##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 28, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-31687
 EVERGREEN SOLAR, INC.
  Delaware
(State or other jurisdiction of 
Incorporation or organization)
    
    04-3242254
(I.R.S. Employer
Identification No.)138 Bartlett Street 
Marlboro, Massachusetts
    
    01752(Address of principal executive offices)
    
    (Zip Code)
 (508) 357-2221
 þ o
  Large accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



EVERGREEN SOLAR, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 2008
 TABLE OF CONTENTS
 Forward Looking Statements
    
    
    1Part I. Financial Information
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    21Item 3.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    33Part II. Other Information
    
    
    33Item 1.
    
    Legal Proceedings
    
    
    33Item 1A.
    
    Risk Factors
    
    
    33Item 4.
    
    Submission of
Matters to a Vote of Security Holders
    
    
    37Item 6.
    
    Exhibits
    
    
    37Signatures
    
    
    
    
    39Exhibits:Ex-10.1 Master Supply Agreement, dated May 21, 2008Ex-10.2 Master Supply Agreement, dated June 18, 2008Ex-10.5 Share Lending Agreement, dated June 26, 2008Ex-10.6 Capped Call Transaction Agreement, dated June 26, 2008Ex-31.1 Section 302 Certification of CEOEx-31.2 Section 302 Certification of CFOEx-32.1 Section 906 Certification of CEOEx-32.2 Section 906 Certification of CFO




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
 This Quarterly Report on Form 10-Q , including Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 2 of this report and the documents
incorporated by reference herein, contain forward-looking statements that involve risks,
uncertainties and assumptions, including those discussed in Item 1A. Risk Factors of this Quarterly
Report on Form 10-Q and in Item 1A. Risk Factors of the Companys Annual Report on Form 10-K filed
with the SEC on February 27, 2008 and amended on April 29, 2008. If the risks or uncertainties ever
materialize or any of the assumptions prove incorrect, our results will differ from those expressed
or implied by such forward-looking statements and assumptions. All statements other than statements
of historical fact are statements that could be deemed forward-looking statements, including but
not limited to statements regarding:
 
    
    our future growth, revenue, earnings and gross margin improvement;
    
    the Devens facility expansion and other potential capacity expansions, and the timing of
such facilities becoming fully operational and meeting manufacturing capacity goals on
schedule and within budget;
    
    capital requirements to respond to competitive pressures and acquire complementary
businesses and necessary technologies;
    
    costs associated with research and development, building or improving manufacturing
facilities, general and administrative expenses and business growth;
    
    the demand and market for solar energy, shifts in our geographic product revenue mix, and
our position in the solar power market;
    
    the volume of photovoltaic solar panels we will produce;
    
    the making of strategic investments and expansion of strategic partnerships,
manufacturing operations and distribution networks; and the future benefit of these
activities;
    
    operating efficiency of manufacturing facilities, including increases in manufacturing
scale and technological improvements needed to continuously reduce the cost per watt to
manufacture our products;
    
    the sufficiency of our cash, cash equivalents, marketable securities; the establishment
of a new revolving credit facility; access to capital markets to satisfy our anticipated
cash requirements; and possible sales of securities and our planned use of proceeds from
such sales;
    
    revenue from customer contracts primarily denominated in Euros that are subject to
foreign currency exchange risks from and the use of derivative financial instruments to
manage those risks;
    
    future plans and benefits from the EverQ joint venture, including the expansion of
EverQs manufacturing capacity and its initial public offering;
    
    our receipt or EverQs receipt of public grant awards and other government funding to
support our expansion or EverQs expansion;
    
    our expectations regarding product performance and cost and technological competitiveness;
    
    our ability to obtain key raw materials, including silicon supply from our suppliers;
    
    the benefits of our proprietary technology and new manufacturing and other developments,
including our quad wafer furnace design and continued enhancements of our wafer, cell and
panel production technologies; and
 1




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##### Table of Contents




    
    the payment of any cash dividends.
 These statements may be identified with such words as we expect, we believe, we
anticipate or similar indications of future expectations. These statements are neither promises
nor guarantees and involve risks and uncertainties, which could cause our actual results to differ
materially from such forward-looking statements. Such risks and uncertainties may include, among
other things, macroeconomic and geopolitical trends and events, the execution and performance of
contracts by distributors, suppliers and other partners, and other risks and uncertainties
described herein, including but not limited to the items discussed in Item 1A. Risk Factors in our
Annual Report on Form 10-K for the period ended December 31, 2007 filed on February 27, 2008 and
amended on April 29, 2008. We caution readers not to place undue reliance on any forward-looking
statements contained in this Quarterly Report, which speak only as of the date of this Quarterly
Report. We disclaim any obligation to update publicly or revise any such statements to reflect any
change in our expectations, or events, conditions, or circumstances on which any such statements
may be based, or that may affect the likelihood that actual results will differ from those set
forth in such forward-looking statements.
 2




