Press release from PR Newswire
Solarfun Reports Third Quarter 2010 Results
Tuesday, November 09, 2010
Solarfun Reports Third Quarter 2010 Results05:35 EST Tuesday, November 09, 2010SHANGHAI, Nov. 9, 2010 /PRNewswire-FirstCall/ -- Solarfun Power Holdings Co., Ltd. ( "Solarfun" or the "Company") (Nasdaq: SOLF), a vertically integrated manufacturer of silicon ingots, wafers and photovoltaic (PV) cells and modules in China, today reported its unaudited financial results for the quarter ended September 30, 2010. The Company will host a conference call to discuss the results at 7:00 am Eastern Time (8:00 pm Shanghai Time) on November 9, 2010. A slide presentation with details of the results will also be available on the Company's website prior to the call.THIRD QUARTER 2010 HIGHLIGHTSTotal net revenues were RMB 2,185.7 million (US$326.7 million), an increase of 24.7% from 2Q10 and an increase of 121.5% from 3Q09. PV module shipments, including module processing services, reached 223.9 MW, an increase from 204.6 MW in 2Q10 and from 102.6 MW in 3Q09. Average selling price ("ASP"), excluding module processing services, increased 4.6% to RMB 11.72 per watt (US$1.75) from RMB 11.19 per watt in 2Q10, and decreased 15.5% compared with RMB 13.86 per watt in 3Q09. Gross profit increased 34.6% quarter-over-quarter to RMB 496.4 million (US$74.2 million) from RMB 368.8 million in 2Q10, and increased 142.8% from RMB 204.4 million in 3Q09. Gross margin increased to 22.7% compared with 21.0% in 2Q10, primarily due to the increase in ASP. Gross margin in 3Q09 was 20.7%.Operating income increased 45.5% quarter-over-quarter to RMB 391.8 million (US$58.6 million) from RMB 269.2 million in 2Q10, and increased 202.8% from RMB 129.4 million in 3Q09. Operating margin improved to 17.9% from 15.4% in 2Q10 and 13.1% in 3Q09.Net income attributable to shareholders on a non-GAAP basis(1) was RMB 273.7 million (US$40.9 million), an increase of 18.1% from RMB 231.7 million in 2Q10 and an increase of 301.0% from RMB 68.2 million in 3Q09.Net income per basic ADS on a non-GAAP basis was RMB 4.62 (US$0.69), an increase of 15.6% from RMB 4.00 in 2Q10 and an increase of 266.0% from RMB 1.26 in 3Q09. Net loss attributable to shareholders on a GAAP basis was RMB 25.2 million (US$3.8 million), compared with net income attributable to shareholders of RMB 272.8 million in 2Q10. The loss in 3Q10 was attributable a non-cash loss of RMB 279.2 million (US$41.7 million) from the change in fair value of the convertible feature of the Company's convertible bonds. There was a non-cash gain of RMB 57.8 million in 2Q10. As explained in prior quarters, the fluctuations in the fair value of the convertible feature of the Company's convertible bonds are primarily due to changes in the Company's ADS price, over which the Company has no direct control, and does not reflect the operating progress achieved by the Company. Net loss per basic ADS on a GAAP basis was RMB 0.43 (US$0.06), compared with net income per basic ADS on a GAAP basis of RMB 4.71 in 2Q10 and RMB 2.53 in 3Q09. Annualized ROE on a non-GAAP basis was 35.3% in 3Q10, compared with 35.9% in 2Q10 and 13.4% in 3Q09. Annualized ROE on a GAAP basis was negative 2.9% in 3Q10, compared with 35.2% in 2Q10 and 20.9% in 3Q09.Peter Xie, President of Solarfun, commented, "We are pleased with the results we achieved in the third quarter, particularly our record shipments and revenues as well as our increased gross margin, operating cost control and continued strong return on equity. In the first nine months of 2010, we have achieved non-GAAP earnings per basic ADS of US$1.70. We continue to see healthy market demand in the fourth quarter and beyond, and with increased scale and further vertical integration in 2011, we believe we will continue to be well-positioned for further profitable growth"STRATEGIC PARTNERSHIP WITH THE HANWHA GROUPAs previously announced, the strategic investment in Solarfun by the Hanwha Group, through Hanwha Solar Holdings Co., Ltd., was completed in September 2010. The net proceeds to Solarfun totaled approximately US$78 