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Hence said:
I think the "pre-production costs expensed under GAAP" refers to R&D expense which for the last quarter was $68.4million (it appears on the income statement on page 5 of the last 10Q.) Purchases of property and equipment, excluding capital leases appears under "Cash Flows from Investing Activities" in the Cash Flow Statement on page 7 of the same 10Q; it was $67.9 million for the last quarter. The 67.9 million will be depreciated on future statements. Depreciation will be an expense on future income statements, but it will also be a non cash expenditure so it will be added back on future cash flow statements as a "source" of funds.
Some of the type of expenses related to the Model S that appeared as R&D before poduction will now start appearing as "Cost of Revenue" expenses; Model X expenses will remain as R&D.
The statements that will be published on Wednesday should provide more clarity on how tight the company's cash position really is. I think Petersen overstates the "going concern" statement ( I am under the impression that those types of auditors' comments are more of an issue with 10k's than 10q's but Petersen is/was a CPA but not me.)
 
I think the "pre-production costs expensed under GAAP" refers to R&D expense which for the last quarter was $68.4million (it appears on the income statement on page 5 of the last 10Q.) Purchases of property and equipment, excluding capital leases appears under "Cash Flows from Investing Activities" in the Cash Flow Statement on page 7 of the same 10Q; it was $67.9 million for the last quarter. The 67.9 million will be depreciated on future statements. Depreciation will be an expense on future income statements, but it will also be a non cash expenditure so it will be added back on future cash flow statements as a "source" of funds.
Some of the type of expenses related to the Model S that appeared as R&D before poduction will now start appearing as "Cost of Revenue" expenses; Model X expenses will remain as R&D.
The statements that will be published on Wednesday should provide more clarity on how tight the company's cash position really is. I think Petersen overstates the "going concern" statement ( I am under the impression that those types of auditors' comments are more of an issue with 10k's than 10q's but Petersen is/was a CPA but not me.)

It seems that sentences like "Thus, a substantial portion of our R&D expenses are one-time investments in preparation for Model S production" (in the Q1 shareholder letter) don't refer to those larger purchases of equipment ? We don't seem to know yet whether separate purchases of equipment will continue in Q2 in the same amount, even if they had similar amounts in previous quarters. At least there don't seem to be any new "Property, plant" purchases. And I'd expect equipment purchases to drastically reduce at the latest during Q3. (Unless perhaps Tesla decides to increase capacity further.)
 
In the Q1 conference call, May 9th, Elon actually said that all of the factory machinery was already in place, and the vast majority of tooling was in place (some stamping dies were still expected for June). (Which I guess doesn't necessarily mean that it was all paid for in Q1.)
 
(Which I guess doesn't necessarily mean that it was all paid for in Q1.)

That is correct. Tool buyoffs don't occur until tools have been approved by the customer and are ready to be shipped to the customer. So, if more were coming in Q2, there would be expense associated with their purchase in that quarter...unless they have 30/60/90 days to pay for them, in which case the expense might not show up until Q3.
 
That is correct. Tool buyoffs don't occur until tools have been approved by the customer and are ready to be shipped to the customer. So, if more were coming in Q2, there would be expense associated with their purchase in that quarter...unless they have 30/60/90 days to pay for them, in which case the expense might not show up until Q3.

There doesn't seem to be any information that those amounts are even close to large enough to worry about. And it would still mean that R&D costs will go down as well, even though a part of them will continue as cost-of-revenue. And according to the Q1 shareholder letter, Tesla concluded Q1 "with $387 million in cash resources". So where would be the problem, if any? The original plan was to start delivery in July (and everyone was expecting that to potentially mean the end of July), and a slow ramp-up was always predicted by Tesla.
 
In reading through some of his comments (they're in a few threads, but you can catch them all via: http://seekingalpha.com/author/john-petersen/comments it appears he thinks that the capital investments are not included in the about $70M losses Tesla reported, because they're taken as long term depreciation:

So, JP's saying there's $68m income losses and another $70m (all approximate) in capital expenses. That gets close to your $150million/quarter figure.

BTW, NigelM, I'm not challenging you at all. Given what JP says about other matters, I wouldn't be surprised to see him twisting numbers and lying. I wonder how it's going to go for him when he's proven wrong in a few weeks?

Sorry for the late reply, I've been away and out of touch (on boats, not in prison! :smile:). In fairness, I should have taken more time and separate out capital investments from factory prep expenses and start-up costs and others that are being expensed as R&D. I was being a little too fast trying to make the point that JP's calculations don't add up - they don't by the way! Once he admits that the capEx doesn't impact working capital how come he still thinks that Tesla will run out of liquidity in such a short space of time?

