Solarfun Reports Second Quarter 2009 Results

Share Name	Share Symbol	Market	Type
Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM)	NASDAQ:SOLF	NASDAQ	Common Stock

Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM) (NASDAQ:SOLF)
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SHANGHAI, Aug. 18 /PRNewswire-FirstCall/ -- Solarfun Power Holdings Co., Ltd. ( "Solarfun" or the "Company") (NASDAQ:SOLF), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the quarter ended June 30, 2009. SECOND QUARTER 2009 RESULTS -- Total net revenues were RMB 854.6 million (US$125.1 million) in the second quarter of 2009, representing a decrease of 36.8% from RMB 1,352.2 million in the second quarter of 2008, but an increase of 24.9% from RMB 684.2 million in the first quarter of 2009. -- PV module shipments reached 64.3 MW in the second quarter of 2009, an increase from 43.1 MW in the second quarter of 2008 and 35.7 MW in the first quarter of 2009. The increase from the first quarter of 2009 was due to increases in PV module shipments and PV module processing services, which represented approximately 36% of the total PV module shipments in the second quarter of 2009. In the second quarter of 2009, excluding module processing, Germany accounted for 83% of the Company's total PV module shipments. The Czech Republic, a new market for the Company, Australia, Korea and Spain accounted for 6%, 5%, 3% and 2% of the Company's total module shipments, respectively. -- Average selling price further declined, as expected, to US$2.66 per watt in the second quarter of 2009 from US$2.78 per watt in the first quarter of 2009, primarily due to the decrease in the market prices of PV products. -- The Company's management determined that a provision of RMB 236.5 million (US$34.6 million) in the second quarter of 2009 was required for pre-payments already made on certain existing supply agreements because the continued performance of these contracts would not be in the best long term economic interest of the Company in view of current prevailing market prices. -- On a U.S. GAAP basis, gross loss was RMB 53.0 million (US$7.8 million) in the second quarter of 2009, compared to a gross profit of RMB 185.6 million in the second quarter of 2008 and a gross profit of RMB 49.4 million in the first quarter of 2009. Excluding the provision for pre-payments, on a non-GAAP basis, gross profit was RMB 183.5 million (US$26.8 million) and gross margin was 21.5% in the second quarter of 2009. This compares to a gross margin of 7.2% in the first quarter of 2009 and 13.7% in the second quarter of 2008, both of which were calculated on a U.S. GAAP basis. The sequential and year-over-year increase was primarily due to the Company's ability to renegotiate the majority of its existing silicon-based raw material supply agreements to obtain reduced prices and its ability to source these materials in many cases on the spot market, as well as the vertical integration to the ingot and wafer level. -- On a U.S. GAAP basis, operating loss was RMB 121.9 million (US$17.8 million) in the second quarter of 2009, compared to an operating profit of RMB 116.4 million in the second quarter of 2008 and an operating loss of RMB 15.3 million in the first quarter of 2009. Excluding the provision for pre-payments, on a non-GAAP basis, operating profit was RMB 114.6 million (US$16.8 million) and the operating margin was 13.4% in the second quarter of 2009. This compares to an operating profit of RMB 116.4 million in the second quarter of 2008 and an operating loss of RMB 15.3 million in the first quarter of 2009, both of which were calculated on a U.S. GAAP basis. The increase in operating profit from the first quarter of 2009 reflects the Company's continuing focus on managing its operating expenses. -- Interest expense was RMB 36.1 million (US$5.3 million) in the second quarter of 2009, an increase from RMB 28.1 million in the second quarter of 2008, but a decrease from RMB 41.4 million in the first quarter of 2009. -- Fair value of the conversion feature of the Company's convertible bonds increased by RMB 113.4 million (US$16.6 million) in the second quarter of 2009, as a result of the increase of the Company's ADS prices during the second quarter of 2009. -- On a U.S. GAAP basis, net loss attributable to shareholders was RMB 319.9 million (US$ 46.8 million) in the second quarter of 2009, compared to net income attributable to shareholders of RMB 78.1 million in the second quarter of 2008 and net income of 27.4 million in the first quarter of 2009. Net loss per basic ADS was RMB 5.95 (US$0.87) in the second quarter of 2009, compared to net income per basic ADS of RMB 1.62 in the second quarter of 2008 and net income per basic ADS of RMB 0.51 in the first quarter of 