million, which Solarfun expects to use to fund its expansion plans and for general corporate purposes. Hanwha also purchased shares from Good Energies II LP and Yonghua Solar Power Investment Holding Ltd. in separate transactions. These transactions resulted in Hanwha holding a 49.99% interest in Solarfun . Three representatives of Hanwha were appointed to Solarfun's Board, which comprises four independent directors and three appointees from Hanwha. (For full details of these transactions and the biographies of new Board members, see Solarfun's press release issued on October 8, 2010 ).Solarfun believes that the strategic partnership with Hanwha provides a number of synergies and growth opportunities for Solarfun, including:Hanwha is a large and well-capitalized Korean conglomerate with global reach, brand and access to capital.Hanwha has identified the solar industry as its primary growth opportunity in the future and intends to establish Solarfun as its flagship vehicle to become a top three solar module producer globally by 2015.Hanwha intends to aggressively pursue upstream businesses such as polysilicon and downstream businesses such as solar project development, management and financing. Hanwha is well positioned to achieve these goals leveraging its existing chemical, engineering and construction as well as financial services provided by its affiliates.This strategic partnership provides a "virtual" vertically integrated solar business unit with brand, scale and low-cost production. This virtual integration strategy also spreads business risk and capital requirements across the two organizations.THIRD QUARTER 2010 RESULTSTotal net revenues were RMB 2,185.7 million (US$326.7 million), an increase of 24.7% from 2Q10 and an increase of 121.5% from 3Q09. The increase in net revenues in 3Q10 compared with 2Q10 was primarily due to higher shipments and higher ASP, reflecting strong end market demand. Revenue contribution from PV module processing services as a percentage of total net revenues was 6.9%, compared with 11.9% in 2Q10. PV module shipments, including module processing services, reached 223.9 MW, an increase from 204.6 MW in 2Q09 and from 102.6 MW in 3Q09. The geographic breakdown by shipment destination in terms of total module revenue in 3Q10 and 2Q10 was as follows:(Photo: http://photos.prnewswire.com/prnh/20101109/LA97768-a)(Photo: http://www.newscom.com/cgi-bin/prnh/20101109/LA97768-a)(Photo: http://photos.prnewswire.com/prnh/20101109/LA97768-b)(Photo: http://www.newscom.com/cgi-bin/prnh/20101109/LA97768-b)Module revenue attributable to shipments to Germany decreased to 53% in 3Q10 from 63% in 2Q10, while shipments to Italy, USA, Netherlands and Canada increased during 3Q10.Average selling price ("ASP"), excluding module processing services, increased 4.6% to RMB 11.72 per watt (US$1.75) from RMB 11.19 per watt in 2Q10. The increase in ASP in 2Q10 reflects the increase in module prices due to tight end market conditions as well as the appreciation of Euro against the RMB. Gross profit increased 34.6% quarter-over-quarter to RMB 496.4 million (US$74.2 million) from RMB 368.8 million in 2Q10, and increased 142.8% from RMB 204.4 million in 3Q09. Gross margin increased to 22.7% from 21.0% in 2Q10, primarily due to the increase in ASP.The blended COGS per watt, excluding module processing services, was US$1.35, representing a 3.2% increase from US$1.31 in 2Q10. The increase was primarily due to the increase in the cost of silicon materials, including polysilicon and externally sourced wafers and cells. The blended COGS takes into account the processing cost (silicon and non-silicon) using internally sourced wafers, purchase costs and additional processing costs of externally sourced wafers and cells, as well as freight costs.The production cost (including both silicon and non-silicon costs) using internal wafers was US$1.16 per watt, representing a 3.6% increase from US$1.12 per watt in 2Q10. The increase was primarily due to the increase in the cost of polysilicon. (Photo: http://photos.prnewswire.com/prnh/20101109/LA97768-c)(Photo: