tsla-10q_20180331.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-34756

Tesla, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

91-2197729

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3500 Deer Creek Road

Palo Alto, California

 

94304

(Address of principal executive offices)

 

(Zip Code)

(650) 681-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

 

 

 

Accelerated filer

 

 

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

(Do not check if a smaller reporting company)

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 30, 2018, there were 169,793,685 shares of the registrant’s common stock outstanding.

 

 

 

 


 

TESLA, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2018

INDEX

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

 

Consolidated Balance Sheets

 

4

 

 

Consolidated Statements of Operations

 

5

 

 

Consolidated Statements of Comprehensive Loss

 

6

 

 

Consolidated Statements of Cash Flows

 

7

 

 

Notes to Consolidated Financial Statements

 

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

33

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

 

Controls and Procedures

 

42

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

43

Item 1A.

 

Risk Factors

 

44

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 3.

 

Defaults Upon Senior Securities

 

59

Item 4.

 

Mine Safety Disclosures

 

59

Item 5.

 

Other Information

 

60

Item 6.

 

Exhibits

 

60

 

 

 

 

 

SIGNATURES

 

62

 

 

 


 

Forward-Looking Statements

The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management. The words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements.

 

 

 


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Tesla, Inc.

Consolidated Balance Sheets

(in thousands, except for par values)

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,665,673

 

 

$

3,367,914

 

Restricted cash

 

 

120,194

 

 

 

155,323

 

Accounts receivable, net

 

 

652,848

 

 

 

515,381

 

Inventory

 

 

2,565,826

 

 

 

2,263,537

 

Prepaid expenses and other current assets

 

 

379,379

 

 

 

268,365

 

Total current assets

 

 

6,383,920

 

 

 

6,570,520

 

Operating lease vehicles, net

 

 

2,315,124

 

 

 

4,116,604

 

Solar energy systems, leased and to be leased, net

 

 

6,346,374

 

 

 

6,347,490

 

Property, plant and equipment, net

 

 

10,519,226

 

 

 

10,027,522

 

Intangible assets, net

 

 

346,428

 

 

 

361,502

 

Goodwill

 

 

61,284

 

 

 

60,237

 

MyPower customer notes receivable, net of current portion

 

 

449,754

 

 

 

456,652

 

Restricted cash, net of current portion

 

 

433,841

 

 

 

441,722

 

Other assets

 

 

415,478

 

 

 

273,123

 

Total assets

 

$

27,271,429

 

 

$

28,655,372

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,603,498

 

 

$

2,390,250

 

Accrued liabilities and other

 

 

1,898,431

 

 

 

1,731,366

 

Deferred revenue

 

 

536,465

 

 

 

1,015,253

 

Resale value guarantees

 

 

629,112

 

 

 

787,333

 

Customer deposits

 

 

984,823

 

 

 

853,919

 

Current portion of long-term debt and capital leases

 

 

1,915,530

 

 

 

796,549

 

Current portion of solar bonds and promissory notes issued to related parties

 

 

82,500

 

 

 

100,000

 

Total current liabilities

 

 

8,650,359

 

 

 

7,674,670

 

Long-term debt and capital leases, net of current portion

 

 

8,761,070

 

 

 

9,415,700

 

Solar bonds issued to related parties, net of current portion

 

 

100

 

 

 

100

 

Convertible senior notes issued to related parties

 

 

2,556

 

 

 

2,519

 

Deferred revenue, net of current portion

 

 

818,250

 

 

 

1,177,799

 

Resale value guarantees, net of current portion

 

 

756,800

 

 

 

2,309,222

 

Other long-term liabilities

 

 

2,561,886

 

 

 

2,442,970

 

Total liabilities

 

 

21,551,021

 

 

 

23,022,980

 

Commitments and contingencies (Note 12)

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests in subsidiaries

 

 

405,835

 

 

 

397,734

 

Convertible senior notes (Note 10)

 

 

2

 

 

 

70

 

Equity

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock; $0.001 par value; 100,000 shares authorized;

   no shares issued and outstanding

 

 

 

 

 

 

Common stock; $0.001 par value; 2,000,000 shares authorized; 169,750 and 168,797

   shares issued and outstanding as of March 31, 2018 and December 31, 2017,

   respectively

 

 

170

 

 

 

169

 

Additional paid-in capital

 

 

9,418,896

 

 

 

9,178,024

 

Accumulated other comprehensive gain

 

 

82,921

 

 

 

33,348

 

Accumulated deficit

 

 

(5,051,292

)

 

 

(4,974,299

)

Total stockholders' equity

 

 

4,450,695

 

 

 

4,237,242

 

Noncontrolling interests in subsidiaries

 

 

863,876

 

 

 

997,346

 

Total liabilities and equity

 

$

27,271,429

 

 

$

28,655,372

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

4


 

Tesla, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Revenues

 

 

 

 

 

 

 

 

Automotive sales

 

$

2,561,881

 

 

$

2,035,060

 

Automotive leasing

 

 

173,436

 

 

 

254,540

 

Total automotive revenues

 

 

2,735,317

 

 

 

2,289,600

 

Energy generation and storage

 

 

410,022

 

 

 

213,944

 

Services and other

 

 

263,412

 

 

 

192,726

 

Total revenues

 

 

3,408,751

 

 

 

2,696,270

 

Cost of revenues

 

 

 

 

 

 

 

 

Automotive sales

 

 

2,091,397

 

 

 

1,496,649

 

Automotive leasing

 

 

104,496

 

 

 

166,026

 

Total automotive cost of revenues

 

 

2,195,893

 

 

 

1,662,675

 

Energy generation and storage

 

 

375,363

 

 

 

151,773

 

Services and other

 

 

380,969

 

 

 

213,876

 

Total cost of revenues

 

 

2,952,225

 

 

 

2,028,324

 

Gross profit

 

 

456,526

 

 

 

667,946

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

367,096

 

 

 

322,040

 

Selling, general and administrative

 

 

686,404

 

 

 

603,455

 

Total operating expenses

 

 

1,053,500

 

 

 

925,495

 

Loss from operations

 

 

(596,974

)

 

 

(257,549

)

Interest income

 

 

5,214

 

