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Samples Notes Upload

by: Michael Mont

Samples Notes Upload ACC 374

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Testing out the notes upload system for Study Soup.
Lisa Sedor
Class Notes
#accounting, #374, #testdocument
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This 10 page Class Notes was uploaded by Michael Mont on Saturday August 20, 2016. The Class Notes belongs to ACC 374 at DePaul University taught by Lisa Sedor in Summer 2016. Since its upload, it has received 6 views. For similar materials see AUDITING II in Accounting at DePaul University.

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Date Created: 08/20/16
Tesla Fourth Quarter & Full Year 2015 Update • $179 million positive core operational cash flow in Q4 2015 • Model S deliveries increased 76% year on year in Q4 2015 • Reaffirming plan for about 60 -80% new vehicle sales growth in 2016 • Model S gross margin tracking toward 30% by Q4 2016 • Beginning in March, e xpecting net cash flow positive for remainder of 2016 with ABL • Planning for full year 2016 non-GAAP profitability, GAAP profit in Q4 2016 st • Model 3 unveiling is March 31 ; on schedule for production & deliveries in late 2017 February 10, 2016 Dear Customers and Fellow Shareholders: In 2015, we significantly expanded Tesla’s product breadth and operational scale. We introduced new variants of Model S, launched Model X, introduced our groundbreaking Autopilot functionality on both vehicles, and started our complementary energy storage business. To accommodate growing demand for these products, we added production capacity at five locations and expanded our network of stores, service centers and Supercharg ers globally. Our customers are now driving over 107,000 Tesla vehicles in 42 countries, and have traveled nearly 2 billion miles. Tesla Autopilot is learning at the rate of over a million real -world miles per day. In Q4 alone, we generated $179 million of positive cash flow from our core operations defined as cash flow consumed in operations Strong Cash Flow from Core Operations ($M) of $30 million plus cash of $209 million received from vehicle sales $200 $179 to our leasing partners. Growing worldwide demand for Tesla vehicles, supported by record production, allowed us to achieve $150 this result as we increased deliveries by more than 50% from just $100 the prior quarter. $50 For 2016, we are planning for even faster delivery growth than last year. We plan to be net cash flow positive and achieve non-GAAP $0 profitability for the year, even after investing about $1.5 billion to add more production capacity, start cell production at the -$50 ($41) ($40) ($54) Gigafactory, and establish additional customer support -$100 Q1 2015 Q2 2015 Q3 2015 Q4 2015 infrastructure. Moderate GAAP profitability is expected in the fourth quarter. These investments will help prepare the way for st Model 3, which is on schedule to be unveiled on March 31 and to start production and deliveries in late 2017. Vehicle Demand Growth & Increasing Production Capability In Q4, we increased global deliveries over 76% year on year as Model S U.S. Sales of Large Luxury Vehicles market share gains continued in every geographic region. In the U.S., MODEL 2015 Sales 2014 Sales % Change just over three years after entering the market, Model S took share from Tesla Model S 25,202 16,689 51.01% all incumbent manufacturers to become the number one selling Audi A7 7,721 8,133 -5.07% comparably priced four-door sedan. In fact, Model S was the only Audi A8 4,990 5,904 -15.48% vehicle in its class with growing sales last year . Even on our BMW 6-Series 8,146 8,647 -5.79% competitors’ home turf and in countries without government incentives BMW 7-Series 9,292 9,744 -4.64% Jaguar XJ 3,611 4,329 -16.59% to purchase electric vehicles, Model S is winning. For example, in Lexus LS 7,165 8,559 -16.29% Switzerland, Model S outsold the Mercedes Benz S-Class, the BMW 7- Mercedes-Benz CLS-Class 6,152 6,981 -11.88% Series, the Porsche Panamera and the Audi A-8 combined for the full Mercedes-Benz S-Class 21,934 25,276 -13.22% Porsche Panamera 4,985 5,740 -13.15% year, and also outsold the Mercedes Benz E-Class. In Germany in Q4, Total 99,198 100,002 -0.80% Model S outsold the Porsche Panamera. Finally, across all of Europe last year Model S outsold the Audi A8 and A7 combined and the BMW Source: Company reports 7-Series