http://www.newscom.com/cgi-bin/prnh/20101109/LA97768-c)(Photo: http://photos.prnewswire.com/prnh/20101109/LA97768-d)(Photo: http://www.newscom.com/cgi-bin/prnh/20101109/LA97768-d)Operating profit was RMB 391.8 million (US$58.6 million), representing an increase of 45.5% from RMB 269.2 million in 2Q10 and an increase of 202.8% from RMB 129.4 million in 3Q09. Operating margin for 3Q10 was 17.9%, which compares to 15.4% in 2Q10 and 13.1% in 3Q09. Operating expenses as a percentage of total net revenues decreased to 4.8% from 5.7% in 2Q10 and 7.6% in 3Q09. Interest expense was RMB 39.9 million (US$6.0 million), compared with RMB 40.2 million in 2Q10 and RMB 40.8 million in 3Q09.The Company recorded a net foreign exchange loss of RMB 31.8 million (US$4.8 million), which combined a foreign exchange gain with losses from the change in fair value of foreign currency derivatives. The Company recorded a net foreign exchange gain of RMB 15.1 million in 2Q10 and a net foreign exchange loss of RMB 19.3 million in 3Q09. Loss from the change in fair value of the conversion feature of the Company's convertible bonds was RMB 279.2 million (US$41.7 million), compared with a gain of RMB 57.8 million in 2Q10 and a gain of RMB 82.4 million in 3Q09. The fluctuations, from the adoption of ASC 815-40 on January 1, 2010, were primarily due to changes in the Company's ADS price during the quarter. This line item has fluctuated, and is expected to continue to fluctuate quarter-to-quarter. The Company has no direct control over the fluctuations.On a non-GAAP basis, net income attributable to shareholders was RMB 273.7 million (US$40.9 million), compared with RMB 231.7 million in 2Q10 and RMB 68.2 million in 3Q09. Net income per basic ADS, on a non-GAAP basis, was RMB 4.62 (US$0.69) in 3Q10, compared with RMB 4.00 in 2Q10 and net loss per basic ADS of RMB 1.26 in 3Q09. On a GAAP basis, net loss attributable to shareholders was RMB 25.2 million (US$3.8 million), compared with net income attributable to shareholders of RMB 272.8 million in 2Q10 and RMB 136.6 million in 3Q09. Net loss per basic ADS was RMB 0.43 (US$0.06) in 3Q10, compared with net income per basic ADS of RMB 4.71 in 2Q10 and RMB 2.53 in 3Q09. On a non-GAAP basis, the Company had an annualized return on equity of 35.3% in 3Q10, compared with 35.9% in 2Q10 and 13.4% in 3Q09. On a GAAP basis, the Company had an annualized return on equity of negative 2.9% in 3Q10, compared with 35.2% in 2Q10 and 21.0% in 3Q09. FINANCIAL POSITION As of September 30, 2010, the Company had cash and cash equivalents of RMB 1,296.7 million (US$193.8 million) and net working capital of RMB 2,681.6 million (US$400.8 million), compared with cash and cash equivalents of RMB 885.4 million and net working capital of RMB 2,002.4 million as of June 30, 2010. Total short-term bank borrowings (including the current portion of long-term bank borrowings) were RMB 950.5 million (US$142.1 million), compared with RMB 706.0 million as of June 30, 2010. The increase in short-term borrowings was because the Company accessed short-term credit facilities to fund working capital needs. As of September 30, 2010, the Company had total long-term debt of RMB 1,128.4 million (US$168.7 million), which comprised both long-term bank borrowings and convertible notes payable. The Company's long-term bank borrowings are to be repaid in installments until their maturity in 2011 and 2012. Holders of the convertible notes have the option to require the Company to purchase the notes on January 15, 2015. Net cash from operating activities in 3Q10 was negative RMB 194.0 million (US$29.0 million), compared with RMB 417.5 million in 2Q10 and RMB 160.3 million in 3Q09. The decrease from 2Q10 was primarily due to the increase in accounts receivables as well as advances to suppliers. As of September 30, 2010, accounts receivable increased to RMB 1,289.9 million (US$192.8 million) from RMB 828.9 million as of June 30, 2010 and RMB 707.2 million as of September 30, 2009. Days sales outstanding decreased slightly to 46 days in 3Q10 from 48 days in 2Q10 