2009. Excluding the provision for pre-payments and the increase in fair value of the conversion feature of the Company's convertible bonds, on a non-GAAP basis, net income attributable to shareholders was RMB 30.0 million (US$4.4 million) and net income per basic ADS was RMB 0.55 (US$0.08) in the second quarter of 2009. Peter Xie, President of Solarfun, commented, "We are quite pleased with our operating performance during the second quarter. These results reflect the significant progress we have made in reducing our raw material costs and returning the Company to profitability prior to the one-time, non-cash provision. This positions us well to aggressively compete for business going forward, and to do so profitably. We are determined to capture an increasing market share if demand for PV products recovers in the second half of 2009. The first shipments to Q-Cells as part of our multi-year manufacturing services agreement occurred during the second quarter and we look forward to higher volumes going forward." FINANCIAL POSITION As of June 30, 2009, the Company had cash and cash equivalents of RMB 494.7 million (US$72.4 million) and working capital of RMB 1,289.0 million (US$188.7 million). Total short term bank borrowings as of June 30, 2009 were RMB 1,394.0 million (US$204.1 million), a decrease from RMB 1,435.0 million as of March 31, 2009. The lending environment in China remains accommodative and as of June 30, 2009, the Company had approximately US$84.9 million of undrawn credit lines with a number of commercial banks. Accounts receivable increased to RMB 514.3 million (US$75.3 million) as of June 30, 2009 from RMB 202.1 million as of March 31, 2009. This increase was primarily due to a large percentage of shipments occurring in the latter part of the second quarter. Days sales outstanding increased from 35 days in the first quarter of 2009 to 38 days in the second quarter of 2009. Inventories declined to RMB 695.7 million (US$101.9 million) as of June 30, 2009 from RMB 747.6 million as of March 31, 2009. Capital expenditures were RMB 24.8 million (US$3.6 million) in the second quarter. The Company currently has a module capacity of 460 MW. The Company plans to expand its module capacity by 50 MW during the third quarter of 2009, and plans to further increase its nameplate capacity to 700 MW in 2010. BUSINESS OUTLOOK Based on current operating trends and market conditions, the Company provides the following outlook. The Company expects: -- Total module shipments to exceed 100 MW in the third quarter. -- Total module shipments to be approximately 80 MW in the fourth quarter, although visibility currently remains quite low. -- Average selling prices to further decline to US$2.00 per watt, or below, by the end of 2009. Peter Xie concluded, "The demand environment appears to be improving in the second half of the year. We will increase our focus on enhancing product performance and quality and on further enhancing our relationships with both new and existing customers. We are enthused about the long term market opportunity in China and have built an internal organization to capture those opportunities. We have been approved by Jiangsu Development and Reform Commission to construct two projects totaling 20 MW in our home province, Jiangsu Province. In the second quarter of 2009, we entered into a number of new framework sales agreements in Europe, totaling approximately 30 MW, to cover our module shipments in the second half of 2009. We are enhancing both our senior level technical team and marketing team in both Europe and the US to better serve our customers and to grow our business." CONFERENCE CALL Management will host a conference call to discuss the results at 8:00 am U.S. Eastern Time (8:00 pm Shanghai time) on Tuesday, August 18, 2009. The dial-in details for the live conference call are as follows: - U.S. Toll Free Number: +1 800 299 0433 - International dial-in number: +1 617 801 9712 - South China Toll Free Number: +10 800 130 0399 - North China Toll Free Number: +10 800 152 1490 Passcode: SOLF A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.solarfun.com.cn/. A replay of the webcast will be available for one month. A telephone replay of the call will be available until August 25, 2009. The dial-in details for the replay are as follows: - U.S. Toll Free Number: +1 888 286 8010 - International dial-in number: +1 617 801 6888 Passcode: 68474346 SECOND QUARTER 2009 FINANCIAL STATEMENTS SOLARFUN POWER HOLDINGS CO., LTD. