Understanding Corporate Annual Reports

GENERAL INFORMATIONLeo Tjakralaksana

Battery Operated Car

• Uses Lithium-Ion2012 super charge

network being providedDesign

• ElegantComfort

• Tablet as command screen

Model S

Sedan

Starting price (69,900)

Roadster

• Sport car-discontinued

• Starting price (59,900)

Model X

• To be released• SUV

• Price is to be announced

ACCOUNTING AND FINANCENick Shmelev

Tesla follows Generally Accepted Accounting Principles.Tesla is audited by Pricewaterhouse Coopers LLC.Tesla uses the straight-line method for :

•Calculating depreciation

•revenues on lease vehicles

• stock based compensations

•development compensation and

costs

• Tesla uses LIFO method to value inventories, which are valued at lower cost of market.

• At the beginning (2007-2008), Tesla had negative stockholders equity.

• However, in 2009 Tesla had positive stock holders equity.

Financial Performance

• Tesla began earning revenue in 2007, selling $73000

worth of powertrains.

• Tesla also earns revenue by selling Zero Emission Vehicle

Credits to other companies.

• Tesla is famous for their electric vehicles, the Tesla

Roadster, Model S, and the soon to be Model X

• However, Tesla had negative operating margins for the

first 3 years.

Financial Disclosures

• Tesla started selling developmental services it provides

to other companies

• Tesla also has future contractual liabilities which are not

noted on the financial statements (Purchase of a facility

and a contract with Lotus)

• Tesla does not pay dividends, and has no intention to do

so in the future

Financial Health

• We have a positive look for Tesla's future.

• Their cars are popular, safe, and are becoming mainstream electric cars

• In 2012 Tesla started to finally generate positive cash flow,

but the company was also increasing it's debt to a projected

$392.5M in 2013.

• The Model S is quickly becoming one the most popular

car on the streets, and is the best electric vehicle out there.

Capital Stock Mie Takahashi

Tesla’s Stock• The Nasdaq Stock

Market LLC since June 29, 2010

• The initial price per stock was 17 dollars.

• It has been increasing since 2012.

• It reached highest price: $252.94 at 3/6/2014

Stock information

It is worth seven times as much as last yearIts total value was over $30 billion (2/25/14)

Preferred Stock

• Authorized: 100,000,000

• Issued outstanding: None

Common Stock• Authorized : 2,000,000.000

• Issued and outstanding: 123,191,938 (January 31, 2014)

• $0.001 par value

• Treasury stocks: None

Strategic or Commercial Relationships

• Daimler AG

Blackstar lnvestco LLC, an affiliate of Daimler, owned 4,867,929 shares of CS

• Toyota

2,941,176 shares of CSat $17.00 per share in July 2010 .

• Panasonic

1,418,573 shares of CS to an entity affiliated with Panasonic at $21.15 per share in November 2010.

Dividends and stock split

• Tesla is not a dividend-paying company.

• No stock split since June 29, 2010

SWOT AnalysisPierce McManus

• Battery Technology

• Proven Sales

• Current monopoly

• Production value/design

Strengths

Weaknesses

• Failing sales model

• Unreliable production

• Limited current growth

• Increasing costs of production

Opportunities

• Acquisition of a lower cost market

• Focus upon foreign sales

• Marketing/Advertising

Threats

• Competition in the market

• State legislation

• Public perception

MARKETINGValeria Gomez

Market description

Tesla can fall under three specific markets:Luxury vehicles

All-electric vehiclesSport cars

Product Review

Model S-Three main options:

•60 kWh

•85 kWh

•85 kWh Performance

Channels & Logistics

• Tesla streamlines the buying process for consumers

• Test drives are “delivered” to customers

• “Tesla Store” marketing platform: 30 stores nationwide

In United States

In Europe

In Asia

Positioning

• Different driving experiences

• Environmentally responsible,

sustainable energy future.

• Fully electric cars at a price affordable to the

average consumer

Product

• The model S as a revolutionary luxury sedan that does not compromise technology, efficiency, style, performance or the environment.