and 56 days in 3Q09. As of September 30, 2010, inventories increased to RMB 689.6 million (US$103.1 million) from RMB 591.6 million as of June 30, 2010 but decreased from RMB 808.4 million as of September 30, 2009. Days inventory outstanding improved to 35 days in 3Q10 from 43 days in 2Q10 and from 88 days in 3Q09, primarily because of continued improvements in the Company's supply chain management. Capital expenditures were RMB 113.5 million (US$17.0 million) in 3Q10. In the first nine months of 2010, the total capital expenditures were RMB 386.8 million (US$57.8 million).CAPACITY EXPANSION Details on the Company's production capacities and expected production capacities are as follows: Capacity ramp-up plan Sept 30, 2009 June 30, 2010 Sept 30, 2010 Dec 31, 2010 (Estimated)2011(Projected)Ingot MW300360360360800Wire sawMW300400400400800CellMW3604005005001300Module MW5507009009001500The Company announced on October 12, 2010 that it plans to complete the following expansion by the third quarter of 2011:Cell capacity to increase from 550 MW to 820 MW; Wire saw capacity to increase from 400 MW to 572 MW; andIngot capacity in increase from 360 MW to 510 MW.The Company plans to further expand the production capacity as stated in above table. The ramp-up of the additional capacity will commence in the second quarter of 2011 and be completed by the end of the fourth quarter 2011.BUSINESS OUTLOOK The Company provides the following guidance based on current operating trends and market conditions. For 4Q10, the Company expects: Total module shipments to be 205 MW to 215 MW, of which about 25% to 30% will be for PV module processing services. ASP excluding PV module processing services to increase slightly from 3Q10, assuming that the average Euro/US dollar exchange rate stays at approximately 1.35 during 4Q10.For the full year 2010, the Company will also raise the shipment guidance from 750 MW to approximately 785 MW.For the fourth quarter of 2010, the Company expects a slight decline in module shipments compared with the previous quarter. This does not reflect the strength of market demand nor the Company's competitive position. The decline in the forecast module shipments is due to the following reasons:As previously announced, the Company will be converting some of its existing cell lines into high-efficiency cell capacity with the installation of selective emitter technology. This will cause some temporary loss of internal cell capacity in the fourth quarter.The Company has made a conscious business decision to balance customer needs with corporate profitability goals and will therefore reduce its purchase of externally sourced cells, which are more expensive than internally sourced cells. CONFERENCE CALL The Company will host a conference call to discuss the 3Q2010 results at 7:00 am Eastern Time (8:00 pm Shanghai Time) on November 9, 2010. Mr. Peter Xie, CEO and President, Mr. Gareth Kung, Chief Financial Officer, and Mr. Paul Combs, Vice President of Strategic Planning, will discuss the results and take questions following the prepared remarks. A representative of Hanwha Chemical Corporation will participate on the call and comment on the recent investment in Solarfun.The dial-in details for the live conference call are as follows: U.S. Toll Free Number: 1.800.638.4930International dial-in number: +1.617.614.3944China Toll Free Number (North): 10 800 152 1490China Toll Free Number (South): 10 800 130 0399Passcode: SOLF A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://investors.solarfun-power.com/. A replay of the webcast will be available for one month. A telephone replay of the call will be available for seven days after the conclusion of the conference call. The dial-in details for the replay are as follows: U.S. Toll Free Number: 1 888 286 8010 International dial-in number: +1 617 801 6888 Passcode: 36339192FOREIGN CURRENCY CONVERSION The conversion in this release of Renminbi into U.S. dollars is made solely for the convenience of the reader, and is based on the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board as of September 30, 2010, which was RMB 6.6905 to US$1.00. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on September 30, 2010 or at any other date. The percentages stated in this press release are calculated based on Renminbi amounts. USE OF NON-GAAP FINANCIAL MEASURES The Company has included in this press release certain non-GAAP financial measures, including certain line items presented on the basis that the accounting impact of the adoption of ASC 815-40 had not been recorded. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein. SAFE HARBOR STATEMENT This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include 4Q and full-year 2010 estimates for PV product shipments, ASPs, production capacities and other results of operations. Forward-looking statements involve inherent risks and uncertainties and actual results may differ materially from such estimates depending on future events and other changes in business climate and market conditions. Solarfun disclaims any obligation to update or correct any forward-looking statements. About Solarfun Solarfun Power Holdings Ltd. (NASDAQ: SOLF) is a leading manufacturer of solar PV cells and modules in China, focusing on delivering high quality and reliable products at competitive prices. Solarfun produces its monocrystalline and polycrystalline products at its internationally certified, vertically-integrated manufacturing facilities. Solarfun partners with third-party distributors, OEM manufacturers, and system integrators to sell its modules into large-scale utility, commercial and governmental, and residential/small commercial markets. Solarfun maintains a strong global presence with local staff throughout Europe, North America, and Asia. Solarfun embraces environmental responsibility and sustainability by taking an active role in the photovoltaic cycle voluntary recycling program. (1) All non-GAAP numbers used in this press release exclude the accounting impact from the adoption of ASC 815-40, which relates to the accounting treatment for the convertible bonds. Please refer to the attached financial statements for the reconciliation between the GAAP and non-GAAP financial results. For further information, please contact: Solarfun Power Holdings Co., Ltd. Investor Contact: Paul Combs V.P. Strategic Planning Building 1, 18th Floor 1199 Minsheng Road, Shanghai, PRC 200135 P. R. China Tel: 86-21-3852 1533 / Mobile: 86 138 1612 2768 E-mail: email@example.com Christensen Kathy Li Tel: +1 480 614 3036 E-mail: kli@ChristensenIR.com Tip Fleming Tel: +852 9212 0684 E-mail: tfleming@ChristensenIR.comSOLARFUN POWER HOLDINGS CO., LTD.CONSOLIDATED BALANCE SHEETS(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),except for number of shares and per share data)December 31June 30September 30September 302009201020102010(Unaudited)(Unaudited)(Unaudited)(Unaudited)RMBRMBRMBUSDASSETSCurrent assetsCash and cash equivalents645,720885,4421,296,734193,817Restricted cash60,539100,46263,8589,545Derivative contracts7,36066,5271,910285Accounts receivable, net587,488828,9391,289,932192,800Inventories, net783,973591,585689,566103,066Advance to suppliers, net979,762954,2201,246,336186,284Other current assets180,315225,340236,28535,318Deferred tax assets63,11560,40275,73411,320Amount due from related parties12,45896,220-- Total current assets3,320,7303,809,1374,900,355732,435Non-current assetsFixed assets ? net1,586,2831,764,5601,829,395273,432Intangible assets ? net208,563207,949206,85630,918Goodwill134,735134,735134,73520,138Deferred tax assets13,78915,01316,2392,427Long-term deferred expenses33,15830,28929,6394,430 Total non-current assets1,976,5282,152,5462,216,864331,345TOTAL ASSETS5,297,2585,961,6837,117,2191,063,780LIABILITIESCurrent liabilitiesDerivative contracts1,14873970,60510,553Short-term bank borrowings404,764530,985748,010111,802Long-term bank borrowings, current portion90,000175,000202,50030,267Accounts payable441,768410,061528,90279,053Notes payable186,921209,590142,50921,300Accrued expenses and other liabilities191,895270,674356,86053,338Customer deposits59,685122,743127,49819,057Deferred