Tesla Motors: A Financial Statement Analysis

A Financial Statement Analysis
AS, RD & TW
660.414 Financial Statement Analysis
December 4, 2013
Tesla Motors: A Financial Statement Analysis

Table of Contents
Table of Contents .......................................................................................................................... 1
Executive Summary ...................................................................................................................... 1
Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis ........................................... 3
Competitive Analysis ..................................................................................................................... 6
DuPont Analysis .......................................................................................................................... 12
Analysis of Financial Statements ................................................................................................ 14
Introduction to Financial Models and Assumptions .................................................................... 16
Discounted Cash Flow Model Conclusions ................................................................................. 20
Earnings Multiple Model/External Funds Needed Conclusion .................................................... 21
Economic Value Added ............................................................................................................... 22
2013 News Highlights for Tesla Motors ...................................................................................... 24
Recommendation ........................................................................................................................ 26
Appendix ..................................................................................................................................... 27

1

Executive Summary

Tesla Motors Inc., a leading designer, manufacturer, and distributor of electric automobiles and
EV technology, has found its way to the forefront of a growing trend of energy efficiency in the
car market. Founded in 2003, Tesla began operations with somewhat of a niche market
approach by selling the Tesla Roadster, an expensive sports car. As CEO Elon Musk began to
switch gears toward a mass consumer base strategy, the Model S materialized and has been
the impetus of the companys recent success. Sales figures have risen dramatically since the
companys IPO in 2010, and has therefore led Wall Street to giving the company a very high
valuation, based on the companys future growth prospects (a stock price jump of close to
450%). Aside from car sales which is the primary source of its revenue, the company also sells
its expertise in battery storage technology to companies such as Toyota, Daimler, and Solar
City.

This analysis will begin with a qualitative analysis of Teslas positive and negative attributes,
both from a historical standpoint and a forward-looking one. From there, the report will continue
with a competitor analysis consisting of financial data from other car companies, including
General Motors, Ford, BMW, and Volkswagen. While these companies are well-established and
sell to a broad array of consumers, it is pertinent to gain a baseline idea of liquidity, leverage,
and profit figures from companies act within the same market. In addition, the competitor
analysis will include a qualitative investigation into the failure of another electric vehicle start-up
company for the sole purpose of analyzing why Tesla has been able to make a dent in the car
market.

Following the aforementioned component of the report, it is appropriate to include a DuPont
analysis of the companys financial position. While some of these numbers may appear skewed
in relation to a mature company (due to its high-growth nature), there are important figures with
respect to leverage and liquidity that are important to note if the company is to survive the
growth stage.

The subsequent section includes two financial models: a Discounted Cash Flow (DCF) model,
and an earnings multiple model. The former proves to be the impetus of the intrinsic valuation,
and as a result, we found the company to be currently over-valued (as of December 10
th
, 2013
at a stock price of $142). The latter does not provide a good indication of the companys future
due to its short-sighted timeframe and Teslas current negative net income. There is additionally
a list of assumptions used for the models to justify the end result.

The final component of this company examination consists of an Economic Value Added (EVA)
analysis. It begins with a justification as to why the EVA approach is not relevant for a high-
growth, emergent company like Tesla. This is pertinent because the numbers can be misleading
when evaluated in isolation. However, there are benefits to conducting this analysis, namely the
positive return on invested capital when adjusting for research and development and operating
lease costs.
2

To conclude the report, an analysis of recent news and coverage was included to not only show
how sensitive the market price is to events, but also to provide extra information about Teslas
prospects in the near future. We then provide our own recommendation as an investor on
whether to buy, hold, or sell the stock at the current time.

3

Strengths, Weaknesses, Opportunities & Threats (SWOT) Analysis
Strengths
Elon Musk Chairman, Product Architect and CEO: Elon Musk is the most
important employee and a strong assets to the Tesla Motors management
team. Musk has a great track record previously founding PayPal, Zip2 and
SpaceX, a venture considered impossible by many. Musk is a skilled leader in
engineering design, manufacturing and e-commerce and a crucial leader for
Tesla Motors' ambitious vision. Additionally, adding to Teslas technology
credibility, he serves as Chairman of the Board for Solar City (a leading solar
panel distributor) which just announced that they will be using components of
Teslas battery technology to store energy for peak demand times.
First to market advantage: Teslas Roadster was the first federally-
compliant highway-capable electric vehicle (EV) launched in both the U.S.
and Europe, setting Tesla up to be known as the electric vehicle company.
Tesla Motors currently has a strong market position in the EV segment due to
their first to market advantage.
Proven product design and development: Tesla Motors has proven they
can design vehicles people want to buy. Tesla's vehicles are popular among
celebrities like Arnold Schwarzenegger, Matt Damon and average
consumers. In 2013 the Model S won Motor Trend's 2013 Car of the year
award, a coveted award in the auto industry that began in 1949. Tesla's
design team focuses great attention and equal emphasis on their zero
emission design and the performance and aesthetics of the car. This assures
that in the future Tesla motors will continue to design cars that appeal to a
large segment of consumers.
Big name partnerships: Tesla Motors has forged strategic supply
partnerships with Toyota, Damiler AG, Panasonic and others. These
partnerships have been key to convert Tesla's EV expertise into additional
revenue. This revenue is important to support Tesla's battery and other
technology research and development operations.
Price skimming strategy: Tesla Motors has brought an innovative price
skimming strategy to the auto industry and it appears to be paying off. Tesla
Motors' three step pricing process (found below) should ensure long-term
profitability while costs are driven down.
o Step 1: sell expensive, luxury cars, knowing not many will sell
o Step 2: sell cheaper luxury cars knowing that more people will buy
them
o Step 3: sell affordable cars that virtually everyone can afford, and sell
a lot of them
Weaknesses:
Limited benefits from economies of scale: At its core Tesla Motors is a startup
heavy manufacturing company, which means currently they do not receive many
benefits from economies of scale. Tesla Motors is currently only a small scale,
boutique operation with low sales volumes. The entire production run of the
Roadster only produced 2,400 vehicles. Since Tesla Motors fully develops their
4

