Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 3, 2010oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             to


Commission file number: 001-34133

GT Solar International, Inc.(Exact name of registrant as specified in its charter)

Delaware

03-0606749(State of Incorporation)

(I.R.S. Employer Identification No.)243 Daniel Webster Highway
Merrimack, New Hampshire 03054(Address of principal executive offices, including zip code)


Registrant's
telephone number, including area code:(603) 883-5200

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting
company. See definition of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of August 2, 2010, the Company had 149,955,238 shares of common stock,
par value $0.01 per share, issued and outstanding.



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Table of Contents



GT SOLAR INTERNAITONAL, INC. AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  FOR THE PERIOD ENDED JULY 3, 2010        Table of Contents



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements:Condensed Consolidated Balance Sheets (unaudited) as of July 3, 2010 and April 3, 2010

1Condensed Consolidated Statements of Operations (unaudited) for the three months ended July 3, 2010 and June 27,
2009

2Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended July 3, 2010 and June 27,
2009

3Notes to Condensed Consolidated Financial Statements (unaudited)

4Item 2.

Management's Discussion and Analysis of Financial Condition and Results of
Operations

18Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31Item 4.

Controls and Procedures

32PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

32Item 1A.

Risk Factors

34Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37Item 3.

Defaults Upon Senior Securities

37Item 4.

(Removed and Reserved)

37Item 5.

Other Information

37Item 6.

Exhibits

38Signatures

39


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Table of Contents



PART IFINANCIAL INFORMATION



Item 1Unaudited Condensed Consolidated Financial Statements



GT Solar International, Inc. and Subsidiaries        Condensed Consolidated Balance Sheets        (In thousands, except per share data)    
(Unaudited)

July 3,
2010

April 3,
2010AssetsCurrent assets:Cash and cash equivalents

$
256,452

$
230,748Short-term investments


19,962


19,967Accounts receivable, net of allowance for doubtful accounts of $3,110 and $2,620, respectively


37,333


52,620Inventories


80,664


68,858Deferred costs


127,511


131,986Advances on inventory purchases


28,759


17,110Deferred income taxes


67,352


72,868Refundable income taxes


1,516


1,516Prepaid expenses and other current assets


1,721


4,340Total current assets


621,270


600,013Non-current assets:Property, plant and equipment, net


19,713


19,359Other assets


683


639Intangible assets, net


2,414


3,205Deferred cost


55,867


66,265Goodwill


42,600


42,600Total assets

$
742,547

$
732,081Liabilities and stockholders' equityCurrent liabilities:Accounts payable

$
31,083

$
22,132Accrued expenses


19,783


17,543Customer deposits


139,109


119,616Deferred revenue


234,707


229,951Accrued income taxes


10,361


33,621Total current liabilities


435,043


422,863Non-current liabilities:Deferred income taxes


23,679


25,661Deferred revenue


86,639


104,396Other non-current liabilities


117


175Total liabilities


545,478


553,095Commitments and contingencies (Note 10)Stockholders' equity:Preferred stock, 10,000 shares authorized, none issued and outstanding





Common stock, $0.01 par value, 500,000 shares authorized; 144,386 and 143,815 shares issued and outstanding as of July 3, 2010 and April 3, 2010,
respectively


1,444


1,438Additional paid-in capital


89,480


86,644Accumulated other comprehensive loss


(6,402
)

(5,145
)Retained earnings


112,547


96,049Total stockholders' equity


197,069


178,986Total liabilities and stockholders' equity

$
742,547

$
732,081


See accompanying notes to these condensed consolidated financial statements.

1

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GT Solar International, Inc. and Subsidiaries        Condensed Consolidated Statements of Operations        (In thousands, except per share data)    
  (Unaudited)

Three Months EndedJuly 3,
2010

June 27,
2009Revenue

$
135,166

$
71,819Cost of revenue


89,243


36,854Gross profit


45,923


34,965Operating expenses:Research and development


3,747


6,399Selling and marketing


3,711


3,867General and administrative


10,588


8,329Amortization of intangible assets


791


791Total operating expenses


18,837


19,386Income from operations


27,086


15,579Other income (expense):Interest income


163


42Interest expense


(169
)

(177
)Interest component of forward foreign exchange contracts


30


(639
)Other, net


184


(2,363
)Income before income taxes


27,294


12,442Provision for income taxes


10,796


4,663Net income

$
16,498

$
7,779


Net income per shareBasic

$
0.11

$
0.05Diluted

$
0.11

$
0.05Weighted-average number of shares used in per share calculations:Basic


143,977


143,116Diluted


145,614


145,286


See
accompanying notes to these condensed consolidated financial statements.

2

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GT Solar International, Inc. and Subsidiaries        Condensed Consolidated Statements of Cash Flows        (In thousands)        (Unaudited)

Three Months EndedJuly 3,
2010

June 27,
2009Cash flow from operating activities:Net income

$
16,498

$
7,779Adjustments to reconcile net income to net cash provided by operating activities:Amortization expense


791


791Depreciation expense


904


852Deferred income taxes expense


4,421


1,377Provision for excess and obsolete inventory


1,243


772Share-based compensation expense


1,548


1,052Other adjustments, net


198


258Changes in operating assets and liabilities:Accounts receivable


15,185


(20,100
)Inventories


(13,049
)

22,678Deferred costs


14,873


(108,873
)Advances on inventory purchases


(11,649
)

43,108Prepaid expenses and other current assets


2,485


172Accounts payable and accrued expenses


9,490


(25,168
)Customer deposits


19,493


(78,708
)Deferred revenue


(13,001
)

169,017Accrued income taxes


(23,260
)

2,404Refundable income taxes





35,307Other assets (liabilities), net


(557
)

775Net cash provided by operating activities


25,613


53,493Cash flow from investing activities:Purchase of property, plant and equipment


(1,264
)

(174
)Net cash used in investing activities


(1,264
)

(174
)Cash flow from financing activities:Proceeds and excess tax benefit from exercise of stock options


1,349


1,019Payments related to share repurchases to satisfy statutory minimum tax withholdings


(55
)

(68
)Net cash provided by financing activities


1,294


951Effect of foreign exchange rates on cash


61


(4
)Increase in cash and cash equivalents


25,704


54,266Cash and cash equivalents at beginning of period


230,748


107,148Cash and cash equivalents at end of period

$
256,452

$
161,414


See
accompanying notes to these condensed consolidated financial statements.

3

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GT Solar International, Inc. and Subsidiaries        Notes to Condensed Consolidated Financial Statements        (In thousands, except per share data)        July 3, 2010

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of GT Solar International, Inc. and subsidiaries ("the Company") have been prepared in accordance with
generally accepted accounting principles in the United States and Securities and Exchange Commission ("SEC") instructions for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial statements contain all
adjustments consisting of normal recurring accruals necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The results for the three months
ended July 3, 2010 are not necessarily indicative of the results to be expected for the fiscal year ending April 2, 2011 or for any other interim period or for any future year. The
accompanying financial statements should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the
fiscal year ended April 3, 2010, filed with the SEC on June 4, 2010.

The
condensed consolidated balance sheet as of April 3, 2010 has been derived from the audited financial statements as of that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements.

Fiscal Year End

The Company's reporting period is based on a 52 week year that ends on the Saturday closest to March 31 which in certain
years results in a 53 week fiscal year. The Company's quarterly reporting covers 13 week periods, unless otherwise noted. The fiscal year ending April 3, 2010 had 53 weeks
with the extra week occurring in the fourth quarter of that year. The Company uses the terms quarterly, monthly, and annual in describing its financial results.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation the most
significant of which relates to certain reclassifications in the Condensed Consolidated Statement of Cash Flows.

2. Significant Accounting Policies

The Company's significant accounting policies are disclosed in its audited financial statements for the year ended April 3, 2010, included in the Annual Report on
Form 10-K filed with the SEC on June 4, 2010 and have not changed materially as of July 3, 2010.

3. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2009, the FASB issued an amendment to the accounting principles relating to the transfer of financial assets that eliminates
the concept of a qualifying special purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting
criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. This

4

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

3. Recent Accounting Pronouncements (Continued)

guidance
is effective for transfers of financial assets in fiscal years beginning after November 15, 2009 and in interim periods within those fiscal years with earlier adoption prohibited. The
adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

In
June 2009, the FASB issued authoritative guidance that eliminates certain exceptions to the consolidation of qualifying special purpose entities, contains new criteria for determining
the primary beneficiary of a variable interest entity, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity.
The guidance also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity's status as a variable interest entity, a company's power
over a variable interest entity, or a company's obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying consolidation provisions. This guidance is
effective for the fiscal year beginning after November 15, 2009, and for interim periods within that period, with earlier adoption prohibited. The adoption of this amendment did not have a
material impact on the Company's consolidated financial statements.

In
January 2010, the FASB issued an update related to fair value measurements and disclosures about transfers between Level 1, Level 2 and Level 3 assets and the
disaggregated activity in the roll forward for Level 3 fair value measurements. These new disclosures are effective for fiscal years beginning after December 15, 2010 and for interim
periods within those fiscal years. The adoption of these expanded disclosures did not have a material impact on the Company's consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In October 2009, the FASB issued authoritative guidance that provides amendments to the revenue recognition criteria for separating
consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This guidance also
eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement and expands
the disclosure requirements regarding a vendor's multiple-deliverable revenue arrangements. This guidance is effective for fiscal years beginning on or after June 15, 2010 and early adoption is
permitted. The Company has elected not to adopt this authoritative guidance early and is currently assessing the potential impact, if any, the adoption of this guidance will have on its consolidated
financial statements.

In
April 2010, the FASB issued authoritative guidance to address the classification of an employee share-based payment award with an exercise price denominated in the currency of a
market in which the underlying equity security trades such that awards of equity share options granted to an employee of an entity's foreign operation should have a fixed exercise price denominated in
(1) the foreign operation's functional currency or (2) the currency in which the employee's pay is denominated should not be considered to contain a condition that is not a market,
performance, or service condition. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15,

5

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

3. Recent Accounting Pronouncements (Continued)

2010.
Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.

In
April 2010, the FASB issued authoritative guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research
or development transactions and is applicable to vendors that provide research or development deliverables in an arrangement in which one or more payments are contingent upon achieving uncertain
future events or circumstances. This guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15,
2010. Early adoption is permitted.
The Company is currently assessing the potential impact, if any, the adoption of this guidance will have on its consolidated financial statements.