tax liability00766115Unrecognized tax benefit27,38527,38527,3854,093Amount due to related parties16,76559,57813,7672,058 Total current liabilities1,420,3311,806,7552,218,802331,636Non-current liabilitiesLong-term bank borrowings, non-current portion380,000250,000200,00029,893Convertible notes payable658,653634,666928,369138,759Long term payable0000Deferred tax liability26,56626,27126,1243,905 Total non-current liabilities1,065,219910,9371,154,493172,557TOTAL LIABILITIES2,485,5502,717,6923,373,295504,193Redeemable ordinary shares5555558EQUITYShareholders? equityOrdinary shares22722725238Additional paid-in capital2,331,7972,352,2932,877,447430,079Statutory reserves69,564104,467151,54122,650Retained earnings410,065786,949714,629106,812 Total shareholders? equity2,811,6533,243,9363,743,869559,579Noncontrolling interest0000TOTAL EQUITY2,811,6533,243,9363,743,869559,579TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS? EQUITY5,297,2585,961,6837,117,2191,063,780SOLARFUN POWER HOLDINGS CO., LTD.CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),except for number of shares and per share data)For the three months endedSeptember 30March 31June 30September 30September 3020092010201020102010(Unaudited)(Unaudited)(Unaudited)(Unaudited)(Unaudited)RMBRMBRMBRMBUSDNet revenues986,7981,475,8321,752,7082,185,749326,695Cost of revenues(782,399)(1,203,334)(1,383,868)(1,689,393)(252,506)Gross profit / (loss)204,399272,498368,840496,35674,189Operating expensesSelling expenses(24,806)(29,481)(39,238)(44,195)(6,606)G&A expenses(42,888)(38,027)(42,092)(55,716)(8,328)R&D expenses(7,324)(15,916)(18,290)(4,672)(698) Total operating expenses(75,018)(83,424)(99,620)(104,583)(15,632)Operating profit (loss)129,381189,074269,220391,77358,557Interest expenses(40,757)(40,919)(40,230)(39,870)(5,959)Interest income2,1505441,2851,962293Exchange gain (loss)8,139(47,011)(82,258)76,22011,392Gain (loss) on change in fair value of derivative(27,466)50,75697,312(108,042)(16,149)Gain (loss) on change in conversion feature fair value of convertible bond82,357(2,505)57,765(279,228)(41,735)Other income1,2123,0089,1965,086760Other expenses(1,903)(1,996)(484)(1,291)(193)Government grant1,9579,36513,1953,669548Net income (loss) before income tax155,070160,316325,00150,2797,514Income tax expenses(18,117)(21,367)(52,163)(75,525)(11,288)Net income (loss)136,953138,949272,838(25,246)(3,774)Net loss attributable to non-controlling interest3310000Net income (loss) attributableto shareholders136,622138,949272,838(25,246)(3,774)Net income (loss) per shareBasic0.510.480.94(0.09)(0.01)Diluted0.510.480.73(0.09)(0.01)Shares used in computationBasic270,304,495289,674,891289,851,889296,202,329296,202,329Diluted270,503,158290,187,034335,514,967296,202,329296,202,329Net income (loss) per ADSBasic2.532.404.71(0.43)(0.06)Diluted2.532.393.63(0.43)(0.06)ADSs used in computationBasic54,060,89957,934,97857,970,37859,240,46659,240,466Diluted54,100,63258,037,40767,102,99359,240,46659,240,466For the three months ended For the three months ended September 30, 2009 June 30, 2010 September 30, 2010 September 30, 2010 (RMB million)(RMB million)(RMB million)(US$ million)Non-GAAP net income/(loss)68.2231.7273.740.9Fair value changes of the conversion features of the Convertible bonds82.457.8(279.2)(41.7)Accretion of interest of the Convertible bonds(14.0)(16.7)(19.7)(2.9)GAAP net income/(loss)136.6272.8(25.2)(3.8)For the three months ended For the three months ended September 30, 2009 June 30, 2010 September 30, 2010 September 30, 2010 (RMB)(RMB)(RMB)(USD)Non GAAP net income per ADS - Basic1.264.004.620.69Fair value changes of the conversion features of the Convertible bonds1.521.00(4.71)(0.70)Accretion of interest of the Convertible bonds(0.26)(0.29)(0.33)(0.05)Net profit contributed to Solarfun Power Holdings Co., Ltd shareholders per ADS - Basic2.534.71(0.43)(0.06)ADS (Basic)54,060,89957,970,37859,240,46659,240,466For the three months ended Annualized for the 3rd quarter of 2009Annualized for the 2nd quarter of 2010Annualized for the 3rd quarter of 2010September 30, 2009 June 30, 2010 September 30, 2010 September 30, 2009June 30, 2010 September 30, 2010Non-GAAP Return on Equity 3.34%8.97%8.82%13.36%35.88%35.28%Fair value changes of the conversion features of the Convertible bonds2.43%0.36%-8.98%9.70%1.44%-35.90%Accretion of interest of the Convertible bonds-0.54%-0.54%-0.56%-2.14%-2.16%-2.26%GAAP Return on equity5.23%8.79%-0.72%20.92%35.16%-2.88%SOLARFUN POWER HOLDINGS CO., LTD.