and 6-Series combined. New Model S orders grew over 35% year on year in Q4, with growth in all regions. Even with this growth, we believe that we remain substantially underpenetrated in all of our markets because of our limited retail presence . Additionally, we continue to see no perceptible impact to our order growth from the change in the price of gasoline as our order rates have continued to increase even as the price of gasoline has fallen. In fact, our customers tell us they value a Tesla vehicle more for its superior performance, technology, safety, lower environmental impact and style than for its ability to save money on fuel. We are also seeing this with the strong demand for pre-owned Tesla vehicles, which are trading at prices higher than our expected residual values. This residual performance is enabling our financing partners to reduce both lease and monthly loan payments. Model X reservations grew over 75% as compared to the prior year despite extremely limited initial exposure for this vehicle. Last week, we kicked off our Model X test drive tour for our reservation holders. We are making more Model X vehicles available at our stores for viewing and test drives in the weeks to come. During Q4, we reduced Model S production costs, started volume Model X production and still produced a record 14,037 new Tesla vehicles. In January 2016, we limited Model X production for a period of time to maintain our quality production standards. We are already seeing improvement from these efforts and we are now significantly increasing our Model X production throughout the b alance of the quarter. We anticipate approaching a Model X production rate of 1,000 vehicles a week in Q2. Reflecting our philosophy of continuous improvement , we have not relaxed our pursuit of making the world’s most reliable cars. The cost of first year repair claims on cars produced in 2015 was at about half the level of cars produced in 2014, and about one quarter the level of cars produced in 2012. Autopilot with Summon – Another Tesla First We launched Autopilot in Q4 and, to the delight of our customers, continually enhanced it with several over -the-air software updates. Customers and media greeted our rollout enthusiastically, with a torrent of online videos and industry acclaim. MotorTrend called Autopilot “otherworldly,” Road & Track remarked that the system was "almost entirely unflappable ,” and TechCrunch called the ride a "mind-blowing experience.” Consistent with our philosophy of continually improving our vehicles, we recently rolled out expanded Autopilot functionality and also new features like perpendicular self-parking and our new Summon capability. With Summon, Model S and Model X can be parked or unparked even with the driver outside the vehicle, and can even open and close preprogrammed garage doors as needed. Summon is an important step on our way to autonomous driving and showcases our leadership in this area. We are now acknowledged as having the most advanced active safety and near - autonomous driving capabilities of any production car in the world. No surprise that Consumer Reports magazine recently named both the base and the P85D versions of Model S to its lis t of top ten cars for 2015. In fact, Autopilot Instrument Cluster Display & Smartphone App With Summon it appears that naming two variants of the same vehicle to this list is another Model S industry first! Tesla Energy Debuts on a Global Stage Global excitement in Tesla Energy products remains very strong. To accommodate this demand, we transitioned production to the Gigafactory in Q4. While this transition did take slightly longer than we had expected, both Powerwall and Powerpack production is now operating smoothly and expanding at the Gigafactory. The first Powe rwalls built at the Gigafactory are now installed in the US, Australia and Germany. In our first main markets, Australia and Germany, we have seen Tesla Energy inbound sales leads quickly exceeding vehicle sales leads, more than doubling our total potential Tesla customer Powerwall Customers in Australia inquiries. We are excited about the potential growth in vehicle sales this new energy customer base could also represent. Even during this initial product launch, Tesla Energy achieved positive gross margin for the quarter. We are on tr ack for a steady increase in gross margins throughout the year as volumes ramp up and costs reduce , allowing a