Other
recent accounting pronouncements issued by the FASB and the SEC did not have or are not expected to have a material impact on the Company's present or future financial statements.

4. Customer Concentrations

The following customers comprised 10% or more of the Company's total net revenues or total accounts receivable:

For the Three Months Ended

As ofJuly 3, 2010

June 27, 2009

July 3, 2010

April 3, 2010Revenue

% of
Total

Revenue

% of
Total

Accounts
Receivable

% of
Total

Accounts
Receivable

% of
TotalPolysilicon CustomersCustomer #1

$20,934


15
%
*


*
%
*


*
%
*


*
%Customer #2

*


*
%
$47,565


66
%
*


*
%
*


*
%Customer #3

*


*
%
*


*
%
$4,599


12
%
$12,127


23
%Photovoltaic CustomersCustomer #4

$40,319


30
%
*


*
%
*


*
%
*


*
%Customer #5

$14,702


11
%
*


*
%
$9,021


24
%
*


*
%Customer #6

*


*
%
$7,669


11
%
*


*
%
*


*
%Customer #7

*


*
%
*


*
%
$3,783


10
%
*


*
%Customer #8

*


*
%
*


*
%
*


*
%
$8,391


16
%Customer #9

*


*
%
*


*
%
*


*
%
$7,570


14
%


---

The
Company requires most of its customers to either post letters of credit or make advance payments prior to delivery. Approximately $30,466 (or 82%) and $41,583 (or 79%) of total
accounts receivable as of July 3, 2010 and April 3, 2010, respectively, was secured by letters of credit.

6

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

5. Fair Value of Financial Instruments

The Company's financial instruments are recorded at amounts that reflect the Company's estimate of their fair values. The Company discloses the level of subjectivity used in measuring
assets and liabilities at fair value under a hierarchal framework as follows:



The
following table provides the assets and liabilities carried at fair value measured on a recurring basis at July 3, 2010 and April 3, 2010:

July 3, 2010Fair Value Measurements UsingTotal
Carrying
Value(Level 1)

(Level 2)

(Level 3)Money market mutual funds

$
236,187

$
236,187





Commercial paper

$
24,962




$
24,962


Forward foreign exchange contracts-liabilities

$
(1,903
)



$
(1,903
)






April 3, 2010Fair Value Measurements UsingTotal
Carrying
Value(Level 1)

(Level 2)

(Level 3)Money market mutual funds

$
226,052

$
226,052





Commercial paper

$
19,967




$
19,967


Forward foreign exchange contracts-liabilities

$
(229
)



$
(229
)




The
Company's money market mutual funds are valued using readily available market prices.

The
Company's commercial paper is valued using quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at
commonly quoted intervals).

The
Company's counterparties to its forward foreign exchange transactions are major international financial institutions. These forward foreign exchange contracts are measured at fair
value using a
valuation which represents a good faith estimate of the mid-market value of the position, based on estimated or actual bids and offers for the positions. The Company considers the effect
of the counterparties' credit standings in these fair value measurements. The Company has elected not to apply the guidance related to fair value measurement to non-financial assets and
liabilities.

7

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

5. Fair Value of Financial Instruments (Continued)

The
following table summarizes the amortized costs and estimated fair values of the Company's investments:

Original Maturity

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair ValueJuly 3, 2010:Commercial papercash and cash equivalents

Less than 3 months

$
5,000

$


$


$
5,000Commercial papershort-term investments

6  9 months

$
19,978

$


$
(16
)
$
19,962$
24,978

$


$
(16
)
$
24,962April 3, 2010:Commercial papershort-term investments

6  9 months

$
19,962

$
6

$
(1
)
$
19,967


6. Derivative and Hedging Activities

The Company enters into forward foreign exchange contracts to hedge portions of foreign currency denominated inventory purchases. These contracts typically expire within
12 months.

For
the three months ended June 27, 2009, the Company recognized losses of $2,112, with respect to forward foreign exchange contracts which had previously been recorded as other
comprehensive income. The losses, which were recognized as other expense in the accompanying condensed consolidated statements of operations, related substantially to forward foreign exchange
contracts to purchase euros ("€") with notional amounts €41,429 that the Company concluded no longer qualified as cash flow hedges because the hedging relationship was
no longer deemed to be highly effective. At the time they were deemed ineffective, the Company entered into offsetting forward foreign exchange contracts to sell euros with notional amounts
€26,633, which were not designated as cash flow hedges, to eliminate any further foreign exchange risk related to those foreign exchange contracts that had yet to mature. As of
July 3, 2010, the Company had forward foreign exchange contracts with notional amounts of €18,534 that qualified as cash flow hedges.

During
the three months ended July 3, 2010 and June 27, 2009, the Company recognized a gain of approximately $300 and $255, respectively, against cost of revenue with
respect to cash flow hedges where the underlying hedged transaction had affected earnings. Approximately $2,580 of accumulated loss is expected to be reclassified into earnings over the next twelve
months.

The
following table sets forth the balance sheet location and fair value of the Company's forward foreign exchange contracts at July 3, 2010 and April 3, 2010:

Balance Sheet Location

July 3, 2010
Fair Value

April 3, 2010
Fair ValueEffective Cash Flow HedgesForward foreign exchange contractsliabilities

Accrued expenses

$
(1,903
)
$
(229
)


8

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

6. Derivative and Hedging Activities (Continued)

The following table sets forth the effect of the Company's forward foreign exchange contracts designated as hedging instruments on the consolidated statement of operations for the three
months ended July 3, 2010 and June 27, 2009.

Three Months Ended

Amount of (Gain) or
Loss Recognized in
OCI on Derivative
(Effective Portion)

Location of Gain or
(Loss) Reclassified
from AOCI
into Income
(Effective Portion)

Amount of Gain or
(Loss) Reclassified
from AOCI
into Income
(Effective Portion)

Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion)

Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion)July 3, 2010

$
1,884

Cost of revenue

$
300

Other, net

$
June 27, 2009

$
(2,897
)
Cost of revenue

$
255

Other, net

$
(2,112
)


7. Inventories

Inventories consisted of the following:

July 3,
2010

April 3,
2010Raw materials

$
46,442

$
42,846Work-in-process


6,479


12,260Finished goods


27,743


13,752$
80,664

$
68,858


Inventory-related
excess and obsolete charges of $1,243 and $772 were recorded in cost of revenue in the three months ended July 3, 2010 and June 27, 2009, respectively.

8. Warranty

The following table presents warranty activities:

Three Months EndedJuly 3,
2010

June 27,
2009Product warranty liability, beginning of the period

$
1,280

$
2,231Accruals for new warranties issued


1,533


389Payments under warranty


(533
)

(680
)Product warranty liability, end of period

$
2,280

$
1,940


9. Income Taxes

The tax provision for the three months ended July 3, 2010 and June 27, 2009 represents federal, state and foreign income taxes. The Company's effective tax rate was 39.6%
and 37.5% for the three months ended July 3, 2010 and June 27, 2009, respectively. The effective tax rate is higher in the period ended July 3, 2010 due to the expiration of the
research and development tax credit. The Company reviews its expected annual effective income tax rates and makes changes on a quarterly basis as necessary based on

9

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

9. Income Taxes (Continued)

certain
factors such as changes in forecasted annual operating income; changes to the valuation allowance for net deferred tax assets; changes to actual or forecasted permanent book to tax
differences; impacts from future tax settlements with state, federal or foreign tax authorities; and impacts from tax law changes. Due to the volatility of these factors, the Company's consolidated
effective income tax rate can change significantly on a quarterly basis.

As
of July 3, 2010 and April 3, 2010, the Company had approximately $661 and $579, respectively, of unrecognized tax benefits. The Company recognizes interest related to
unrecognized benefits as a component of tax expense, of which $70 was recognized for the quarter ended July 3, 2010. Additionally, penalties were not recorded during the three months ended
July 3, 2010.

10. Commitments and Contingencies

Purchase Commitments

The Company's commitments to purchase raw materials, research and development and other services from various suppliers and vendors are
estimated to be $243,057 as of July 3, 2010, substantially all of which are due within the fiscal year ending April 2, 2011.

The
Company periodically reschedules or cancels a portion of its commitments to its vendors to procure materials to reflect a reduction in the rate of production or requests by some of
its customers to delay shipment. During the three months ended June 27, 2009, the Company recognized losses of $512 resulting from expected forfeitures of vendor advances and other termination
charges. These charges have been included in cost of revenue. The Company did not incur similar charges during the three months ended July 3, 2010.

Contingencies

Beginning on August 1, 2008, seven putative securities class action lawsuits were commenced in the United States District Court
for the District of New Hampshire (the "Court"), against the Company, certain of its officers and directors, certain underwriters of its July 24, 2008 initial public offering and others,
including certain investors. On October 3, 2008, the Court entered an order consolidating these actions under the caption Braun et al. v. GT Solar International, Inc., et al (the
"federal class action"). The Court selected the lead plaintiff and lead plaintiff's counsel in the federal class action on October 29, 2008. The lead plaintiff filed an amended consolidated
complaint on
December 22, 2008. The lead plaintiff asserts claims under various sections of the Securities Act. The amended consolidated complaint alleges, among other things, that the defendants made false
and materially misleading statements and failed to disclose material information in certain SEC filings, including the registration statement and Prospectus for the Company's July 24, 2008
initial public offering, and other public statements, regarding the status of the Company's business relationship with LDK Solar, Ltd. Among other relief, the amended consolidated complaint
seeks class certification, unspecified compensatory damages, rescission, interest, attorneys' fees, costs and such other relief as the Court should deem just and proper.

The
defendants moved to dismiss the amended consolidated complaint on February 5, 2009. On September 22, 2009, the Court denied the defendants' motion. Following the
Court's denial of the motion,

10

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

10. Commitments and Contingencies (Continued)

the
parties submitted a proposed joint case management order, which the Court approved on November 16, 2009. The case management order provides for discovery to close on May 25, 2011.

In
addition, on September 18, 2008 a putative securities class action was filed in New Hampshire state court in the Superior Court for Hillsborough County, Southern District (the
"State Court"), under the caption Hamel v. GT Solar International, Inc., et al., against the Company, certain of the Company's officers and directors and certain underwriters of its
July 24, 2008 initial public offering (the "state class action"). The state class action plaintiff asserts claims under various sections of the Securities Act of 1933, as amended. The state
class action complaint alleges, among other things, that the defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including
the registration statement for the Company's July 24, 2008 initial public offering, and other public statements, regarding the status of the Company's business relationship with LDK Solar.
Among other relief, the state class action complaint seeks class certification, unspecified compensatory damages, rescission, interest, attorneys' fees, costs and such other relief as the State Court
should deem just and proper.