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$"),except for number of shares and per share data)For three months endedFor three months endedSeptember 30, 2009June 30, 2010September 30, 2010September 30, 2010RMBRMBRMBUSDCash flow from operating activitiesNet income (loss)136,953272,838(25,246)(3,774)Adjustments to reconcile net income (loss) to net cashprovided (used) in operating activities:Unrealised financial derivative27,967(19,644)134,48320,101Loss from disposal of a subsidiary00Amortization of convertible bonds discount12,94614,69314,4752,164Changes in fair value of conversion feature of convertible bonds(82,357)(57,765)279,22841,735Loss from disposal of fixed assets2010513320Depreciation and amortization41,40344,90048,0647,184Amortization of long-term deferred expense1,6361,7961,802269Provision for doubtful debt of advance to suppliers(1,954)(46)(7)Reversal of doubtful debt for accounts receivable11500Write down of inventory71,97119,88141,4986,203Stock compensation expense9,8557,49210,5861,582Warranty provision8,25913,03821,7053,244Deferred tax benefit(4,421)8,314(15,939)(2,382)Unrecognized tax benefit268000Changes in operating assets and liabilitiesRestricted cash(13,096)(16,022)37,0445,537Inventory(184,643)109,394(139,479)(20,847)Account receivables(193,022)20,019(460,992)(68,902)Advances to suppliers51,98441,322(292,070)(43,654)Prepaid expense34,770(6,819)52,5107,848Other current assets58,4645,898(63,457)(9,487)Amount due from related parties(18,155)(9,489)96,21914,381Accounts payable143,970(80,216)42,0676,288Accrued expenses and other liabilities33,95044,91964,4619,635Customer deposits18,000(18,683)4,755711Amount due to related parties5,46121,504(45,811)(6,847)Net cash provided (used) in operating activities160,344417,475(194,010)(28,998)Cash flows from investing activitiesAcquisition of fixed assets(46,623)(188,170)(103,397)(15,454)Change of restricted cash142,308(6,140)(440)(66)Acquisition of intangible assets(140)00Net cash provided (used) in investing activities95,685(194,450)(103,837)(15,520)Cash flows from financing activitiesProceeds from share lending arrangement with Hanwha213Proceeds from exercise of stock option7514,263637Proceeds from issuance of ordinary shares78,607510,33076,277Proceeds from short-term bank borrowings631,56497,143460,71368,861Payment of short term bank borrowings(1,011,840)(349,290)(243,688)(36,423)Proceeds from long term bank borrowings300,000000Payment for long term bank borrowings(7,500)(22,500)(22,500)(3,363)Utilization of notes payables51,58600Net cash provided (used) by financing activities42,417(273,896)709,139105,992Net increase (decrease) in cash and cash equivalents298,446(50,871)411,29261,474Cash and cash equivalents at the beginning of period494,740936,313885,442132,343Cash and cash equivalents at the end of period793,186885,4421,296,734193,817Supplemental disclosure of cash flow information:Interest paid100,41213,73131,4384,699Income tax paid31,54241,5896,216Realized gain from derivative contracts50377,66826,4433,952Supplemental schedule of non-cash activities:Acquisition of fixed assets included in accounts payable, accrued expenses and other liabilities33,70216,3329,6941,449Conversion of CB into ordinary sharesTransfer of unamortized debt issuance costs to equityupon conversion of CB into ordinary sharesSOURCE Solarfun Power Holdings Co., Ltd.For further information: Investors, Paul Combs, V.P. Strategic Planning of Solarfun Power Holdings Co., Ltd., 86-21-3852 1533, Mobile, 86 138 1612 2768, firstname.lastname@example.org; or Kathy Li, +1-480-614-3036, kli@ChristensenIR.com, or Tip Fleming, +852 9212 0684, tfleming@ChristensenIR.com, both of Christensen, for Solarfun Power Holdings Co., Ltd.