SolarCity restating 2012/2013 results, delaying 10-K filing

After talking with accountant Ernst & Young, SolarCity (SCTY -2.3%) has decided to restate its results from Q1 2012 to Q3 2013 due to "an error in the allocation of overhead expenses." (8-K)

The company plans to "recognize a downward adjustment of assets related to solar energy systems leased and to be leased and an upward adjustment to the costs of solar energy system sales" for the aforementioned timeframe.

In addition, SolarCity, which had previously planned to release its full Q4 results today - a business update was provided a week ago - now says it's delaying the filing of its 2013 10-K.

Deutsche (Buy) thinks "evidence of ineffective internal controls" and the delayed release of Q4 results will worry investors over the near-term. But it also points out there will be "no change in total overhead" in the restatement, only "a shift in how it is allocated."

The firm adds SolarCity still expects its next offering of solar asset-backed securities to arrive in late Q1 or early Q2.

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Comments (9)
  • cmnsnse
    , contributor
    Comments (878) | Send Message
    No one likes accounting errors, but these overhead problems appear to be resolved. Maybe a temporary shake out of uninitiated investors.


    The real bottom line stuff I heard was that retained value stayed the same at 1bln. Also heard that February bookings were the most in company history. The CEO said January was the previous record, and February beat it by a "healthy margin."


    With accelerated bookings, I'm sensing that the zep and paramount acquisitions have had a material effect on operational capacity. They are now capable of completing more jobs faster. When you can complete higher volumes quicker, you can pursue more customers. Also, I've noticed the mix of lease to sales favoring more and more the lease. Growth in lease is fairly aggressive quarter over quarter. I take the reduction in commercial income as a sign they are allocating more effort on the more broad residential lease market and potentially preparing for a large booking for the gigafactory project.


    All in all, I see a big q2-q4 MWs installed number as well as a significant milestone bump when they hit 1 GW of installations. To further support that growth, 100m abs will close in the next month with the expectation of 2 or 3 more abs of 100m or more over remainder of the year. Abs product for the public is an unknown capital infusion, but any success here will positively reflect in stock price. To add to its already 500m in installation capital right now, the projected 300-400mln in abs capital should keep up with the agressive bookings and operational capacity. In other words, the money will keep up with volume and pace of MWs installed. So I expect them to achieve the higher 525mws by year end.


    Also, Elon has stated battery production will increase significantly in the second half of the year since Panasonic will have ramp up (in accordance with new 1.8 billion cell deal). He also stated that the scaling will have a significant affect on costs. Now if you remember in the solarcity demand logic press release, Tesla CTO JB Straubel they have reached the point where energy storage is economical because scale and cost of battery production. To add, Elon reinforced this statement in his Amsterdam town hall meeting stating he expects stationary(commercial and residential)energy storage to come to market in ramping volumes at the end of 2014/ beginning of 2015. This supports Solarcity CEO stating Demand logic is expected to come online by Q4.


    With this, I find the accounting error as a temporary buying opportunity, for what could be a 100+ stock by the end of the year with impressive growth coupled with innovation/implementation of low cost energy storage. A clear differentiator among all competitors in the residential/commercial and potentially utility scale energy market.
    3 Mar 2014, 01:22 PM Reply Like
  • rkw29
    , contributor
    Comments (714) | Send Message
    Delayed again??? But it is still being spun as "oh, that's okay, nothing to see here. Things are as rosy as ever!"
    3 Mar 2014, 03:42 PM Reply Like
  • made profit
    , contributor
    Comments (2) | Send Message
    True,when are we going to see some hard numbers?
    3 Mar 2014, 08:30 PM Reply Like
  • michalesco
    , contributor
    Comment (1) | Send Message
    "The (...) final, audited statements will be filed on or before Tuesday, March 18, 2014."


    4 Mar 2014, 10:01 AM Reply Like
  • wiserinvestor
    , contributor
    Comments (586) | Send Message
    March 3rd 2014 "Levi & Korsinsky commenced an investigation SolarCity Corporation ("SolarCity" or the "Company") (NasdaqGS: SCTY) for possible violations of federal securities laws."
    4 Mar 2014, 12:15 AM Reply Like
  • wiserinvestor
    , contributor
    Comments (586) | Send Message
    On March 3rd 2014 "Levi & Korsinsky commenced an investigation SolarCity Corporation ("SolarCity" or the "Company") (NasdaqGS: SCTY) for possible violations of federal securities laws."
    4 Mar 2014, 12:22 AM Reply Like
  • cmnsnse
    , contributor
    Comments (878) | Send Message


    Good to see you're still at it. Btw, Bank of America news tomorrow: raising price target from 81 to 96... I caution you not to short if that's apart of your investment strategy at the moment.
    4 Mar 2014, 12:56 AM Reply Like
  • PeterZone
    , contributor
    Comments (2) | Send Message
    There is nothing wrong with the company. If they wanted to screw shareholders with the numbers, they wouldn't have told us there was an error.


    I love when investors panic over nothing.
    I sincerely hope the stock will go down though ... so I can get cheaper shares of this sweet growing company ... :)
    4 Mar 2014, 01:28 AM Reply Like
  • cmnsnse
    , contributor
    Comments (878) | Send Message
    Well, if you look at the past two years, Solarcity has had a massive shift in revenue generation from commercial and cash jobs, to residential and lease contracts. Went from 3 to 1 commercial/residential to 1 to 3 commercial/residential pretty much over the last year or so. I can see the overhead numbers didn't pop out in 2012, but really showed error by the end of 2013 because of the massive record breaking installs in Q4 and then what they were seeing down the line in Q1 and beyond. Buying Zepp and Paramount, and getting the first Solar ABS in history locked in the midst of this rapid residential lease ascent probably didn't help in seeing the overhead equation issue sooner.


    This is strictly a rapid growth/rapid change problem to me. The overhead needed to be realigned to reflect the rapid & large residential upswing. That's what's happening here.


    Even though it slows down the reporting a little, can't see this at all slowing down the machine that is SCTY...
    18 Mar 2014, 02:23 PM Reply Like
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