The
Company removed the state class action to the United States District Court for the District of New Hampshire on October 22, 2008. The state class action was consolidated with
the federal class action on November 25, 2008. On February 2, 2009, the federal Court granted the plaintiff's motion to remand the state class action to New Hampshire State Court. On
May 4, 2009, the parties agreed to a stay of the state class action, pending resolution of the motion to dismiss in the consolidated federal case. At a case structuring conference on
June 3, 2009, the state court endorsed the proposed joint case management order filed by the parties which requires coordination of any discovery to be taken in the state class action with that
taken in the federal class action. With the denial of the motion to dismiss the federal action, the parties submitted a proposed joint case management order to the State Court on November 6,
2009. On January 12, 2010, the State Court granted a joint motion of the parties to transfer the state class action to the State Court's Business and Commercial Dispute Docket.

A
derivative suit, captioned Fan v. GT Solar Int'l, Inc., et al., was filed in New Hampshire State Court on January 14, 2009 (the "derivative action"). The derivative
complaint is asserted nominally on behalf of the Company against certain of its directors and officers and alleges various claims for breach of fiduciary duty, unjust enrichment, abuse of control, and
gross mismanagement. The derivative complaint is premised on the same allegations asserted in the federal class action. On April 10, 2009, the State Court granted the Company's motion to stay
the derivative action, pending resolution of the motion to dismiss in the federal action. In accordance with the terms of the stay the parties have conferred regarding a case management schedule for
the derivative action. The derivative action remains stayed.

The
Company intends to defend these actions vigorously. There can be no assurance, however, that the Company will be successful, and an adverse resolution of any of the lawsuits could
have a material adverse effect on the Company's consolidated financial position and results of operations. The Company is not presently able to reasonably estimate potential losses, if any, related to
the lawsuits.

The
Company is subject to various other routine legal proceedings and claims incidental to its business, which management believes will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.

11

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

10. Commitments and Contingencies (Continued)

Customer Indemnifications

In the normal course of business, the Company indemnifies, under pre-determined conditions and limitations, its customers
for infringement of third-party intellectual property rights by the Company's products or services. The Company seeks to limit its liability for such indemnity to an amount not to exceed the sales
price of the products or services subject to its indemnification obligations. The Company does not believe, based on information available, that it is probable that any material amounts will be paid
under these indemnification provisions.

11. Senior Credit Facility

On July 29, 2008, the Company entered into a senior credit agreement with Bank of America, N.A., as sole administrative and collateral agent, and a syndicate of financial
institutions. The senior credit agreement provides for a three-year revolving senior credit facility in an aggregate principal amount of up to $90,000, which is available for the borrowing
of revolving loans and the issuance of standby LOCs (the "senior credit facility"); provided that the aggregate principal amount of revolving loans may not exceed $50,000 at any time. The senior
credit facility includes a sub-limit of $25,000 for swingline loans.

The
aggregate amount of borrowings and outstanding standby LOCs under the senior credit facility may not exceed a borrowing base equal to Adjusted EBITDA multiplied by 3.0 plus
unrestricted cash on hand. The senior credit facility is guaranteed by all of the Company's existing and future direct and indirect domestic subsidiaries. Obligations under the senior credit facility
are secured by a first-priority lien on substantially all of the tangible and intangible assets and by a pledge of the capital stock of all of the Company's domestic subsidiaries and 65% of the
capital stock of the Company's foreign subsidiaries owned directly by us or one of the Company's domestic subsidiaries.

The
senior credit facility may be increased by an aggregate amount of up to $100,000, with additional commitments from the lenders under the senior credit facility or from new financial
institutions, if no default or event of default exists. The Company may exercise the option to increase the commitments not more than three times, and each increase will be in a minimum aggregate
principal amount of $10,000 and integral multiples of $5,000 in excess thereof. As of July 3, 2010 and April 3, 2010, the Company had $26,761 and $33,094, respectively, of outstanding
standby LOCs and no borrowings under this facility, resulting in $63,239 of availability under the senior credit agreement as of July 3, 2010.

Borrowings
under the senior credit facility bear interest at a floating rate equal to, at the Company's option, LIBOR plus 2.25% per annum or a base rate plus 1.25% per annum. The base
rate is defined as the higher of the Bank of America prime rate or the federal funds rate plus 0.50%. The Company pays a commitment fee to the lenders equal to 0.50% per annum on the actual daily
unused portions of the senior credit facility and letter of credit fees equal to 2.25% per annum on the maximum amount
available to be drawn under each standby letter of credit. As of July 3, 2010, the 3 month LIBOR rate, Bank of America prime rate and federal funds rate were 0.53%, 3.25% and 0.25%,
respectively.

The
senior credit agreement that governs the senior credit facility contains financial covenants that require the Company to meet certain financial tests, including a maximum
consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio, calculated on a consolidated basis for each

12

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

11. Senior Credit Facility (Continued)

consecutive
four fiscal quarter period. The senior credit agreement also contains covenants, which, among other things, limit the Company's ability to: incur indebtedness; make investments; engage in
mergers and other fundamental changes; sell or otherwise dispose of property or assets; pay dividends and other restricted payments or enter into transactions with affiliates; enter into burdensome
agreements; use proceeds to purchase or carry margin stock or extend credit to others; make subordinated debt payments; make certain changes to the terms of material indebtedness; and other covenants
customary for such a facility. The Company was in compliance with all of these covenants as of July 3, 2010.

Effective
July 29, 2010, the Company elected to terminate its senior credit facility and its cash-collateralized letter of credit facility (See
Note 18Subsequent Events).

12. Stockholder's Equity

A summary of the changes in stockholders' equity for the three months ended July 3, 2010 is provided below:

Common
Stock
Shares

Common
Stock
Par Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders'
EquityBalance at April 3, 2010


143,815

$
1,438

$
86,644

$
96,049

$
(5,145
)
$
178,986Net income











16,498





16,498Other comprehensive income(1)














(1,257
)

(1,257
)Option exercises and vesting of restricted stock units


581


6


1,298








1,304Share-based compensation expense








1,548








1,548Excess tax benefit from share-based award activity








45








45Minimum tax withholding payments for employee share-based awards(2)


(10
)




(55
)







(55
)Balance at July 3, 2010


144,386

$
1,444

$
89,480

$
112,547

$
(6,402
)
$
197,069


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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

13. Share-Based Compensation

During the three months ended July 3, 2010 and June 27, 2009, the Company recorded $1,548 and $1,052, respectively, of expense related to share-based compensation.
Share-based compensation cost capitalized as part of inventory is insignificant for all periods presented.

During
the three months ended July 3, 2010, the Company granted 873 options to purchase shares of the Company's common stock to certain employees. The stock options are
exercisable at an average of $5.43 per share, which was based on the fair market value of the Company's common stock on the date of grant. The average fair value of the stock options was estimated
using the Black-Scholes option pricing model which uses highly subjective assumptions including the expected stock price volatility, as well as, other assumptions as follows: risk free interest rate
of 2.4%, expected life of 6 years and an
expected stock price volatility of 50%. The total fair value of stock options granted during the three months ended July 3, 2010 was $2,347, or a weighted-average of $2.69 per share. During the
three months ended July 3, 2010, the Company granted 492 restricted stock units to certain employees and directors. The total fair value of the restricted stock units granted during the three
months ended July 3, 2010, which was based on the fair market value of the Company's common stock on the date of grant was $2,665, or a weighted-average of $5.42 per share.

As
of July 3, 2010, the Company had unrecorded deferred share-based compensation expense of approximately $16,431, after estimated forfeitures, which will be recognized over an
estimated weighted-average remaining requisite service period of approximately three years.

14. Earnings Per Share

The following table sets forth the computation of the weighted average shares used in computing basic and diluted earnings per share:

Three Months EndedJuly 3,
2010

June 27,
2009Weighted average common sharesbasic


143,977


143,116Dilutive common stock options and awards


1,637


2,170Weighted average common and common equivalent sharesdiluted


145,614


145,286


Potential
common stock equivalents excluded from the calculation of dilutive earnings per share because the effect would have been anti-dilutive are as follows:

July 3,
2010

June 27,
2009Weighted average restricted stock units and common stock options having no dilutive effect


4,889


2,442


14

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

15. Comprehensive Income

The following table summarizes components of comprehensive income related to derivatives classified as cash flow hedges, unrealized gains (losses) on available for sale securities, as
well as foreign currency translation adjustments from the Company's subsidiary that does not use the U.S. dollar as its functional currency:

Three Months EndedJuly 3,
2010

June 27,
2009Net income

$
16,498

$
7,779Change in derivative instruments, net of tax effect of $879 and $(1,657), respectively


(1,305
)

3,097Changes in unrealized gain on available for sale securities, net of tax effect of $8


(13
)

Foreign currency translation adjustment


61


(4
)Comprehensive income

$
15,241

$
10,872


The
following table summarizes the Company's accumulated other comprehensive loss as of July 3, 2010 and April 3, 2010:

July 3,
2010

April 3,
2010Cash flow hedges of foreign exchange, net of tax

$
(6,569
)
$
(5,264
)Unrealized gain (loss) on available for sale securities, net of tax


(10
)

3Foreign currency translation adjustment


177


116Total

$
(6,402
)
$
(5,145
)


16. Segment Information

The Company reports its results in two segments: the photovoltaic (PV) business and polysilicon business.

The
PV business manufactures and sells DSS units, ancillary equipment required in the operation of the DSS unit as well as services related to the production of PV wafers, cells and
modules.

The
polysilicon business manufactures and sells CVD reactors and related equipment used to react gases at high temperatures to produce polysilicon, the key raw material used in solar
cells.

The
Company evaluates performance and allocates resources based on revenues and operating income (loss). Operating income (loss) for each segment includes selling, general and
administrative expenses directly attributable to the segment including the amortization of acquired intangible assets. Corporate Services include non-allocable overhead costs, including
human resources, legal, finance, information technology, general and administrative and corporate marketing expenses. Corporate Services assets include deferred tax assets, cash and cash equivalents
and other non-allocated assets.