positive cash contribution to Tesla overall even with rapid growth. Q4 & Full Year Results Total Q4 non-GAAP revenue was $1.75 billion for the quarter, up 59% from a year ago, while GAAP revenue was $ 1.21 billion. For full year 2015, our revenue totaled $5.29 billion on a non-GAAP basis, up 47% from 2014, and $4.05 billion on a GAAP basis. Total Q4 gross margin was 20.0% on a non-GAAP basis and 18.0% on a GAAP basis. Automotive revenue in Q4 was $1.65 billion on a non-GAAP basis, and comprised GAAP Automotive revenue of $1.12 b illion plus a net increase of $533 million related to cars with a resale value guarantee or collateralized borrowing an d subject to lease accounting. We delivered 17,478 vehicles in Q4, including 206 Model X vehicles. Tesla directly leased 881 cars to customers in Q4, about the same percentage as last quarter and worth $85 million of aggregate transaction value. As expected, Model S average transaction price declined by about 2% due to vehicle and option mix. Price increases outside the U.S. offset the impact of unfavorable movements in foreign currencies during the quarter. Q4 Automotive gross margin, excluding $8 million of ZEV credit revenue, was 20.9% on a non-GAAP basis and 19.2% on a GAAP basis. These margin measures were burdened by $67 million non-GAAP ($51 million GAAP) of unfavorable labor and overhead allocations associated with lower than planned Model X production volume, and non-recurring asset impairment charges for obsolete painting equipment and Model S components as we transitioned to improved production processes and designs. Excluding these items, Q4 Automotive gross margin was 25.0% on a non-GAAP basis and 23.7% on a GAAP basis. This represented sequential improvement, despite a decline in average transaction price in Q4. Q4 Services and other revenue was $97 million, up 47% from a year ago. Higher used Tesla vehicle sales, as well as growing service and Tesla Energy revenue offset a decline in powertrain sales, compared to Q4 last year. Q4 GAAP operating expenses were $47 9 million and included $50 million of non-cash stock based compensation. Our non- GAAP operating expenses in Q4 were higher than expected at $429 million, up 18% from Q3. Our Q4 non-GAAP net loss was $114 million, or $0.87 per share, and our Q4 GAAP net loss was $320 million or a loss of $2.44 per share, both based on 131 million basic shares. For full year 2015, our net loss was $2.30 per share on a non- GAAP basis and a loss of $6.93 per share on a GAAP basis, both based on 128 million basic shares. Tesla Model X – Falcon Wings Deployed Our Q4 earnings per share figures both include a $17 million loss, or $0.13 per basic share, related mostly to unrealized losses from foreign currency revaluation. Cash and cash equivalents were $1.2 billion at the end of the quarter. Capital expenditures during the quarter were $411 million, and $1.6 billion for the full year. Capital expenditures were primarily for the capacity expa nsion and tooling associated with Model X, construction of the Gigafactory, and expansion of service centers, retail locations and the Supercharger network . Our GAAP cash outflow from operations during the quarter was $30 million. Operationally, this cash flow is offset by $209 million of cash from vehicle sales to our leasing partners but classified in the financing section of our statement of cash flows. Adjusting for the classification of these cash flows , our core operations generated $179 million of positive cash flow in Q4, and $44 million for the full year. We plan to use our leasing partners as the primary funding source for our indirect leasing activities during 2016. We also expect to draw on our asset-based line to support leases funded direct ly by Tesla and the expected growth in our finished goods inventory . During Q4, we used our asset-based financing line to pay off a more expensive third party warehouse loan facility, resulting in drawings on the asset-based line of $135 million at the end of the quarter. To support these activities, we recently expanded our asset-based line to $1 billion. Q1 and Full Year 2016 Outlook We expect to generate positive net cash flow and achieve non-GAAP profitability for the full-year 2016. Thus our cash balance at the end of 2016 should increase from the year end 2015 level. We plan to fund about $1.5 billion in capital expenditures without accessing any outside capital other than our existing