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Quarterly Estimates

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Guest BIPV Investor

Any updates to people's models based on today's data? In regards to JKS, if they are aiming for 600MW of internal projects, that is going to reduce their revenue for several quarters as these projects represent ~1/4 of JKS's total 2014 shipment guidance. Analyst revenue estimates per Yahoo are $396.12M, which strikes me as very high. Even if 600MW were sold at $0.64 (which is unrealistic), they would still miss on revenue, but crush on earnings (what really matters).

 

What delivery schedule are people expecting for the internal projects? Are people assuming they shipped 100-200MW for them in Q2? For these projects to be connected to the grid by end of 2014, I'd imagine most the modules will have needed to be shipped prior to Q4, but I could be wrong on this. Just a thought as this represents a substantial portion of JKS's module sale revenue (i.e. it becomes lumpy like other project developers). 

 

Edit: actually, I don't know how JKS intends to record revenue for internal panel sales now that they are not the full owner of Jinko Power. Per TSL, GAAP accounting means you do not recognize revenue for this internal shipments (makes sense). Perhaps someone else can shed some light on their thoughts on this.

 

Edit 2: Reading over the Q1 transcript for CSIQ they shed some light on module delivery schedules for mainland projects: 

 

"Dr. Shawn Qu - Chairman and CEO

In terms of China, it can be pulled back. For example, last year, during the Q4 rush, people built large projects, 20, 30 or 100 megawatt projects for (indiscernible). However, that may not result in quality project. That’s why we did not have -- lock into projects type last year. To build a reasonable a good project, a project which can last 10 years. I think you better project half of the year and more than half year. And that was also the driver behind some of the seasonality in China.

So you typically want the modules near the end of construction because you put in the rack is one of the last things to do and since their shipping times inside China are relatively quick, the app for modules near the end of Q3 or into Q4, when they are aiming for a Q4 completion to capture the feed-in-tariff for this year. So that’s part of the reason why the China demand is so backend loaded."

 

http://seekingalpha.com/article/2223493-canadian-solars-csiq-ceo-dr-shawn-qu-on-q1-2014-results-earnings-call-transcript?page=5&p=qanda&l=last

 

From TSL's Q2 Guidance:

"In the second quarter of 2014 the Company expects to ship between 950 MW and 1,010 MW of PV modules, of which 150 MW to 170 MW will be shipped to its downstream PV projects. Revenues will not be recognized for the modules shipped to its own developed projects as required by U.S. GAAP regulations."

 

Adding 160MW to the 545.25MW that were shipped = 705.25MW is safe/confirmed. To hit the low end of guidance they would need to ship 250MW to mainland customers, which would represent ~10% of China's Q2 market. I wouldn't bet on that happening, yet guidance was given with only 5 weeks remaining so I have to assume that several mainland orders that did not ship in Q1, will be included in Q2 to meet guidance. Reading over the transcrip again, Trina was very confident in their guidance independent of the China market size as, "from our perspective it doesn’t really matter that the 11, or 12 or 13 or 14, from Trina’s perspective being the leader in providing module and downstream projects, we believe that as we are gaining market share and as we are – it’s our brand and quality of service that being recognized, the demand for our product is very much evident."

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Guest BIPV Investor

This is my CSIQ model for Q2,

I do not count for the lawsuits etc or any other potential one times but CB only

Revenue $590M

GM 18.6%

gross profit $109M

Opex $46M

Net interest expense 10M (13-3M of interest income)

Foreign derivatives and forex around 2M gain

Add 10M CB net ( 5M in costs) see the same or very similar CB performance here as JKS

12M in taxes (this is very high but I expect high taxation on strong performance quarters including GAAP gains like CB)

Net income $53M

controlling interest around 7M

net income 46.7M

or around $0.85 per share.

 

What are the components of your revenue for CSIQ? I've been reviewing their presentations and earnings calls, and I can't get a clear picture on what plants sales or % completion they were including in this guidance. Some plants like the Demorestville plant still haven't officially closed. Same with their William Rutley plant which finished in 2012 Q4.

