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Bryce_in_TX

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  • Tesla Has Outed The Good News Early, Now What? [View article]
    "So the accounting has to follow the DUTY paperwork and rules, not the other way around like you are talking about."

    You are making up your own rules now. Where, in the accounting texts, did it say what you just said?. It never did, did it? This is your opinion, and it is wrong. Go back to the accounting texts, again.

    The showroom/service center is owned by Tesla. It is Tesla. The sale is an intercompany transaction, as is the delivery to the showroom/service center. Hopefully most everyone else can see the truth and facts. I'm out.
    Apr 12, 2015. 12:32 AM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @petteri,

    "1) Securized financing
    Tesla had around $766B of operating lease vehicles at year end. If it uses this as a collateral it can raise maybe around $600M with low interest rate. However if Tesla sells more cars a part of it must be used to finance new leases."

    Both the sales of vehicles with the resale value guarantee and the leasing of vehicles are accounted for under GAAP using "lease accounting". See page 23 of 10K:

    Sales with the resale value guarantee:
    "Under the resale value guarantee program, Model S customers have the option of selling their vehicle back to us during the period of 36 to 39 months following delivery for a pre-determined resale value. As a result of this resale value guarantee and customers having the option of selling their vehicles to us, we apply lease accounting to such purchases"

    Standard leasing:
    "Under the leasing program offered through Tesla Finance, we lease vehicles directly to customers. Customers have the option of purchasing their vehicles at the stated value in the leasing contract or returning their vehicles to us. We apply lease accounting to such purchases. Unlike the resale value guarantee program, we may receive only a very small portion of the price of the vehicle from our customers at the time of purchase, and instead will receive a stream of lease payments"

    http://1.usa.gov/1GDd6Jo

    So, both types of transactions are accounted for similarly, but the cash for the resale value guarantee sales has been received already. This represents most of the $766 million of "operating lease vehicles" listed on the balance sheet. That cash is being used in operations, and the asset has been transferred legally to the customer, so I see no asset to securitize and received a loan against.

    There are a total of 11,750 vehicles that are being treated as leases under GAAP, according to the 10-K, page 48 and 49, 10,400 of resale guarantee sales, 1,150 through standard leasing by Tesla Finance, and 200 by standard leasing with a bank partner. Of those, only the 1,150 would qualify for securitizing, IMO, since on only those has the full cash sales price of the car not been received.

    So dividing 1,150 by 11,750 yields 9.7872%. That percentage times $766.7 million yields $75,039,000 million. So the amount to be securitized would be less. Not a very significant source of cash.

    "Tesla has bond debt 150 % of the revenue, the operating cash flow is negative,"

    Tesla's bond debt is $2.4 billion and its 2014 revenue was $3.2 billion. Its bond debt was 75% of revenue.

    GAAP operating cash flow for 2014 was a negative $57 million, but taking into consideration that some development expenses should be capitalized, rather than expensed, I think its operating cash flow was positive for all of 2014.

    You said Tesla had negative EBITDA, also, which isn't true. What's up?
    Apr 11, 2015. 05:16 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    Your original comment:

    ""Over 95% of their wholesale is to their own stores. They record the new car sale to the store/showroom/service centers on delivery to the store, not when the store sells it to a customer."

    The sale from Tesla to the store/showroom/serve center is a sale from Tesla to Sub A. This is an intercompany sale. The delivery to Sub A is an intercompany transaction. As I have already explained, intercompany transactions are eliminated for consolidation, so that no revenue, cost of sales, gross profit, or reduction in inventory is reflected for this sale on the consolidated financial statements. When the consolidated financial statements are prepared, the car is still in inventory on Tesla's books, as a result. That is clear from what I have stated and that is backed up from the accounting texts I have provided a link to. Therefore, if the car is still in inventory, the delivery to the showroom/service center (Sub A) is not counted by Tesla in the 10030 deliveries it reported recently, IMO.