vehicles in-house, including all their sub-assemblies, which leads to higher costs of
production as economies of scale are not achieved.
Limited operating history: Tesla is just 10 years old, and the Tesla Motors brand
name currently lacks recognition. Compared to most of its competitors, Tesla is a
niche brand in the auto industry that is unknown to most except auto enthusiasts and
consumers with deep pockets. The auto industry is a competitive industry that
requires a strong brand for differentiation.
Consumer behavior change required for EV adoption: Although Tesla Motors has
proven they can build cars people want to buy they have still yet to prove, on
significant scale, they are capable of providing all the resources for consumer
behavior change required for the adoption of an EV. Tesla Motors is competing
against a heavily engrained technology that has been in use for over one hundred
years. There inherently important behavior changes required by consumers to
transition from gasoline vehicles to Eves. For example, it takes several hours to fuel
an EV compared with several minutes to fuel a gasoline vehicles.
Efficiency: Teslas COGS have been growing quicker than sales leaving room for
improvements to manufacturing efficiency. Additionally, strong demand for Tesla
vehicles has led to a situation where the manufacturing of Tesla vehicles has slowed
because of the limited supply of specialized components like batteries.
Opportunities:
Peak oil: One of the greatest opportunities for Tesla Motors is peak oil. Oil is a finite
resource that will eventually deplete. Elon Musk, CEO, is anticipating peak
production around 2020. While there is wide variation in specifically when peak oil
will occur, there is no speculation that it will occur. As the production of oil decreases,
the price of oil will increase and more people will buy electric cars as they are a more
cost effective option to fuel. If gas prices crossed $8 per gallon and government
support held constant a Tesla would become a competitive buy. Therefore, Tesla
Motors is taking a highly proactive approach to the post oil transportation vehicles.
Peak oil is a significant opportunity for profit but other opportunities maybe more
eminent.
EV infrastructure: As a market leader in EV's Tesla Motors has a unique opportunity
to shape the infrastructure for the entire future EV market. Most important in this
infrastructure is a robust network of charging and battery swapping stations that will
increase the range of where EVs can travel. EV infrastructure is currently is in its
infancy. However, Tesla Motors plans to develop this infrastructure for their own cars,
and other auto manufacturers may follow them and pay Tesla Motors to use their
stations for their electric vehicles. Thus, Tesla Motors has the potential to become a
car company and an energy company in the future.
Environmentally conscious company: Consumers are becoming more
environmentally conscious as disasters like the BP's Deep Water Horizon spill
illustrate the environmental consequences of the world's current reliance on fossil
fuels. Additionally, a future carbon constrained economy is becoming more of a
realistic possibility as atmospheric greenhouse gas concentrations increase
everyday. EPA standards and other legislative mandates and are already in motion
to accelerate the consumer adoption of EVs by reducing prices and making owning
EVs more convenient. Tesla Motors only manufactures zero emissions EVs and
5

therefore is uniquely positioned to capitalize on the greening opportunity of
consumers preferences.
Threats:
Consumer skepticism of EVs: Consumers are skeptical of the capabilities of EV
technology and particularly the safety of innovative EV technology. Accidents with
Tesla's vehicles, like battery fires, have made headlines and have had a significant
impact on the Tesla share price. If these events continue to occur and shape
consumer's perception of the brand and EV's, Tesla may find it extremely difficult to
acquire new customers.
Political uncertainty: In most states Tesla Motors was legally inhibited from
opening brick and mortar dealerships. Instead Tesla has opened Apple-esque
stores to serve as showroom where customers can interact with the Tesla product
and then make their purchase online. This illustrates the political defense the
traditional automotive industry has ingrained to protect their industry from successful
startups.
High price: The price of Tesla's vehicles need to come down and come down
quickly. Though discretionary spending on luxury goods like a sports cars has
increased since the depths of the Great Recession most people still cannot afford to
pay $60,000-$90,000 for a car. People will save money on fuel in the long run by
purchasing a Tesla but Tesla's current sticker price is still simply too high to make
this cost savings important in the short run. Tesla does have a cheaper model X
planned for production that cannot suffer the same delays in production the model S
occurred when it was first introduced.
Competition from established giants: Competition from established big name auto
manufacturers like Toyota and GM is going to heat up. Tesla has enjoyed its first in
market advantage and now competitive giants are positioning to catch up. These big
name manufacturers have greater resources available then Tesla and the ability to
innovate on what Tesla has worked hard to pioneer so Tesla needs to continue to
stay ahead of the threat of competitive giants.

6

Competitive Analysis

Ratio\Company Tesla (2012) GM (2012) Ford (2012) BMW (2012) Volkswagen
Liquidity
Net Working Cap. (1000s) (14,340) $ 16,004,000 $ 7,947,000 $ 9,362,000 ! 7,548,000 !
Current Ratio 0.973 1.296 1.226 1.317 1.072
Quick Ratio 0.475 1.024 1.017 1.000 0.800
Activity
Inventory Turnover 2.406 9.659 16.976 6.054 5.603
Accounts Rec. Turnover 22.718 14.764 26.423 26.399 18.726
Accts. Payable Turnover 2.131 7.062 6.451 10.883 9.378
Fixed Asset Turnover 0.968 6.368 5.381 8.119 5.405
Cash Flow Yield 0.571 1.728 1.939 1.072 0.329
Cash Conversion Cycle
Days Sales Outstanding 15.85 24.38 13.62 13.64 19.22
Days in Inventory 149.65 37.27 21.21 59.47 64.25
Average Paymet Period 168.91 50.98 55.80 33.08 38.39
Cash Conversion Cycle -3.41 10.68 -20.97 40.03 45.09
Debt
Debt Ratio 0.888 0.752 0.916 0.591 0.736
Debt to Equity 7.935 3.104 4.964 1.448 2.784
LTD to Assets 0.360 0.023 0.149 0.162 0.395
Times Interest Earned -1551.3 -61.092 9.429 5.191 5.466
Fixed Charge Coverage -3.24 -12.370 9.259 5.015 4.667
Profitability
Gross Profit Margin 7.28% 6.69% 11.05% 19.49% 18.25%
Operating Profit Margin -95.41% -20.20% 3.94% 10.86% 5.97%
Return on Assets -43.36% 4.17% 5.39% 7.15% 3.88%
EPS (1.26) $ 2.35 $ 1.42 $ 1.95 ! 17.36 !
Market Valuation
P/E Ratio (trailing) -112.38 17.40 11.66 42.11 10.76
Dividend Payout Ratio 0 0 13.47% 0 7.64%
DuPont
Net Profit Margin -95.88% 4.08% 3.69% 6.75% 11.36%
Total Asset Turnover 0.452 1.138 1.532 1.060 0.684
Financial Leverage Ratio 5.241 3.551 5.335 2.441 3.881
Return on Equity -227.2% 16.5% 30.1% 17.5% 30.1%

Based on a comparison of Tesla and other companies in the car manufacturing industry, Tesla
appears to be in fairly poor shape overall. However, this analysis considered many well-
established firms including General Motors, Ford, BMW, and Volkswagen. The comparisons
with General Motors and Ford were considered since those firms and Tesla are American-
based car manufacturers. The comparisons with BMW and Volkswagen were considered
because those firms represent more direct competitors whose products include high-price luxury
sedans. Additionally, BMW has already released a full electric car, and Volkswagen
subsidiaries Porsche and Audi have released hybrids and are currently pursuing full electric
cars.