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I am using company's guidance for Q2, which has a specific dollar amount. The only adjustment I have is JKS's CB. I would adjust my view of revenue on this to a neutral impact. Probably 0.20 less.

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JKS records first than eliminates sales to own projects. Based on your other statements, their future sales will include actually 45% of the revenues, and profits. JKS sales modules to own projects at 10% GM.  The deal, should improve sales for JKS, which otherwise would not recognize anything at 100% ownership. Is the 45% revenue recognition accurate? It should be as ownership is is not of the company but of the third party.

JKS could potentially use some sort of tax benefit for the equity sale, using module sales as the cost, but I am not sure 100% how. Since projects were completed in Q2, I am curious if the rush of announcement had some SEC implication to able infuse the part of it into Q2 results.

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While I am using CSIQ dollar guidance, I have no particular ability to relate projects to revenues. CSIQ made huge deliveries in Q2, but I am not going to be optimistic about exceeding guidance. JKS did really well, but I am curious on the US deliveries being potentially for storing.

I doubt they will not meet the guidance,  Hanwha is a disappointment, Yingli no idea, ReneSola hard to tell.

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Guest BIPV Investor

I agree that 45% revenue recognition is better than 0%. Looking at analyst estimates, they have $460M for Q3, which is a huge number to make off module sales alone. 

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Guest BIPV Investor

Agreed about the other names, as they are there only to drag the rest of the sector down. Thanks for the feedback on where you are deriving the revenue number from. I was hoping to be able to put the puzzle pieces together and determine the likelihood of them hitting their guidance. I think Expo and Sunnysky have too high of estimates for revenue as I am not optimistic on the ASP they got for their mainland sales, so I can easily see a bottom line beat, but a revenue miss.

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Last minute checks. They said 30% sequential improvement (from 455MW module), so about 591MW which is what they guided. 40% goes to China in Q1. At the same ratio, total could be as high as 613MW. ASP should be stable, per CSIQ results. Anyone have thoughts on CB treatment for JKS at this point?

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I am playing around to add the table, so it can be displayed formatted. Unfortunately, I have not found anything forum ready with the dictionary-vocabulary style. A database could be useful, but this is another application.

I could post the image and mark each line  on the statement and member could ask the question and others could provide and answer. using a number as a reference. I am sure that plenty of members know a lot about this, so I would not want to go too basic.

Any ideas for the format?

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Perhaps this would be question -answer format?

Let me open up

The first step would be to ask a question in the proper section of the financial statements.

Balance sheet is basically a snapshot of financial condition at the end of the period, it gets updated quarterly. Each line is basically an account, some have contra accounts etc. Assets must equal liability plus equity, hence the balance in a sheet.

US listed follow US GAAP, there is the difference between EU reporting. Anyway, GAAP stands for generally accepted accounting principles.

I personally look at the balance sheets for two quarters and look at signs of health in a company's books.

 

Income Statement is the one ending with EPS, we can discuss this one in the proper thread.

 

Only SOL, I think provides cash flow. You can probably tell the most from the cash flow statement.

Combination of IS (income statement) and BS (balance sheet) could theoretically empower an accountant to construct cash flow statement anyway.

However, there is not enough info on most of the solar companies statements, to complete such an exercise. SOL's cash flow transparency helped me criticize SOL's results and avoiding the problem last year.

I think this is a start to questions on a balance sheet view.

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Good description. Besides SOL HSOL have been providing quaterly cash flows.

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Perhaps today we could take TSL's FS and review them in two categories BS and IS?

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Yes that's a good idea. There were some interesting BS impacting infusions in Q2. One was equity sale and one was CB issue. Equity sale added to their equity, cash and working capital and the CB added to their cash and working capital. Cash remained flat, but working capital got a nice bump as raised cash was invested in other current assets like AR. After Jinko and CSIQ each had done two equity issues and one CB issue past year to close the financial power gap to Trina, Trina got into BS arms race last minute before the market headwinds and war of tiers by attrition until BS breaking point started.

