Earnings Expert, LLC

The company weathered structural changes in the past year.The company management board has changed completely in the calendar year. In June of 2010, the company refinanced debt and sold shares creating the opportunity to return to profitable growth.  Revenues in the third quarter of 2010 increased by 3.7% in a crowded and competitive German market, representing more than half of the company’s revenues for the first three quarters.  We are concerned by the company’s lack of capital expenditures and lack of increased capacity utilization in comparison to its peers.  The Chinese photovoltaic manufactures are dramatically using short-term debt to finance massive capacity growth.  Conversely the company’s capacity declined in fiscal year 2010.  This might be a good strategy in the long term as solar markets are bound to change, but in the short run a low risk strategy might provide limited returns.

Despite improved business during the second and third quarters of 2010, poor financial performance in prior periods put many of the company’s rankings in the bottom half of its peer group. The company relies heavily on debt, which places its debt-to-equity ratio at 19^th in its peer group and cash-to-debt ratio at 17^th. Poor inventory management has the company ranked 22^nd on the cash conversion cycle. The company has a strong last 12-month operating cash flow relative to its peers. The company is ranked 14^th among peers, down from 13^th. Continual reduction in capital expansion, combined with a strong operating cash flow put the company’s ranking on free cash flow-to-net income at fourth.

The company provides good disclosure in its quarterly filings. It provides full footnote disclosures and a statement of cash flows. Furthermore, the company provides total megawatts produced and production capacity in its quarterly filings. The company does not provide revenue and cost of goods sold by product on an annual or quarterly basis, but it does provide revenues by segment on an annual basis. Complete warranty data can only be found in annual filings and allowance for doubtful accounts information cannot be found in annual or quarterly filings. We have a management concern as the chief executive officer has also taken on the chief financial officer role.  The dual responsibility seems like a lot for one individual to handle.  In addition, the company appointed a new chief operating officer that will start in fiscal 2011.