7

In the comparison of Tesla against other American car companies, Tesla is the least stable firm,
but that is to be expected when comparing a startup with more established companies.
Additionally, Ford appears to be the frontrunner of the three and GM shows some signs of
concern. Overall Teslas greatest concern seems to come from its DuPont analysis, which will
be considered in further detail in a subsequent section. Teslas negative net profit margin and
high financial leverage ratio is driving a large negative return on equity, whereas the other two
firms have return on equity values in the 15-30% range. The biggest difference is in the net
profit margin, which Tesla can improve by reaching a breakeven point and beginning to
generate positive net profits. However, Tesla, total asset turnover is about one third that of the
other firms at less than 0.5. This indicates a large concern with Teslas efficiency, which has
already been noted as a weakness of the firm. At this point, increasing efficiency would not only
raise total asset turnover, but could shorten the time to breakeven. In the cash conversion cycle
analysis, Tesla is well positioned with a cycle less than zero. This is primarily driven by the very
long average payment period. Teslas cash conversion period is in line with its American
competitors and should be something that Tesla works to maintain in the future. The one
weakness of Tesla in the cash conversion cycle relative to GM and Ford is its high days in
inventory value. This is driven by a very low turnover, which indicates an inability to move its
inventory in an efficient manner. While the cash conversion cycle provides a strong outlook on
cash efficiency, the cash flow yield is much smaller for Tesla than for both Ford and GM, which
indicates a weakness in cash generated from operating activities. This is a more telling value
for Tesla, because in order to achieve continued success, Tesla must improve the cash from
operating activities. Finally, in the debt section of the ratio analysis, Tesla appears to be in poor
shape. It has decreased much of its long term debt in 2013 with the repayment of the
Department of Energy loan. However, the times interest earned and fixed charge coverage
ratios are negative, which creates a concern that Tesla may have difficulty paying off its debts.
These negative values were driven by a negative earnings before interest and tax value. This
creates a serious concern about the leverage of Tesla, and combined with the high financial
leverage ratio makes Tesla a very risky company without the profits to back it up so far.
General Motors falls into the same category with Tesla with negative times interest earned and
fixed charge coverage ratios. Ford, however, appears to be the strongest of the three American
car manufacturers considered, with sustainable times interest earned and fixed charge
coverage ratios. Overall, comparing Tesla with large, mature firms must be analyzed with the
differences in mind, but does show areas where Tesla has a strong strategy and highlights
areas where Tesla can improve.

The comparison of Tesla with the German car manufacturers BMW and Volkswagen allows the
comparison between Tesla and firms who can be seen as more direct alternatives for many
consumers. All three have brands with an upscale image and fairly high price point. Of the
three firms considered, Tesla again shows weaknesses in its ratio analysis when compared with
the other companies. In the DuPont analysis, Tesla is behind both BMW and Volkswagen in
profitability and efficiency, and without a stable growth is the riskiest of the three firms. This
highlights a key area of focus for Tesla, and improvements in profitability should be a main
priority for the firm. Teslas cash conversion cycle is shorter than both its European
counterparts, both of which have very similar breakdowns. This demonstrates a strength of
8

Teslas current strategy and should be maintained moving forward. From the efficiency
standpoint, Tesla appears to be in line with both BMW and Volkswagen with a similar cash flow
yield. Tesla is more leveraged than both its European competitors, with unsustainable times
interest earned and fixed charge coverage ratios in their current state. These ratios for BMW
and Volkswagen are in the range of where Tesla should aim to be, and Tesla should consider
striving toward some of strategies of these firms once it attains the status of a more stable firm.
In the debt section analysis, BMW appears to be the most conservative company, while both
Tesla and Volkswagen take on more risk. However, Volkswagen is in a better position to
manage its risk with higher profits. Tesla is in need of improving many facets of its operations,
and could look to emulate many of the strategies of BMW and Volkswagen. These two
companies represent stable and successful firms that target the same market that Tesla is
attempting to enter. While Tesla does differentiate itself through the emphasis on full electric
cars only, they can still compare their financials with BMW and Volkswagen to view current
strengths and weaknesses and create strategies moving forwards.

9

Industry Benchmarking

Ratio\Company Tesla (2012) Industry Avg. Industry Avg.
D&B SIC 3711 RMA NAICS 336111
Liquidity
Net Working Cap. (1000s) (14,340) $ N/A N/A
Current Ratio 0.973 1.4 1.5
Quick Ratio 0.475 0.7 0.6
Activity
Inventory Turnover 2.406 3.843 4.8
Accounts Rec. Turnover 22.718 10.624 10.4
Accts. Payable Turnover 2.131 6.676 13.6
Fixed Asset Turnover 0.968 7.019 12.6
Cash Flow Yield 0.571 N/A N/A
Cash Conversion Cycle
Days Sales Outstanding 15.85 33.89 34.62
Days in Inventory 149.65 93.68 75.00
Average Paymet Period 168.91 53.93 26.47
Cash Conversion Cycle -3.41 73.64 83.14
Debt
Debt Ratio 0.888 0.671 0.66
Debt to Equity 7.935 2.076 2.9
LTD to Assets 0.360 0.181 0.095
Times Interest Earned -1551.3 N/A 5
Fixed Charge Coverage -3.24 N/A N/A
Profitability
Gross Profit Margin 7.28% 25.70% 26.00%
Operating Profit Margin -95.41% 2.40% 1.00%
Return on Assets -43.36% 2.70% 1.70%
EPS (1.26) $ N/A N/A
Market Valuation
P/E Ratio (trailing) -112.38 N/A N/A
Dividend Payout Ratio 0 N/A N/A
DuPont
Net Profit Margin -95.88% 4.00% 1.50%
Total Asset Turnover 0.452 0.636 1.700
Financial Leverage Ratio 5.241 3.040 2.941
Return on Equity -227.2% 10.80% 7.50%

Tesla was also compared to industry averages using benchmarking ratios obtained from D&B
(SIC 3711) and from RMA (NAICS 336111) which correspond to motor vehicle
manufacturers. When comparing Tesla to the industry averages, there are some classifications
of ratios that are particularly concerning for the company. In the liquidity set of ratios, Teslas
results fell near the industry averages, and what was expected of a high-growth company.
Additionally, Tesla had a quick ratio of around 0.5, which indicates that much of its current
10

assets are tied up in inventory. The good news is that Tesla has a strong pipeline of customers,
and consequently finds itself periodically backed-up in orders. One of the problem areas for the
company is with debt and leverage. Tesla has a higher debt ratio, debt to equity ratio, and long
term debt to assets ratio than the benchmarks. Additionally, Tesla's times interest earned and
fixed charge coverage ratios are both negative, where the industry averages are not. For Tesla,
the fixed charge coverage ratio is more revealing than times interest earned. This is because
Tesla has a substantial amount of operating leases, which are accounted for in the fixed charge
coverage ratio. In the activity set of ratios, Tesla appears to be in line with or better than the
industry benchmarks. This is very important moving forward because the activity ratios highly
reflect the day-to-day continuing operations of the firm, which are critical to sustained
growth. Teslas cash flow yield for 2012 was 0.57. This does not lie in the ideal 1-3 range, and
poses a concern for their working capital management. On the other hand, starting a car
company is not cheap, and a negative cash flow is to be expected for a capital intensive startup
company. The profitability set of ratios is again of concern for Tesla and are driven by negative
operating and net profits. If Tesla is able to reach a breakeven point in the future, it is likely that
the profitability ratios will see drastic improvements. The key for Tesla currently is the gross
profit margin, which is three to four times less than the industry benchmarks. This represents a
problem with cost of goods sold as a percentage of sales. If the company is able to continue to
grow sales at the large rates they have seen over the past years and can manage to decrease
the growth rate of cost of sales, Tesla will begin to see marked improvements in its profitability
ratios. From the DuPont analysis of Tesla compared with industry benchmarks, it is clear that
the profitability and efficiency categories for Tesla are behind the industry averages, while the
risk is far higher than the industry averages. This has created a negative return on equity for
Tesla, which will only be remedied by attaining positive net profits. The DuPont analysis will be
considered further in a later section.