 

 

3,090

 

Interest expense

 

 

(149,546

)

 

 

(99,346

)

Other expense, net

 

 

(37,716

)

 

 

(18,098

)

Loss before income taxes

 

 

(779,022

)

 

 

(371,903

)

Provision for income taxes

 

 

5,605

 

 

 

25,278

 

Net loss

 

 

(784,627

)

 

 

(397,181

)

Net loss attributable to noncontrolling interests and

   redeemable noncontrolling interests in subsidiaries

 

 

(75,076

)

 

 

(66,904

)

Net loss attributable to common stockholders

 

$

(709,551

)

 

$

(330,277

)

Net loss per share of common stock attributable

   to common stockholders

 

 

 

 

 

 

 

 

Basic

 

$

(4.19

)

 

$

(2.04

)

Diluted

 

$

(4.19

)

 

$

(2.04

)

Weighted average shares used in computing net loss

   per share of common stock

 

 

 

 

 

 

 

 

Basic

 

 

169,146

 

 

 

162,129

 

Diluted

 

 

169,146

 

 

 

162,129

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

5


 

Tesla, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Net loss attributable to common stockholders

 

$

(709,551

)

 

$

(330,277

)

Unrealized gains (losses) on derivatives:

 

 

 

 

 

 

 

 

Reclassification adjustment for net losses

   into net loss

 

 

 

 

 

(5,570

)

Net unrealized loss on derivatives

 

 

 

 

 

(5,570

)

Foreign currency translation adjustment

 

 

49,573

 

 

 

8,541

 

Other comprehensive income

 

 

49,573

 

 

 

2,971

 

Comprehensive loss

 

$

(659,978

)

 

$

(327,306

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

6


 

Tesla, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(784,627

)

 

$

(397,181

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

416,233

 

 

 

376,602

 

Stock-based compensation

 

 

141,639

 

 

 

103,717

 

Amortization of debt discounts and issuance costs

 

 

39,345

 

 

 

31,747

 

Inventory write-downs

 

 

18,546

 

 

 

26,918

 

Loss on disposals of fixed assets

 

 

52,237

 

 

 

41,120

 

Foreign currency transaction losses

 

 

47,661

 

 

 

5,064

 

Loss related to SolarCity acquisition

 

 

-

 

 

 

11,571

 

Non-cash interest and other operating activities

 

 

(3,984

)

 

 

(6,589

)

Changes in operating assets and liabilities, net of effect of business combinations:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(169,142

)

 

 

91,541

 

Inventories

 

 

(322,081

)

 

 

(124,514

)

Operating lease vehicles

 

 

(97,196

)

 

 

(458,965

)

Prepaid expenses and other current assets

 

 

(50,001

)

 

 

(75,504

)

MyPower customer notes receivable and other assets

 

 

(57,583

)

 

 

8,006

 

Accounts payable and accrued liabilities

 

 

317,983

 

 

 

2,531

 

Deferred revenue

 

 

45,795

 

 

 

103,941

 

Customer deposits

 

 

67,359

 

 

 

(51,004

)

Resale value guarantee

 

 

-

 

 

 

184,579

 

Other long-term liabilities

 

 

(60,560

)

 

 

56,609

 

Net cash used in operating activities

 

 

(398,376

)

 

 

(69,811

)

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Purchases of property and equipment excluding capital leases, net of sales

 

 

(655,662

)

 

 

(552,624

)

Purchases of solar energy systems, leased and to be leased

 

 

(72,975

)

 

 

(219,948

)

Business combinations, net of cash acquired

 

 

-

 

 

 

(109,147

)

Net cash used in investing activities

 

 

(728,637

)

 

 

(881,719

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuances of common stock in public offerings

 

 

-

 

 

 

400,175

 

Proceeds from issuances of convertible and other debt

 

 

1,775,481

 

 

 

1,838,166

 

Repayments of convertible and other debt

 

 

(1,389,388

)

 

 

(690,945

)

Repayments of borrowings under Solar Bonds issued to related parties

 

 

(17,500

)

 

 

(90,000

)

Collateralized lease (repayments) borrowings

 

 

(87,092

)

 

 

186,355

 

Proceeds from exercises of stock options and other stock issuances

 

 

94,018

 

 

 

57,307

 

Principal payments on capital leases

 

 

(18,787

)

 

 

(18,303

)

Common stock and debt issuance costs

 

 

(2,913

)

 

 

(11,094

)

Purchases of convertible note hedges

 

 

-

 

 

 

(204,102

)

Proceeds from issuances of warrants

 

 

-

 

 

 

52,883

 

Proceeds from investments by noncontrolling interests in subsidiaries

 

 

73,704

 

 

 

142,003

 

Distributions paid to noncontrolling interests in subsidiaries

 

 

(52,942

)

 

 

(63,696

)

Payments for buy-outs of noncontrolling interests in subsidiaries

 

 

(2,921

)

 

 

-

 

Net cash provided by financing activities

 

 

371,660

 

 

 

1,598,749

 

Effect of exchange rate changes on cash and cash equivalents and restricted cash

 

 

10,102

 

 

 

11,643

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

 

(745,251

)

 

 

658,862

 

Cash and cash equivalents and restricted cash, beginning of period

 

 

3,964,959

 

 

 

3,766,900

 

Cash and cash equivalents and restricted cash, end of period

 

$

3,219,708

 

 

$

4,425,762

 

Supplemental Non-Cash Investing and Financing Activities

 

 

 

 

 

 

 

 

Acquisitions of property and equipment included in liabilities

 

$

286,975

 

 

$

654,322

 

Estimated fair value of facilities under build-to-suit leases

 

$

56,169

 

 

$

65,244

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 


7


 

Tesla, Inc.

Notes to Consolidated Financial Statements

(unaudited)

 

Note 1 – Overview

Tesla, Inc. (“Tesla”, the “Company”, “we”, “us” or “our”) was incorporated in the State of Delaware on July 1, 2003. We design, develop, manufacture and sell high-performance fully electric vehicles and design, manufacture, install and sell solar energy generation and energy storage products. Our Chief Executive Officer, as the chief operating decision maker (“CODM”), organizes the Company, manages resource allocations and measures performance among two operating and reportable segments: (i) automotive and (ii) energy generation and storage.