sources that support our leasing and finished goods inventory. We plan to invest in equipment to support cell production at the Gigafactory, begin installation of Model 3 vehicle production machinery, open about 80 retail locations and service centers, and energize about 300 new Supercharger locations. To achieve these goals we plan to deliver 80,000 to 90,000 new Model 250,000% Cumula:ve%Model%S/X%Deliveries%(Year%End)% S and Model X vehicles in 2016, representing accelerating growth over 2015 at the midpoint of the range. We expect our average vehicle 187,000%*% 197,000% transaction price to increase slightly during 2016, as Model X grows to 200,000% become a larger share of our deliveries throughout the year. In Q1, we plan to grow deliveries 60% year on year to approximately 16,000 150,000% vehicles, and we plan to directly lease about the same percentage of cars as we did in Q4. 107,000% 100,000% Throughout the rest of 2016, Automotive gross margin should continue 57,000% to increase, helped by cost reductions for Model S and improving margin 50,000% 25,000% on Model X as our manufacturing efficiency improves for that vehicle. 2,600% By year-end, Model S gross margin should begin to approach 30% and 0% 2012% 2013% 2014% 2015% 2016%Forecast% Model X gross margin should be about 25%, with continued improvement for Model X in 2017. Q1 operating expenses should increase just slightly from Q4 as we sharpen our focus on expense management . Then as development work continues on Model 3 and as we expand to support growth , operating expenses should increase throughout 2016, so that for the full year total operating expenses should increase by about 20%. Achieving these results in 2016 should leave us well positioned for 2017, when we plan to laun ch Model 3 and take another significant step towards our mission of accelerating the world’s transition to sustainable transportation. Elon Musk, Chairman & CEO Jason Wheeler, Chief Financial Officer Webcast Information Tesla will provide a live webcast of its fourth quarter and full year 2015 financial results conference call beginning at 2:30 p.m. PT on February 10, 2016, at This webcast will also be available for replay for app roximately one year thereafter. Non-GAAP Financial Information Consolidated financial information has been presented in accordance with GAAP as well as on a non -GAAP basis. On a non- GAAP basis, financial measures exclude non -cash items such as stock-based compensation, the change in fair value related to Tesla’s warrant liability, non -cash interest expense related to Tesla's convertible senior notes as well as one -time expenses associated with the early repayment of the Department of Energy Loan. Non-GAAP financial measures also exclude the impact of lease accounting on related revenues and cost of revenues associated with Model S deliveries with the resale value guarant ee and similar buy-back terms, as this perspective is useful in understanding the underlying cash flow a ctivity and timing of vehicle deliveries. Management believes that it is useful to supplement its GAAP financial statements with this non -GAAP information because management uses such information internally for its operating, budgeting and financial planni ng purposes. These non- GAAP financial measures also facilitate management’s internal comparisons to Tesla’s historical performance as well as comparisons to the operating results of other companies. Non-GAAP information is not prepared under a comprehens ive set of accounting rules and therefore, should only be read in conjunction with financial information reported under U.S. GAAP when understanding Tesla's operating performance. A reconciliation between GAAP and non -GAAP financial information is provide d below. Forward-Looking Statements Certain statements in this shareholder letter, including statements in the “Q1 and Full Year 2016 Outlook” section; statement s relating to the progress Tesla is making with respect to product development ; statements regarding growth in the number of Tesla store, service center, Supercharger locations; statements relating to the production and delivery timing of future products s uch as Model 3; statements relating to future financing needs and sources; growth in dema nd and orders for Tesla products and the catalysts for that growth; the ability to achieve product demand, volume, production, delivery, revenue, cash flow, leasing, gross