From the prior benchmarks it is obvious that Tesla is unique in its industry. The composite
benchmarks from D&B and RMA are not all that useful, therefore for the final analysis we
plan to benchmark Tesla against two failed EV companies, as well as sales figures for other
EV vehicles such as the Chevy Volt and Nissan Leaf. Moreover, it may be helpful to
compare financials of Tesla with a mature car companys first five years.

Other EV Car Start-ups

Tesla has thus far succeeded in the initial growth stage by displaying the ability to sell its
products and allocating its finances to the right areas. One other comparable company,
however, was not able to do so:

Fisker Karma
1
: The first issue with this attempted start up proved to simply be an inferior
product. Its battery technology was not only outsourced, but also faulty. The company recalled a
significant amount of vehicles due to countless buyers complaining about their cars breaking
within days after the purchase. Second, the Fisker Karma was not allocating much money to
technology improvement. Instead, they were purchasing components from suppliers in numbers
that were far too ambitious with respect to sales. A clear misallocation of finances also
contributed to the companys demise. Tesla invests a tremendous amount of its finances in
internal technology improvement (R&D), and as a result, has other companies purchasing its

1
Fehienbachei, Katie. "A Look 0nuei the hoou: why Electiic Cai Stait 0p Fiskei Faileu." !"#$%&. uigaom, n.u. Web. 7 Bec.
2u1S. <http:gigaom.com2u1Su417a-look-unuei-the-hoou-why-electiic-cai-staitup-fiskei-ciasheu-anu-buineu>.
11

expertise. The third reason Fisker is not where Tesla is today is due to executive turnover. The
company saw three CEOs in less than six months, which is not a good indication of the
companys direction. Conversely, Tesla has one of the most distinguished CEOs in the world
with Elon Musk.

Both Tesla and Karma started with much notoriety, but the reasons listed in the previous
paragraph show why the market and this analysis is optimistic about Tesla. Until now, Tesla has
had extraordinary growth, and shows no signs of stopping. The company has passed the first
obstacle, which is showing the world it can sell a quality product.

12

DuPont Analysis

Dupont Analysis 2012 2011 2010
Net Profit Margin -95.88% -124.56% -132.19%
Asset Turnover 0.45 0.29 0.30
Financial Leverage 5.24 3.18 1.86
Return on Equity
-226.08% -113.55% -74.54%

Net profit margin for Tesla has been negative for the past three years, but it has been
improving over the past two years. The primary driver of the net loss for Tesla is the
increasing cost of sales for the company. Cost of sales have been increasing at a faster
rate than sales, which has led to a negative gross profit margin. This highlights one of the
key weaknesses of Tesla currently: its production inefficiencies. Demand for Teslas cars
are not the key problem in generating a profit, it is the inability of the company to produce
enough vehicles to see their sales numbers eclipse their costs. With the Model S, Tesla
hopes to produce on a greater scale, which may help the company work out its inefficiency
problems. The trend towards a positive profit is slow, but it does indicate that there will be a
breakeven point for the company at some point in the future. Once this goal is achieved,
the return on equity for Tesla will finally be positive. In the quarterly reports from 2013, the
trend towards a positive net profit has continued, which reinforces the belief that success
could be just around the corner. The profitability trending towards zero is due to the
increase in sales growing at a faster rate than net loss. These results are all a product of
recurring activities and can be expected to continue through the breakeven point.

Teslas asset turnover ratio is much lower than the industry average. The industry average
for car manufacturers is around 1.5, while Teslas is less than 0.5. This means that Tesla
has a difficult time turning assets into sales. This is concerning for a growth company
because in order to survive, it must be able to generate sales from its continuing operations.
It can also indicate that Tesla should try to trim down on its assets and improve its efficiency
on the assets that it chooses to maintain. Once Tesla achieves a positive profit margin, it
should emphasize efficiency of assets, which will help improve the overall return on equity
for the company.

The financial leverage multiplier for Tesla is much higher than the industry average of about
3. This opens up Tesla to much more risk than it should be taking on currently. A startup
growth-oriented company will be riskier than a more established mature company, but Tesla
needs to find a way to decrease its financial leverage multiplier. In the past, Teslas
financial multiplier has been closer to the industry average, but in 2012 the company made
huge investments in its property, plant and equipment in preparation for the launch of its
new Model S car. For such a large company, Tesla should try to become a leaner firm that
uses its resources more efficiently. Teslas high financial leverage multiplier is really hurting
the firm right now, since it is operating with a net loss. This is causing the return on equity
to be much more negative than it would be with a more stable and sustainable leverage
ratio.

Teslas Return on Equity is a negative due to a negative net profit margin, however it is
growing closer to zero, which is a good sign. However, the financial multiplier for Tesla has
13

skyrocketed, which has greatly magnified the overall return on equity to worse than negative
300%. The total asset turnover has increased for Tesla, which again is a promising result,
but still below where it should hope to be. Overall, the trends of profitability and efficiency
are in the right direction, but the high financial multiplier has made the return on equity trend
downwards.

14

Analysis of Financial Statements

(Thousands) 2012 2011 2010
Operating Activities (266.10) $ (114.40) $ (127.80) $
+/- Investing Activities (206.90) $ (175.90) $ (180.30) $
+/- Financing Activities 419.60 $ 446.00 $ 338.00 $
!"##$%& () *$+, -.(/+

Negative operating cash flows for 2012 were significantly higher because of the rampant
increase in production, due to higher demand. This is evidenced by its two largest expenditures
in the section: inventories and accounts payable. These are two positive indications of growth
looking toward the future. A red flag should arise if these two statistics do not increase over time
for a high-growth company.

From the financial statements (Appendix), it is apparent that Teslas main avenue of growth is
internal. They are not growing through acquisition, and their partnerships represent a very small
portion of their business. Most of their growth comes from their continuing operations, and they
are very focused on their two upcoming products: the Model S and the Model X (to be released
in 2014). Of the small amount of sales growth that comes outside of these cars, the primary
contribution is from selling its expertise in EV production to other car companies, such as
Toyota and Daimler.

Teslas debt financing primarily comes from issuance of a single note and a DOE loan which
was fully paid off in 2013. Therefore, the maturities of long-term debt presented in the table
found below actually over represents Teslas current debt financing.