    The 10030 deliveries represent actual sales which are reflected on Tesla's consolidated financial statements, IMO. I don't think any intercompany transactions are in the 10030 deliveries. That would be misleading. I see no reference to demo/loaners in the press release.

    http://bit.ly/1BVZyCw

    This is supported by the 10-K, see page 5:

    "We began customer deliveries in June 2012. As of December 31, 2014, we had delivered almost 57,000 Model S vehicles."

    http://1.usa.gov/1GDd6Jo

    When Tesla says it has delivered 57,000 Model S vehicles, it is stated here in context of "customer deliveries". Sub A, or a Tesla owned show room/service center is not a "customer". Tesla owns the showrooms/service centers, which means they are part of Tesla, as a group, whether they are separate companies with different tax IDs makes no difference. They are 100% owned by Tesla and are subsidiaries of Tesla. When consolidated financials are prepared, all intercompany transactions of inventory between parent and subs, upstream or downstream, are eliminated so that the financials reflect only those transactions of Tesla as a group, parent and subs.

    So, when Tesla says it delivered 10030 vehicles for the quarter, I interpret that in the same context, "customer deliveries", not deliveries to a showroom/service center. The deliveries to a showroom/service center are intercompany transactions. As already stated a number of times, all intercompany transactions relating to inventory purchases, downstream or upstream, are eliminated on the consolidated financials.

    In your example, the $100K sale from Tesla to a showroom/service center is an intercompany transaction which is eliminated for consolidation. The only sale that shows up on the consolidated financials is the $90K sale to a retail customer. The car is still in inventory until the sale to the retail customer. (Intercompany transaction is eliminated, which means the cost of goods sold for the intercompany transaction is eliminated, which means the car is still in inventory.) There is no loss, assuming it cost $80K to make the car.

    We have beat this horse to death. That is my final comment.
    Apr 11, 2015. 01:08 PM | 1 Like Like |Link to Comment
  • Tesla Convertibles: A Debacle In The World Of Bonds? [View article]
    @petteri,

    "Negative EDITDA."

    Net Loss ($294) + Depreciation $231 + Interest Exp $100 = $37 million POSITIVE EBITDA. What am I missing? What are the taxes, income or other? Income taxes were $9 million.
    Apr 11, 2015. 12:49 AM | 1 Like Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    "But TSLA does not count both sales as revenue. TSLA counts one time sale but they lost $10k on that same NEW CAR sale because the SUB A collected only $90k, not $100 from the retail customer ! You already admitted that the DEMO car that did arrived in Germany on March 31st has been included in the 10030 units delivered in Q1 2015. So there is no double counting at all, correct ? "

    No, you have no understanding of the accounting. I'm done. Read the accounting texts, they are clear as a bell. All intercompany transactions of inventory are eliminated for consolidation. No sale takes place until a car is sold to an unrelated party (non-Tesla owned entity). Sub A IS A RELATED PARTY. Done.
    Apr 10, 2015. 11:59 PM | 1 Like Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    "That is incorrect !!! The DEMO car is still in the SUB A showroom and as of Apr 10th 2015 that car is not sold yet to a retail customer yet ! The consolidation happens when that DEMO car is sold as USED. Here is the example. On March 31st TSLA Fremont receives $100k from SUB A in Germany. On Apr 10th SUB A sells that DEMO car for $90k to a retail customer. The SUB A records $10k loss on that sale. Where do you see double sale of the same car for TSLA Fremont ????"