margin, spending, capital expenditure and profitability targets; productivity improv ments and capacity expansion plans; and Tesla Gigafactory timing, plans and output expectations, including those related to cell and other production, are “forward -looking statements” that are subject to risks and uncertainties. These forward -looking statements are based on management’s current expectations, and as a result of certain risks and uncertainties, actual results may differ materially from those projectedThe following important factors, without limitation, could cause actual results to di ffer materially from those in the forward-looking statements: the risk of delays in the manufacture, production and delivery of Model S and Model X vehicles and Tesla Energy products, and production and delivery of Model 3 vehicles; the ability to design a nd achieve market acceptance of Model S and its variants, as well as new vehicle models, specifically Model X and Model 3; the ability of suppliers to meet quality and part delivery expectations at increasing volumes; adverse foreign exchange movements; an y failures by Tesla products to perform as expected or if product recalls occur; Tesla’s ability to continue to reduce or control manufacturing and other costs; consumers’ willi ngness to adopt electric vehicles; competition in the automotive market general ly and the alternative fuel vehicle market in particular; Tesla’s ability to establish, maintain and strengthen the Tesla brand; Tesla’s ability to manage future growth effectively as we rapi dly grow, especially internationally; the unavailability, reducti on or elimination of government and economic incentives for electric vehicles; Tesla’s ability to establish, maintain and strengthen its relationships with strategic partners such as Panasonic;potential difficulties in finalizing, performing and realizing potential benefits under definitive agreements for the Tesla Gigafactory site, obtaining permits and incentives, negotiating terms with technology, materials and other partners for Gigafactory, and mainta ining Gigafactory implementation schedules, output and costs estimates; and Tesla’s ability to execute on its retail strategy and for new store, service center and Tesla Supercharger openings. More information on potential factors that could affect our financial results is included from time to time in our Securities and Exchange Commission filings and reports, including the risks identified under the section captioned “Risk Factors” in our quarterly report on Form 10 -Q filed with the SEC on November 5, 2015. Tesla disclaims any obligation to update informa tion contained in these forward-looking statements whether as a result of new information, future events, or otherwise. Investor Relations Contact: Press Contact: Jeff Evanson Khobi Brooklyn Investor Relations – Tesla Communications – Tesla Tesla Motors, Inc. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended Year Ended Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2015 2015 2014 2015 2014 Revenues Automotive (1A) $ 1,117,007 $ 852,555 $ 890,396 $ 3,740,972 $ 3,007,012 Services and other 97,372 84,234 66,265 305,052 191,344 Total revenues 1,214,379 936,789 956,661 4,046,024 3,198,356 Cost of revenues Automotive (1B) 896,441 628,729 636,698 2,823,301 2,145,749 Services and other 99,374 76,564 58,266 299,220 170,936 Total cost of revenues (2) 995,815 705,293 694,964 3,122,521 2,316,685 Gross profit 218,564 231,496 261,697 923,503 881,671 Operating expenses Research and development (2) 190,243 178,791 139,565 717,900 464,700 Selling, general and administrative (2) 288,654 236,367 196,970 922,232 603,660 Total operating expenses 478,897 415,158 336,535 1,640,132 1,068,360 Loss from operations (260,333) (183,662) (74,838) (716,629) (186,689) Interest income 750 327 219 1,508 1,126 Interest expense (38,617) (29,308) (28,703) (118,851) (100,886) Other income (expense), net (17,149) (15,431) (588) (41,652) 1,813 Loss before income taxes (315,349) (228,074) (103,910) (875,625) (284,636) Provision for income taxes 5,048 1,784 3,719 13,043 9,404 Net loss $ (320,397) $ (229,858) $ (107,629) $ (888,663) $ (294,040) Net loss per common share, basic and diluted $ (2.44) $ (1.78) $ (0.86) $ (6.93) $ (2.36) Shares used in per share calculation, basic and diluted 131,100 129,006 125,497 128,202 124,573 Notes: (1) Duue o the applcatton ofeaase accounttng orrModdelS vehicleswiih hee esale