2013 $58.07
2014 $57.22
2015 $56.38
2016 $55.34
2017 $54.67
Thereafter: $205.69
Maturities of long-
term debt (in
millions)

Many of Teslas leases are in the form of operating leases, which represent off-balance sheet
financing. This will significantly raise Teslas interest payments and decrease the times interest
earned ratio. Additionally, due to the significant amount of lease obligations, a better measure of
leverage for Tesla would be the fixed charge coverage ratio. This ratio incorporates the lease
payments and more accurately demonstrates the debt requirements facing the company.
Teslas operating lease obligations and capital lease obligations can be found in the following
table.

15

Operating Lease Obligations (thousands)
2013 2013
2014 2014
2015 2015
2016 2016
2017 2017
Capital Lease Obligations (thousands)
$5,646 $13,866
$14,298
$13,962
$19,967
$8,103
$5,199
$3,566
$923
$30

Finally, the earnings per share (EPS) have been negative for the past three years, but a
positive net income in the first quarter of 2013 can create hope for a positive value
soon. Despite the relatively poor EPS numbers the stock has sharply risen over the past
years. This could be a result of a financial turnaround with a net profit in the first quarter of
2013. However, the CEO has acknowledged that the stock is likely overvalued, which may
cause the value to decrease if positive net income is not maintained. Both the EPS value
and the stock price will likely continue to be very volatile due to the fact that Tesla is such a
young company with many factors contributing to its growth.

2012 2011 2010
-$3.70 -$2.52 -$4.22
EPS (Dilutive - NASDAQ)

16

Introduction to Financial Models and Assumptions

Tesla is a new, growth-oriented firm, which makes it challenging to make assumptions
about the direction of the firm for extended periods into the future. This volatility makes the
models difficult to construct, and the results taken from the models must acknowledge this
high uncertainty. For a more mature company, expectations can be set at steady growth
year after year, but for a growth company like Tesla there is the opportunity for enormous
growth as well as the risk of severe losses. For Tesla, there exists the possibility of over
100% sales growth year to year as was seen from 2011 to 2012, while at the same time its
operating loss almost doubled. Therefore, while these models can be useful, especially in
the short term where predictions may be more accurate, the results must be interpreted with
an understanding of the assumptions that were made. After the in-depth presentation of the
assumptions found below all relevant assumptions are again presented next to the models
in the following sections for quick reference.
Sales Growth Rate
Sales assumptions are based on revenue earned from Teslas primary business and largest
revenue driver, selling electric vehicles. Other sales, selling ZEC credits and licensing
technology, are volatile and an insignificant percent of sales, approximately .1%. The sales
growth rate in Q4 of 2013 was projected to be 20% in order to meet managements delivery goal
of 21,500 vehicles in 2013. This projected Q4 rate brings the cumulative 2013 forecasted sales
growth rate to 85%, representing a 17% decrease from 2012. Stronger sales of the Model S are
expected in 2014 with the introduction of more sales channels. The sales of the Model S will be
supported by the brands publicity from the introduction of the Model X at the end of 2014. The
sales growth rate in 2014 and 2015 are projected to be 90%. By Q2 2015 high volume
production of the Model X, meaning comparable to the Model S at that time, will be reached and
drive the years strong sales growth rate. Post 2015 Teslas sales growth rate is trended
downward in the following manner; 80% in 2016-2017, 70% in 2018, 60% in 2019, 50% in 2020
and 40% in 2021-2022.
Research and Development (R&D)
Research and development is not projected to increase in Q4 of 2013, in cumulative 2013 and
in 2014. This reflects the on going R&D of the Model X that is currently inflating Teslas R&D.
After 2014 we predict R&D will decrease for the duration of our models due to the significant
R&D expenditure in prior years. We therefore assume any update of the Roadster, Model S or
Model X will be undertaken with minimal additional R&D expenditure.
Effective Tax Rate
Teslas past tax rate is not an adequate predictor for its future tax rate. Income tax provisions
have represented about 0.1% of assets for the past three years. A combination of
government subsidies and net loss currently leaves Tesla with very little tax expense. The
projected effective tax rate for Tesla is most importantly tied to the date when Tesla will be
profitable. Although there is variability in precisely when profitability will occur our DCF model
predicts a positive operating profit in 2016. Before 2016 Tesla is predicted to be taxed at its
current effective rate of .2%. After 2016 we predicted Tesla will be taxed at an effective rate of
17

25%, which will account for some discounts due to the government tax breaks that are likely for
an electric car company. If, however, Tesla becomes a profitable company, they will likely
see this value rise, and must be prepared for the extra expense they will incur.
Selling General and Administrative (SG&A) Expenses Rate
The SG&A rate is predicted to increase nominally but decrease as a percentage of sales. Tesla
is currently out their retail channels, which will keep SG&A steady at 15% of sales through 2014.
After 2014 the rate trends inversely with increased sales.
Days in Inventory (DII)
CEO Elon Musk has consistently voiced his belief that Teslas only constraint is its production
capacity. With similar concerns we predict production capacity issues to swell the days in
inventory of Teslas vehicles during the 2014 release and shortly after the release of the Tesla
Model X. After the high volume production capacity for both the Model S and Model X has been
achieved late in 2015 we predict Teslas DII to smoothly trend downward until 2022.
Weighted Average Cost of Capital (WACC)
For this calculation, we used a risk free rate of 2.71% from the current yield on a standard 10-
Year Treasury bond. We assumed this because there is no significant, foreseeable change in
the Federal Reserves asset purchasing program, especially with Janet Yellens dovish
approach to monetary policy. Moreover, Japans rates have been close to zero since the 1990s,
indicating that rates can be low for long periods of time in large economies. Additionally, this
figure comes from the Treasury website, which already takes the Expectations Hypothesis
theory into account. The market risk premium we used in the CAPM equation (cost of equity)
was the difference between the average NASDAQ returns of the past 10 years, and the risk free
rate. The key driver of the cost of equity is the stocks beta, and we felt that the betas given for
Tesla from online sources (Google, Morningstar, and Yahoo Finance pages) were too low.
Therefore, we chose to use a comparable analysis for this aspect, yielding us a beta of 2.2; this
was calculated by looking at other car companies such as Ford, GM, and Daimler, for the
industrys returns are very contingent on the market. Our cost of debt is the issued coupon rate
of 2.5%. We also assumed a 0% tax rate, for it is negligible for the company currently with a net
loss. All things considered, we derived a WACC calculation of 10.27%, and we discounted all
projections at this rate.
Gross Profit Rate
Currently, Teslas gross profit margin is low due to a cost of good sold that represents about
75% of sales. This is one of the key problems that Tesla is currently facing, and it has
recognized the need to improve its efficiency. Tesla plans to produce future vehicles on a larger
scale than it did with both the Roadster and Model S, which should allow it to take advantage of
economies of scale and increase its gross profit margin. As Tesla becomes more experienced
with its production processes, we expect the cost of goods sold to decrease as a percentage of
sales and to see a higher gross profit rate from the company.
Interest Expense Weighted Rate
18

