Canadian Solar Reports 2Q10 Financial Results

ONTARIO, Canada, Sept. 2 /PRNewswire-Asia-FirstCall/ -- Canadian Solar Inc. (the "Company", "we" or "Canadian Solar") (Nasdaq: CSIQ), one of the world's largest solar companies, today announced its financial results for the second quarter ended June 30, 2010 and its outlook for the third quarter and full year 2010.

Net revenues for the second quarter of 2010 were $328.7 million, compared to net revenues of $336.9 million for the first quarter of 2010 and net revenues of $114.2 million for the second quarter of 2009.

Net income for the second quarter of 2010 was $3.2 million, or $0.07 per diluted share, compared to a net income for the first quarter of 2010 of $1.5 million, or $0.03 per diluted share.

Shipments for the second quarter of 2010 were 181.2 MW, compared to shipments of 185.0 MW for the first quarter of 2010 and shipments of 48.2 MW for the second quarter of 2009. The Company's sales came from the key solar industry markets worldwide, with Europe continuing to be the Company's largest contributing geographic market.

Dr. Shawn Qu, Chairman and CEO remarked: "Demand and pricing continued to be strong for the quarter, a situation we expect to continue throughout 2010. Q2 shipments were above prior guidance. We reduced our purchase of third party solar cells in order to improve our gross margin, a practice we will continue in Q3 and Q4. The rapid expansion of our internal capacity made this strategy possible. We manufactured 110 MW of cells internally in Q2 and purchased the balance. We expect to increase our internal quarterly cell output to 127 MW in Q3 and 180 MW in Q4. We also continue to build on our brand reputation for technology innovation and excellence. Since March, we have been shipping several new products, including enhanced selective emitter modules and our New Edge modules. Our enhanced selective emitter cells significantly increase the unit power output of our solar modules, while the New Edge modules permit rapid and inexpensive rooftop installation of solar systems. These products have been well received by our customers and we expect that these products will help us gain market share and give us better pricing power going forward."

Arthur Chien, CFO commented: "This quarter's results included a $9.0 million net foreign exchange charge, which is slightly less than predicted. Currency hedging reduced the impact of foreign exchange losses by $21.6 million. Q2 general and administrative expenses included additional legal and additional auditing costs of approximately $4.8 million related to the SEC subpoena and the internal audit committee investigation."

                              Revenue by Geography

               2Q 2010      1Q 2010       2Q 2009       1H 2010    1H 2009
    Region   US$M     %   US$M      %    US$M    %    US$M    %   US$M     %


    Europe   284.1  86.4% 298.2   88.5%  66.9  58.6% 582.3  87.5% 102.9  62.9%

    America   24.2   7.4%  19.1    5.7%  16.2  14.2%  43.3   6.5%  18.9  11.5%

    Asia and
     others   20.4   6.2%  19.6    5.8%  31.1  27.2%  40.0   6.0%  41.9  25.6%


    Total    328.7 100.0% 336.9  100.0% 114.2 100.0% 665.6 100.0% 163.7   100%

Business Outlook

The outlook below is based on the Company's current views with respect to operating and market conditions, and its current order book and customers' forecasts, all of which are subject to change. The risks to our outlook also include changes in foreign exchange rates, products and materials pricing and the project financing environment.

    -- 3Q10 Guidance:  For 3Q10, we expect shipments of approximately 190 MW
       to 200 MW, with a gross margin of approximately 14.5% to 15.5%.

    -- Full-year Guidance: For the full year 2010, we are reiterating our
       shipments guidance of approximately 700 MW to 800 MW.

    -- Increased internal cell production: We are on track to expand our
       annual internal cell manufacturing capacity to 800 MW by the end of
       3Q10.  We expect to complete our third cell building by early 2011, and
       ramp up our total internal cell production capacity to 1.3 GW, of which
       620 MW will be higher conversion efficiency cell capacity.

Dr. Shawn Qu, Chairman and CEO of Canadian Solar, remarked: "We are seeing improvements in many aspects of our operations. Our ingot and wafer costs have come down substantially and are now in line with leading wafer companies, and our cell conversion efficiencies using our proprietary enhanced selective emitter technology have exceeded 18%. We expect module pricing to remain relatively stable for the balance of the year. We expect that these factors, as well as our increased internal cell production, to support continued margin improvement through the fourth quarter. We also expect our increased internal cell production early next year to enable us to substantially improve our margin structure. Finally, we expect our solar system business to start generating meaningful income in Q4 and continue to grow in 2011.

Investor Conference Call / Webcast Details

The dial-in number for the live audio call, which will begin on Thursday, September 2, 2010 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. September 2, 2010 in Hong Kong), is +1-617-597-5363. The conference call passcode is 10260478. A live webcast of the conference call will also be available on Canadian Solar's website at http://www.canadiansolar.com .

A replay of the call will be available approximately two hours after the conclusion of the live call through 11:00 a.m. on September 9, 2010, U.S. Eastern Time (11:00 p.m., September 9, 2010 in Hong Kong) by telephone at +1-617-801-6888. To access the replay, use passcode 92103221. A webcast replay will also be available at http://www.canadiansolar.com .

About Canadian Solar Inc. (NASDAQ: CSIQ)

Canadian Solar Inc. is one of the world's largest solar companies. As a leading vertically integrated provider of ingot, wafer, solar cell, solar module and other solar applications, Canadian Solar designs, manufactures and delivers solar products and solar system solutions for on-grid and off-grid use to customers worldwide. With operations in North America, Europe and Asia, Canadian Solar provides premium quality, cost-effective and environmentally-friendly solar solutions to support global, sustainable development. For more information, visit http://www.canadiansolar.com .