vaueeguuarantee orsimiarrbuy-back terms,,he folowing s supppemeentallnformatton orr the perrods pessented:: (A) Net increase in deferred revenue and other long-term liabilities as a result of lease accounting and therefore not recognized in automotive sales $ 532,646 $ 307,048 $ 138,973 $ 1,245,517 $ 400,185 (B) Net increase in operating lease vehicles as a result of lease accounting and therefore not recognized in automotive cost of sales $ 401,385 $ 221,268 $ 110,234 $ 910,719 $ 312,710 Thhe able above exccudessasssumeed netwaaranty and stock based comppenssaton amoounts ncluded innoon-GAAAP costtofsales.. (2) Includes stock-based comppenssaton expensse ofhee olowingg orrhe perrods pessented:: Cost of revenues $ 5,995 $ 3,828 $ 5,053 $ 19,244 $ 17,454 Research and development 25,452 24,153 17,595 89,309 62,601 Selling, general and administrative 24,158 28,052 21,869 89,446 76,441 Total stock-based compensation expense $ 55,605 $ 56,033 $ 44,517 $ 197,999 $ 156,496 Classification of Revenues and Costs of Revenues Our income statement reflects the classification s of revenues and costs of revenues to segregate our new vehicle business from our other business activities. “Automotive” r evenue and related costs now reflect activities related to the sale or lease of new vehicles including regulatory credits, data connectivity, Autopilot functionality and Supercharging. “Services and other” revenues and related costs include activities such as powertrain sales, service revenue, Tesla Energy and pre-owned Tesla vehicle sales. Tesla Motors, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands) Dec 31, Dec 31, 2015 2014 Assets Cash and cash equivalents $ 1,196,908 $ 1,905,713 Restricted cash and marketable securities - current 22,628 17,947 Accounts receivable 168,965 226,604 Inventory 1,277,838 953,675 Prepaid expenses and other current assets 125,229 94,718 Operating lease vehicles, net (1) 1,791,403 766,744 Property and equipment, net 3,403,334 1,829,267 Restricted cash - noncurrent 31,522 11,374 Other assets 74,633 43,209 Total assets $ 8,092,460 $ 5,849,251 Liabilities and Stockholders' Equity Accounts payable and accrued liabilities $ 1,338,945 $ 1,046,830 Deferred revenue (2) 1,006,896 483,922 Customer deposits 283,370 257,587 Capital lease obligations 32,671 21,799 Long-term debt 2,640,869 2,408,084 Other long-term liabilities (3) 1,658,720 661,123 Total liabilities 6,961,471 4,879,345 Mezzanine equity (4) 42,045 58,196 Stockholders' equity 1,088,944 911,710 Total liabilities and stockholders' equity $ 8,092,460 $ 5,849,251 Notes: (1) Includes the following increase in operating lease vehicles related to deliveries and subject to lease accounting, net of depreciation recognized in automotive cost of sales, for the following periods: Resale value guarantee program (and other vehicles with similar buy-back terms) Beginning balance $ 689,689 $ 376,979 First quarter 103,022 69,743 Second quarter 170,025 68,752 Third quarter 215,337 63,981 Fourth quarter 378,455 110,234 Ending balance $ 1,556,528 $ 689,689 Model S leasing program Beginning balance $ 81,636 $ - First quarter 35,687 - Second quarter 39,587 11,214 Third quarter 25,162 23,824 Fourth quarter 52,547 46,598 Ending balance $ 234,619 $ 81,636 (2) Includes the following increase in deferred revenue related to deliveries with the resale value guarantee and similar programs and subject to lease accounting, net of revenue amortized to automotive sales, for the following periods: Beginning balance $ 376,471 $ 227,868 First quarter 45,334 38,188 Second quarter 60,767 33,586 Third quarter 67,522 27,993 Fourth quarter 129,037 48,836 Ending balance $ 679,131 $ 376,471 (3) Includes the following increase in other liabilities related to deliveries with the resale value guarantee and similar programs and subject to lease accounting for the following periods: Beginning balance $ 487,879 $ 236,298 First quarter 118,341 54,318 Second quarter 186,957 54,575 Third quarter 245,133 52,551 Fourth quarter 392,263 90,137 Ending balance $ 1,430,573 $ 487,879 (4) Our common stock price exceeded the conversion threshold price of our convertible senior notes due 2018 (2018 Notes) issued in May 2013; therefore, the 2018 Notes are convertible at the holder’s option during the first quarter of 2015. As such, the carrying value of the 2018 Notes was classified as a current liability as of December 31, 2015 and the difference between the principal