On a quarter by quarter basis, Teslas interest expense has fluctuated. With the full repayment
of the nearly $500 million Department of Energy loan, we expect that the total amount of interest
paid as a percentage of sales will decrease in the future. However, we anticipate that the
weighted rate of interest expense will continue - at least in the short term - to hover around its
current value of 2.5%
Other Income Percent of Sales
Other income percent of sales was fixed at .1% for the duration of our models. This was a
conservative assumption that Tesla will not be making money outside of their core competency.
Dividend Growth Rate
As a relatively new growth-oriented company, Tesla does not currently offer any dividends.
With the current state of cash flows for the company, we do not anticipate a dividend payout
anytime in the near future. Tesla would be best suited to invest any profits it makes in the
company in an attempt to continue to grow its market share.
Days Sales Outstanding (DSO)
Teslas Day Sales Outstanding has hovered around 20 for the past three years. We anticipate
this number to rise with the increase in production and sales of cars. The goal of the company
to produce the Model S and Model X more efficiently and at a greater scale than the Roadster
will likely increase its overall sales. The current limiting factor for the company is not sales
demand, but rather supply due to lackluster production efficiency. If Tesla is able to produce its
new cars with improved efficiency there is a great chance the firms DSO will rise.
Average Payment Period
Tesla has a very short payment period. This means that Tesla pays its obligations quickly. We
do not expect this to change much because even in a period of high growth and uncertainty, like
it is in currently, the company has shown that it is able to meet its obligations in a timely manner.
Long-Term Debt Due Following Year
In 2013, Tesla repaid the entirety of its Department of Energy government loan nine years early
through a combination of debt and equity financing of about one billion dollars. However, the
debt was offered as convertible debt and the equity was offered through an increase in number
of shares outstanding. While Tesla decreased its amount of long-term debt on the balance
sheet, it increased its liabilities and shareholder equity in an effort to raise the necessary funds;
to be more specific, they issued $660 Million of debt in May of this year. This is the only long-
term debt outstanding currently. With the funds that Tesla has already acquired, there is no
expectation of another huge capital influx from a debt offering in the near future. Tesla already
has a huge financial leverage multiplier, and should work to bring that into a more sustainable
range while working to generate a positive net income.
Diluted Shares Outstanding
Tesla currently has 139 Million fully diluted shares outstanding, according to Bloomberg
Businessweek as of 11/5/2013. This is more than the amount of shares in the market valuation
mostly because of the stock based compensation of upper management. We expect new
19

issuances of shares over time, however it is very difficult to forecast exactly when because
Tesla requires funding somewhat sporadically.
CAPEX Growth
We expect Capital Expenditures to grow at a modest, yet consistent rate over time. This rate
hovers around 3% for the 10-year forecast. We believe this is due to Teslas expected increase
in production, for one of the main goals of the company is to match demand. Tesla must spend
money on production facilities if the company wants to increase efficiency and produce more
cars.
Terminal Growth Rate
The terminal growth rate was selected to be 4%, which conservatively accounts for expected
cash flow growth in the long-term future.
Negative Yield
According to Bloomberg, Tesla currently has a negative yield for their sole note issuance. This
is most likely due to the incredibly high premium the notes are currently trading for, and from
this information, it is clear that creditors are confident in the companys financing practices.

20

Discounted Cash Flow Model Conclusions

The DCF model (Appendix) for Tesla was carried ten years into the future, and for a high growth
company there is a degree of uncertainty in the results. However, on December 10
th
2013,
when this analysis was conducted, the result was an equity value per share of $129.98, near the
current share price of $142.19. However, since the stock price was slightly higher than the
equity value per share, it was concluded that the stock is slightly over-valued based on the DCF
assumptions. This falls into line with the current trends of the stock. Recently, the stock has
seen a small decline that would indicate that it is trending toward a more fair value. Based on
this model, the stock price can be expected to continue to fall.

Additionally, our analysis projected a compound annual sales growth of 67% over the ten year
period. This is an attainable goal for Tesla, which has seen huge sales growth in past years,
and with the planned introduction of two new cars in the near future these numbers are
definitely attainable. Additionally, this model expects an 80% increase in operating income over
the period. This is if Tesla is able to improve its efficiency in production, something it has
recognized as a weakness. If Tesla continues to produce more cars with a decreasing cost of
goods sold, it is possible for the company to increase its gross profit and operating profits. In
our model, Tesla achieves positive operating income in 2016, which is important because
operating income represents the core activities of the business. This represents the breakeven
point from which Tesla will begin to generate positive profits. From that point on, Tesla will
continue to grow its operating income, which will in turn create positive net income and a
positive return on equity. This will also be an important date for Tesla, and it can be better
compared to the other more stable car manufacturers from that point forwards.

In our projected base case Tesla achieves positive cash flows in 2019. This signifies that the
company will have a healthy cash flow and smooth operational efficiency. This is still a long
ways into the future based on the model, but something Tesla has recognized as a goal.
Positive total cash flows is a goal that Tesla should aim to achieve as quickly as possible, as it
signifies that the company can expect more stable growth. However, it should be noted that this
model predicts that Tesla will have further negative cash flows for the next few years before it
begins to head toward positive cash flows. Due to the importance of this breakeven point,
multiple plausible scenarios were explored with the goal of shortening the duration before this
point, which allowed us to analyze where Tesla should strive for continued improvement. The
key weakness of Tesla in the past has been gross margin, which has been in the neighborhood
of 10%. However, based on the past few quarters and a stated devotion to cutting costs by
Tesla, the gross margin is expected to rise. Based on the DCF model, breakeven for
operational profits will come in 2016, but the company will not see positive cash flows until 2019.

21

Earnings Multiple Model/External Funds Needed Conclusion

From the earnings multiple forecasting analysis (Appendix), the first conclusion to note is the
predicted negative stock price. This is because that value is based on the net income, which
has been negative for Tesla over the past years. For Tesla, this process is not the best way to
predict the worth of the company because despite its losses, there are still high future
expectations for the firm and it has seen soaring stock prices over the past year. In addition to
running this model for a year to year scenario, we chose to perform a quarter to quarter analysis.
Since a high-growth company like Tesla is very dynamic, many aspects of the financial
statements can change quickly. During the course of 2013, Tesla repaid in full its Department
of Energy loan, and raised almost one billion dollars in new capital, data that will not be seen on
a 10-K until next Mays report, but can be seen in the past few 10-Q reports. For example, five
days before the debt issuance in May, CEO Elon Musk expressed that he was hesitant to
undertake additional financing for the company. This quarterly analysis allowed us to predict the
fourth quarter of 2013 based on the two most previous quarters as well as for the year 2013
based on the past two years. While this analysis does not provide a very meaningful estimation
of a projected market price, it is useful in estimating future financial statement values as well as
future ratios. By adjusting some of our assumptions, we can see which areas Tesla should
focus on most in order to achieve their goals, which primarily include reaching a positive net
income.