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

16. Segment Information (Continued)

Financial
information for the Company's business segments is as follows:

Photovoltaic
Business

Polysilicon
Business

Corporate
Services

TotalThree months ended July 3, 2010Revenue

$
111,441

$
23,725

$


$
135,166Gross profit


36,692


9,231





45,923Depreciation and amortization


815


319


561


1,695Income (loss) from operations

$
30,520

$
5,845

$
(9,279
)
$
27,086Three months ended June 27, 2009Revenue

$
19,934

$
51,885

$


$
71,819Gross profit


6,683


28,282





34,965Depreciation and amortization


721


402


520


1,643Income (loss) from operations

$
1,055

$
21,616

$
(7,092
)
$
15,579AssetsJuly 3, 2010

$
202,490

$
184,127

$
355,930

$
742,547April 3, 2010

$
198,451

$
195,134

$
338,496

$
732,081


The
following table presents net sales by geographic region, which is based on the destination of the shipments:

Three Months EndedJuly 3,
2010

June 27,
2009China

$
56,802

$
17,964Europe


47,019


48,660Korea


21,068


4,592Other Asia


9,518


137United States


705


456Other


54


10Total

$
135,166

$
71,819


A
summary of long-lived assets, consisting of net property and equipment, intangible assets and goodwill, by geographical region is as follows:

July 3,
2010

April 3,
2010United States

$
63,613

$
64,020China


997


1,019Taiwan


111


125Hong Kong


6


Total

$
64,727

$
65,164


16

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

July 3, 2010

17. Other, net

The components of other income (expense), net are as follows:

Three Months EndedJuly 3,
2010

June 27,
2009Foreign currency gain (loss)

$
68

$
(261
)Loss on derivatives-ineffective portion (See Note 6)





(2,112
)Other


116


10Total other income (expense), net

$
184

$
(2,363
)


18. Subsequent Events

On July 29, 2010, the Company elected to terminate both its senior credit facility and its cash-collateralized letter of credit facility. The senior credit facility
had no outstanding borrowings and was only being used to secure standby letters of credit. The Company had never utilized the cash-collateralized letter of credit facility. The Company was
in compliance with the covenants of these facilities at the time of termination. On July 29, 2010, the outstanding
standby letters of credit under the senior credit facility amounted to $29,952 and were subsequently cash collateralized under a separate agreement with the Bank of America, N.A. which required this
amount to be transferred into a restricted cash account.

On
July 29, 2010, the Company acquired privately-held Crystal Systems, Inc., a crystalline growth technology company that manufactures sapphire substrates used
in LED applications, and other components used in the defense, medical and aerospace industries. The purchase consideration consisted of approximately $24,000 in cash, approximately 5,400 shares of
the Company's common stock with a closing date estimated value of $31,000 and a potential additional $21,000 cash earn-out based on the attainment of certain financial and technical
targets through the period ending March 31, 2012.

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Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report on Form 10-Q, contains "forward-looking statements" that involve risks
and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking
statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by the use of words such as, but not
limited to, "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "will," "plan," "target," "continue," and similar expressions or variations intended to identify
forward-looking
statements and include statements about our expectations for future periods with respect to our backlog, gross margins, customer concentrations, demand for our products, cost of solar equipment,
investments in solar energy, growth of our business and product portfolio, our plans to sell sapphire crystalline materials and sapphire furnaces and our plans to obtain a new credit facility. These
statements are based on the belief, judgment, estimates and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks,
uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, the following factors and any other factors discussed under the heading titled "Risk Factors"
included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010 as filed with the Securities and Exchange Commission (the "SEC") on June 4,
2010:



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Table of Contents



The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other statements that are included under the heading "Risk
Factors" included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010 filed with the SEC on June 4, 2010 and in this report. Forward-looking
statements speak only as of the date of this report. We undertake no obligation to publicly update or review any forward-looking statements to reflect events or circumstances after the date of such
statements.

Our Company Overview

GT Solar International, Inc., through its subsidiaries (referred to collectively herein as "we," "us" and "our") is a leading
global provider of polysilicon production technology, and sapphire and silicon crystalline ingot growth systems and materials for the solar, LED and other speciality markets. Our

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Table of Contents

customers
include several of the world's largest solar companies as well as companies in the chemical industry.

Our
principal products are:



In
July 2008, we completed an initial public offering of 30,300,000 shares of common stock held by GT Solar Holdings, LLC. In March 2010, we completed a secondary public
offering of 28,750,000 shares of common stock held by GT Solar Holdings, LLC. As of July 3, 2010, GT Solar Holdings, LLC owned or controlled approximately 53% of our common stock.

Factors Affecting Our Results of Operations

Demand for our products and services are driven by end-user demand for solar power. Key drivers of the demand for solar
power include: volatile prices of conventional energy sources; the desire for energy independence to counter perceived geopolitical supply risks surrounding fossil fuels; environmental pollution from
fossil fuels and the resulting tightening of emission controls; the competitive cost of energy from alternative renewable energy sources; government incentive programs for the development of solar
energy making solar energy more cost competitive and changing consumer preferences towards renewable energy sources.

In
addition, our results of operations are affected by a number of external factors including the availability and market price of polysilicon, availability of raw materials, foreign
exchange rates, interest rates, commodity prices (particularly steel and graphite prices) and macroeconomic factors, including the availability of capital that may be needed by our customers, and
political, regulatory and legal conditions in the international markets in which we conduct business (including China).

Our
results of operations are affected by a number of other factors including, among other things, when we are able to recognize revenue under our contracts. Our revenue recognition
policies often require us to defer revenue from shipped products and recognize revenue at a later date as more fully described under the caption "Note 2Significant Accounting
PoliciesRevenue Recognition" in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on June 4, 2010.
Other
factors affecting operations include delays in customer acceptances of our products, delays of deliveries of ordered products and our rate of progress in the fulfillment of our obligations under our
contracts. A delay in deliveries or cancellations of orders would cause us to have inventories in excess of our short-term needs, and may delay our ability to recognize, or prevent us from
recognizing revenue on contracts in our order backlog.

Changes
in the global capital markets has resulted in reduced availability of capital and a more stringent lending environment which in turn has contributed to the volatility of spending
within the PV industry. Although we continue to believe that the effect of these uncertainties is somewhat mitigated by our requirement of non-refundable deposits on most orders, we have
negotiated extensions of the delivery schedules and other modifications under some of our existing contracts and we expect similar negotiations to occur in the future. In addition, when a customer
fails to make deposits when due under their contracts, we terminate those contracts. We continue to negotiate with certain of our customers and are unable to estimate the impact, if any, on our
results of operations until such negotiations conclude and the timing of deliveries and other terms are finalized as more fully described under the heading "Order Backlog."

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Worldwide
manufacturing capacity of polysilicon has grown due to recent entrants and expansion by existing manufacturers that occurred during 2008 and 2009. These factors, among others,
have resulted in excess polysilicon manufacturing capacity which in turn has caused significant declines in the price of polysilicon. Although we believe declining polysilicon costs will benefit the
PV industry and will lead to increased demand for solar energy over the long term, lower polysilicon prices have negatively impacted the profitability of some existing polysilicon manufacturers and
caused other companies to reduce or delay their expansion plans. We believe that the demand for CVD reactors has the potential to increase as a result of polysilicon manufacturers seeking more
economically viable capacity. However, because of the long lead-times required to install capacity, it is difficult to predict if, or when this will occur.

Demand
for PV on-grid applications, which, in turn impacts the demand for PV manufacturing equipment, has historically been dependent in part on the availability and size of
government subsidies and economic incentives. The ability of a government to provide economic incentives may be adversely impacted by the recent economic downturn. For example, Germany, which has the
world's largest PV installed base, has announced a 16% reduction in their solar feed-in tariff rate for roof-top solar systems and the elimination of feed-in
tariffs for ground-based solar systems on agricultural land both of which are scheduled to be fully phased in by September 1, 2010. Spain, which has also been a major market for PV products,
reduced availability of subsidies in 2009 from 2,400 MW per year to 500 MW per year for solar projects. It is difficult to determine the impact that a changing incentive program has on solar module
demand and our customer's ability to sell solar modules in a particular geographic market. We believe decreasing module costs will reduce the effect of tariffs on the investment returns for solar
projects. In contrast to decreasing incentives in Europe, China has recently announced policies designed
to stimulate its renewable energy sector, including solar power. The changing environment for such government incentive programs creates uncertainty for the solar industry.

Although
we believe our long-term prospects are in line with solar industry forecasts which generally predict increasing PV demand through 2014, those forecasts vary widely
due to the current uncertainties in the capital markets and end-user solar markets. The current excess capacity in solar manufacturing, as well as increased competition, is expected to
result in lower prices for our PV products which could result in reduced margins if we are unable to reduce our costs. We are taking steps in an effort to mitigate the effect of these factors
including adjusting our pricing policies as necessary, seeking cost reduction opportunities including diversification into lower cost manufacturing regions and focusing our research and development
efforts on improvements that reduce the total production costs to our customers.

Our
quarterly results have fluctuated significantly in the past and we expect that our quarterly results will continue to fluctuate significantly in the future.

Order Backlog

Our order backlog consists of signed purchase orders or other written contractual commitments. The table below sets forth our order
backlog as of July 3, 2010 and April 3, 2010 by product category:

July 3, 2010

April 3, 2010Product Category

Amount

% of
Backlog

Amount

% of
Backlog(dollars in millions)Photovoltaic business

$
604


54
%
$
441


49
%Polysilicon business


520


46
%

465


51
%Total

$
1,124


100
%
$
906


100
%


Our
order backlog includes deferred revenue which represents equipment that had been shipped to customers but not yet recognized as revenue. Substantially all of the contracts in our
order backlog require the customer to either post a standby letter of credit in our favor and/or make advance payment prior to

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shipment
of equipment. Our order backlog as of July 3, 2010, included deferred revenue of $87.0 million related to our photovoltaic business and $234.3 million related to our
polysilicon business and cash
received in deposits related to our order backlog where deliveries had not yet occurred were $139.1 million as of July 3, 2010.

From
the date of a written commitment, we generally would expect to deliver PV products over a period ranging from three to nine months and polysilicon products over a period ranging
from twelve to eighteen months, although portions of the related revenue are expected to be recognized over longer periods in many cases. Disregarding the effect of any contract terminations or
modifications, we would expect to convert approximately 55% of our July 3, 2010 order backlog into revenue during the next twelve months and approximately 45% thereafter. Although most of our
orders require substantial non-refundable deposits, our order backlog as of any particular date should not be relied upon as indicative of our revenues for any future period. We began
tracking our backlog as a performance measure on a consistent basis during 2007.