amount and the carrying value of the 2018 Notes was reflected as convertible debt in mezzanine equity on our condensed consolidated balance sheet as of December 31, 2015. Tesla Motors, Inc. Supplemental Consolidated Financial Information (Unaudited) (In thousands) Three Months Ended Year Ended Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2015 2015 2014 2015 2014 Selected Cash Flow Information Cash flows provided by (used in) operating activities (1) $ (29,849) $ (203,340) $ (86,402) $ (524,499) $ (57,337) Cash flows used in investing activities (414,280) (404,090) (372,231) (1,673,551) (990,444) Cash flows provided by financing activities 225,038 893,978 11,325 1,523,523 2,143,130 Other Selected Financial Information Cash flows provided by (used in) operating activities (1) $ (29,849) $ (203,340) $ (86,402) $ (524,499) $ (57,337) Change in collateralized lease borrowing $ 208,793 $ 163,416 $ 3,271 $ 568,745 $ 3,271 Cash flow from core operations $ 178,944 $ (39,924) $ (83,131) $ 44,246 $ (54,066) Capital expenditures (411,222) (392,403) (368,661) (1,634,850) (969,885) Depreciation and amortization $ 143,723 $ 110,366 $ 67,976 $ 422,590 $ 231,931 Dec 31, Sep 30, Dec 31, 2015 2015 2014 Cash and Investments Cash and cash equivalents $ 1,196,908 $ 1,426,036 $ 1,905,713 Restricted cash and marketable securities - current 22,628 25,223 17,947 Restricted cash - noncurrent 31,522 26,355 11,374 (1)Duurng the hree moonths endeddJuune 30,20014,wee began sepaaraely presentngg he efecttofexchhange ratechaanges on ourrcash and cash equivalents n ourcoondenseed consoldated statemeentoffcash fowssduee o ourrgowwing operatonss n oreign curenncy envionmmenns.. Prrorperrod amoounts have been reclassiied o conform to he currenttperod presennatton.. Supplemental Model S Leasing Program Information (in thousands, except for vehicle deliveries) Three Months Ended Twelve Months Ended Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2015 2015 2014 2015 2014 Vehicles delivered 881 495 647 2,598 1,152 Average per unit price of vehicles delivered $ 97 $ 91 $ 101 $ 99 $ 101 Aggregate value of vehicles delivered (1) $ 85,328 $ 44,804 $ 65,246 $ 256,619 $ 115,782 Leasing revenue recognized $ 13,704 $ 11,514 $ 2,993 $ 40,915 $ 4,280 (1)Agggregate vauee s he producctofmuullpying vehiclesdeelvered by he averagge peruniiprrce ofvehicessdellvered Non-GAAP Financial Information This letter includes non-GAAP financial information because we plan and manage our business using such information. Our non -GAAP measures align the recognition of revenues and costs related to a vehicle sale with the time when the customer take delivery of the car and cash is received or owed to us. This contrasts with the approach of other automotive manufacturers who under GAAP account ing recognize revenue when the vehicle is sold into dealership inventory rather than to end customers, even though in the c ase of a captive finance lease they may not collect cash for several years on a consolidated basis. Our non-GAAP revenue and gross profit is determined by adding back the deferred revenue and related costs for cars sold with resale value guarantee and where we have collected, or will collect from a bank intermediary in a matter of days, the purchase price of the car in cash. For cars leased directly by Tesla, we recognize lease revenue and related costs over the lease term and the same wa y for both GAAP and non-GAAP purposes. Our non -GAAP expense and per share information also exclude non -cash interest expense and stock-based compensation. Tesla Motors, Inc. Reconciliation of GAAP to Non-GAAP Financial Information (Unaudited) (In thousands, except per share data) Three Months Ended Year Ended Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2015 2015 2014 2015 2014 Net loss (GAAP) $ (320,397) $ (229,858) $ (107,629) $ (888,663) $ (294,040) Stock-based compensation expense 55,605 56,033 44,517 197,999 156,496 Non-cash interest expense related to convertible notes and other borrowing 26,716 21,850 20,826 86,247 75,019 Net income (loss) (Non-GAAP) including lease accounting (238,076) (151,975) (42,286) (604,417) (62,525) Model S gross profit deferred due to lease accounting (1)(2) 124,190 77,022 26,072 309,515 82,626 Net income (loss) (Non-GAAP) $ (113,886) $ (74,953) $ (16,214) $ (294,902) $ 20,101 Net loss per share, basic (GAAP) $ (2.44) $ (1.78) $ (0.86) $ (6.93) $ (2.36) Stock-based compensation expense 0.42 