Pricing

• Buying system is unique because it all happens through their website; sells expensive vehicles now with mainstream ambitions

Distribution

• Tesla has changed the dreaded experience of buying a car:

• Galleries in highly populated shopping centers

• Buying experience tailored to costumer’s life schedule

INVEST IN TESLA? Reiner Bennardo Riatan

In 2012:

• Net Loss: $396.213 M

• Cash: ($53.376 M)

“Tesla announced that it achieved profitability in the first quarter of 2013

for the first time in history”- Mashable, April 1 ,2013 -

Tesla’s stock price 2012-2014

$35,000 – 200 miles E Model will come within 3-4 years

How?Why do investors care?

Nasdaq’s recommendation

NEWS & CURRENT EVENTS

Brad Nicholl

Future Factory Plans

• Production numbers of electric vehicles:• 2013: 22,300 units

• 2014 estimate: 40,000 units

• 2020 desired output: 500,000 units

• Lithium-Ion Battery-Supply Shortage• Limited supply of batteries causes limitations:• Sales of Toyota Prius (2009, 2011)

• Preventing expansion

“The Gigafactory” Plan

• A factory to produce lithium-ion batteries will:• Overcome the shortage of lithium-ion batteries

• Reduce costs of batteries by more than 30%

• Costs of the factory:• Between $4 billion to $5 billion• $2 billion from Tesla Motors

• $3 billion from partners

(Panasonic & material suppliers)

through 2020

Factory details and requirements:

• Facility Area: 10 million square feet

• Total Land Area: 500 acres to 1000 acres

• Total Factory Employees: 6500

• Powered by: Solar & wind power

• Transportation (to California) by: Freight train

Possible & ideal locations:

Arizona, Nevada, New Mexico, or Texas

Issuance of Convertible Bonds

What is a convertible bond?• Ability to convert the bond to stock shared• Potential to benefit from an increase in share price

• Share price must be above conversion premium/price• Conversion rate, price, & premium are all directly related

Issuance of Convertible Bonds

• Additional stock issued will dilute the share price

• No interest payments received after conversion

• No maturity (principal) value received if converted

• Allows corporations to offer lower interest rates

• Bonds converted reduce the corporation’s liabilities

• Callable: Corp. generally has power to force conversion

Issuance of Convertible

Bonds• Tesla needed to raise funds to finance the massive

battery factory and expand operations

• Planned to raise $1.6 billion

• Raised $2 billion due to excess demand, issuing:

• $800 million convertible bonds issued @ 0.25% due 2019

• $1.2 billion convertible bonds issued @ 1.25% due 2021

• Details of the convertible bonds:

• Conversion Premium: 42.5% above last reported share price on pricing date (2/27/14 = $252.54)

• Conversion Price: $359.87/share ($252.54 x 1.425)

• Conversion Rate: 2.7788 shares/$1000 bond (1000/359.87)

• Senior Note status: Takes precedence over other debt

Issue With Direct-Sales Method

Direct-sales method• Selling Tesla vehicles

directly to costumers through Tesla dealerships

• Skips the “middleman,” independent dealerships

• Creates a better experience and increased understanding of the Tesla electric vehicles

Issue With Direct-Sales Method

States that have banned Tesla’s direct-sales method:

• Arizona, Texas, & recently New Jersey, with others possibly to join in the future

Why ban direct-sales method?

• Hurts established, independent dealerships

• Fear of similar tactics from foreign automakers

• Campaign money received

from a dealers association

• Solutions to bans on direct-sales method

• Display rooms only

• Limit to cars displayed depending on state law on ban

• Ability to test-drive depends on state law on ban

• Purchasing information cannot be provided

• Customers must purchase via online

QUESTIONS

Prize: Bluetooth

• Which Tesla’s car has been discontinued?

a)Model S

b)Model X

c)Roadster

d)Model E

Prize: Key Finder

• What Type of bonds is Tesla planning to sell?

a)Convertible

b)Debenture

c)Callable

d)Treasury