Another conclusion from these earnings multiple analyses are the external funds needed based
on the predictions of the 2013 balance sheets. For the annual analysis this amount was
$430,000 and for the quarterly analysis was $442,000. This indicates that Tesla is in need of
additional funds in order to create the growth based on the assumptions of the model. These
are large amounts of capital, which is understandable for a company in the growth phase of
development. Capital is a necessary step for Tesla, and the company has been successful in
raising funds in the past. While these amounts of funds needed are significant, they will likely
go directly into improving the existing weaknesses in the firm. With this money, Tesla should
work on its production inefficiencies, which represent a deficiency in the continuing operations of
the firm. This fundraising can also help Tesla attain its breakeven point sooner.

22

Economic Value Added

Before delving into the quantitative analysis of Teslas EVA, it is pertinent to describe the
calculations limitations. While in some instances, EVA can be a good measure of a companys
health, in Teslas case it is not. To quote a Boston Consulting Groups
2
perspective on the
subject, three growth antithetical incentives the measure may elicit are: one, EVA is biased
against new assets by discouraging the purchase of new assets for growth. Management may
find itself in a position, if they are attempting to maximize EVA, where they pass on growth
oriented projects to keep the capital charge low. In Teslas case, this cannot happen or else a
lack of market share will hinder the companys goals of becoming the premier electric vehicle.
Two, the measure may furthermore motivate management to milk the business, which means
liquidating assets at a faster rate than earnings growth figures. The cost of capital will therefore
be lower, but it leaves the company with somewhat of a stagnant approach to operations. Tesla
is clearly a high-growth oriented company, and selling off assets in this critical stage would be
devastating to its growth. And three, EVA is biased in favor of large, low-return businesses.
This can occur by rewarding small, incremental improvements instead of fruitful, but delayed
income streams. In other words, EVA can be a valuable measure of a mature, stable company,
but this is not so for a company that is attempting to reconfigure the conventional approach to
automobile transportation. However, both the quarter and annual analysis yielded benefits to
our analysis of the company, such as a positive ROIC (from the R&D adjustment).
Annually

(Thousands) 2011 2012
EVA
$(199,955.00)
(348,341.00) $
ROIC 20.63% 36.31%
EVA Momentum 35.91%

From 2011 to 2012 the EVA Momentum was calculated to be -35.90%. This is a concerning
trend because it represents a substantial decrease in economic value added of the
firm. However, the main driver of this value is the more negative EVA in 2012 than in
2011. This was due primarily to the more negative NOPAT in 2012 than in 2011, which shows
that Tesla is spending a lot more in an effort to grow the company. Since Tesla is still in its
growth stage, the large increases in both revenues and expenses is a positive sign of
growth. However, it further reinforces the need for Tesla to improve its efficiency. If Tesla is
able to increase its sales at a greater rate than its cost of goods sold, it should be able to
improve its NOPAT and therefore its EVA and EVA momentum. Once Tesla is able to generate
a consistently positive NOPAT, the EVA calculations will begin to be more telling of the
companys strengths and weaknesses. Another driver of EVA was invested capital. In both
2012 and 2011 Tesla had a large Department of Energy loan, which represented a large part of
its debt. However, it paid off that loan in 2013, which will have a significant impact on the 2013
EVA and next years EVA Momentum. Finally, the WACC for both 2011 and 2012 was over
14%, whereas the WACC we calculated based on the most recent quarterly data was just over
10%. This will also improve Teslas EVA moving forward.

2
0lsen, Eiic. "Economic value Auu." '(! *+,-.+/0"1+-. Boston Consulting uioup, n.u. Web. 1u Bec. 2u1S.
<https:www.bcgpeispectives.comcontentaiticlesstiategy_business_unit_stiategy_economic_value_auueu>.
23

Teslas return on invested capital also went from about -20% to about -35%. ROIC is defined as
NOPAT divided by invested capital. The primary change from 2011 to 2012 came in the form of
a much more negative NOPAT in 2012. This was driven by the larger scale of operations in
2012 and the continued lack of production efficiency that allowed operational costs to continue
to grow. In order to improve ROIC Tesla first needs to generate a positive NOPAT, which can
be achieved by improving efficiencies and cutting operational costs.

Quarterly

(Thousands) Q3 2012 Q3 2013
EVA $(450,406.91) (1,839,192.58) $
ROIC 0.09% -1.56%
EVA Momentum -2771.81%

From the first period (Q-4 2011 Q-3 2012) to the second (Q-4 2012 Q-3 2013), the EVA
Momentum was calculated to be -2771%. This is a concerning trend because it represents a
substantial decrease in economic value added of the firm. However, the main driver of this is
the substantial increase in the stock price (from around $25 to $140) within the second
period. This is a good sign from an investors perspective since it is an indication that Wall
Street is incredibly optimistic about the companys outlook. But, inherent in the calculation, this
dramatic increase in the market capitalization reduces the EVA figure significantly.

Teslas return on invested capital also went from -1.56% to 0.09%. While this is a small change,
the major takeaway is that ROIC in the most recent period is positive, showing that the company
is profitable when adjusted for substantial R&D and operating lease costs. Looking to the future,
it is a sign of good things to come.

24

2013 News Highlights for Tesla Motors
Date Headline Results & Conclusions
April 2, 2013 Tesla Unveils Revolutionary
New Finance Product -
Tesla is guaranteeing the
resale value to give customers
absolute peace of mind about
the value of the asset they are
purchasing
May 22, 2013 Tesla Repays Its Government
Loan 9 years Early
Tesla used the publicity
around the advance loan
repayment to reinforce that it
was first American automaker
to fully pay back the feds and
they have the staying power of
the established automotive
veterans
May 29, 2013 Super charger network Tesla owners can receive a
free high-speed charge at a
planned network of Tesla
owned stations across North
America and Europe. This
could simplify the consumer
behavior change required to
own a Tesla
August 19, 2013 Tesla Says Model S Crash
Test Score is Best NHTSA
Have Ever Recorded
Autoblog.com
Tesla continues to prove they
build the best vehicles, not just
the best EVs
October 3, 2013 Tesla car fire began in
battery after crash Fox
News
In the days after the first fire in
the state of Washington, Tesla
shares fell nearly 11%
October 28, 2013 Another Tesla Model S
Caught Fire after A Crash In
Mexico Jalopnik (auto blog)
The market response was
more muted, with Teslas
share price falling 6%
November 6, 2013 Tesla Shares Sink; Analysts
Stay Bullish -
Q3 results beat analysts
estimates but the outlook
spooked investors: Q4 will be
very similar to Q3. Share price
dropped about 10%
November 6, 2013 Third Tesla Model S Catches
fire after crash CNN Money
The stock continues to fall
another 9% on news of the
fire.
November 19, 2013 Tesla Welcomes Ferderal
Probe into Model S Fires -
SFGate
Tesla requested the National
Highway Traffic Safety
Administration conduct a full
investigation into the fires as
soon as possible to silence the
media coverage of Model S.
fires vs. gasoline fires
December 3, 2013 Tesla Rebounds After
Germany Clears Model S
Fires, But NHTSA
Investigation Still Looms
Forbes
We anticipate the Model S to
be cleared of the NHTSA
investigation before 2014. This
will add to consumer
confidence in Teslas
technology
25

The above summarizes the lime light of media coverage that Tesla has received in 2013.
Although this coverage is not always positive Tesla has conducted their public relations, often
spearheaded by their vocal CEO Elon Musk, with expert skill in order to assure investors that
Tesla is committed to achieving their mission. We believe this years media coverage has only
contributed to building notoriety for the Tesla brand, even though the coverage may have
contributed to financial turbulence. We anticipate this media turbulence to continue in the short
run but once again we are confident this coverage can be in the best long run financial interest
for Tesla Motors if they continue to succeed using their current public relations strategy.