 

Note 2 – Summary of Significant Accounting Policies

Unaudited Interim Financial Statements

The consolidated balance sheet as of March 31, 2018, the consolidated statements of operations and the consolidated statements of comprehensive loss for the three months ended March 31, 2018 and 2017 and the consolidated statements of cash flows for the three months ended March 31, 2018 and 2017, as well as other information disclosed in the accompanying notes, are unaudited. The consolidated balance sheet as of December 31, 2017 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

The interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future years or interim periods.

Reclassifications

Certain prior period balances have been reclassified to conform to the current period presentation in the consolidated financial statements and the accompanying notes as a result of the adoption of the Accounting Standards Update (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash.

Revenue Recognition

Adoption of new accounting standards

ASU 2014-09, Revenue - Revenue from Contracts with Customers. On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method. As a policy election, the new revenue standard was applied only to contracts that were not substantially completed as of the date of adoption. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the January 1, 2018 opening balance of accumulated deficit. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

A majority of our automotive sales revenue is recognized when control transfers upon delivery to customers. For certain vehicle sales where revenue was previously deferred either as an in-substance operating lease, such as certain vehicle sales to customers or leasing partners with a resale value guarantee, we now recognize revenue when the vehicles are shipped as a sale with a right of return. As a result, the corresponding operating lease asset, deferred revenue, and resale value guarantee balances as of December 31, 2017, were reclassified to accumulated deficit as part of our adoption entry. Furthermore, the warranty liability related to such vehicles has been accrued as a result of the change from in-substance operating leases to vehicle sales. Prepayments on contracts that can be cancelled without significant penalties, such as vehicle maintenance plans, have been reclassified from deferred revenue to customer deposits. Refer to the Automotive Revenue and Automotive Leasing Revenue sections below for further discussion of the impact on various categories of vehicle sales.

8


 

Following the adoption of the new revenue standard, the revenue recognition for our other sales arrangements, including sales of solar energy systems, energy storage products, services, and sales of used vehicles, remained consistent with our historical revenue recognition policy. Under our lease pass-through fund arrangements, we do not have any further performance obligations and therefore reclassified all investment tax credit (“ITC”) deferred revenue as of December 31, 2017, to accumulated deficit as part of our adoption entry. The corresponding effects of the changes to lease pass-through fund arrangements are also reflected in our non-controlling interests in subsidiaries.

Accordingly, the cumulative effect of the changes made to our consolidated January 1, 2018 consolidated balance sheet for the adoption of the new revenue standard was as follows (in thousands):

 

 

 

Balances at

December 31, 2017

 

 

Adjustments from Adoption of New Revenue Standard

 

 

Balances at

January 1, 2018

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Inventory

 

$

2,263,537

 

 

$

(27,009

)

 

$

2,236,528

 

Prepaid expenses and other current assets

 

 

268,365

 

 

 

51,735

 

 

 

320,100

 

Operating lease vehicles, net

 

 

4,116,604

 

 

 

(1,808,932

)

 

 

2,307,672

 

Other assets

 

 

273,123

 

 

 

68,355

 

 

 

341,478

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued liabilities and other

 

 

1,731,366

 

 

 

74,487

 

 

 

1,805,853

 

Deferred revenue

 

 

1,015,253

 

 

 

(436,737

)

 

 

578,516

 

Resale value guarantees

 

 

787,333

 

 

 

(295,909

)

 

 

491,424

 

Customer deposits

 

 

853,919

 

 

 

56,081

 

 

 

910,000

 

Deferred revenue, net of current portion

 

 

1,177,799

 

 

 

(429,771

)

 

 

748,028

 

Resale value guarantees, net of current portion

 

 

2,309,222

 

 

 

(1,346,179

)

 

 

963,043

 

Other long-term liabilities

 

 

2,442,970

 

 

 

104,767

 

 

 

2,547,737

 

Redeemable noncontrolling interests

   in subsidiaries

 

 

397,734

 

 

 

8,101

 

 

 

405,835

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive gain

 

 

33,348

 

 

 

15,221

 

 

 

48,569

 

Accumulated deficit

 

 

(4,974,299

)

 

 

623,172

 

 

 

(4,351,127

)

Noncontrolling interests in subsidiaries

 

 

997,346

 

 

 

(89,084

)

 

 

908,262

 

 

 

9


 

In accordance with the new revenue standard requirements, the impact of adoption on our consolidated balance sheet was as follows (in thousands):

 

 

 

March 31, 2018

 

 

 

As Reported

 

 

Balances Without Adoption of New Revenue Standard

 

 

Effect of Change

Higher / (Lower)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Inventory

 

$

2,565,826

 

 

$

2,597,055

 

 

$

(31,229

)

Prepaid expenses and other current assets

 

 

379,379

 

 

 

325,367

 

 

 

54,012

 

Operating lease vehicles, net

 

 

2,315,124

 

 

 

4,254,727

 

 

 

(1,939,603

)

Other assets

 

 

415,478

 

 

 

340,390

 

 

 

75,088

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued liabilities and other

 

 

1,898,431

 

 

 

1,829,478

 

 

 

68,953

 

Deferred revenue

 

 

536,465

 

 

 

987,591

 

 

 

(451,126

)

Resale value guarantees

 

 

629,112

 

 

 

975,233

 

 

 

(346,121

)

Customer deposits

 

 

984,823

 

 

 

926,236

 

 

 

58,587

 

Deferred revenue, net of current portion

 

 

818,250

 

 

 

1,297,897

 

 

 

(479,647

)

Resale value guarantees, net of current portion

 

 

756,800

 

 

 

2,173,643

 

 

 

(1,416,843

)

Other long-term liabilities

 

 

2,561,886

 

 

 

2,446,724

 

 

 

115,162

 

Redeemable noncontrolling interests

   in subsidiaries

 

 

405,835

 

 

 

397,904

 

 

 

7,931

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive gain

 

 

82,921

 

 

 

52,150

 

 

 

30,771

 

Accumulated deficit

 

 

(5,051,292

)

 

 

(5,707,801

)

 

 

656,509

 