 

Would you like a Trina panel very low ASP, free credit and superior quality, brand and warranty or a tier 2-3 to with only low ASP?

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but working capital got a nice bump as raised cash was invested in other current assets like AR

 

Accounts receivable (AR) hold revenue from sales, which did not produce cash.  Cash from equity and CB went to PPE ($129M) and long term debt reduction of $208M. So some $337M in total.
How is TSL able to get so much cash if the CB was $120M (less call option) and equity at $92M, total $212M? Accounts Payable, which balance increased by $190M. We have $402M plus the cash balance lower by $15M (includes restricted) gives us $417M of cash to play. IN addition to spending $337M, inventory increased and so did current projects. Do not see call option anywhere for $52M, which should be in asset line somewhere

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Accounts receivable (AR) hold revenue from sales, which did not produce cash.  Cash from equity and CB went to PPE ($129M) and long term debt reduction of $208M. So some $337M in total.

How is TSL able to get so much cash if the CB was $120M (less call option) and equity at $92M, total $212M? Accounts Payable, which balance increased by $190M. We have $402M plus the cash balance lower by $15M (includes restricted) gives us $417M of cash to play. IN addition to spending $337M, inventory increased and so did current projects. Do not see call option anywhere for $52M, which should be in asset line somewhere

 

Yes I don't find the call options either. On the other hand Additional paid-in capital only increased 55m, not the 97m issued. The 42m diff still falls short of the 52m planned to be spent on call options.

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The accounting for this call option appears to be off the balance sheet. As we all know the liability plus equity equals assets, therefore paid-in capital being only 55M could be a result of option being currently worth 37M and not being recognized under asset lines for derivative investments. 

Not sure why. JKS has the capped call options line and paid-in capital seem to move along with the line (more less)

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Ok, let's talk about this one a bit.

Jinko being an example

Revenue and cost of revenues often called COGS (cost of goods sold) result of it is gross profit and the gross profit/ revenue is a GM reflected in %.

Jinko describes cost of revenues as follows:

 

primarily consists of: (i) raw materials, which primarily consist of both virgin polysilicon and recoverable silicon materials;
(ii) consumables and components, which include crucibles for the production of monocrystalline and multicrystalline silicon ingots, steel alloy saw wires,
slurry, chemicals for raw material cleaning and silicon wafer cleaning, and gases such as argon and silane, as well as silicon wafers and solar cells we procure from third parties for the production of solar modules; (iii) direct labor costs, which include salaries and benefits for employees directly involved in
manufacturing activities; (iv) overhead costs, which consist of equipment maintenance costs, cost of utilities including electricity and water; (v) depreciation
of property, plant, equipment and project assets; and (vi) processing fees paid to third party factories relating to the outsourced production of solar cells and
solar modules. (vii) subcontractor cost and those indirect costs related to contract performance, such as indirect labor, supplies and tools.

 

Then we have two other sections operating and financial expense

Operating expenses or Opex is basically three broad sections

S&M Selling and marketing

G&A or General and administrative expense

R&D or research and development.

 

S&M for Jinko is :

 

consists primarily of shipping and handling expenses, warranty cost, exhibition costs, salaries, bonuses and other benefits for our sales personnel as well as sales-related travel and entertainment expenses.

G&A

 

General and administrative expenses consist primarily of salaries and benefits for our administrative,
finance and human resources personnel, amortization of land use rights, office expenses, entertainment expenses, business travel expenses, professional
service fees as well as provision for bad debts

R&D

 

Research and development expenses consist primarily of silicon materials used in our research and
development activities and, salaries, bonuses and other benefits for research and development personnel, and depreciation of equipment for research and
development.

 

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One thing which is special is that the zero-strike call is basically the same as the stock itself. If somebody is going to deliver on a future date a certain # of shares to TSL free of charge, this should be recorded as an equity right or as it seems you don't necessarily have to record it?

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