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 Evergreen Solar, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
 December 31,
    
    
    June 28,2007
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    29,428
    
    
    $
    49,634Marketable securities
    
    
    70,275
    
    
    
    19,174Restricted cash
    
    
    41,000
    
    
    
    24,000Accounts receivable, net of allowances for doubtful accounts
    
    
    9,297
    
    
    
    9,133Grants receivable
    
    
    5,818
    
    
    
    9,557Inventory
    
    
    8,094
    
    
    
    7,681Prepaid cost of inventory
    
    
    
    
    
    
    9,141VAT receivable, net
    
    
    10,549
    
    
    
    7,891Other current assets
    
    
    7,729
    
    
    
    8,951Total current assets
    
    
    182,190
    
    
    
    145,162Investment in and advances to EverQ
    
    
    87,894
    
    
    
    100,524Restricted cash
    
    
    414
    
    
    
    236Deferred financing costs
    
    
    1,991
    
    
    
    1,770Loan receivable from silicon supplier
    
    
    21,904
    
    
    
    47,247Prepaid cost of inventory
    
    
    143,035
    
    
    
    157,397Fixed assets, net
    
    
    114,641
    
    
    
    259,652Other assets
    
    
    1,186
    
    
    
    2,057Total assets
    
    $
    553,255
    
    
    $
    714,045Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    57,005
    
    
    $
    41,181Capped call installment premiums due  current portion
    
    
    
    
    
    
    37,146Accrued employee compensation
    
    
    4,875
    
    
    
    4,849Accrued interest
    
    
    1,969
    
    
    
    1,969Accrued warranty
    
    
    705
    
    
    
    887Other current liabilities
    
    
    5,408
    
    
    
    11,812Total current liabilities
    
    
    69,962
    
    
    
    97,844Subordinated convertible notes
    
    
    90,000
    
    
    
    90,000Capped call installment premiums due
    
    
    
    
    
    
    18,001Deferred income taxes
    
    
    
    
    
    
    10,317Total liabilities
    
    
    159,962
    
    
    
    216,162Commitments and Contingencies (Notes 7, 8 and 9)Stockholders equity:Preferred stock, $0.01 par value, 27,227,668 shares authorized
    
    
    
    
    
    
    Common stock, $0.01 par value, 250,000,000 shares authorized,
102,252,965 and 152,450,054 issued and outstanding at
December 31, 2007
and June 28, 2008, respectively
    
    
    1,023
    
    
    
    1,524Additional paid-in capital
    
    
    521,695
    
    
    
    630,471Accumulated deficit
    
    
    (136,280
    )
    
    
    (145,227
    )Accumulated other comprehensive income
    
    
    6,855
    
    
    
    11,115Total stockholders equity
    
    
    393,293
    
    
    
    497,883Total liabilities and stockholders equity
    
    $
    553,255
    
    
    $
    714,045
  3




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##### Table of Contents



Evergreen Solar, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 Quarter ended
    
    
    Year-to-date Period EndedJune 30,
    
    
    June 28,
    
    
    June 30,
    
    
    June 28,2007
    
    
    2008
    
    
    2007
    
    
    2008Product revenues
    
    $
    13,407
    
    
    $
    18,118
    
    
    $
    26,034
    
    
    $
    36,377Royalty and fee revenues
    
    
    1,985
    
    
    
    4,638
    
    
    
    3,456
    
    
    
    9,326Total revenues
    
    
    15,392
    
    
    
    22,756
    
    
    
    29,490
    
    
    
    45,703Cost of revenues
    
    
    11,952
    
    
    
    14,863
    
    
    
    23,221
    
    
    
    30,094Gross profit
    
    
    3,440
    
    
    
    7,893
    
    
    
    6,269
    
    
    
    15,609Operating expenses:Research and development
    
    
    5,233
    
    
    
    5,887
    
    
    
    10,368
    
    
    
    10,830Selling, general and administrative
    
    
    5,447
    
    
    
    5,894
    
    
    