Noncontrolling interests in subsidiaries

 

 

863,876

 

 

 

949,784

 

 

 

(85,908

)

 

In accordance with the new revenue standard requirements, the impact of adoption on our consolidated statement of operations and consolidated statement of comprehensive loss was as follows (in thousands):

 

 

 

Three Months Ended March 31, 2018

 

 

 

As Reported

 

 

Balances Without Adoption of New Revenue Standard

 

 

Effect of Change

Higher / (Lower)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Automotive sales

 

$

2,561,881

 

 

$

2,262,843

 

 

$

299,038

 

Automotive leasing

 

 

173,436

 

 

 

338,375

 

 

 

(164,939

)

Energy generation and storage

 

 

410,022

 

 

 

413,465

 

 

 

(3,443

)

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

Automotive sales

 

 

2,091,397

 

 

 

1,875,272

 

 

 

216,125

 

Automotive leasing

 

 

104,496

 

 

 

225,581

 

 

 

(121,085

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

5,605

 

 

 

6,332

 

 

 

(727

)

Net loss

 

 

(784,627

)

 

 

(820,970

)

 

 

36,343

 

Net loss attributable to noncontrolling interests

   and redeemable noncontrolling interests in

   subsidiaries

 

 

(75,076

)

 

 

(78,082

)

 

 

3,006

 

Net loss attributable to common stockholders

 

 

(709,551

)

 

 

(742,888

)

 

 

33,337

 

Foreign currency translation adjustment

 

 

49,573

 

 

 

34,023

 

 

 

15,550

 

Comprehensive loss

 

 

(659,978

)

 

 

(708,865

)

 

 

48,887

 

 

In accordance with the new revenue standard requirements, the impact of adoption on our consolidated statement of cash flows is a decrease in collateralized lease borrowings of $125.0 million from a net financing cash inflow of $37.9 million to a net financing cash outflow of $87.1 million as presented with an offsetting increase to cash outflows from operations. Additionally, the adjustments to the consolidated balance sheet, consolidated statement of operations and consolidated statement of comprehensive loss identified above would have corresponding impacts within the operating section of the consolidated statement of cash flows.

10


 

Automotive Revenue

Automotive Sales without Resale Value Guarantee

Automotive revenue includes revenues related to deliveries of new vehicles, and specific other features and services that meet the definition of a performance obligation under the new revenue standard, including internet connectivity, access to our Supercharger network and future over-the-air software updates. We recognize revenue on automotive sales upon delivery to the customer, which is when the control of a vehicle transfers. Payments are typically received at the point control transfers or in accordance with payment terms customary to the business. Other features and services such as connectivity, Supercharger, and over-the-air software updates are provisioned upon control transfer of a vehicle and recognized over time on a straight-line basis as we have a stand-ready obligation to deliver such services to the customer. We recognize revenue related to these other features and services over the performance period, which is generally the expected ownership life of the vehicle or the eight-year life of the vehicle, except for internet connectivity, which is over the four-year period. Revenue related to Autopilot and full self-driving features is recognized when functionality is delivered to the customer. For our obligations related to automotive sales, we estimate standalone selling price by considering costs used to develop and deliver the service, third-party pricing of similar options and other information that may be available.

At the time of revenue recognition, we reduce the transaction price and record a reserve against revenue for estimated variable consideration related to future product returns. Such estimates are based on historical experience and are immaterial in all periods presented. In addition, any fees that are paid or payable by us to a customer’s lender when we arrange the financing are recognized as an offset against automotive sales revenue.

Costs to obtain a contract mainly relate to commissions paid to our sales personnel for the sale of vehicles. Commissions are not paid on other obligations such as connectivity, access to our Supercharger network, and over-the-air software updates. As our contract costs related to automotive sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred. We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories have transferred to the customer as an expense in cost of revenues. Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts.

Automotive Sales with Resale Value Guarantee

We offer resale value guarantees or similar buy-back terms to certain customers who purchase vehicles and who finance their vehicles through one of our specified commercial banking partners. We also offer resale value guarantees in connection with automobile sales to certain leasing partners. Currently, both programs are available only in certain international markets. Under these programs, we receive full payment for the vehicle sales price at the time of delivery and our counterparty has the option of selling their vehicle back to us during the guarantee period, which currently is generally at the end of the term of the applicable loan or financing program, for a pre-determined resale value.

With the exception of two programs which are discussed within the Automotive Leasing section, we now recognize revenue when control transfers upon delivery to customers in accordance with the new revenue standard as a sale with a right of return as we do not believe the customer has a significant economic incentive to exercise the resale value guarantee provided to them. The process to determine whether there is a significant economic incentive includes a comparison of a vehicle’s estimated market value at the time the option is exercisable with the guaranteed resale value to determine the customer’s economic incentive to exercise. The performance obligations and the pattern of recognizing automotive sales with resale value guarantees are consistent with automotive sales without resale value guarantees with the exception of our estimate for sales return reserve. Sales return reserves for automotive sales with resale value guarantees are estimated based on historical experience plus consideration for expected future market values. The two programs that are still being recorded as operating leases are discussed in further detail below in Vehicle Sales to Leasing Partners with a Resale Value Guarantee and a Buyback Option and Vehicle Sales to Customers with a Resale Value Guarantee where Exercise is Probable.

Prior to the adoption of the new revenue standard, all transactions with resale value guarantees were recorded as operating leases. The amount of sale proceeds equal to the resale value guarantee was deferred until the guarantee expired or was exercised. For certain transactions that were considered interest bearing collateralized borrowings as required under ASC 840, Leases, we also accrued interest expense based on our borrowing rate. The remaining sale proceeds were deferred and recognized on a straight-line basis over the stated guarantee period to automotive leasing revenue. The guarantee period expired at the earlier of the end of the guarantee period or the pay-off of the initial loan. We capitalized the cost of these vehicles on the consolidated balance sheet as operating lease vehicles, net, and depreciated their value, less estimated residual value, to cost of automotive leasing revenue over the same period.