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for number of shares and per share data) As of As of December 31 March 31 June 30 June30 2008 2009 2009 2009 (Audited) (Unaudited) (Unaudited) (Unaudited) RMB RMB RMB USD ASSETS Current assets Cash and cash equivalents 410,901 466,276 494,740 72,434 Restricted cash 88,137 270,398 260,749 38,176 Derivative contracts 39,665 63,079 5,062 741 Accounts receivable, net 319,537 202,096 514,328 75,304 Inventories, net 731,708 747,587 695,743 101,863 Advance to suppliers, net 1,145, 614 1,154,252 877,909 128,535 Other current assets 481, 749 425,131 376,277 55,089 Deferred tax assets 57,992 68,872 65,453 9,583 Amount due from related parties 19 19 24,435 3,577 --- --- ------ ----- Total current assets 3,275,322 3,397,710 3,314,696 485,302 --------- --------- --------- ------- Non-current assets Fixed assets - net 1,492,575 1,629,544 1,616,596 236,684 Intangible assets - net 212,736 211,559 210,512 30,821 Goodwill 134,735 134,735 134,735 19,726 Deferred tax assets 4,489 13,653 6,920 1,013 Long-term deferred expenses 37,444 37,075 37,908 5,550 ------ ------ ------ ----- Total non-current assets 1,881,979 2,026,566 2,006,671 293,794 --------- --------- --------- ------- TOTAL ASSETS 5,157,301 5,424,276 5,321,367 779,096 ========= ========= ========= ======= LIABILITIES Current liabilities Derivative contracts 5,792 5,273 18,584 2,721 Short-term bank borrowings 1,098,832 1,435,000 1,394,014 204,096 Long-term bank borrowings, current portion 30,000 45,000 60,000 8,785 Accounts payable 217,026 187,987 268,971 39,380 Notes payable 39,341 76,377 107,610 15,755 Accrued expenses and other liabilities 189,028 129,392 136,131 19,931 Customer deposits 9,494 2,956 3,346 490 Deferred tax liabilities 1,416 3,263 709 104 Unrecognized tax benefit 27,385 27,385 28,199 4,129 Amount due to related parties 39,766 10,109 8,103 1,186 ------ ------ ----- ----- Total current liabilities 1,658,080 1,922,742 2,025,667 296,577 --------- --------- --------- ------- Non-current liabilities Long-term bank borrowings 170,000 147,500 125,000 18,301 Convertible bonds 1,178,969 519,365 642,925 94,130 Deferred tax liabilities 27,155 27,008 26,861 3,933 ------ ------ ------ ----- Total non-current liabilities 1,376,124 693,873 794,786 116,364 --------- ------- ------- ------- TOTAL LIABILITIES 3,034,204 2,616,615 2,820,453 412,941 Redeemable ordinary shares 32 32 32 5 Solarfun Power Holding Co., Ltd. Shareholders' equity Ordinary shares 214 214 214 32 Additional paid-in capital 2,138,624 2,151,026 2,164,186 316,854 Statutory reserves 47,638 47,638 49,589 7,260 (Accumulated deficit) Retained earnings (67,594) 604,653 282,797 41,404 ------ ------- ------- ------ Total Solarfun Power Holding Co., Ltd. shareholders' equity 2,118,882 2,803,531 2,496,786 365,550 Noncontrolling interest 4,183 4,098 4,096 600 ----- ----- ----- --- TOTAL SHAREHOLDERS' EQUITY 2,123,065 2,807,629 2,500,882 366,150 --------- --------- --------- ------- TOTAL LIABILITIES, AND SHAREHOLDERS' EQUITY 5,157,301 5,424,276 5,321,367 779,096 ========= ========= ========= ======= SOLARFUN POWER HOLDINGS CO., LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"), except for number of shares and per share data) For the three months ended June 30 March 31 June 30 June 30 2008 2009 2009 2009 (Unaudited) (Unaudited) (Unaudited) (Unaudited) RMB RMB RMB USD Net revenue Photovoltaic modules 1,233,527 678,136 742,004 108,636 Photovoltaic cells 104,217 6,043 5,538 811 Others 14,449 18 107,068 15,676 ------ --- ------- ------ Total net revenue 1,352,193 684,197 854,610 125,123 --------- ------- ------- ------- Cost of revenue Photovoltaic modules (1,056,912) (521,338) (741,664) (108,586) Photovoltaic cells (97,244) (7,284) (18,529) (2,713) Others (12,481) (281) (83,038) (12,158) Write down of inventories (105,848) (64,414) (9,431) --- ------- ------ ----- Total cost of revenue (1,166,637) (634,751) (907,645) (132,888) --------- ------- ------- ------- Gross profit / (losses) 185,556 49,446 (53,035) (7,765) ------- ------ ------ ----- Operating expenses Selling expenses (26,482) (16,328) (18,206) (2,665) General and administrative expenses (34,956) (40,233) (47,002) (6,881) Research and development expenses (7,697) (8,185) (3,673) (538) ----- ----- ----- --- Total operating expenses (69,135) (64,746) (68,881) (10,084) ------ ------ ------ ------ Operating profit / (losses) 116,421 (15,300) (121,916) (17,849) Interest expenses (28,148) (41,397) (36,091) (5,284) Interest income 1,368 494 1,060 155 Exchange gain / (losses) 4,136 (32,849) 15,590 2,283 Change in fair value of derivative contracts 0 71,086 (49,423) (7,236) Change in fair value of conversion feature of convertible bond 28,458 (113,423) (16,606) Other income 4,383 3,533 276 40 Other expenses (6,140) (3,584) (4,302) (630) Government grants 114 1,907 1,797 263 --- ----- ----- --- Income / (losses) before income tax 92,134 12,348 (306,432) (44,864) ------ ------ ------- ------ Income tax benefit / (expenses) (8,282) 15,002 (13,475) (1,973) ----- ------ ------ ----- Consolidated