If
a customer fails to perform on a timely basis, and such failure continues after notice of breach and a cure period, we may terminate the contract. Our contracts generally do not
contain cancellation provisions and in the event of a customer breach, the customer may be liable for contractual damages. During the three months ended July 3, 2010, we terminated or modified
contracts resulting in a $5.4 million reduction in our order backlog (98% of the reduction was from one contract). During the fiscal year ended April 3, 2010, we terminated or modified
contracts resulting in a $105 million reduction in our order backlog (95% of the reduction was from 9 contracts). During the three months ended July 3, 2010, we recorded revenues of
$41.6 million from terminated contracts and during the fiscal year ended April 3, 2010, we recorded revenues of $21.1 million from terminated contracts.

Although
we have a reasonable expectation that most of our customers will substantially perform on their contractual obligations, we monitor those contracts that we believe to be at risk
which include contracts with customers to whom we have sent notices of breach for failure to provide letters of credit or to make payments when due. We conduct negotiations with certain customers who
have requested that we extend their delivery schedules or make other contract modifications or who have not provided letters of credit or made payments in accordance with the terms of their contracts.
We engage in a certain level of these negotiations in the ordinary course. We monitor the effect, if any, that these negotiations may have on our future revenue recognition. If we cannot come to an
agreement with these customers, our order backlog could be reduced. Other customers with contracts in our order backlog that are not currently under negotiation may approach us with similar requests
in the future, or may fail to provide letters of credit or to make payments when due, which could further reduce our order backlog. If we cannot come to an agreement with these customers, our order
backlog could be further reduced.

As
of July 3, 2010, our order backlog consisted of contracts with 31 PV customers, 23 of which have orders of $3 million or greater and contracts with 7 polysilicon
customers, 6 of which have orders of $3 million or greater. Our order backlog as of July 3, 2010, included $565 million attributed to two customers each representing 10% or more
our order backlog.

Recent Developments

On July 29, 2010, we acquired privately-held Crystal Systems, Inc., a crystalline growth technology company
that manufactures sapphire substrates used in LED applications, and other components used in the defense, medical and aerospace industries. The purchase consideration consisted of approximately
$24 million in cash, approximately 5.4 million shares of our common stock with a closing date estimated value of $31 million and a potential additional $21 million cash
earn-out based on the attainment of certain financial and technical targets through the period ending March 31, 2012.

The
acquisition of Crystal Systems provides us access to certain technologies that offer opportunities to grow our business and product portfolio. In particular, Crystal Systems has
demonstrated crystal growth

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technology
using an advanced Heat Exchanger Method, or advanced HEM, and recently produced large, symmetric sapphire crystals in a highly automated and remotely monitored tool, which we believe
constitutes a significant advance in sapphire crystal production. Our management also believes, based upon input from customers, that growing crystals using an advanced HEM technology provides
materials that offer high purity level and crystalline quality. We intend to expand our sapphire materials business and expect that we will make capital expenditures of up to $22 million in the
sapphire material business through the period ending March 31, 2012.

Currently,
Crystal Systems sells crystalline sapphire materials for multiple uses by customers in several industries, including LED, semiconductor, defense, medical and aerospace. We
plan to continue the sale of the sapphire crystalline materials to customers, but we also have plans to sell the furnaces used to manufacture sapphire, the implementation of which will draw heavily
upon our experience in manufacturing of multi-crystalline furnace technology for the solar industry. Currently, we expect to commence marketing and sale of sapphire furnaces during our fiscal year
2012.

Results of Operations

The following tables set forth the results of operations as a percentage of revenue for the three months ended July 3, 2010 and
June 27, 2009:

Three Months EndedJuly 3,
2010

June 27,
2009Statement of Operations Data:*Revenue


100
%

100
%Cost of revenue


66


51Gross profit


34


49Research and development


3


9Selling and marketing


3


5General and administrative


8


12Amortization of intangible assets





1Income from operations


20


22Interest income (expense), net





Interest expense





Interest component of forward foreign exchange contracts





(1
)Other expense, net





(4
)Income before income taxes


20


17Provision for income taxes


8


6Net income


12
%

11
%


*percentages
subject to rounding.


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Three Months Ended July 3, 2010 compared to Three Months Ended June 27, 2009.

Three Months EndedBusiness Category

July 3,
2010

June 27,
2009

Change

% Change(dollars in thousands)Photovoltaic BusinessPhotovoltaic equipment

$
109,283

$
19,039

$
90,244Photovoltaic services, parts and other


2,158


895


1,263Total photovoltaic business


111,441


19,934


91,507


459
%Polysilicon BusinessPolysilicon equipment


22,643


51,352


(28,709
)Polysilicon services, parts and other


1,082


533


549Total polysilicon business


23,725


51,885


(28,160
)

(54
)%Total revenue

$
135,166

$
71,819

$
63,347


88
%


Revenue
from our PV business increased 459% for the three months ended July 3, 2010 as compared to the three months ended June 27, 2009. This increase in revenue is
primarily related to increased orders received during the past six months as well as revenue of $41.6 million primarily from one terminated turnkey contract as described in further detail
below. Revenue from our polysilicon business decreased 54% for the three months ended July 3, 2010 as compared to the three months ended June 27, 2009. We typically experience a longer
period of time between delivery and revenue recognition with our polysilicon contracts than with our PV contracts. Polysilicon revenue for the three months ended July 3, 2010 substantially
relates to contracts that were in our order backlog as of March 28, 2009.

Our
PV equipment revenue includes sales of DSS units as well as other PV equipment. During the three months ended July 3, 2010, revenue from DSS sales increased 311% to
$69.7 million as compared to $17.0 million for the three months ended June 27, 2009. Sales of other PV equipment accounted for $39.6 million for the three months ended
July 3, 2010 and $2.0 million of our revenue for the three months ended June 27, 2009. Other PV equipment revenue is primarily attributed to turnkey contracts and ancillary
equipment under our DSS contracts, which can vary based upon specific customer requirements. Ancillary equipment supplied by us is primarily secured from third parties.

Revenue
from PV services, parts and other was $2.2 million for the three months ended July 3, 2010 and $0.9 million for the three months ended June 27, 2009.
This increase is consistent with the overall increase in our PV business.

Included
within the PV business total is revenue from our turnkey contracts. Revenue from these contracts for the three months ended July 3, 2010 was $41.1 million,
consisting of $5.7 million from sales of DSS units and $35.4 million from sales of other PV equipment. Included in our PV equipment revenue was $40.3 million related to a turnkey
contract that was substantially delivered but was terminated due to non-payment of an outstanding receivable. We recorded no turnkey contract revenue for the three months ended
June 27, 2009. Turnkey revenue is generally recorded only
after final production line acceptance and therefore is periodic in nature. Our market for turnkey services has substantially decreased in recent years. During the three months ended July 3,
2010, we completed our review of our turnkey business and decided to no longer offer turnkey integration services. This decision was based our assessment of reduced market opportunities, as well as
low gross margins compared to our other product lines. Our decision did not impact the recoverability of any tangible or intangible assets, nor did we incur any significant costs to eliminate this
product offering.

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Revenue from our polysilicon business decreased by 54% to $23.7 million for the three months ended July 3, 2010 as compared to $51.9 million
for the three months ended June 27, 2009. Revenue related to our CVD reactors is typically deferred until pre-established reactor output performance criteria and final acceptance is
achieved and may fluctuate significantly. Included in our backlog are polysilicon contracts that grant contractual rights which are considered a separate element under the contract and requires
revenue to be recognized ratably over the period commencing when all other elements have been delivered and other contract criteria have been met and through the period such rights exist. During the
three months ended July 3, 2010, we recognized revenue of $20.9 million on a ratable basis from one of these customers with a remaining deferred revenue balance for this customer of
$135.5 million at July 3, 2010, which is expected to be recognized as revenue ratably through fiscal year 2013. During the three months ended June 27, 2009, we recognized no
revenue on a ratable basis.

In
both the three months ended July 3, 2010, and June 27, 2009, a substantial percentage of our revenue resulted from sales to a small number of customers. Three of our
customers accounted for 56% of our revenue for the three months ended July 3, 2010 and two customers accounted for 77% of our revenue for the three months ended June 27, 2009. No other
customer accounted for more than 10% of our revenue during the respective periods.

Based
upon order backlog as of July 3, 2010, we believe our PV business will represent a majority of our revenue for fiscal year 2011. For the fiscal year ending April 2,
2011, we believe that no one customer will account for more than 30% of our total annual revenue.

Cost of Revenue, Gross Profit and Gross Margins.The following table sets forth total cost of revenue and gross profit for the three
months ended
July 3, 2010 and June 27, 2009:

Three Months EndedJuly 3,
2010

June 27,
2009

Change

% Change(dollars in thousands)Cost of revenuePhotovoltaic business

$
74,749

$
13,251

$
61,498Polysilicon business


14,494


23,603


(9,109
)Total

$
89,243

$
36,854

$
52,389


142
%Gross profitPhotovoltaic business

$
36,692

$
6,683

$
30,009Polysilicon business


9,231


28,282


(19,051
)Total

$
45,923

$
34,965

$
10,958


31
%


Our
PV cost of revenue and gross profit increased $61.5 million or 464%, and $30.0 million, or 449%, respectively, for the three months ended July 3, 2010 as
compared to the three months ended June 27, 2009 reflective of an overall increase in PV revenue. Our polysilicon cost of revenue and gross profit decreased by $9.1 million and
$19.1 million, respectively, for the three months ended July 3, 2010 as compared to the three months ended June 27, 2009 reflective of an overall decrease in polysilicon revenue.
The following

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table
sets forth total gross margins for the three months ended July 3, 2010 and June 27, 2009 and, for comparative purposes, the fiscal year ended April 3, 2010:

Three Months Ended

Fiscal
Year EndedJuly 3,
2010

June 27,
2009

April 3,
2010Gross marginsPhotovoltaic business


33
%

34
%

34
%Polysilicon business


39
%

55
%

44
%Overall


34
%

49
%

40
%


Overall
gross profit as a percentage of revenue, or gross margin, decreased to 34% for the three months ended July 3, 2010 from 49% for the three months ended June 27,
2009.

Gross
margins for the PV business during the three months ended July 3, 2010 were 33% as compared to gross margins of 34% during the three months ended June 27, 2009.
Included in the gross margins for the three months ended July 3, 2010 was revenue of approximately $40.3 million from a terminated turnkey project that generated a gross margin of
approximately 17%. Our other PV business was favorably impacted as a result of higher factory utilization.