11


 

In cases where our counterparty retained ownership of the vehicle at the end of the guarantee period, the resale value guarantee liability and any remaining deferred revenue balances related to the vehicle were settled to automotive leasing revenue, and the net book value of the leased vehicle was expensed to cost of automotive leasing revenue. If our counterparty returned the vehicle to us during the guarantee period, we purchased the vehicle from our counterparty in an amount equal to the resale value guarantee and settled any remaining deferred balances to automotive leasing revenue, and we reclassified the net book value of the vehicle on the consolidated balance sheet to used vehicle inventory.

Deferred revenue activity related to the access to our Supercharger network, internet connectivity, autopilot and over-the-air software updates on automotive sales with and without resale value guarantee consisted of the following (in thousands):

 

 

 

Three Months Ended March 31, 2018

 

Deferred revenue on automotive sales with and without resale value guarantee—

   beginning of period

 

$

475,919

 

Additions

 

 

70,227

 

Net changes in liability for pre-existing contracts

 

 

2,882

 

Revenue recognized

 

 

(21,611

)

Deferred revenue on automotive sales with and without resale value guarantee—

   end of period

 

$

527,417

 

Deferred revenue is equivalent to the total transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, as of March 31, 2018. Additionally, revenue recognized per the above table is materially consistent with what was included in deferred revenue at the beginning of the period. Of the total deferred revenue on automotive sales with and without resale value guarantees, we expect to recognize $201.6 million of revenue in the next 12 months. The remaining balance will be recognized over the performance period as discussed above in Automotive Sales without Resale Value Guarantee.

Automotive Regulatory Credits

California and certain other states have laws in place requiring vehicle manufacturers to ensure that a portion of the vehicles delivered for sale in that state during each model year are zero-emission vehicles. These laws and regulations provide that a manufacturer of zero-emission vehicles may earn regulatory credits (“ZEV credits”) and may sell excess credits to other manufacturers who apply such credits to comply with these regulatory requirements. Similar regulations exist at the federal level that require compliance related to greenhouse gas (“GHG”) emissions and also allow for the sale of excess credits by one manufacturer to other manufacturers. As a manufacturer solely of zero-emission vehicles, we have earned emission credits, such as ZEV and GHG credits, on our vehicles, and we expect to continue to earn these credits in the future. We enter into contractual agreements with third-parties to purchase our regulatory credits. Payments for regulatory credits are typically received at the point control transfers to the customer, or in accordance with payment terms customary to the business.

We recognize revenue on the sale of regulatory credits at the time control of the regulatory credits is transferred to the purchasing party as automotive revenue in the consolidated statement of operations. We had no deferred revenue related to sales of automotive regulatory credits as of March 31, 2018 or December 31, 2017.

Automotive Leasing Revenue

Automotive leasing revenue includes revenue recognized under lease accounting guidance for our direct leasing programs as well as the two programs with resale value guarantees which continue to qualify for operating lease treatment. Prior to the adoption of the new revenue standard, all programs with resale value guarantees were accounted for as operating leases.

Direct Vehicle Leasing Program

We offer vehicle leasing programs in certain locations in North America and Europe. Qualifying customers are permitted to lease a vehicle directly from Tesla for up to 48 months. Currently, the program is only offered to qualified customers in North America. At the end of the lease term, customers have the option of either returning the vehicle to us or purchasing it for a pre-determined residual value. We account for these leasing transactions as operating leases, and we recognize leasing revenues on a straight-line basis over the contractual term and record the depreciation of these vehicles to cost of automotive leasing revenue. As of March 31, 2018 and December 31, 2017, we had deferred $105.6 million and $96.6 million, respectively, of lease-related upfront payments which will be recognized on a straight-line basis over the contractual term of the individual leases. Lease revenues are recorded in automotive leasing revenue, and for the three months ended March 31, 2018 and 2017, we recognized $74.8 million and $46.9 million, respectively.

12


 

We capitalize shipping costs and initial direct costs such as the incremental cost of contract administration, referral fees and sales commissions from the origination of automotive lease agreements as an element of operating lease vehicles, net, and subsequently amortize these costs over the term of the related lease agreement. Our policy is to exclude taxes collected from a customer from the transaction price of automotive contracts.

Vehicle Sales to Leasing Partners with a Resale Value Guarantee and a Buyback Option

We offer buyback options in connection with automobile sales with resale value guarantees with certain leasing partner sales in the United States. These transactions entail a transfer of leases, which we have originated with an end-customer, to our leasing partner. As control of the vehicles has not been transferred in accordance with the new revenue standard, these transactions continue to be accounted for as interest bearing collateralized borrowings in accordance with ASC 840, Leases. We have not sold any vehicles under this program in the United States since the second half of 2017 and all current period activity relates to the exercise or cancellation of active transactions. Under this program, cash is received for the full price of the vehicle and the collateralized borrowing value is generally recorded within resale value guarantees and the customer upfront deposit is recorded within deferred revenue. We accrete the deferred revenue amount to automotive leasing revenue on a straight-line basis over the option period and accrue interest expense based on our borrowing rate. We capitalize vehicles under this program to operating lease vehicles, net, on the consolidated balance sheet, and we record depreciation from these vehicles to cost of automotive leasing revenue during the period the vehicle is under a lease arrangement. Cash received for these vehicles, net of revenue recognized during the period, is classified as collateralized lease (repayments) borrowings within cash flows from financing activities in the consolidated statement of cash flows.

At the end of the lease term, we settle our liability in cash by either purchasing the vehicle from the leasing partner for the buyback option amount or paying a shortfall to the option amount the leasing partner may realize on the sale of the vehicle. Any remaining balances within deferred revenue and resale value guarantee will be settled to automotive leasing revenue. In cases where the leasing partner retains ownership of the vehicle after the end of our option period, we expense the net value of the leased vehicle to cost of automotive leasing revenue. The maximum amount we could be required to pay under this program, should we decide to repurchase all vehicles, was $837.2 million as of March 31, 2018, including $504.0 million within a 12-month period. As of March 31, 2018, we had $1.0 billion of such borrowings recorded in resale value guarantees and $183.0 million recorded in deferred revenue liability, respectively. For the three months ended March 31, 2018, $82.5 million of leasing revenue related to this program was recognized.