Net income / (losses) 83,852 27,350 (319,907) (46,837) ------ ------ ------- ------ Net (income) / losses attributable to noncontrolling interest 5,763 (85) (2) 0 ----- --- --- --- Net income / (losses) attributable to Solarfun Power Holding Co., Ltd. shareholders 78,089 27,435 (319,905) (46,837) ====== ====== ======= ====== Net income / (losses) attributable to Solarfun Power Holding Co., Ltd. per share Basic 0.32 0.10 (1.19) (0.17) Diluted 0.31 0.10 (1.19) (0.17) Shares used in computation Basic 241,340,409 268,848,771 268,981,409 268,981,409 Diluted 287,007,417 268,848,771 268,981,409 268,981,409 Net income / (losses) attributable to Solarfun Power Holding Co., Ltd. per ADS Basic 1.62 0.51 (5.95) (0.87) Diluted 1.36 0.51 (5.95) (0.87) ADSs used in computation Basic 48,268,082 53,769,754 53,796,282 53,796,282 Diluted 57,401,483 53,769,754 53,796,282 53,796,282 USE OF NON-GAAP FINANCIAL MEASURES The Company has included in this press release certain non-GAAP financial measures, including certain line items presented on the basis that the one-time provisions recorded in the second quarter of 2009 had not been so recorded. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein. Reconciliation of Non-GAAP measures to GAAP measures For the three months ended June 30, ---------------------- 2009 2009 ---- ---- (RMB million) (US$million) Non-GAAP gross profit 183.5 26.8 Prepayment provision (236.5) (34.6) ------ ----- GAAP gross loss (53.0) (7.8) ===== ==== For the three months ended June 30, 2009 ------------- Non-GAAP gross margin 21.5% Prepayment provision as % of revenue (27.7%) ------ GAAP gross margin (6.2%) ===== For the three months ended June 30, -------------------- 2009 2009 ---- ---- (RMB million) (US$million) Non-GAAP operating profit 114.6 16.8 Prepayment provision (236.5) (34.6) ------ ----- GAAP operating loss (121.9) (17.8) ====== ===== For the three months ended June 30, 2009 ------------- Non-GAAP operating margin 13.4% Prepayment provision (27.7%) ------- Operating margin (14.3%) ======= For the three months ended June 30, -------------------- 2009 2009 ---- ---- (RMB million) (US$million) Non-GAAP net income 30.0 4.4 Prepayment provision (236.5) (34.6) Changes in fair value of conversion feature of convertible bonds (113.4) (16.6) ------ ----- GAAP net loss (319.9) (46.8) ====== ===== For the three months ended June 30, -------- 2009 2009 ---- ---- (RMB) (US$) Non-GAAP net income per ADS 0.55 0.08 Prepayment provision (4.40) (0.64) Changes in fair value of conversion feature of convertible bonds (2.10) (0.31) ----- ----- Net loss attributable to Solarfun Power Holdings Co., Ltd. (5.95) (0.87) ===== ===== FOREIGN CURRENCY CONVERSION The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the exchange rates as set forth in the H.10 statistical release of the Federal Reserve Board as of June 30, 2009,, which was RMB6.8302 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on June 30, 2009, or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts. SAFE HARBOR STATEMENT This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include third quarter, fourth quarter and full year 2009 estimates for net revenue, PV product shipments, raw materials and product prices, PV cell production capacity and gross margins. Forward-looking statements involve inherent risks and uncertainties and actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Solarfun disclaims any obligation to update or correct any forward-looking statements. About Solarfun Solarfun Power Holdings Co, Ltd. manufactures ingots, PV cells and PV modules, and provides PV module processing services to convert PV cells into PV modules. Solarfun produces both monocrystalline and multicrystalline silicon cells and modules. Solarfun sells its products both through third-party distributors, OEM manufacturers and directly to system integrators. Solarfun was founded in 2004 and its products have been certified to TUV and UL safety and quality standards. SOLF-G http://www.solarfun.com.cn/ For further information, contact: Solarfun Power Holdings Co., Ltd. Paul Combs V.P. Strategic Planning 26F BM Tower 218 Wusong Road Shanghai, 200080 P. R. China Tel: 86 21-6393-8206 / Mobile: 86 138 1612 2768 E-mail: Christensen Kathy Li Tel: 480 614 3036 E-mail: Roger Hu Tel: 852 2117 0861 E-mail: DATASOURCE: Solarfun Power Holdings Co., Ltd. CONTACT: Paul Combs, V.P. Strategic Planning of Solarfun Power Holdings Co., Ltd., 86 21-6393-8206, Mobile, 86 138 1612 2768, ; or Kathy Li, +1-480-614-3036, , or Roger Hu, 852 2117 0861, , both of Christensen, for Solarfun Power Holdings Co., Ltd. Web Site: http://www.solarfun.com.cn/

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SOLF Solarfun Power Holdings CO., Ltd. ADS, Each Representing Five Ordinary Shares (MM)