0.43 0.35 1.54 1.26 Non-cash interest expense related to convertible notes and other borrowing 0.20 0.17 0.17 0.67 0.60 Model S gross profit deferred due to lease accounting (1)(2) 0.95 0.60 0.21 2.41 0.66 Net income (loss) per share, basic (Non-GAAP) $ (0.87) $ (0.58) $ (0.13) $ (2.30) $ 0.16 Shares used in per share calculation, basic (GAAP and Non-GAAP) 131,100 129,006 125,497 128,202 124,573 Net loss per share, diluted (GAAP) $ (2.44) $ (1.78) $ (0.86) $ (6.93) $ (2.07) Stock-based compensation expense 0.42 0.43 0.35 1.54 1.10 Non-cash interest expense related to convertible notes and other borrowing 0.20 0.17 0.17 0.68 0.53 Net income (loss) (Non-GAAP) including lease accounting (1.82) (1.18) (0.34) (4.71) (0.44) Model S gross profit deferred due to lease accounting (1)(2) 0.95 0.60 0.21 2.41 0.58 Net income (loss) per share, diluted (Non-GAAP) $ (0.87) $ (0.58) $ (0.13) $ (2.30) $ 0.14 Shares used in per share calculation, diluted (Non-GAAP) 131,100 129,006 125,497 128,202 142,221 (1))ncuddes delveressoffModdelS wiih he resalevaaue guaaanneeeorrsmiiarrbuy-back temss and nottdelveressundderrhe MoodelS leasing program.. (2)UnnderGAAAAP,waaranny costs areexxpensed as incuredd orrModdelS vehice dellveres wiih he resalevalue guarantee orrsmiiarrbuy-back ermss and subjectto easseacccountngg.ForrNon-- GAAAP purpooses,an esttmated incremeentalwarranty esseveeoff$14.9 miionn,$12.7 miilon and $5.5miilon is ncudded orr he hree moonths ended Deecembberr31,20115 ,Septembberr30,20015,, and Deecembber311,20144,,espectveey.Foorrhe yearennded Deecembber311,20155annd 2014,,anesstmaaedd ncremeentalwaaranty reserve of$44.6 miilon and $14.6 miionn s ncluded,,esspectvely.. Addiionaaly,socckbaased comppenssaton of$4.3 miilon,$2.4 miilon and $1.0 miion isexxcudeed orrnon-GAAAP puurposes orr he hree moonths ended Deecembberr31,20115,Seeptembber30,,2015,, and Deecembber311,20144,,espectveey..Forrhe yeaarendeed Decemmbeer31,,2015 and 20114,stock-based comppennsaton off$10.6miilon andd$3.4 miilon s excluded,,esspectvely.. Tesla Motors, Inc. Reconciliation of GAAP to Non-GAAP Financial Information (Unaudited) (In thousands, except per share data) Three Months Ended Year Ended Dec 31, Sep 30, Dec 31, Dec 31, Dec 31, 2015 2015 2014 2015 2014 Revenues (GAAP) $ 1,214,378 $ 936,789 $ 956,661 $ 4,046,025 $ 3,198,356 Model S revenue deferred due to lease accounting (1) 532,646 307,048 138,973 1,245,517 400,185 Revenues (Non-GAAP) $ 1,747,024 $ 1,243,837 $ 1,095,634 $ 5,291,542 $ 3,598,541 Gross profit (GAAP) $ 218,563 $ 231,496 $ 261,697 $ 923,502 $ 881,671 Model S gross profit deferred due to lease accounting (1)(2) 124,190 77,022 26,072 309,515 82,626 Stock-based compensation expense 5,995 3,828 5,053 19,244 17,455 Gross profit (Non-GAAP) $ 348,748 $ 312,346 $ 292,822 $ 1,252,261 $ 981,752 Research and development expenses (GAAP) $ 190,243 $ 178,791 $ 139,565 $ 717,900 $ 464,700 Stock-based compensation expense (25,452) (24,153) (17,595) (89,309) (62,601) Research and development expenses (Non-GAAP) $ 164,791 $ 154,638 $ 121,970 $ 628,591 $ 402,099 Selling, general and administrative expenses (GAAP) $ 288,654 $ 236,367 $ 196,970 $ 922,232 $ 603,660 Stock-based compensation expense (24,158) (28,052) (21,869) (89,446) (76,441) Selling, general and administrative expenses (Non-GAAP) $ 264,496 $ 208,315 $ 175,101 $ 832,786 $ 527,219 (1))ncludes delverresoffMoodelS wiih he resale vaueeguuarantee orsimiarrbuy-back terms and nottdelverresunnderrhe MoodelS leasing program.. (2)UnnderrGAAAP,,warrantycosss are expenseddass ncurred orrMoodelS vehicledeelveres wiih he resalevaaue guaaanneeeorrsmiiarrbuy-back temss and subjectto easse accountngg.Forr Noon-GAAAP purposses,an estmaated nccemmennallwarranty eserve off$14.9 miion,,$12.7 miionnannd $5.5miilon s incudeed orrhee hree moonthsennded Deccembber311,20155 ,Septembberr 30,,2015,,and Deceembeer31,,2014,,esspectvely.Forrheeyeaarendded Deceembeer31,,2015 and 20114,an esttmated incemmennallwarranty eserve off$44.6 miion andd$114.6miilon sis incudeed,,especctvey..Adddionnaly,stock-based comppennsaton of$443 miilon,$224 miilon and $1.0 miionn s excudded orrnon-GAAAPP purposes forrhe hree moonths ended Deecembberr31,, 20155,Seppemmbeer30,,2015,,and Decemmbeer31,,2014,,esspectvely..Forrhe yearrended Deecembberr31,20115 and 2014,,socckbaased comppensaaton of$1006 miilon and $3.4 miionn sis excluded,,esspectvely..


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