For
the three months ended June 27, 2009, gross margins were adversely impacted by approximately $0.7 million of costs primarily related to lower levels of production
during the period and $0.5 million of
charges incurred as we rescheduled and/or cancelled a portion of our commitments to our vendors to procure materials in the PV business to reflect a reduced rate of production.

Gross
margins within our polysilicon business during the three months ended July 3, 2010 and June 27, 2009 were 39% and 55%, respectively. Our gross margins tend to vary
depending on the volume, pricing and timing of revenue recognition for our polysilicon contracts.

We
expect that the effect of both the anticipated levels of manufacturing and the mix of revenue to be recognized for the remaining portion of the fiscal year ending April 2, 2011
will result in increased overall annual gross margins for the balance of the fiscal year ending April 2, 2011 as compared to the overall gross margins earned through the three months ended
July 3, 2010 and therefore, annual gross margins are expected to be more comparable to overall margins for the fiscal year ended April 3, 2010.

Research and Development.The following table sets forth total research and development expenses for the three months ended July 3,
 2010 and
June 27, 2009:

Three Months EndedJuly 3,
2010

June 27,
2009

Change

% Change(dollars in thousands)Research and developmentPhotovoltaic business

$
3,076

$
3,240

$
(164
)Polysilicon business


671


3,159


(2,488
)Total

$
3,747

$
6,399

$
(2,652
)

(41
)%


Research
and development expenses decreased 41% to $3.7 million for the three months ended July 3, 2010, as compared to $6.4 million for the three months ended
June 27, 2009. The decrease was primarily related to the timing of certain polysilicon project costs, as well as, the reallocation of engineering resources to support customer related
activities. Our spending on research and development activities is directly related to projects under development and the timing of the spending associated with each of the projects may vary from
quarter to quarter. We expect our rate of spending in R&D to increase over the

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remainder
of the fiscal year ended April 2, 2011, as we continue to invest in new product development and expand our product base in both our polysilicon and PV businesses.

Selling and Marketing.The following table sets forth total selling and marketing expenses for the three months ended July 3, 2010
and
June 27, 2009:

Three Months EndedJuly 3,
2010

June 27,
2009

Change

% Change(dollars in thousands)Selling and marketingPhotovoltaic business

$
1,757

$
970

$
787Polysilicon business


1,954


2,897


(943
)Total

$
3,711

$
3,867

$
(156
)

(4
)%


Selling
and marketing expenses decreased 4% to $3.7 million for the three months ended July 3, 2010 from $3.9 million for the three months ended June 27,
2009. Selling and marketing expenses for our PV business increased approximately $0.8 million primarily related to an increase in payroll and payroll-related costs. Additionally, during the
three months ended July 3, 2010, our polysilicon business selling and marketing expenses decreased by $0.9 million of which approximately $0.8 million was related to decreased
sales commissions. Sales commissions are accrued based on operational factors such as deposits, shipments and final acceptances received from customers rather than when revenue is recognized.

General and Administrative.General and administrative expenses increased by $2.3 million or 27% to $10.6 million for the
three months
ended July 3, 2010 from $8.3 million for the three months ended June 27, 2009. Increased general and administrative expenses were primarily related to payroll and payroll related
costs and consulting.

Amortization of Intangible Assets.Amortization expense attributed to intangible assets was unchanged for the three months ended
July 3, 2010
as compared to the three months ended June 27, 2009.

Interest Income.We invest our excess cash in exchange traded money market mutual funds and short term commercial paper. Interest
income increased to
$0.2 million for the three months ended July 3, 2010 from less than $0.1 million for the three months ended June 27, 2009 due to increased cash balances and
short-term investments.

Interest Expense.During each of the three months ended July 3, 2010 and June 27, 2009, interest expense was $0.2 million,
 which
is primarily attributed to the expensing of deferred debt costs in connection with our credit facility and other related credit facility fees.

Interest Component of Forward Foreign Exchange Contracts.During the three months ended July 3, 2010 forward point interest income
was less
than $0.1 million. During the three months ended June 27, 2009, forward point interest expense was $0.6 million. These amounts represent the interest rate differential between the
two countries involved in our forward foreign exchange contract for the specified period of time and can be either a premium or discount at the beginning of the contract and are adjusted to reflect
interest rate market condition changes. Such changes can result in interest income or interest expense over the life of the contract.

Other, net.During the three months ended July 3, 2010, other income, net was $0.2 million. During the three months ended
June 27, 2009, other expense, net was $2.4 million, which included a loss of $2.1 million recognized due to fair value adjustments on certain forward foreign exchange contracts
that no longer qualified as a cash flow hedge because the hedging relationship was no longer deemed to be highly effective.

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Provision for Income Taxes.Our effective income tax expense rate was 39.6% in the three months ended July 3, 2010 and 37.5% in
the three
months ended June 27, 2009. The effective tax rate is higher in the period ended July 3, 2010 due to the expiration of the research and development tax credit. We review the expected
annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income; changes to the valuation allowance
for net deferred tax assets; changes to actual or forecasted permanent book to tax differences; impacts from future tax settlements with state, federal or foreign tax authorities; and impacts from tax
law changes. Due to the volatility of these factors, our consolidated effective income tax rate can fluctuate on a quarterly basis.

Net Income.As a result of the foregoing factors, for the three months ended July 3, 2010, net income was $16.5 million
compared to
$7.8 million for the three months ended June 27, 2009.

Liquidity and Capital Resources

Overview

Our cash balances increased by $25.7 million during the three months ended July 3, 2010, from $230.7 million as of
April 3, 2010 to $256.5 million as of July 3, 2010. During the same period of fiscal 2010, our cash balance increased by $54.3 million, from $107.1 million as of
March 28, 2009 to $161.4 million as of June 27, 2009. We manage our cash inflows through the use of customer deposits and milestone billings that allow us in turn to meet our cash
outflow requirements, which primarily consist of vendor payments and prepayments for contract related costs (raw material and components costs) and payroll and overhead costs as we perform on our
customer contracts. The following discussion of the changes in our cash balance refers to the various sections of our Condensed Consolidated Statements of Cash Flows, which appears in Item 1 of
this quarterly report on Form 10-Q.

Cash Flows from Operating Activities

For the three months ended July 3, 2010, our cash provided by operations was $25.6 million which included
$16.5 million of net income, $1.9 million of a net increase in deferred revenue less deferred costs and a decrease in accounts receivable of $15.2 million. We also experienced an
increase in customer deposits of $19.5 million and increases in inventory and advance payments on inventory purchases of $24.7 million as a result of the recent increase in customer
orders over the most recent prior six months.

For
the three months ended June 27, 2009 our cash provided by operations was $53.5 million which included the receipt of approximately $35.3 million for refundable
income taxes due to an election of a change in accounting method for tax purposes. This change in methodology resulted in a one year deferral of customer deposits and additional receipts that under
the prior tax method had been included in taxable income in the year of receipt. As a result of this change in methodology, we were in an overpayment position regarding our estimated income taxes for
the year ended March 28, 2009. We filed for a refund of Federal income taxes in May 2009 in the amount of $35.3 million which was received in June 2009. Other significant sources of cash
included $7.8 million of net income, $60.1 million of a net increase in deferred revenue less deferred costs primarily related to the shipment of our polysilicon reactors and reductions
in inventory and advance payments on inventory purchases of $65.8 million reflecting the slowdown in our business as a result of current economic uncertainties. The significant uses of cash
were an increase in accounts receivable of $20.1 million, a decrease in customer deposits of $78.7 million and a decrease in accounts payable and accrued expenses of
$25.2 million.

Cash Flows from Investing Activities

We outsource a significant portion of our manufacturing and therefore, we require minimal capital expenditures to meet our production
demands. Our capital expenditures for the three months ended July 3, 2010 and June 27, 2009, were approximately $1.3 million and $0.2 million, respectively. Our capital

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expenditures
for the three months ended July 3, 2010 were primarily used for improving our business information systems and purchase of machinery and equipment to support our growth.

Cash Flows from Financing Activities

During the three months ended July 3, 2010 and June 27, 2009, we received $1.3 and $1.0 million, respectively,
from financing activities, primarily related to the exercise of stock options.

We
believe that cash generated from operations together with our existing cash and customer deposits will be sufficient to satisfy working capital requirements, commitments for capital
expenditures, and other cash requirements for the foreseeable future, including at least the next twelve months.

Senior Credit Facility

On July 29, 2008, we entered into a senior credit agreement with Bank of America, N.A., as sole administrative and collateral
agent, and a syndicate of financial institutions. The senior credit agreement provides for a three-year revolving senior credit facility in an aggregate principal amount of up to
$90.0 million, which is available for the borrowing of revolving loans and the issuance of standby LOCs (the "senior credit facility"); provided that the aggregate principal amount of revolving
loans may not exceed $50.0 million at any time. The senior credit facility includes a sub-limit of $25.0 million for swingline loans.

The
aggregate amount of borrowings and outstanding standby LOCs under the senior credit facility may not exceed a borrowing base equal to Adjusted EBITDA multiplied by 3.0 plus
unrestricted cash on hand. The senior credit facility is guaranteed by all of our existing and future direct and indirect domestic subsidiaries. Obligations under the senior credit facility are
secured by a first priority lien on substantially all of the tangible and intangible assets and by a pledge of the capital stock of all of our domestic subsidiaries and 65% of the capital stock of our
foreign subsidiaries owned directly by us or one of our domestic subsidiaries.

The
senior credit facility may be increased by an aggregate amount of up to $100.0 million, with additional commitments from the lenders under the senior credit facility or from
new financial institutions, if no default or event of default exists. We may exercise our option to increase the commitments not more than three times, and each increase will be in a minimum aggregate
principal amount of $10.0 million and integral multiples of $5.0 million in excess thereof. As of July 3, 2010, we had $26.8 million of outstanding LOCs and no borrowings
under the senior credit facility, resulting in $63.2 million of availability under the senior credit facility.

Borrowings
under the senior credit facility bear interest at a floating rate equal to, at our option, LIBOR plus 2.25% per annum or a base rate plus 1.25% per annum. The base rate is
defined as the higher of the Bank of America prime rate or the federal funds rate plus 0.50%. We pay a commitment fee to the lenders equal to 0.50% per annum on the actual daily unused portions of the
senior credit facility and letter of credit fees equal to 2.25% per annum on the maximum amount available to be drawn under each standby letter of credit. As of June 27, 2009, the
3 month LIBOR rate, Bank of America prime rate and federal funds rate were 0.53%, 3.25% and 0.25%, respectively.