26

Buy, Sell, Hold Recommendation

All things considered, we recommend a hold for investors. At the current price, we feel Tesla is
overvalued both from our DCF analysis and the companys current financial position with
respect to earnings. While Tesla may grow substantially in the long-run, we believe the price will
deflate the P/E ratio to a more reasonable level before rising again as it becomes more well-
established. We look forward to seeing what happens to the companys valuation when the Q-4
2013 earnings call occurs.

27

Appendix
Consolidated Balance Sheet
(thousands)
Current Assets:
Cash and cash equivalents 201.89 $ 18.1% 255.27 $ 35.8% 99.56 $ 25.8%
Short-term marketable securities - $ 0.0% 25.06 $ 3.5% - $ 0.0%
Restricted Cash 19.09 $ 1.7% 23.48 $ 3.3% 73.60 $ 19.1%
Receivables, net 26.84 $ 2.4% 9.54 $ 1.3% 6.71 $ 1.7%
Inventories 268.50 $ 24.1% 50.08 $ 7.0% 45.18 $ 11.7%
Prepaid expenses and other 8.44 $ 0.8% 9.41 $ 1.3% 10.84 $ 2.8%
Total Current Assets 524.77 $ 47.1% 372.84 $ 52.3% 235.89 $ 61.1%
Long-term Assets:
Operating Lease Vehicles, net 10.07 $ 0.9% 11.76 $ 1.6% 7.96 $ 2.1%
PP&E, net 552.23 $ 49.6% 298.41 $ 41.8% 114.64 $ 29.7%
Restricted Cash 5.16 $ 0.5% 8.07 $ 1.1% 4.87 $ 1.3%
Other Assets 21.96 $ 2.0% 22.37 $ 3.1% 22.73 $ 5.9%
Total assets 1,114.19 $ 100.0% 713.45 $ 100.0% 386.08 $ 100.0%
Current Liabilities:
Accounts Payable 303.38 $ 27.2% 56.14 $ 7.9% 28.95 $ 7.5%
Accrued Liabilities 39.80 $ 3.6% 32.11 $ 4.5% 20.95 $ 5.4%
Deferred Revenue 1.91 $ 0.2% 2.35 $ 0.3% 4.64 $ 1.2%
Capital Lease Obligations, current portion 4.37 $ 0.4% 1.07 $ 0.1% 0.28 $ 0.1%
Reservation payments 138.82 $ 12.5% 91.76 $ 12.9% 30.76 $ 8.0%
Long-term debt, current portion 50.84 $ 4.6% 7.92 $ 1.1% - $ 0.0%
Total current liabilities 539.11 $ 48.4% 191.34 $ 26.8% 85.57 $ 22.2%
Long-term Liabilities:
Common stock warrant liability 10.69 $ 1.0% 8.84 $ 1.2% 6.09 $ 1.6%
Capital Lease Obligations, less current 9.97 $ 0.9% 2.83 $ 0.4% 0.50 $ 0.1%
Deferred revenue, less current 3.06 $ 0.3% 3.15 $ 0.4% 2.78 $ 0.7%
Long-term debt, less current 401.50 $ 36.0% 268.34 $ 37.6% 71.83 $ 18.6%
Other long-term liabilities 25.17 $ 2.3% 14.92 $ 2.1% 12.27 $ 3.2%
Total liabilities 989.49 $ 88.8% 489.40 $ 68.6% 179.03 $ 46.4%
Shareholders' Equity:
Common stock 0.12 $ 0.0% 0.10 $ 0.0% 0.10 $ 0.0%
Additional paid-in capital 1,190.19 $ 106.8% 893.34 $ 125.2% 621.94 $ 161.1%
Accumulated other comprehensive loss - $ 0.0% (0.00) $ 0.0% - $ 0.0%
Accumulated Deficit (1,065.61) $ -95.6% (669.39) $ -93.8% (414.98) $ -107.5%
Total shareholder's equity 124.70 $ 11.2% 224.05 $ 31.4% 207.05 $ 53.6%
Total liabilities and shareholder's equity 1,114.19 $ 100.0% 713.45 $ 100.0% 386.08 $ 100.0%
2 0 1 0 2 0 1 1 2 0 1 2
Consolidated Balance Sheet
% total assets % total assets % total assets

Consolidated Income Statement
thousands (except EPS)
Amount %sales %change Amount %sales %change Amount %sales
Total Revenues 413.26 $ 100.00% 102.34% 204.24 $ 100.00% 74.95% 116.74 $ 100.00%
Less: Total Cost of Revenues 383.19 $ 92.72% 168.63% 142.65 $ 69.84% 65.84% 86.01 $ 73.68%
Gross Profit 30.07 $ 7.28% -51.19% 61.60 $ 30.16% 100.43% 30.73 $ 26.32%
Less: R&D Expense 273.98 $ 66.30% 31.10% 208.98 $ 102.32% 124.72% 93.00 $ 79.66%
Less: SGA 150.37 $ 36.39% 44.45% 104.10 $ 50.97% 23.09% 84.57 $ 72.44%
Operating Profit (394.28) $ -95.41% 56.78% (251.49) $ -123.13% 71.27% (146.84) $ -125.78%
less: interest expense 0.25 $ 0.06% 490.70% 0.04 $ 0.02% -95.67% 0.99 $ 0.85%
other income 0.29 $ 0.07% 12.94% 0.26 $ 0.12% -1.16% 0.26 $ 0.22%
less: other expenses 1.83 $ 0.44% -30.91% 2.65 $ 1.30% -59.81% 6.58 $ 5.64%
Income before Taxes (396.08) $ -95.84% 55.98% (253.92) $ -124.32% 64.72% (154.16) $ -132.05%
Less: income tax provision 0.14 $ 0.03% -72.19% 0.49 $ 0.24% 182.66% 0.17 $ 0.15%
Net Income (396.21) $ -95.88% 55.74% (254.41) $ -124.56% 64.85% (154.33) $ -132.19%
EPS-Basic & Diluted (3.69) $ 0.00% 45.85% (2.53) $ 0.00% -16.78% (3.04) $ 0.00%
Cash Flows from Operating Activities (266.08) $ -64.39% 107.82% (128.03) $ -62.69% 0.17% (127.82) $ -109.48%
2 0 1 2 2 0 1 1 2 0 1 0
Income Statements as a Percent of Sales and Changes from Prior Year

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