    10,276
    
    
    
    10,886Facility start-up and equipment write-offs
    
    
    
    
    
    
    11,281
    
    
    
    
    
    
    
    16,562Total operating expenses
    
    
    10,680
    
    
    
    23,062
    
    
    
    20,644
    
    
    
    38,278Operating loss
    
    
    (7,240
    )
    
    
    (15,169
    )
    
    
    (14,375
    )
    
    
    (22,669
    )Other income (expense):Foreign exchange gains (losses), net
    
    
    145
    
    
    
    (158
    )
    
    
    744
    
    
    
    3,656Interest income
    
    
    2,160
    
    
    
    2,735
    
    
    
    3,410
    
    
    
    5,762Interest expense
    
    
    (927
    )
    
    
    (46
    )
    
    
    (1,836
    )
    
    
    (362
    )Other income, net
    
    
    1,378
    
    
    
    2,531
    
    
    
    2,318
    
    
    
    9,056Loss before equity income (loss)
    
    
    (5,862
    )
    
    
    (12,638
    )
    
    
    (12,057
    )
    
    
    (13,613
    )Equity income (loss) from interest in EverQ
    
    
    (1,646
    )
    
    
    3,716
    
    
    
    (1,670
    )
    
    
    4,666Net loss
    
    $
    (7,508
    )
    
    $
    (8,922
    )
    
    $
    (13,727
    )
    
    $
    (8,947
    )Net loss per share (basic and diluted)
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.18
    )
    
    $
    (0.08
    )Weighted average shares used in computing basic and
diluted net loss per share
    
    
    82,562
    
    
    
    118,327
    
    
    
    74,824
    
    
    
    113,625
  4




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Evergreen Solar, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 Year-to-date Period EndedJune 30,
    
    
    June 28,2007
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (13,727
    )
    
    $
    (8,947
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation expense
    
    
    3,265
    
    
    
    8,577Loss on disposal of fixed assets
    
    
    
    
    
    
    1,943Equity (income) loss from EverQ
    
    
    1,670
    
    
    
    (4,666
    )Amortization of deferred debt financing costs
    
    
    222
    
    
    
    147Imputed interest and accretion of bond premiums
    
    
    (256
    )
    
    
    (994
    )Compensation expense associated with employee equity awards
    
    
    3,166
    
    
    
    3,398Provision for warranty
    
    
    
    
    
    
    182Changes in operating assets and liabilities:Accounts receivable
    
    
    8,763
    
    
    
    164Grants receivable
    
    
    
    
    
    
    10,000Inventory
    
    
    (215
    )
    
    
    413Prepaid cost of inventory
    
    
    
    
    
    
    (22,719
    )Interest receivable
    
    
    (424
    )
    
    
    203Other current assets
    
    
    (267
    )
    
    
    1,433Accounts payable
    
    
    (3,502
    )
    
    
    (13,590
    )Interest payable
    
    
    1,968
    
    
    
    (1,784
    )Other current liabilities
    
    
    370
    
    
    
    2,014Other
    
    
    
    
    
    
    (4,118
    )Net cash provided by (used in) operating activities
    
    
    1,033
    
    
    
    (28,344
    )Cash flows from investing activities:Purchases of fixed assets and deposits on fixed assets under construction
    
    
    (13,095
    )
    
    
    (165,652
    )Decrease (increase) in restricted cash
    
    
    (41,000
    )
    
    
    17,178Decrease in EverQ loan
    
    
    269
    
    
    
    Increase in loan receivable from silicon supplier
    
    
    
    
    
    
    (22,164
    )Purchases of marketable securities
    
    
    (21,327
    )
    
    
    (1,501
    )Proceeds from sale and maturity of marketable securities
    
    
    28,575
    
    
    
    52,806Net cash used in investing activities
    
    
    (46,578
    )
    
    
    (119,333
    )Cash flows from financing activities:Proceeds from the issuance of common stock, net of offering costs
    
    
    171,467
    
    
    
    166,726Proceeds from exercise of stock options and warrants, and
shares purchased under Employee Stock Purchase Plan
    
    
    734
    
    
    
    1,157Net cash provided by financing activities
    
    
    172,201
    
    
    
    167,883Net increase in cash and cash equivalents
    
    
    126,656
    
    
    
    20,206Cash and cash equivalents at beginning of period
    
    
    6,828
    
    
    
    29,428Cash and cash equivalents at end of period
    
    $
    133,484
    
    
    $
    49,634Supplemental cash flow information:Non-cash cost of prepaid inventory
    