The
senior credit agreement that governs the senior credit facility contains financial covenants that require us to meet certain financial tests, including a maximum consolidated net
leverage ratio and a minimum consolidated fixed charge coverage ratio, calculated on a consolidated basis for each consecutive four fiscal quarter period. The senior credit agreement also contains
covenants, which, among other things, limit our ability to: incur indebtedness; make investments; engage in mergers and other fundamental changes; sell or otherwise dispose of property or assets; pay
dividends and other restricted payments or enter into transactions with affiliates; enter into burdensome agreements; use proceeds to purchase or carry margin stock or extend credit to others; make
subordinated debt payments; make certain changes to

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the
terms of material indebtedness; and other covenants customary for such a facility. We were in compliance with all of these covenants as of July 3, 2010.

On
July 29, 2010, we elected to terminate both the senior credit facility and the cash-collateralized letter of credit facility. The senior credit facility had no
outstanding borrowings and was only being used to secure standby letters of credit. We had never utilized the cash-collateralized letter of credit facility. On July 29, 2010, the
outstanding standby letters of credit under the senior credit facility amounted to $30 million and were subsequently cash collateralized under a separate agreement with the Bank of America,
N.A. which required this amount to be transferred into a restricted cash account. The agreement allows us to cash collateralize future standby letters of credit. We are in the process of evaluating
our credit needs and anticipate entering into a new credit facility in the near future, but there can be no assurance that we will be able to obtain a new credit facility under acceptable terms and
conditions, or at all.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited
purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Contractual Obligations and Commercial Commitments

There have been no significant changes to our "Contractual Obligations and Commercial Commitments" table in Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the year ended April 3, 2010, other than those
resulting from changes in the amount of purchase commitments under agreement as described below.

As
of July 3, 2010, purchase commitments under agreement totaled $243 million of which substantially all are due during the fiscal year ended April 2, 2011. As of
July 3, 2010, prepayments under certain of these purchase commitments amounted to $28.8 million.

Recently Adopted Accounting Pronouncements

In June 2009, the FASB issued an amendment to the accounting principles relating to the transfer of financial assets that eliminates
the concept of a qualifying special purpose entity, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies other sale-accounting
criteria, and changes the initial measurement of a transferor's interest in transferred financial assets. This guidance is effective for transfers of financial assets in fiscal years beginning after
November 15, 2009 and in interim periods within those fiscal years with earlier adoption prohibited. The adoption of this guidance did not have a material impact on our consolidated financial
statements.

In
June 2009, the FASB issued authoritative guidance that eliminates certain exceptions to the consolidation of qualifying special purpose entities, contains new criteria for determining
the primary beneficiary of a variable interest entity, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable interest entity.
The amendment also contains a new requirement that any term, transaction, or arrangement that does not have a substantive effect on an entity's status as a variable interest entity, a company's power
over a variable interest entity, or a company's obligation to absorb losses or its right to receive benefits of an entity must be disregarded in applying consolidation provisions. The elimination of
the qualifying special purpose entity concept and its consolidation exceptions is effective for the fiscal year beginning after November 15, 2009, and for interim periods within that period,
with earlier adoption prohibited. The adoption of this amendment did not have a material impact on our consolidated financial statements.

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In
January 2010, the FASB issued an update that improves the requirements related to fair value measurements and disclosures about transfers between Level 1, Level 2 and
Level 3 assets and the disaggregated activity in the roll forward for Level 3 fair value measurements. These new disclosures are effective for fiscal years beginning after
December 15, 2010 and for interim periods within those fiscal years. The adoption of these expanded disclosures did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In October 2009, the FASB issued authoritative guidance that provides amendments to the revenue recognition criteria for separating
consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This guidance also
eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement and expands
the disclosure requirements regarding a vendor's multiple-deliverable revenue arrangements. This guidance is effective for fiscal years beginning on or after June 15, 2010 and early adoption is
permitted. We have elected not to adopt this authoritative guidance early and are currently assessing the potential impact, if any; the adoption of this guidance will have on our consolidated
financial statements.

In
April 2010, the FASB issued authoritative guidance to address the classification of an employee share-based payment award with an exercise price denominated in the currency of a
market in which the underlying equity security trades such that awards of equity share options granted to an employee of an entity's foreign operation should have a fixed exercise price denominated in
(1) the foreign operation's functional currency or (2) the currency in which the employee's pay is denominated should not be considered to contain a condition that is not a market,
performance, or service condition. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Early adoption is
permitted. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

In
April 2010, the FASB issued authoritative guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research
or development transactions and is applicable to vendors that provide research or development deliverables in an arrangement in which one or more payments are contingent upon achieving uncertain
future events or
circumstances. This guidance is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early
adoption is permitted. We are currently assessing the potential impacts, if any, the adoption of this guidance will have on our consolidated financial statements.

Other
recent accounting pronouncements issued by the FASB and the SEC did not have or are not expected to have a material impact on our present or future financial statements.

Critical Accounting Policies and Estimates

For the three months ended July 3, 2010, there were no significant changes to our critical accounting policies as identified in
our consolidated financial statements for the year ended April 3, 2010 included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010, filed with
the SEC on June 4, 2010.

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Risk

We are exposed to a variety of market risks, including changes in interest rates affecting the return on our investments and foreign
currency fluctuations.

Investment Risks

We maintain an investment portfolio which at July 3, 2010 consisted of $236.2 million of exchange traded money market
funds and $25.0 million in short-term commercial paper. At any time a sharp rise in market interest rates could have an adverse impact on the fair value of our investment portfolio.
Conversely, declines in market interest rates could have a material impact on the interest earnings of our investment portfolio. We do not currently hedge these interest rate exposures. We place our
investments with high quality issuers and have policies limiting, among other things, the amount of credit exposure to any one issuer. We seek to limit default risk by purchasing only investment grade
securities. A hypothetical movement of plus or minus 50 basis points in market interest rates would not have a material impact to the value of our investment portfolio. We also have the ability to
hold our investments until maturity, and therefore do not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates
on our investment portfolio.

Foreign Currency Risk

Although, our reporting currency is the U.S. dollar and substantially all of our sales contracts are currently denominated in U.S.
dollars, we may incur costs denominated in other currencies. In addition, we maintain our cash balances primarily in the U.S. dollar. However, from time to time, we may maintain cash balances in
currencies other than the U.S. dollar. As a result, we will be subject to currency translation risk. Exchange rates between a number of currencies and U.S. dollars have fluctuated significantly over
the last few years and future exchange rate fluctuations may occur.

Our
primary foreign currency exposure relates to fluctuations in foreign currency exchange rates, primarily the euro for inventory purchases from vendors located in Europe. Fluctuations
in exchange rates could affect our gross and net profit margins and could result in foreign exchange and operating losses. Changes in the customer's delivery schedules can affect related payments to
our vendors which will cause fluctuations in the cash flows and when we expect to make payments when these cash flows are realized or settled.

We
enter into forward foreign exchange contracts that qualify as cash flow hedges to hedge portions of our anticipated foreign currency denominated inventory purchases. These contracts
typically expire within 12 months. Consistent with the nature of the economic hedges provided by these forward foreign exchange contracts, increases or decreases in their fair values would be
effectively offset by corresponding decreases or increases in the U.S. dollar value of our future foreign currency denominated inventory purchases (i.e., "hedged items"). The information
provided below relates only to the hedging instruments and does not represent the corresponding changes in the underlying hedged items.

As
of July 3, 2010 we had Euro forward foreign exchange contracts with notional amounts of €18.5 million all of which expire within twelve months. As of
July 3, 2010, the fair value and carrying amount of our forward foreign exchange contracts was a net liability of $1.9 million. Relative to our foreign currency exposures existing at
July 3, 2010, a 10% appreciation (depreciation) of the Euro against the U. S. dollar would result in an increase (decrease) in the fair value of these derivative instruments of approximately
$2.3 million.

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Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures as of July 3, 2010. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding
required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and
management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and
procedures as of July 3, 2010, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.

Changes in Internal Control over Financial Reporting

There have been no significant changes in our internal controls over financial reporting during the three months ended July 3,
2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

General

Beginning on August 1, 2008, seven putative securities class action lawsuits were commenced in the United States District Court
for the District of New Hampshire (the "Court"), against us, certain of our officers and directors, certain underwriters of our July 24, 2008 initial public offering and others, including
certain investors in us. On October 3, 2008, the Court entered an order consolidating these actions under the caption Braun et al. v. GT Solar International, Inc., et al (the "federal
class action"). The Court selected the lead plaintiff and lead plaintiff's counsel in the federal
class action on October 29, 2008. The lead plaintiff filed an amended consolidated complaint on December 22, 2008. The lead plaintiff asserts claims under various sections of the
Securities Act. The amended consolidated complaint alleges, among other things, that the defendants made false and materially misleading statements and failed to disclose material information in
certain SEC filings, including the registration statement and Prospectus for our July 24, 2008 initial public offering, and other public statements, regarding the status of our business
relationship with LDK Solar, Ltd. Among other relief, the amended consolidated complaint seeks class certification, unspecified compensatory damages, rescission, interest, attorneys' fees,
costs and such other relief as the Court should deem just and proper.

The
defendants moved to dismiss the amended consolidated complaint on February 5, 2009. On September 22, 2009, the Court denied the defendants' motion. Following the
Court's denial of the motion, the parties submitted a proposed joint case management order, which the Court approved on November 16, 2009. The case management order provides for discovery to
close on May 25, 2011.

In
addition, on September 18, 2008 a putative securities class action was filed in New Hampshire state court in the Superior Court for Hillsborough County, Southern District (the
"State Court"), under the

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caption
Hamel v. GT Solar International, Inc., et al., against us, certain of our officers and directors and certain underwriters of our July 24, 2008 initial public offering (the "state
class action"). The state class action plaintiff asserts claims under various sections of the Securities Act of 1933, as amended. The state class action complaint alleges, among other things, that the
defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including the registration statement for our July 24, 2008 initial
public offering, and other public statements, regarding the status of our business relationship with LDK Solar. Among other relief, the state class action complaint seeks class certification,
unspecified compensatory damages, rescission, interest, attorneys' fees, costs and such other relief as the State Court should deem just and proper.