IMO Q2 costs could not have been dangerously higher than Q1 and my worst case estimate is $110m Q2 net income loss versus $90m in Q1; given Tesla's available resources, I don't consider that a problem.
 
Just going to say the obvious: If they were crunched for money, they would have rushed out cars that were less-than perfect. The fact that they are so complacent about holding back deliveries while they tweak things tells me that they are very confident in their cash position.
 
Just going to say the obvious: If they were crunched for money, they would have rushed out cars that were less-than perfect. The fact that they are so complacent about holding back deliveries while they tweak things tells me that they are very confident in their cash position.

I'm no expert, but my thoughts are that if a new car company (in general) wasn't releasing a new car it could mean one of two things. Either they're very confident in their car and want everything to be right... or they screwed something up so bad, that they're hiding it for as long as possible. Obviously in the case of Tesla we know it's the former, but not all investors are believers like us. Once production ramps up and customers and magazines get ahold of the car for a longer amount of time, I think we'll see the stock go up.

Then again, plenty of my other predictions have failed, like these:

"After they show off the Model S Prototype at the NAIAS, the stock will go up" - Happened January 11th, 2011. Stock went way down.
"After they show off the Model S Betas and the Tesla factory, the stock will go up" - Happened on Oct. 1st, 2011. Stock went down.
"Once they announce the firm delivery date of the Model S, the stock will go up" - Happened on May 22nd, 2012. Stock didn't appear to be affected.
"Once they deliver the first car, the stock will go up" - Announced this on June 6th, 2012. Stock went down.
"Once they deliver the first batch of cars, the stock will go up" - Happened on June 22nd, 2012. Stock went down.
"Once they allow test drives by both the reservation holders and the media, the stock will go up" - Happened on June 23rd, 2012. Stock went down.

So apparently I suck at predicting the short-term market. Good thing I'm in this for the long haul.
 
TSLA, QTWW, ZBB: Tesla’s Downgrade blurs Outlook for Quantum and ZBB

Factually, Tesla plans to reduce its production from nearly 1,000 units to just 500 units in the third quarter to ensure quality. Sounds familiar? Solar companies kept using similar arguments for slowing production until it became unbearable. This is not to suggest that Tesla is on the same road to bankruptcy but there may be a bigger picture behind the scenes which is not shared with investors.

Factually? :confused: Just because Wunderlich Securities said so? How about Tesla?

Larry
 
TSLA, QTWW, ZBB: Tesla’s Downgrade blurs Outlook for Quantum and ZBB

Factually, Tesla plans to reduce its production from nearly 1,000 units to just 500 units in the third quarter to ensure quality. Sounds familiar? Solar companies kept using similar arguments for slowing production until it became unbearable. This is not to suggest that Tesla is on the same road to bankruptcy but there may be a bigger picture behind the scenes which is not shared with investors.


Factually? :confused: Just because Wunderlich Securities said so? How about Tesla?

Norbert found this article which I cross-posted here also: Elon Musk Talks: 'Several More Years' at the Helm | PluginCars.com

“We never actually reported what third quarter production will be,” Musk told me. “The only number we talk about is the production target of 5,000 this year. It’s not a demand issue: We have orders for well over 10,000 cars. We’re confident that the 5,000 number will be approximately correct. The production ramp is very narrow as we iron out the supply chain, but it ramps up very quickly. We want to be careful about the quality of each car.”
 
Don't know if anyone else cares, but the recent drop in TSLA's price has created some very interesting Put option possibilities:

Aug $28 Puts today were sold for $1.25 each. That means on Aug 18th you buy TSLA for $26.75, or you keep the $1.25 for an effective annualized return of 65%. The Sept $29 Puts sold for $2.43 each, which net you stock at $26.57 or the premium was earned at a 51% rate of return. If you really don't want to buy the stock unless it's at a firesale, the Sept $25 Puts at around $1.20 will make you about 4.8% in 60 days or you buy the stock at $23.80.

That these OTM options are paying so well tells me that there are some nervous investors out there wanting to protect themselves from a precipitous near term drop in the stock. If you're able to make these trades and believe that $27 or $24 is a good buy in price for the stock, trades like these are worth looking at.

For longer term trades, although volume is low, Jan 2014 options are out now and you might be able to get into a synthetic long at $30 for a net credit, or at $28 for a small debit. If you believe Tesla will stay above $20 during the next 18 months, it's a way to leverage yourself into Tesla's success 18 months from now without the expense of having to buy the stock outright today.
 
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