On a quarterly basis, we assess the estimated market values of vehicles under our buyback options program to determine if we have sustained a loss on any of these contracts. As we accumulate more data related to the buyback values of our vehicles or as market conditions change, there may be material changes to their estimated values, although we have not experienced any material losses during any period to date.

Vehicle Sales to Customers with a Resale Value Guarantee where Exercise is Probable

For certain international programs where we have offered resale value guarantees to certain customers who purchased vehicles and where we expect the customer has a significant economic incentive to exercise the resale value guarantee provided to them, we continue to recognize these transactions as operating leases. The process to determine whether there is a significant economic incentive includes a comparison of a vehicle’s estimated market value at the time the option is exercisable with the guaranteed resale value to determine the customer’s economic incentive to exercise. We have not sold any vehicles under this program since the first half of 2017 and all current period activity relates to the exercise or cancellation of active transactions. The amount of sale proceeds equal to the resale value guarantee is deferred until the guarantee expires or is exercised. The remaining sale proceeds are deferred and recognized on a straight-line basis over the stated guarantee period to automotive leasing revenue. The guarantee period expires at the earlier of the end of the guarantee period or the pay-off of the initial loan. We capitalize the cost of these vehicles on the consolidated balance sheet as operating lease vehicles, net, and depreciate their value, less salvage value, to cost of automotive leasing revenue over the same period.

In cases where a customer retains ownership of a vehicle at the end of the guarantee period, the resale value guarantee liability and any remaining deferred revenue balances related to the vehicle are settled to automotive leasing revenue, and the net book value of the leased vehicle is expensed to cost of automotive leasing revenue. If a customer returns the vehicle to us during the guarantee period, we purchase the vehicle from the customer in an amount equal to the resale value guarantee and settle any remaining deferred balances to automotive leasing revenue, and we reclassify the net book value of the vehicle on the consolidated balance sheet to used vehicle inventory. As of March 31, 2018, $125.1 million of the guarantees were exercisable by customers within the next 12 months. For the three months ended March 31, 2018, $16.1 million of leasing revenue related to this program was recognized. 

 

13


 

Energy Generation and Storage Segment

Energy Generation and Storage Sales

Energy generation and storage revenues consists of the sale of solar energy and storage systems to residential, small commercial, and large commercial and utility grade customers. Sales of solar energy systems to residential and small scale commercial customers consists of the engineering, design, and installation of the system. Post installation, residential and small scale commercial customers receive a proprietary monitoring system that captures and displays historical energy generation data and consists of hardware located on site and software hosted by us. Residential and small scale commercial customers pay the full purchase price of the solar energy system up-front, which includes the monitoring system. Revenue for the design and installation obligation is recognized when control transfers, which is when we install a solar energy system and the system passes inspection by the utility or the authority having jurisdiction. Revenue for the monitoring service is recognized ratably as a stand-ready obligation over the warranty period of the solar energy system. Sales of energy storage systems to residential and small scale commercial customers consists of the installation of the energy storage system and revenue is recognized when control transfers, which is when the product has been delivered or, if we are performing installation, when installed and accepted by the customer. Payment for such storage systems are made upon invoice or in accordance with payment terms customary to the business.

For large commercial and utility grade solar energy and storage sales which consist of the engineering, design, and installation of the system, customers make milestone payments that are consistent with contract specific phases of a project. Revenue from such contracts is recognized over time using percentage of completion method based on cost incurred as a percentage of total estimated contract costs. Certain large scale commercial and utility grade solar energy and storage sales also include operations and maintenance service which are negotiated with the design and installation contracts and are thus considered to be a combined contract with the design and installation service. For certain large commercial and utility grade solar and storage systems where percentage of completion method does not apply, revenue is recognized when control transfers, which is when the product has been delivered to the customer for storage systems and when the project has received permission to operate from the utility for solar energy systems. Operations and maintenance service revenue is recognized ratably over the respective contract term. Customer payments for such services are usually paid annually or quarterly in advance.

In instances where there are multiple performance obligations in a single contract, we allocate the consideration to the various obligations in the contract based on the relative standalone selling price method. Standalone selling prices are estimated based on estimated costs plus margin or using market data for comparable products. Costs incurred on the sale of residential installations before the solar energy systems are completed are included as work in process within inventory in the consolidated balance sheets. However, any fees that are paid or payable by us to a solar loan lender would be recognized as an offset against revenue. Costs to obtain a contract relate mainly to commissions paid to our sales personnel related to the sale of solar energy and storage systems. As our contract costs related to energy generation and storage sales are typically fulfilled within one year, the costs to obtain a contract are expensed as incurred.

As part of our energy generation and storage contracts, we may provide the customer with performance guarantees that warrant that the underlying energy generation or storage system will meet or exceed the minimum contract energy generation or retention requirements. In certain instances, we may receive a bonus payment if the system performs above a specified level. Conversely, if an energy generation or storage system does not meet the performance guarantee requirements, we may be required to pay liquidated damages. Other forms of variable consideration related to our large commercial and utility grade energy generation and storage contracts include variable customer payments that will be made based on our energy market participation activities. Such guarantees and variable customer payments represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available. Such estimates are included in the transaction price only to the extent that it is probable a significant reversal of revenue will not occur.

We record as deferred revenue any amounts that are collected from customers related to fees charged for prepayments and remote monitoring service and operations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. As of March 31, 2018 and December 31, 2017, deferred revenue related to such customer payments amounted to $135.3 million and $124.0 million, respectively. From the deferred revenue balance as of December 31, 2017, revenue recognized during the three months ended March 31, 2018 was $15.4 million. We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for energy generation and storage sales with an original expected contract length of one year or less. As of March 31, 2018, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was $228.0 million. Of this amount, we expect to recognize $128.4 million in the next 12 months and the remaining over a period of 20 years.

14


 

Energy Generation and Storage Leasing

For revenue arrangements where we are the lessor under operating lease agreements for solar energy systems, including energy storage products, we record lease revenue from minimum lease payments, including upfront rebates and incentives earned from such systems, on a straight-line basis over the life of the lease term, assuming all other revenue recognition criteria have been met. For incentives that are earned based on the amount of electricity generated by the system, we record revenue as the amounts are earned. The difference between the payments received and the revenue recognized is recorded as deferred revenue on the consolidated balance sheet.