We
removed the state class action to the United States District Court for the District of New Hampshire on October 22, 2008. The state class action was consolidated with the
federal class action on November 25, 2008. On February 2, 2009, the federal Court granted the plaintiff's motion to remand the state class action to New Hampshire State Court. On
May 4, 2009, the parties agreed to a stay of the state class action, pending resolution of the motion to dismiss in the consolidated federal case. At a case structuring conference on
June 3, 2009, the state court endorsed the proposed joint case management order filed by the parties which requires coordination of any discovery to be taken in the state class action with that
taken in the federal class action. With the denial of the motion to dismiss the federal action, the parties submitted a proposed joint case management order to the State Court on November 6,
2009. On January 12, 2010, the State Court granted a joint motion of the parties to transfer the state class action to the State Court's Business and Commercial Dispute Docket.

A
derivative suit, captioned Fan v. GT Solar Int'l, Inc., et al., was filed in New Hampshire State Court on January 14, 2009 (the "derivative action"). The derivative
complaint is asserted nominally on behalf of the Company against certain of our directors and officers and alleges various claims for breach of fiduciary duty, unjust enrichment, abuse of control, and
gross mismanagement. The derivative complaint is premised on the same allegations asserted in the federal class action. On April 10, 2009, the State Court granted our motion to stay the
derivative action, pending resolution of the motion to dismiss in the federal action. In accordance with the terms of the stay the parties have conferred regarding a case management schedule for the
derivative action. The derivative action remains stayed.

We
intend to defend the federal and state class actions, and the derivative action, vigorously. There can be no assurance, however, that we will be successful, and an adverse resolution
of any of the lawsuits could have a material adverse effect on our consolidated financial position and results of operations. We are not presently able to reasonably estimate potential losses, if any,
related to the lawsuits.

We
are subject to various other routine legal proceedings and claims incidental to our business, which we believe will not have a material adverse effect on our financial position,
results of operations or cash flows.

Item 1A.    Risk Factors

In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider
the risk factors discussed under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010 filed with the Securities and Exchange
Commission on June 4, 2010. Except as noted below, there have been no material changes to the risk factors previously disclosed under the caption "Risk Factors" in the Annual Report on
Form 10-K. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently
deem immaterial or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of these risks or uncertainties actually
occurs, our business, financial condition and operating results would likely suffer. Any failure to successfully implement our operating strategy or the occurrence of any of the events or
circumstances set forth below and in our "Risk Factors" in the Annual Report on Form 10-K could

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result
in the actual operating results being different from our guidance, and such differences may be adverse and material.

Modification of Risk Factors

Our Annual Report on Form 10-K for the fiscal year ended April 3, 2010, filed on June 4, 2010,
included a risk factor under the heading "Item 1A. Risk FactorsRisks Relating to Our Business Generally" which was captioned "Our credit facilities contain covenants that impose
significant restrictions on us". On July 29, 2010, we elected to terminate both our senior credit facility and our cash-collateralized letter of credit facility and therefore we
have removed this risk from "Item 1A. Risk Factors" for this Quarterly Report on Form 10-Q. In connection with this termination, we entered into a new
cash-collateralized arrangement to fund our standby letters of credit requirements with restricted cash. We anticipate financing our working capital needs for the immediate future through
cash flows from operations. However, it is possible that we could enter into a new credit facility in the future and if so, it is likely that such a facility could have similar types of covenants and
restrictions.

Additional Risk Factors

As part of our business strategy, we have entered into and may enter into or seek to enter into business combinations and acquisitions that may be difficult to integrate,
disrupt our business, expose us to litigation or unknown liabilities, dilute stockholder value and divert management attention.

If
acquisition opportunities arise in the future, we may seek to enter into business combinations or purchases. For example, on July 29, 2010, we completed the acquisition of
Crystal Systems, Inc., a crystalline growth technology company that manufactures high-quality, large area sapphire substrates used in the LED, defense, medical and aerospace
industries. Acquisitions and combinations, including the acquisition of Crystal Systems, Inc., are accompanied by a number of risks, including the difficulty of integrating the operations and
personnel of the acquired companies, the potential disruption of our ongoing business, the potential distraction of management, expenses related to the acquisition and potential unknown liabilities
associated with acquired businesses. In addition, there may, in particular, be risks and uncertainties in connection with the intellectual property rights of an acquired company, including
(i) the nature, extent and value of the intellectual property assets of an acquired company, (ii) the rights that an acquired company has to utilize intellectual property that it claims
to have developed or to have licensed, (iii) the validity of intellectual property transfers to or from third parties, (iv) the enforceability of registered and other intellectual
property rights, and (v) the validity of any threatened actions by third parties against the acquired company for intellectual property infringement and the extent of the potential loss
relating thereto. Third parties may also be more likely to assert claims against the acquired company, including claims for breach of intellectual property rights, once the company has been acquired
by us. Any inability to integrate completed acquisitions or combinations in an efficient and timely manner or the inability to properly assess and utilize the intellectual property portfolio without
infringing the rights of a third party could have an adverse
impact on our results of operations. In addition, we may not be able to recognize any expected synergies or benefits in connection with a future acquisition or combination or we may be unable to
effectively implement the business plan for the acquired company which would prevent us from achieving our financial and business goals for the business. If we are not successful in completing
acquisitions or combinations that we may pursue in the future, we may incur substantial expenses and devote significant management time and resources without a successful result. In addition, future
acquisitions could require use of substantial portions of our available cash or result in dilutive issuances of securities. Acquisitions and combinations also frequently require the acquiring company
to recognize significant amounts of intangible assets, such as goodwill, patents and trademarks and customer lists, in an acquisition, which amounts may be subject to a future impairment if we are
unable to successfully implement the operating strategy for the acquired company.

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If high-quality, low cost crystalline sapphire products do not achieve market acceptance, or if alternative technologies are developed, prospects for Crystal
Systems would be limited.

As
a result of our acquisition of Crystal Systems, Inc. in July 2010 a portion of our business, in the future, will consist of the manufacture and sale of crystalline sapphire
materials, which are used in the LED industry. Potential customers for crystalline sapphire and LED materials may be reluctant to adopt such products as an alternative to existing traditional lighting
technology. In addition, our potential customers may have substantial investments and know-how related to their existing crystalline sapphire and lighting technologies, and may perceive
risks relating to the complexity, reliability, quality, usefulness and cost-effectiveness of our crystalline sapphire and LED products compared to other sapphire and lighting products
available in the market. If acceptance of crystalline sapphire products and LED lighting does not increase significantly, then opportunities to increase this portion of our business and revenues would
be limited.

Moreover,
if effective new sources of light other than LED devices are developed, Crystal Systems' current products and technologies could become less competitive or obsolete. Any of
these factors could have an adverse impact on the growth of that portion of our business and the recoverability of our investment in Crystal Systems.

Historically,
the sapphire industry has experienced volatility in product demand and pricing. Changes in average selling prices of the Crystal Systems products as a result of competitive
pricing pressures, increased sales discounts and new product introductions by competitors could have an adverse impact on the results of operations.

The technology used in the crystalline sapphire and LED industry continues to change rapidly, and if we are unable to modify our products to adapt to future changes in the
crystalline sapphire and LED industry we will be unable to attract or retain customers.

Our
ability to expand into new applications in the crystalline sapphire and LED market depends on continued advancement in the design and manufacture of sapphire and LEDs by others. The
crystalline sapphire and LED industry has been characterized by a rapid rate of development of new technologies and manufacturing processes, rapid changes in customer requirements, frequent product
introductions and ongoing demands for greater functionality. The future success of Crystal Systems will depend on our ability to develop new products for use in crystalline sapphire and LED
applications and to adjust our product specifications in response to these developments in a timely manner. If our development efforts are not successful or are delayed, or if our newly developed
products do not achieve market acceptance, we may be unable to attract or retain customers and our operating results could be harmed. In addition, although sapphire is currently the preferred
substrate material for certain LED applications, we cannot be assured that the LED market demand for sapphire will continue. Research is also ongoing for the use of silicon substrates in LED
applications. If sapphire is displaced as the substrate of choice for certain LED applications, the financial condition and results of operations of our Crystal Systems subsidiary could be adversely
affected.

Part
of our business plan in connection with the Crystal Systems acquisition is to commence the marketing and sale of sapphire furnaces during our fiscal year 2012. We may not be able to
execute on our strategy to sell sapphire furnaces in a timely manner, or at all, for reasons within or outside of our control. Among the factors that may delay or prevent the realization of our
business plan include, limited resources that we can utilize to manufacture such furnaces, developments by competitors and others in the sapphire crystalline market that make the sapphire furnaces
inefficient or obsolete or power demands of these furnaces that limit broad market acceptance.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

Item 2(a)
and 2(b) are not applicable

The
following table sets forth information in connection with purchases made by, or on behalf of, us or any affiliated purchaser, of shares of our common stock during the three months
ended July 3, 2010:

(a)
Total Number of
Shares Purchased

(b)
Average Price
Paid per Share

(c)
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

(d)
Maximum Number
(or Approximate Dollar
Value) of Shares that
May Yet Be Purchased
Under the Plans
or ProgramsMonth #1 (April 4, 2010 through May 8, 2010)


1,757

$
5.80





Month #2 (May 9, 2010 through June 5, 2010)


6,465

$
5.48





Month #3 (June 6, 2010 through July 3, 2010)


1,725

$
5.63








We
did not repurchase any of our common stock on the open market as part of a stock repurchase program during the three months ended July 3, 2010; however, our employees
surrendered, and we subsequently retired, 9,947 shares of our common stock to satisfy the tax withholding obligations on the vesting of restricted stock awards issued under our 2008 Equity Incentive
Plan.

Item 3.    Defaults Upon Senior Securities



Item 4.    (Removed and Reserved)

Item 5.    Other Information



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Item 6.    Exhibits

Exhibits are incorporated by reference or are filed with this report as indicated below (numbered in accordance with Item 601 of
Regulation S-K).

Incorporated by ReferenceExhibit
Number

Description of Document

Form

Date
Filed

Exhibit #

Filed
Herewith10.1*

Form of Indemnification Agreement for non-employee directors

8-K

4/20/10

10.110.2*

Form of Indemnification Agreement for executive officers

8-K

6/8/10

10.131.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a)/15d-14(a), by Chief Executive Officer.







X31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a)/15d-14(a), by Chief Financial Officer.







X32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer and Chief Financial Officer.







X


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

GT SOLAR INTERNATIONAL, INC.By:

/s/ THOMAS GUTIERREZ Thomas GutierrezDate: August 6, 2010



President and Chief Executive OfficerBy:

/s/ RICHARD J. GAYNOR Richard J. GaynorDate: August 6, 2010



Vice President and Chief Financial Officer


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