    
    119,914
    
    
    
    
  5




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Evergreen Solar, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Basis of Presentation
       6




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##### Table of Contents



2. Net Loss per Common Share
   3. Cash and Marketable Securities
    December 31,
    
    
    June 28,2007
    
    
    2008Cash
    
    $
    23,362
    
    
    $
    21,542Money market funds
    
    
    1,908
    
    
    
    28,057Certificates of deposits
    
    
    1,161
    
    
    
    35Commercial paper
    
    
    2,997
    
    
    
    Subtotal cash and cash equivalents
    
    
    29,428
    
    
    
    49,634Asset backed securities
    
    
    2,982
    
    
    
    3,004Commercial paper
    
    
    41,490
    
    
    
    Corporate bonds
    
    
    25,803
    
    
    
    16,170Subtotal marketable securities
    
    
    70,275
    
    
    
    19,174Total cash, cash equivalents and marketable securities
    
    $
    99,703
    
    
    $
    68,808
 7




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##### Table of Contents



4. Inventory
  December 31,
    
    
    June 28,2007
    
    
    2008Raw materials
    
    $
    6,468
    
    
    $
    6,396Work-in-process
    
    
    1,014
    
    
    
    878Finished goods
    
    
    612
    
    
    
    407$
    8,094
    
    
    $
    7,681Prepaid cost of inventory
    
    $
    143,035
    
    
    $
    166,538Less: current portion
    
    
    
    
    
    
    9,141Noncurrent portion
    
    $
    143,035
    
    
    $
    157,397
   8




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##### Table of Contents



5. Fixed Assets
  Useful
    
    
    December 31,
    
    
    June 28,Life
    
    
    2007
    
    
    2008Laboratory and manufacturing
equipment
    
    3-7 years
    
    $
    53,323
    
    
    $
    66,505Computer and office equipment
    
    3-7 years
    
    
    1,320
    
    
    
    1,671Leasehold improvements
    
    Lesser of 15 to 20
    
    
    13,592
    
    
    
    13,770years or lease termAssets under construction
    
    
    
    
    
    
    67,125
    
    
    
    206,528135,360
    
    
    
    288,474Less: Accumulated depreciation
    
    
    
    
    
    
    (20,719
    )
    
    
    (28,822
    )$
    114,641
    
    
    $
    259,652
    6. Investment in EverQ
   9




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Quarter Ended
    
    Year-To-Date Period EndedJune 30,
    
    June 28,
    
    June 30,
    
    June 28,2007
    
    2008
    
    2007
    
    2008Revenue
    
    $
    31,300
    
    
    $
    91,972
    
    
    $
    58,901
    
    
    $
    174,246Cost of goods sold
    
    
    29,352
    
    
    
    69,598
    
    
    
    51,143
    
    
    
    136,465Other expenses
    
    
    6,885
    
    
    
    12,355
    
    
    
    12,767
    
    
    
    23,782Net income (loss)
    
    
    (4,937
    )
    
    
    10,019
    
    
    
    (5,009
    )
    
    
    13,999
 December 31,
    
    June 28,2007
    
    2008Current assets
    
    $
    205,460
    
    
    $
    224,763Non-current assets
    
    
    350,155
    
    
    
    414,954Current liabilities
    
    
    141,068
    
    
    
    164,880Non-current liabilities
    
    
    282,293
    
    
    
    317,195
  Evergreen Solar Loans to EverQ
  Date of Loan
    
    Principal (EUR)
    
    Principal (USD)
    
    Interest Rate
    
    Date DueJanuary 25, 2007
    
    30,000,000
    
    $
    47,247,000
    
    
    
    5.43
    %
    
    December 31, 2009
 7. Long-Term Debt
 Subordinated Convertible Notes
  Conversion Option
  10




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Redemption Period
    
    Price (%)Beginning on July 1, 2010 and ending on June 30, 2011
    
    
    101.250Beginning on July 1, 2011 and ending on June 30, 2012
    
    
    100.625
    Senior Convertible Notes
 Capped Call
   11




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##### Table of Contents



Capped Call
    Common
Stock Lending Agreement
 8. Line of Credit
  9. Guarantor Arrangements
  Product Warranty
  12




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Balance at December 31, 2007
    
    $
    705Warranty costs accrued
    
    
    182Balance at June 28, 2008
    
    $
    887
 EverQ Debt Guarantee
  10. Fair Value Measurements
   Valuation Hierarchy
     13




