "Q1 developed as expected, with year-over-year revenue growth, an improvement in blended gross margin and stable pricing compared to Q4 2006. During the quarter, we took the opportunity to reorganize our supply chain to position the Company for success in 2007. In addition, we increased our sales contracts worldwide. The additional sales and marketing resources we added continue to pay off. We saw a clear trend of market demand moving towards high market reputation and financially strong module manufacturers, like CSI. This led to a much higher level of customer activity starting in March 2007, which we expect will further build throughout the year. CSI continues to ramp up its in-house solar cell manufacturing, while also maintaining long-term strategic purchasing from a few selected supply partners. We believe this balanced supply approach creates a win-win situation and provides us with the ability to respond quickly to increased demand from our customers. We continue to build CSI's brand as a trusted supplier of solar products based on product design, performance and customization, as well as after-sale services."
Bing Zhu, our Chief Financial Officer, said: "We made good progress in Q1. In line with normal seasonal patterns and the Chinese New Year factory shut down, Q1 started slowly but picked-up in March. The European market, which was weak in Q406, rebounded strongly and represented over 69% of our sales in Q107, compared to about 45% in Q406. We continue to diversify our geographic reach. Sales to South America represented almost 11% of our revenues in Q1 from nil in previous quarters. In Q207, we expect to also begin selling into Italy and Korea. We are pleased that blended gross margin improved in Q1 compared to Q406 and we expect this trend to continue in Q2 and through the year as we start to benefit from higher solar module shipments, lower materials costs and the continued ramp-up of our in-house cell production lines."
On April 15, 2007, CSI officially opened its first solar cell manufacturing facility, with a manufacturing area of about 10,000 sq meters in Suzhou, China. CSI's first solar cell line, which was installed on February 10, 2007, approximately one month ahead of schedule, has begun producing solar cells. The Company expects to complete Line 2 on schedule at the end of June. Lines 3 and 4, originally planned for completion in December, will be installed on or ahead of schedule, which would bring the total cell manufacturing capacity to 100MW. The new cell facility, which took just seven months from ground breaking to production, exemplifies CSI's ability to execute its strategy to become one of the top ten providers of solar energy solutions in the world.
Revenue by Geography (US $ millions)
Q106 Q406 Q107
Region Revenue % Revenue % Revenue %
China 73 0.8% 13,355 54.8% 3,308 18.9%
Europe 7,752 88.2% 11,013 45.2% 12,139 69.4%
North America 928 10.6% - 0.0% 225 1.3%
South America - 0.0% - 0.0% 1,817 10.4%
Other 38 0.4% 4 0.0% - 0.4%
Total Net Revenue 8,791 100.0% 24,372 100.0% 17,489 100.0%
Note: Revenue to China in Q1 07 included $2.8 million silicon materials
sales and in Q4 06 included $8.3 million silicon materials sales.
Outlook
Based on current market conditions and our order backlog and production capacity, the Company expects net revenues for the second quarter of 2007 to be in the range of $55 million to $58 million, with cash operating income, determined on a non-GAAP basis by excluding share based compensation and other non-cash items, in the range of $1.5 million to $1.6 million. Blended average solar cell cost is expected to decrease in Q2 compared with Q1, with additional cost reductions through 2007.
The financial information presented in this press release is preliminary and remains subject to additional review and final year-end closing procedures to be performed by us and the completion of the 2006 audit by our external auditors, in particular the completion of the new US GAAP regulation FIN 48 analysis for all open tax years. We expect our audited financial results for 2006 will be finalized in late May 2007 and we expect to file our annual report on 20-F, including audited 2006 financial statements, with the Securities and Exchange Commission ("SEC") shortly thereafter.
Investor Conference Call / Webcast Details
A conference call has been scheduled for 9:00 p.m. on Monday, May 14, 2007 (in Jiangsu). This will be 9:00 a.m. on Monday, May 14, 2007 in New York. During the call, time will be set-aside for analysts and interested investors to ask questions of executive officers.
The call may be accessed by dialing 800-322-2803 (domestic) or +1-617-614-4925 (international). The passcode to access the call is 46828385. A replay of the call will be available starting one hour after the live call and continuing until noon on Tuesday, May 22, 2007 (in Jiangsu) or midnight on Monday, May 21, 2007 (in New York) at www.csisolar.com and by telephone at 888-286-8010 (domestic) or +1-617-801-6888 (international). The passcode to access the replay is 89796178.
About Canadian Solar Inc.
Founded in 2001, Canadian Solar Inc. (CSI) is a vertically integrated manufacturer of solar module and custom-designed solar application products serving worldwide customers. CSI is incorporated in Canada but conducts its manufacturing operations in China. Backed by years of experience and knowledge in the solar power market and the silicon industry, CSI has become a major global provider of solar power products for a wide range of applications. For more information visit www.csisolar.com.
Contacts:
In Jiangsu, P.R. China In the U.S.