    The Tesla sale to Sub A and the Sub A sale to retail customer on April 10. If Tesla counts both sales as revenue, it is double counting. The Tesla sale to Sub A on March 31 is an intercompany sale. It is eliminated during consolidation. I have gone over and over on this and you still don't get it. I have provided accounting texts which back up what I am saying. Yet, you are saying, "INCORRECT!". No, I am correct in what I am saying. You don't understand the accounting texts. All you have is an opinion which is not credible. I am done.
    Apr 10, 2015. 11:38 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    "Thanks, Now since we are on the same page lets see in which Q that car will be reported. TSLA said few day ago that they delivered 10030 cars in Q1 2015. Can you say if that DEMO car that arrived in SUB A in Germany on March 31st 2015 , is part of those 10030 or not ? "

    If Sub A sells it to a 3rd party (non-Tesla owned entity) on March 31, then it will show up in Tesla revenue in the First Quarter. IF that occurs, then Tesla has recorded a sale of that car to Sub A, and Sub A has recorded the sale of the same car to a customer. See the problem? If both Tesla and Sub A record a sale of the same car, it will be double counting. The intercompany sale, Tesla to Sub A, has to be eliminated in the consolidation process so that, as a group, Tesla and Sub A only report the sale once.

    If Sub A does not sell the car on March 31 to an unrelated 3rd party, then Tesla has recorded a sale to Sub A, but it is an intercompany sale. It has to be reversed or eliminated for consolidation (group) purposes. As a group (Tesla and Sub A), no sale of the car has been made to an unrelated party, and no revenue is recognized on Tesla's consolidated financial statements.

    See pages 145 and 146 in link. Everything I have said is based on FASB accounting guidance. Ultimately, as a group, no sale takes place until the car is sold to an unrelated party (non-Tesla owned entity).

    http://bit.ly/1I12SB6
    Apr 10, 2015. 11:16 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    "When the DEMO car , sitting in the showroom, that the duty was paid on March 31th 2015 in Germany will be recorded as a sold in TSLA statement to investors , in Q1 15 or later ? If later , when will that be, before that car is sold as used to a retail customer, or on the date the retail customer drives off with it ?


    Thanks. "

    The thing is, "Sub A" is wholly owned by the parent, Tesla. Because that is true, the consolidated financial statements eliminate intercompany transactions. Tesla selling to Sub A is selling to itself, it is an intercompany transaction. So, Tesla records intercompany revenue when they sell the car, and Sub A records the cars it purchases from Tesla as Inventory. But these are intercompany transactions and are accounted for as I have stated.

    Sub A is part of Tesla. It is not an independent company. Read the SEC reports. The stores/service centers are owned by Tesla. Read the link I gave you. All intercompany transactions are eliminated during consolidation. Selling cars to subsidiaries is selling to yourself. It is the same with any other company. Talk to a CPA.
    Apr 10, 2015. 10:32 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    Think of it from a common sense angle. Tesla sells 100 new cars to "subsidiary A". Then sub A sells the same cars back to Tesla. Then repeat over and over. How much cash flow has this generated? Nada. The same money keeps changing hands. You may not realize it, but this is what you are advocating, counting intercompany sales as legitimate revenue. What it amounts to is selling to yourself and counting the exchange as a sale. You don't understand the accounting, and obviously have never taken an advanced accounting course where this is covered.

    Find me any authoritative accounting source that shows what you are advocating is legal. I have provided authoritative support for what I am saying. You have provided just your opinion.
    Apr 10, 2015. 09:53 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    "Ok, so to be on the same page please tell me when the DEMO car that the duty was paid on March 31th 2015 in Germany will be recorded as a sold in TSLA statement to investors , in Q1 15 or later ? If later , when will that be, before that car is sold as used to a retail customer, or on the date the retail customer drives off with it?"

    A sale occurs and revenue is recorded, on a consolidated basis, when the car is sold to a non-Tesla owned entity, be that a person, a company that has a leasing fleet, whoever.

    Tesla states that their stores/service centers are "company owned" which means either they are branches or separate companies which are wholly owned by Tesla. Assuming the stores/service centers are separate companies which are subsidiaries of Tesla, then there would be sales of cars from Tesla to the subsidiaries. But these "sales" are intercompany sales, identified in the accounts by both parties so that elimination can take place for consolidation purposes.