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##### Table of Contents



Using Significant
    
    Using SignificantTotal
    
    Quoted Prices in
    
    Other Observable
    
    UnobservableCarrying
    
    Active Markets
    
    Inputs
    
    InputsValue
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Money markets
    
    $
    28,057
    
    
    $
    28,057
    
    
    $
    
    
    
    $
    Certificate of deposit
    
    
    35
    
    
    
    
    
    
    
    35
    
    
    
    Marketable securities
    
    
    19,174
    
    
    
    
    
    
    
    19,174
    
    
    
    
 Valuation Techniques
  11. Stockholders Equity
    14




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Common Stock Lending Agreement
   12. Comprehensive Income (Loss)
  Quarter Ended
    
    
    Year-To-Date Period EndedJune 30,
    
    
    June 28,
    
    
    June 30,
    
    
    June 28,2007
    
    
    2008
    
    
    2007
    
    
    2008Net loss
    
    $
    (7,508
    )
    
    $
    (8,922
    )
    
    $
    (13,727
    )
    
    $
    (8,947
    )Other comprehensive income (loss):Unrealized gain (loss) on marketable securities
    
    
    2
    
    
    
    (69
    )
    
    
    4
    
    
    
    (3
    )Cumulative translation adjustments
    
    
    291
    
    
    
    150
    
    
    
    522
    
    
    
    4,263Total comprehensive loss
    
    $
    (7,215
    )
    
    $
    (8,841
    )
    
    $
    (13,201
    )
    
    $
    (4,687
    )
 13. Stock Based Compensation
 15




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Quarter Ended
    
    
    Year-to-Date Period EndedJune 30,
    
    
    June 28,
    
    
    June 30,
    
    
    June 28,2007
    
    
    2008
    
    
    2007
    
    
    2008Cost of revenue
    
    $
    199
    
    
    $
    229
    
    
    $
    344
    
    
    $
    476Research and development expenses
    
    
    412
    
    
    
    381
    
    
    
    773
    
    
    
    723Selling, general and
administrative expenses
    
    
    1,078
    
    
    
    1,003
    
    
    
    2,049
    
    
    
    1,732Facility start-up
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    467$
    1,689
    
    
    $
    1,865
    
    
    $
    3,166
    
    
    $
    3,398
 Stock Incentive Plan
   Weighted-AverageShares
    
    
    Exercise Price(in thousands)Outstanding at January 1, 2008
    
    
    4,185
    
    
    $
    4.43Granted
    
    
    
    
    
    
    Exercised
    
    
    360
    
    
    
    2.43Forfeited
    
    
    14
    
    
    
    5.18Outstanding at June 28, 2008
    
    
    3,811
    
    
    $
    4.62
  16




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##### Table of Contents



Options Outstanding
    
    Options ExercisableWeightedAverage
    
    Weighted
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    Average
    
    
    
    
    
    AverageExercise
    
    Number
    
    Contractual
    
    Exercise
    
    Number
    
    ExercisePrices
    
    Outstanding
    
    Life (Years)
    
    Price
    
    Exercisable
    
    Price(in thousands)
    
    
    
    
    
    
    
    
    
    (in thousands)$
    0.87
    
    
    $
    1.60
    
    
    
    82
    
    
    
    4.80
    
    
    $
    1.52
    
    
    
    82
    
    
    $
    1.511.61
    
    
    
    1.61
    
    
    
    1,638
    
    
    
    5.45
    
    
    
    1.61
    
    
    
    1,638
    
    
    
    1.611.68
    
    
    
    2.40
    
    
    
    503
    
    
    
    5.39
    
    
    
    2.11
    
    
    
    452
    
    
    
    2.082.45
    
    
    
    4.70
    
    
    
    382
    
    
    
    5.82
    
    
    
    3.61
    
    
    
    291
    
    
    
    3.575.00
    
    
    
    7.30
    
    
    
    507
    
    
    
    6.48
    
    
    
    6.92
    
    
    
    388
    
    
    
    6.907.59
    
    
    
    13.39
    
    
    
    305
    
    
    
    6.80
    
    
    
    9.65
    
    
    
    245
    
    
    
    9.8313.97
    
    
    
    13.97
    
    
    
    8
    
    
    
    7.58
    
    
    
    13.97
    
    
    
    4
    
    
    
    13.9714.00
    
    
    
    14.00
    
    
    
    35
    
    
    