Bing Zhu, Chief Financial Officer David Pasquale
Canadian Solar Inc. The Ruth Group
Phone: +86-512-62696755 Phone: +1-646-536-7006
ir@csisolar.com dpasquale@theruthgroup.com
Safe Harbor/Forward-Looking Statements
Certain statements in this press release including statements regarding expected future financial and industry growth 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 general business and economic conditions and the state of the solar industry; governmental support for the deployment of solar power; future shortage or availability of the supply 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, including customers of our silicon materials sales; 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 price; 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 registration statement on Form F-1 originally filed on October 23, 2006, as amended. 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 CSI 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)
Q1 2006 Q4 2006 Q1 2007
Net Revenues:
Net Revenues - product 8,733 24,372 17,489
Net Revenues - others 58 - -
Total Net revenues 8,791 24,372 17,489
Cost of Revenues:
Cost of Revenues - product 6,261 24,272 17,143
Cost of Revenues - others 58 - -
Total Cost of Sales 6,319 24,272 17,143
Gross profit 2,472 100 346
Operating expenses
Selling expenses 125 1,233 1,053
General and administrative
expenses 396 3,797 3,086
Research and development
expenses 28 38 186
Total operating expenses 549 4,068 4,325
Income/(Loss) from operations: 1,923 (4,968) (3,979)
Other income (expenses):
Interest expenses (754) (213) (67)
Interest income 19 271 285
Loss on change in fair value
of derivatives (6,997) - -
Loss on change in fair value
of instruments related to
convertible notes (1,190) - -
Others - net 6 (77) -
Income (loss) before taxes (6,993) (4,987) (3,761)
Income taxes (73) (169) (93)
Net Income (loss) (7,066) (5,156) (3,854)
Basic loss per share 0.46 0.21 0.14
Diluted loss per share 0.46 0.21 0.14
Basic weighted averaging
outstanding share 15,427,995 24,120,000 27,270,000
Diluted weighted averaging
outstanding share 15,427,995 24,120,000 27,270,000
Canadian Solar Inc.
Reconciliation of US GAAP Gross Profit, Operating Income (Loss) and Net Income
(Loss) to
Non-US GAAP Gross Profit, Operating Income (Loss) and Net Income (Loss)
(Unaudited)
Use of Non-GAAP Financial Information
To supplement its condensed consolidated financial statements presented in accordance with GAAP, CSI uses the following measures as defined as non- GAAP financial measures by the SEC: adjusted gross profit, adjusted operating income (loss) and adjusted net income (loss), each excluding share-based compensation and other one-time non-cash charges, expenses or gains, which we referred to as special items. CSI believes that non-GAAP adjusted gross profit, adjusted operating income (loss) and adjusted net income (loss) measures indicate the company's baseline performance before subtracting other charges which the management considers to be outside of the company's core operating results. In addition, these non-GAAP measures are among the primary indicators used by the management as a basis for its planning and forecasting of future periods. The presentation of these non-GAAP measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.
Q1 2006 Q1 2007
Gross Operating Net Gross Operating Net
Profit Income Income Profit Income Income
(Loss) (Loss) (Loss) (Loss)
US GAAP Profit/
(Loss) 2,472 1,923 (7,066) 346 (3,979) (3,854)
Convertible
Note charge 8,590
Share-based
compensation
charge 69 2,224 2,224
Total special items 8,590 69 2,224 2,224
Non-US GAAP Profit/
(Loss) 2,472 1,923 1,524 415 (1,755) 1,630
Adjusted Gross Margin 28.12% 2.37%
Adjusted Operating
Expense - % of
Revenue 6.25% 12.01%
Adjusted Operating
Margin 21.87% (10.03%)
Non-US GAAP adjusted condensed consolidated statements of operations are
intended to present the Company's operating results, excluding special
items.
Canadian Solar Inc.
Unaudited Condensed Consolidated Balance Sheets
(In Thousands of U.S. Dollars)
December 31 March 31
2006 2007
ASSETS
Current Assets:
Cash and cash equivalents 40,911 26,212
Restricted cash 825 -
Accounts receivable, net 17,344 20,044
Inventories 39,700 48,588
Value added tax recoverable 2,281 3,501
Advances to suppliers 13,484 11,906
Prepaid and other current assets 2,399 1,007
Total current assets 116,944 111,258
Property, plant and equipment, net 7,910 14,099
Intangible assets 39 53
Prepaid lease payments 1,103 1,108
Deferred tax assets - non current 3,674 3,199
TOTAL ASSETS 129,670 129,717
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short term borrowings 3,311 10,344
Accounts payable 6,874 3,403
Other payables 993 1,641
Advances from suppliers and customers 3,225 704
Amounts due to related parties 149 174
Other current liabilities 1,191 847
Income tax payable 86 156
Total current liabilities 15,829 17,269
Accrued warranty costs 875 1,026
TOTAL LIABILITIES 16,704 18,295
Stockholders' equity
Common shares 97,402 97,402
Additional paid in capital 17,348 19,572
Accumulated deficit (2,834) (7,300)
Accumulated other comprehensive income 1,050 1,748
Total stockholders' equity 112,966 111,422
LIABILITIES AND STOCKHOLDER'S EQUITY 129,670 129,717
SOURCE Canadian Solar Inc.
In Jiangsu, P.R. China, Bing Zhu, Chief Financial Officer of Canadian Solar Inc., +86-512-62696755, or ir@csisolar.com; or in the U.S., David Pasquale of The Ruth Group, +1-646-536-7006, or dpasquale@theruthgroup.com
http://www.csisolar.com/