For solar energy systems where customers purchase electricity from us under power purchase agreements (“PPA”), we have determined that these agreements should be accounted for as operating leases pursuant to ASC 840. Revenue is recognized based on the amount of electricity delivered at rates specified under the contracts, assuming all other revenue recognition criteria are met.

We record as deferred revenue any amounts that are collected from customers, including lease prepayments, in excess of revenue recognized and operations and maintenance service, which is recognized as revenue ratably over the respective customer contract term. As of March 31, 2018 and December 31, 2017, deferred revenue related to such customer payments amounted to $221.2 million and $206.8 million, respectively. Deferred revenue also includes the portion of rebates and incentives received from utility companies and various local and state government agencies, which are recognized as revenue over the lease term. As of March 31, 2018 and December 31, 2017, deferred revenue from rebates and incentives amounted to $29.2 million and $27.2 million, respectively.

We capitalize initial direct costs from the origination of solar energy system leases or power purchase agreements, which include the incremental cost of contract administration, referral fees and sales commissions, as an element of solar energy systems, leased and to be leased, net, and subsequently amortize these costs over the term of the related lease or power purchase agreement.

Services and Other Revenue

Services and other revenue consists of repair and maintenance services, service plans, merchandise, sales of used Tesla vehicles, sales of electric vehicle components to other manufacturers and sales of non-Tesla vehicle trade-ins. There were no significant changes to the timing or amount of revenue recognition as a result of our adoption of the new revenue standard.

Revenues related to repair and maintenance services are recognized over time as services are provided and extended service plans are recognized over the performance period of the service contract as the obligation represents a stand-ready obligation to the customer. We sell used vehicles, services, service plans, vehicle components and merchandise separately and thus use standalone selling prices as the basis for revenue allocation to the extent that these items are sold in transactions with other performance obligations. Payment for used vehicles, services, and merchandise are typically received at the point when control transfers to the customer or in accordance with payment terms customary to the business. Payments received for prepaid plans are refundable upon customer cancellation of the related contracts and are included within customer deposits on the consolidated balance sheet. Deferred revenue related to services and other revenue was immaterial as of March 31, 2018 and December 31, 2017.

Revenue by source

The following table disaggregates our revenue by major source (in thousands):

 

 

 

Three Months Ended March 31, 2018

 

Automotive sales without resale value guarantee

 

$

2,182,514

 

Automotive sales with resale value guarantee

 

 

299,038

 

Automotive regulatory credits

 

 

80,329

 

Energy generation and storage sales

 

 

297,895

 

Services and other

 

 

263,412

 

Total revenues from sales and services

 

 

3,123,188

 

Automotive leasing

 

 

173,436

 

Energy generation and storage leasing

 

 

112,127

 

Total revenues

 

$

3,408,751

 

 

15


 

Income Taxes

There are transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. As of March 31, 2018 and December 31, 2017, the aggregate balances of our gross unrecognized tax benefits were $218.1 million and $198.7 million, respectively, of which $210.0 million and $191.0 million, respectively, would not give rise to changes in our effective tax rate since these tax benefits would increase a deferred tax asset that is currently fully offset by a valuation allowance.

 

Net Loss per Share of Common Stock Attributable to Common Stockholders

Basic net income (loss) per share of common stock attributable to common stockholders is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average shares of common stock outstanding for the period. Potentially dilutive shares, which are based on the weighted-average shares of common stock underlying outstanding stock-based awards, warrants and convertible senior notes using the treasury stock method or the if-converted method, as applicable, are included when calculating diluted net income (loss) per share of common stock attributable to common stockholders when their effect is dilutive. Since we expect to settle in cash the principal outstanding under the 0.25% Convertible Senior Notes due in 2019, the 1.25% Convertible Senior Notes due in 2021 and the 2.375% Convertible Senior Notes due in 2022, we use the treasury stock method when calculating their potential dilutive effect, if any. Furthermore, in connection with the offerings of our bond hedges, we entered into convertible note hedges (see Note 10, Convertible and Long-Term Debt Obligations). However, our convertible note hedges are not included when calculating potentially dilutive shares since their effect is always anti-dilutive.

The following table presents the potentially dilutive shares that were excluded from the computation of diluted net income (loss) per share of common stock attributable to common stockholders, because their effect was anti-dilutive:

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Stock-based awards

 

 

9,630,761

 

 

 

9,738,595

 

Convertible senior notes

 

 

1,527,584

 

 

 

2,370,788

 

Warrants

 

 

301,504

 

 

 

595,104

 

Restricted Cash and Deposits

We maintain certain cash balances restricted as to withdrawal or use. Our restricted cash is comprised primarily of cash as collateral for our sales to lease partners with a resale value guarantee, letters of credit, real estate leases, insurance policies, credit card borrowing facilities and certain operating leases. In addition, restricted cash includes cash received from certain fund investors that have not been released for use by us and cash held to service certain payments under various secured debt facilities. The following table totals cash and cash equivalents and restricted cash as reported on the consolidated balance sheets; the sums are presented on the consolidated statements of cash flows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2017

 

 

2016

 

Cash and cash equivalents

 

$

2,665,673

 

 

$

3,367,914

 

 

$

4,006,593

 

 

$

3,393,216

 

Restricted cash

 

 

120,194

 

 

 

155,323

 

 

 

88,946

 

 

 

105,519

 

Restricted cash, net of current portion

 

 

433,841

 

 

 

441,722

 

 

 

330,223

 

 

 

268,165

 

Total as presented in

   the consolidated statements of cash flows

 

$

3,219,708

 

 

$

3,964,959

 

 

$

4,425,762

 

 

$

3,766,900

 

Concentration of Risk

Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk consist of cash, cash equivalents, restricted cash, accounts receivable and interest rate swaps. Our cash balances are primarily invested in money market funds or on deposit at high credit quality financial institutions in the U.S. These deposits are typically in excess of insured limits. As of March 31, 2018, no entity represented 10% or more of our total accounts receivable balance. As of December 31, 2017, no entity represented 10% of our total accounts receivable balance. The risk of concentration for our interest rate swaps is mitigated by transacting with several highly-rated multinational banks.