    2.35
    
    
    
    14.00
    
    
    
    35
    
    
    
    14.0015.09
    
    
    
    15.09
    
    
    
    335
    
    
    
    7.66
    
    
    
    15.09
    
    
    
    167
    
    
    
    15.0919.00
    
    
    
    19.00
    
    
    
    16
    
    
    
    2.35
    
    
    
    19.00
    
    
    
    16
    
    
    
    19.003,811
    
    
    
    5.87
    
    
    $
    4.62
    
    
    
    3,318
    
    
    $
    3.98
    17




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##### Table of Contents



Weighted-AverageGrant DateShares
    
    
    Fair Value(in thousands)Outstanding at January 1, 2008
    
    
    2,837
    
    
    $
    11.02Granted
    
    
    573
    
    
    
    9.45Vested
    
    
    186
    
    
    
    10.22Forfeited
    
    
    28
    
    
    
    10.13Outstanding at June 28, 2008
    
    
    3,196
    
    
    $
    10.80
    14. Facility Start-up Costs and Equipment Write-offs
  15. Income Taxes
  18




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##### Table of Contents



16. Geographical and Customer Concentration of Revenue Information
  Year-to-Date Period EndedJune 30,
    
    June 28,2007
    
    2008By geography:United States
    
    
    82
    %
    
    
    51
    %Europe
    
    
    3
    %
    
    
    46
    %Korea
    
    
    14
    %
    
    
    2
    %Others
    
    
    1
    %
    
    
    1
    %100
    %
    
    
    100
    %By customer:PowerLight
    
    
    21
    %
    
    
    52
    %Ralos Vertriebs GmbH
    
    
    2
    %
    
    
    20
    %S.A.G. Solarstrom Vertriebs GmbH
    
    
    
    
    
    
    10
    %Woojin Electric Machinery Co. Ltd.
    
    
    14
    %
    
    
    2
    %AEE Solar
    
    
    10
    %
    
    
    SunEdison
    
    
    20
    %
    
    
    groSolar
    
    
    13
    %
    
    
    All other
    
    
    20
    %
    
    
    16
    %100
    %
    
    
    100
    %
 17. Related Party Transactions
   19




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18. Recent Accounting Pronouncements
     20




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with the condensed consolidated financial
statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q and
the consolidated financial statements and related notes thereto in our most recent Annual Report on
Form 10-K.
 Executive Overview
 TM
  21




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Critical Accounting Policies and Estimates
 22




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##### Table of Contents



Accounting for EverQ
    Revenue Recognition and Allowance for Doubtful Accounts
    Warranty
 23




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Stock-based Compensation
    Cash and cash equivalents
  Inventory
  Impairment of Long-lived Assets
  24




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##### Table of Contents



Income Taxes
  Results of Operations
 Description of Our Revenues, Costs and Expenses
 Revenues.
 Cost of revenues.
 Research and development expenses.
 Selling, general and administrative expenses.
 Facility start-up and equipment write-offs.
 25




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##### Table of Contents



Other income (expense), net.
 Equity income (loss) from interest in EverQ.
 Comparison of Quarters Ended June 30, 2007 and June 28, 2008
 Revenues .
  26




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Quarter EndedJune 30,
    
    June 28,2007
    
    2008By geography:United States
    
    
    82
    %
    
    
    53
    %Europe
    
    
    7
    %
    
    
    42
    %Korea
    
    
    10
    %
    
    
    3
    %Others
    
    
    1
    %
    
    
    2
    %100
    %
    
    
    100
    %By customer:PowerLight
    
    
    17
    %
    
    
    52
    %Ralos Vertriebs GmbH
    
    
    4
    %
    
    
    24
    %S.A.G. Solarstrom Vertriebs GmbH
    
    
    
    
    
    
    4
    %Woojin Electric Machinery Co. Ltd.
    