Safe Harbor/Forward-Looking Statements:

Certain statements in this press release including statements regarding our expected revenue recognition, expected future shipment volumes, gross and net margins, manufacturing capacities, processing costs, and cell conversion efficiencies, are forward-looking statements that involve a number of risks and uncertainties that could cause actual results to differ materially. These statements are made under the "Safe Harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by such terms as "believes," "expects," "anticipates," "intends," "estimates," the negative of these terms, or other comparable terminology. Factors that could cause actual results to differ include the risks regarding the previously disclosed SEC and internal investigations as well as general business and economic conditions and the state of the solar industry; governmental support for the deployment of solar power; future available supplies of high-purity silicon; demand for end-use products by consumers and inventory levels of such products in the supply chain; changes in demand from significant customers; changes in demand from major markets such as Germany; changes in customer order patterns; changes in product mix; capacity utilization; level of competition; pricing pressure and declines in average selling prices; delays in new product introduction; continued success in technological innovations and delivery of products with the features customers demand; shortage in supply of materials or capacity requirements; availability of financing; exchange rate fluctuations; litigation and other risks as described in the Company's SEC filings, including its annual report on Form 20-F filed on August 19, 2010. Although the Company believes that the expectations reflected in the forward looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today's date, unless otherwise stated, and Canadian Solar undertakes no duty to update such information, except as required under applicable law.

                               Canadian Solar Inc.
            Unaudited Condensed Consolidated Statements of Operations
    (In Thousands of U.S. Dollars, Except Share And Per Share Data And Unless
                                Otherwise Stated)

             Item          2Q 2010    1Q 2010    2Q 2009    1H 2010    1H 2009

    Net revenues           328,675    336,931    114,176    665,606    163,641
    Cost of revenues       284,069    295,018     91,096    579,087    144,456
    Gross profit            44,606     41,913     23,080     86,519     19,185
    Selling expenses        11,941     10,698      3,229     22,639      5,110
    General and
     administrative
     expenses               13,957      8,174      6,410     22,131     10,928
    Research and
     development
     expenses                1,689      1,834        530      3,523      1,000
    Total operating
     expenses               27,587     20,706     10,169     48,293     17,038
    Income from
     operations             17,019     21,207     12,911     38,226      2,147
    Interest expenses       (6,446)    (3,862)    (1,913)   (10,308)    (4,167)
    Interest income          1,630      1,395      2,849      3,025      3,412
    Gain on change in
     fair value of
     derivatives            21,563        536     (1,050)    22,099     10,316
    Exchange (loss) gain   (30,529)   (16,438)     6,038    (46,967)     3,162
    Income before taxes      3,237      2,838     18,835      6,075     14,870
    Income tax expenses        120      1,454      1,163      1,574      1,983
    Net income               3,117      1,384     17,672      4,501     12,887
    Less: Net income
     (loss) attributable
     to Non-controlling
     interest                 (101)      (113)        --       (214)        --
    Net income
     attributable to CSI     3,218      1,497     17,672      4,715     12,887

    Basic earnings per
     share                   $0.08      $0.04      $0.50      $0.11      $0.36
    Basic weighted
     average
     outstanding
     shares             42,840,944 42,755,446 35,699,453 42,798,432 35,692,919
    Diluted earnings
     per share               $0.07      $0.03      $0.49      $0.11      $0.36
    Diluted weighted
     average
     outstanding
     shares             43,655,154 43,974,827 36,141,329 43,774,988 35,802,842



                               Canadian Solar Inc.
                 Unaudited Condensed Consolidated Balance Sheets
                          (In Thousands of U.S. Dollars)

                                                        June 30,  December 31,
                          Item                            2010        2009
    Assets
    Current assets
    Cash and cash equivalents                            255,197     160,111
    Restricted cash                                      269,608     179,390
    Accounts receivable, net of allowance for
     doubtful accounts                                   198,768     151,549
    Inventories                                          182,410     164,313
    Value added tax recoverable                           33,094      39,495
    Advances to suppliers                                 25,686      17,264
    Foreign currency derivative assets                     8,145           0
    Prepaid and other current assets                      41,070      41,865
    Current assets - subtotal                          1,013,978     753,987
    Property, plant and equipment, net                   247,439     217,136
    Intangible assets                                      1,993       1,824
    Advances to suppliers                                 33,858      35,210
    Prepaid land use right                                13,185      12,535
    Investments                                            7,069       7,101
    Deferred tax assets - non current                     13,484      10,910
    Other non-current assets                               5,820          --
    Total assets                                       1,336,826   1,038,703
    Liabilities and equity
    Current liabilities
    Short term borrowings                                548,891     251,702
    Accounts payable                                      83,642      92,271
    Notes payable                                        105,635     105,218
    Other payables                                        37,421      34,724
    Advances from customers                                8,562       3,644
    Amounts due to related parties                           262         261
    Foreign currency derivative liabilities                   --         523
    Provision for firm purchase commitment                14,084      13,823
    Other current liabilities                             14,562      12,775
    Current liabilities - subtotal                       813,059     514,941
    Accrued warranty costs                                23,321      16,900
    Liability for uncertain tax positions                 10,899      10,705
    Convertible notes                                        885         866
    Long term borrowings                                  13,253      29,290

    Total liabilities                                    861,417     572,702
    Common shares                                        501,084     500,322
    Additional paid in capital                           (59,317)    (61,269)
    Retained earnings                                     16,257      11,542
    Accumulated other comprehensive income                17,243      15,121
    Total Canadian Solar Inc. stockholders' equity       475,267     465,716
    Non-controlling interest                                 142         285
    Total equity                                         475,409     466,001
    Total liabilities and equity                       1,336,826   1,038,703

SOURCE Canadian Solar Inc.