16


 

Supply Risk

We are dependent on our suppliers, the majority of which are single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components from these suppliers, could have a material adverse effect on our business, prospects, financial condition and operating results.

 

Warranties

We provide a manufacturer’s warranty on all new and used vehicles, production powertrain components and systems and energy storage products we sell. In addition, we also provide a warranty on the installation and components of the solar energy systems we sell for periods typically between 10 to 30 years. We accrue a warranty reserve for the products sold by us, which includes our best estimate of the projected costs to repair or replace items under warranty. These estimates are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. These estimates are inherently uncertain given our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future. The warranty reserve does not include projected warranty costs associated with our vehicles subject to lease accounting and our solar energy systems under lease contracts or power purchase agreements, as the costs to repair these warranty claims are expensed as incurred. The portion of the warranty reserve expected to be incurred within the next 12 months is included within accrued liabilities and other while the remaining balance is included within other long-term liabilities on the consolidated balance sheet. Due to the adoption of the new revenue standard, automotive sales with resale value guarantees that were previously recorded within operating lease assets required a corresponding warranty accrual which is included in the table below. Warranty expense is recorded as a component of cost of revenues. Accrued warranty activity consisted of the following (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Accrued warranty—beginning of period

 

$

401,790

 

 

$

266,655

 

Warranty costs incurred

 

 

(44,681

)

 

 

(23,016

)

Net changes in liability for pre-existing warranties,

   including expirations and foreign exchange impact

 

 

501

 

 

 

(3,510

)

Additional warranty accrued from adoption of the new revenue standard

 

 

37,139

 

 

 

 

Provision for warranty

 

 

71,117

 

 

 

66,822

 

Accrued warranty—end of period

 

$

465,866

 

 

$

306,951

 

 

For the three months ended March 31, 2018 and 2017, warranty costs incurred for vehicles accounted for as operating leases or collateralized debt arrangements were $5.8 million and $6.1 million, respectively.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, to replace the existing revenue recognition criteria for contracts with customers. In August 2015, the FASB issued ASU No. 2015-14, Deferral of the Effective Date, to defer the effective date of ASU No. 2014-09 to interim and annual periods beginning after December 15, 2017. Subsequently, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations, ASU No. 2016-10, Identifying Performance Obligations and Licensing, ASU No. 2016-11, Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20, Technical Corrections and Improvements, to clarify and amend the guidance in ASU No. 2014-09. We adopted the ASUs on January 1, 2018 on a modified retrospective basis through a cumulative adjustment to accumulated deficit. The adoption of the ASUs changed the timing of revenue recognition to be at delivery for certain vehicle sales to customers or leasing partners with a resale value guarantee, which will therefore qualify to be accounted for as sales with a right of return as opposed to the prior accounting as operating leases or collateralized lease borrowings. Upon adoption of the ASUs, we recorded a decrease to our beginning accumulated deficit of $623.2 million including income tax effects, which were immaterial. Refer to the Revenue Recognition section above for details.

In February 2016, the FASB issued ASU No. 2016-02, Leases, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We currently expect to adopt the ASU on January 1, 2019. We will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. We intend to elect the available practical expedients upon adoption. Upon adoption, we expect the consolidated balance sheet to include a right of use

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asset and liability related to substantially all of our lease arrangements. Further, solar leases and PPAs that commence after January 1, 2019, where we are the lessor and are currently accounted for as leases will no longer meet the definition of a lease with the adoption of this ASU and will instead be accounted for in accordance with ASC 606. We are continuing to assess the impact of adopting the ASU on our financial position, results of operations and related disclosures and anticipate the effect on the consolidated financial statements to be material.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, to reduce the diversity in practice with respect to the classification of certain cash receipts and cash payments on the statement of cash flows. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is retrospective. We adopted the ASU on January 1, 2018, which did not have a material impact on the consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, to require the recognition of the income tax effects from an intra-entity transfer of an asset other than inventory. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is modified retrospective. We early adopted the ASU on January 1, 2017. Our adoption did not have a material impact on the consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires entities to present the aggregate changes in cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, the statement of cash flows now presents restricted cash and restricted cash equivalents as a part of the beginning and ending balances of cash and cash equivalents. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU was retrospective. We adopted the ASU on January 1, 2018, which resulted in restricted cash being combined with unrestricted cash reconciling beginning and ending balances. Refer to the Restricted Cash and Deposits section above for the reconciliation.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, to clarify the definition of a business with the objective of assisting entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is prospective. We adopted the ASU on January 1, 2018, which we anticipate will result in more transactions being accounted for as asset acquisitions rather than business acquisitions. Adoption of the guidance had no impact on the financial statements for the three month period ended March  31, 2018 as there were no acquisitions.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, to simplify the test for goodwill impairment by removing Step 2. An entity will, therefore, perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. The ASU is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Adoption of the ASU is prospective. We have not yet selected an adoption date, and the ASU currently is not expected to have a material impact on the consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Recognition of Nonfinancial Assets, to clarify the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets. The ASU is effective for interim and annual periods beginning after December 15, 2017. We adopted the ASU on January 1, 2018 on a modified retrospective basis through a cumulative adjustment to accumulated deficit. Upon adoption of the ASU, we recorded a decrease to our beginning accumulated deficit of $9.4 million.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting, to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU is effective for interim and annual periods beginning after December 15, 2017. Adoption of the ASU is prospective. We adopted the ASU on January 1, 2018, which did not have a material impact on the consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities, to simplify the application of current hedge accounting guidance. The ASU expands and refines hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Adoption of the ASU is generally modified retrospective. We are currently obtaining an understanding of the ASU and plan to adopt the ASU on January 1, 2019.

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In December 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings.

In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which allows us to record provisional amounts during a measurement period not to extend beyond one year form the enactment date. SAB 118 was codified by the FASB as part of ASU No. 2018-05, Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. As of March 31, 2018, we have not made any additional measurement period adjustments. Such adjustments may be necessary in future periods due to, among other things, the significant complexity of the Act and anticipated additional regulatory guidance that may be issued by the Internal Revenue Service (“IRS”), changes in analysis, interpretations and assumptions the Company has made and actions the Company may take as a result of the Act. We are continuing to gather information