    
    10
    %
    
    
    3
    %AEE Solar
    
    
    16
    %
    
    
    SunEdison
    
    
    23
    %
    
    
    groSolar
    
    
    14
    %
    
    
    All other
    
    
    16
    %
    
    
    17
    %100
    %
    
    
    100
    %
 Cost of product revenues and gross margins .
  Research and development expenses.
 Selling, general and administrative expenses.
 27




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Facility start-up and equipment write-offs.
 Other income, net .
 Equity income (loss) from interest in EverQ.
 Net Loss.
 Comparison of Year-To-Date Periods Ended June 28, 2008 and June 30, 2007
 Revenues .
  28




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##### Table of Contents



Year-to-Date Period EndedJune 30,
    
    June 28,2007
    
    2008By geography:United States
    
    
    82
    %
    
    
    51
    %Europe
    
    
    3
    %
    
    
    46
    %Korea
    
    
    14
    %
    
    
    2
    %Others
    
    
    1
    %
    
    
    1
    %100
    %
    
    
    100
    %By customer:PowerLight
    
    
    21
    %
    
    
    52
    %Ralos Vertriebs GmbH
    
    
    2
    %
    
    
    20
    %S.A.G. Solarstrom Vertriebs GmbH
    
    
    
    
    
    
    10
    %Woojin Electric Machinery Co. Ltd.
    
    
    14
    %
    
    
    2
    %AEE Solar
    
    
    10
    %
    
    
    SunEdison
    
    
    20
    %
    
    
    groSolar
    
    
    13
    %
    
    
    All other
    
    
    20
    %
    
    
    16
    %100
    %
    
    
    100
    %
 Cost of product revenues and gross margins .
  Research and development expenses.
 Selling, general and administrative expenses.
 29




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Facility start-up and equipment write-offs.
 Other income, net .
 Equity income (loss) from interest in EverQ.
 Net Loss.
 Liquidity and Capital Resources
   30




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EverQ Debt Guarantee
  31




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Off-Balance Sheet Arrangements
  Contractual Obligations
  Total
    
    
    Less than
    
    
    
    
    
    
    
    
    AfterYears
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 YearsNon-cancelable operating leases
    
    $
    6,770
    
    
    $
    2,566
    
    
    $
    3,815
    
    
    $
    389
    
    
    $
    Maturity of Convertible Debt (1)
    
    
    90,000
    
    
    
    
    
    
    
    
    
    
    
    90,000
    
    
    
    Interest expense associated with
Convertible Debt
    
    
    17,719
    
    
    
    3,938
    
    
    
    11,813
    
    
    
    1,968
    
    
    
    Capital expenditure obligations
    
    
    116,878
    
    
    
    116,878
    
    
    
    
    
    
    
    
    
    
    
    Raw materials purchase
commitments
    
    
    827,716
    
    
    
    65,960
    
    
    
    302,735
    
    
    
    237,975
    
    
    
    221,046Total contractual cash
obligations
    
    $
    1,059,083
    
    
    $
    189,342
    
    
    $
    318,363
    
    
    $
    330,332
    
    
    $
    221,046
 
 (1)
    
    Convertible Debt was redeemed for common stock of the Company in July 2008  
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
 Interest Rate Risk
  Foreign Currency Exchange Rate Risk
    32




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Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  
 PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2007 as
filed on February 27, 2008 and amended on April 29, 2008 describes some of the risks and
uncertainties associated with our business. Additional risks and uncertainties that may adversely
impact our business, financial condition, results of operations, cash flows and future results are
described below. Other factors may also exist that we cannot anticipate or that we currently do
not consider to be significant based on currently available information. These other factors that
are not disclosed below or in our most recent Annual Report on Form 10-K also have the potential to
materially affect our business, financial condition, results of operations, cash flows and future
results.
 The significant amount and the structure of our recent offering of senior convertible notes could
adversely affect our business, financial condition and results of operations.
  33




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##### Table of Contents




    
    requiring us to use a substantial portion of our cash flow from operations to service
our indebtedness, which would reduce our cash flow available for working capital, capital
expenditures, development projects and other general corporate purposes;
    
    limiting our flexibility in planning for or reacting to, and increasing our
vulnerability to, changes in our business, the industry in which we operate and the general
economy; and
    
    placing us at a competitive disadvantage compared to our competitors who have less debt
or are less leveraged.
    Our recent customer contracts for our products will result in a significant portion of our sales of
Evergreen Solar manufactured products being concentrated among a limited number of customers in the
remainder of 2008 and in 2009.
   Fluctuations in currency exchange rates could adversely affect our business as well as result in
foreign currency exchange losses.
  34




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##### Table of Contents



Our ability to use net operating loss carryforwards may be subject to limitation.
  The capped call transaction entered into in connection with the sale of our senior convertible
notes in July 2008 may affect the trading price of our senior convertible notes and our common
stock.
     35