    The actual intercompany transactions and eliminations are rather complicated, but what it amounts to is eliminating all intercompany sales, intercompany cost of goods sold, intercompany gross profit on inventory sold to the subsidiaries which is sold to 3rd parties during the period, and intercompany inventory sold to the subsidiaries but still not sold to 3rd parties at the end of the year.

    Look at the example in the link I provided, page112. It is exactly as I have described in this last paragraph.
    Apr 10, 2015. 09:20 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    "@Bryce_in_TX

    Bryce I am not disputing accounting rules, I am disputing when NEW cars sales are recorded on the TSLA DEMO cars, you are mixing the topics...."

    Revenue is recorded on a consolidated basis when the cars are sold to a non-Tesla owned entity, PERIOD. There may be an intercompany sale, Tesla to a store, but that sale/revenue, profit, and cost of goods sold are eliminated during the consolidation process. The inventory unsold to a non-Tesla entity remains on the consolidated company's books. Look at the example in the book.
    Apr 10, 2015. 03:25 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    I have explained how the accounting works, that there can be intercompany profits and losses, but those are eliminated during consolidation, US and international, all together. I've done consolidations for a US oil/gas drilling company that had a Norwegian subsidiary. You don't accept facts or accounting rules. I suggest rereading what I quoted from the accounting books. You don't know accounting. Bryce out.
    Apr 10, 2015. 03:11 PM | Likes Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    "You are missing my point. "

    I don't think so. Tesla, the parent, may record an intercompany profit on a sale to the store, but if the store is owned by Tesla, that is if the store's financials are consolidated with Tesla, the parent, then that intercompany profit is eliminated during the consolidation, per what I have cited already from the accounting books.

    You may call Tesla IR and they may say they record a profit, but I bet it is an intercompany profit, eliminated during consolidation for financial statement purposes. If not, IMO, it's fraud.
    Apr 10, 2015. 02:52 PM | Likes Like |Link to Comment
  • Headwinds For New Tesla Financing: Estimates Declining And P/E Multiples At Historic Peak [View article]
    @Davewmart,

    "Personally I don't like their practices, which skate right on the edge, and in previous cases when companies with similar practises have been wound up a lot of rotten fish have been discovered"

    I see this as well. It does concern me.
    Apr 10, 2015. 02:40 PM | 1 Like Like |Link to Comment
  • Tesla Has Outed The Good News Early, Now What? [View article]
    @mikestesla,

    From "International Accounting" textbook, pages 110-112:

    "Intercompany sales of merchandise are a natural outgrowth of vertical business combinations, which involve a combinor and one or more of its customers or suppliers as combines. Intercompany sales of merchandise from a parent to its subsidiaries are termed 'downstream' sales and 'upstream' sales are sales from subsidiaries to the parent. When intercompany sales are made between two affiliates of the same parent company, these are termed as 'lateral' sales. Intercompany sales between parent and subsidiary or between two subsidiaries on a cost plus basis, may have a margin either equal to, more than, or less than sales to outsiders. In such situations, the selling affiliate's intercompany gross profit is realized only when the purchasing subsidiary sells the merchandise to outsiders."

    http://bit.ly/1ciR978

    The advanced accounting book I have says the same:
    "Many business transactions between a parent company and its subsidiaries involve a profit (gain) or loss. Among these transactions are intercompany sales of merchandise, intercompany sales of plant assets, intercompany leases of property under capital/sales-type leases, and intercompany sales of intangible assets. Until intercompany profits or losses in such transactions are realized through the sale of the asset to an outsider or otherwise, the unrealized profits or losses must be eliminated in the preparation of consolidated financial statements."

    You don't record a sale until a non-Tesla entity buys the car or cars. The parent and subsidiary entities will have different tax IDs in this situation.
    Apr 10, 2015. 02:19 PM | Likes Like |Link to Comment
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