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##### Table of Contents



Changes in the accounting guidelines relating to the borrowed common stock could decrease our
earnings per share and potentially the trading price of our common stock and our senior convertible
notes.
  The issuance or sale of equity, convertible or exchangeable securities in the market, or the
perception of such future sales or issuances, could lead to a decline in the price of our common
stock.
  Compliance with environmental regulations can be expensive, and noncompliance with these
regulations may result in potentially significant monetary damages and penalties and adverse
publicity.
  Provisions of our senior convertible notes could discourage an acquisition of us by a third party.
  36




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Item 4. Submission of Matters to a Vote of Security Holders
    
    
    increase the aggregate number of shares of our common stock available for grant under
the Plan from 10,650,000 to 12,150,000;
    
    extend the termination date for the Plan by ten years to April 16, 2018;
    
    add a requirement that all discretionary awards to non-employee directors be
administered by an independent committee of our board of directors; and
    
    clarify the provisions prohibiting the repricing of options
granted pursuant to the Plan.
   
 Item 6. Exhibits
 Number
    
    Description3.1 (1)
    
    Third Amended and Restated Certificate of Incorporation (Exhibit 3.2)3.2 (1)
    
    Second Amended and Restated By-laws (Exhibit 3.4)3.3 (2)
    
    Certificate of Amendment of Third Amended and Restated Certificate of Incorporation (Exhibit
3.1)3.4 (3)
    
    Certificate of the Powers, Designations, Preferences and Rights of the Series A Convertible
Preferred Stock of the Company (Exhibit 4.4)3.5 (4)
    
    Certificate of Designations of Rights, Preferences and Privileges of Series B Preferred Stock
of the Company (Exhibit 3.4)
 37




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##### Table of Contents



Number
    
    Description4.1 (5)
    
    Indenture between the Company and U.S. Bank National Association, as Trustee, dated as of
July 2, 2008 (Exhibit 4.1)4.2 (5)
    
    First Supplemental Indenture between the Company and U.S. Bank National Association, as
Trustee, dated as of July 2, 2008 (Exhibit 4.2)4.3 (5)
    
    Form of 4% Senior Convertible Note due 2013 (Exhibit 4.2)10.1 +
    
    Master Supply Agreement by and between the Company and Ralos Vertriebs GmbH, dated May 21,
200810.2 +
    
    Master Supply Agreement by and between the Company and Wagner & Co Solartechnik GmbH, dated
June 18, 200810.3 (2)*
    
    Evergreen Solar, Inc. Amended and Restated 2000 Stock Option And Incentive Plan (Exhibit 10.1)10.4 (2)*
    
    First Amendment to the Evergreen Solar, Inc. Amended and Restated 2000 Employee Stock
Purchase (Exhibit 10.2)10.5
    
    Share Lending Agreement dated as of June 26, 2008 between the Company and Lehman Brothers
International (Europe), through Lehman Brothers Inc.10.6
    
    Capped Call Transaction agreement dated June 26, 2008 between the Company and Lehman Brothers
OTC Derivatives Inc.31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200231.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(d) and Rule 15d-14(d) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 200232.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(d) and Rule 15d-14(d) of
the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 
 +
    
    Confidential treatment requested as to certain portions.*
    
    Indicates a management contract or compensatory plan, contract or arrangement.(1)
    
    Incorporated herein by reference to the exhibits to the Companys Registration Statement on
Form S-1/A, filed on October 3, 2000. The number given in parenthesis indicates the
corresponding exhibit number in such Form S-1/A.(2)
    
    Incorporated herein by reference to the exhibits to the Companys Current Report on Form 8-K
dated June 18, 2008 and filed on June 23, 2008. The number given in parenthesis indicates the
corresponding exhibit number in such Form 8-K.(3)
    
    Incorporated herein by reference to the exhibits to the Companys Registration Statement on
Form S-8 dated June 9, 2003. The number given in parenthesis indicates the corresponding
exhibit number in such Form S-8.(4)
    
    Incorporated herein by reference to the exhibits to the Companys Registration Statement on
Form S-3 dated May 16, 2007. The number given in parenthesis indicates the corresponding
exhibit number in such Form S-3.(5)
    
    Incorporated herein by reference to the exhibits to the Companys Current Report on Form 8-K
dated July 2, 2008 and filed on July 7, 2008. The number given in parenthesis indicates the
corresponding exhibit number in such Form 8-K. 38




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SIGNATURES
  Date: August 4, 2008
    EVERGREEN SOLAR, INC./s/ Michael El-HillowMichael El-HillowChief Financial Officer and Secretary
(Principal Financial Officer) 39