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 June 27, 2009oro

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 HighwayMerrimack, New Hampshire

03054(Address of principal executive offices)

(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, 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 o

Non-accelerated filer ý (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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of July 29, 2009, the Company had 143,414,703 shares of common stock,
par value $0.01 per share, outstanding.



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Table of Contents

GT SOLAR INTERNAITONAL, INC. AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  FOR THE QUARTERLY PERIOD ENDED JUNE 27, 2009        Table of Contents



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements:Condensed Consolidated Balance Sheets (unaudited) as of June 27, 2009 and March 28, 2009

1Condensed Consolidated Statements of Operations (unaudited) for the three months ended June 27, 2009 and June 28,
2008

2Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended June 27, 2009 and June 28,
2008

3Notes to Condensed Consolidated Financial Statements (unaudited)

4Item 2.

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

20Item 3.

Quantitative and Qualitative Disclosures about Market Risk

33Item 4T.

Controls and Procedures

33PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

34Item 1A.

Risk Factors

35Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36Item 3.

Defaults Upon Senior Securities

36Item 4.

Submission of Matters to a Vote of Security Holders

36Item 5.

Other Information

36Item 6.

Exhibits

37Signatures

38


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PART IFINANCIAL INFORMATION



Item 1Condensed Consolidated Financial Statements



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

June 27,
2009

March 28,
2009AssetsCurrent assets:Cash and cash equivalents

$
161,414

$
107,148Accounts receivable, net


77,484


57,552Inventories


80,026


103,476Advances on inventory purchases


65,730


120,227Deferred costs


230,257


174,961Deferred income taxes


27,128


25,498Refundable and prepaid income taxes


2,460


40,329Prepaid expenses and other current assets


1,791


2,825Total current assets


646,290


632,016Property, plant and equipment, net


18,178


18,856Intangible assets, net


5,577


6,368Deferred cost


90,220


36,643Advances on inventory purchases


11,389


Other assets


859


940Goodwill


42,600


42,600Total assets

$
815,113

$
737,423Liabilities and stockholders' equityCurrent liabilities:Accounts payable

$
24,214

$
50,832Accrued expenses


13,720


15,695Customer deposits


143,946


222,654Deferred revenue


368,508


285,005Accrued income taxes





158Total current liabilities


550,388


574,344Deferred income taxes


20,311


15,647Deferred revenue


148,636


63,122Other non-current liabilities


963


2,405Total liabilities


720,298


655,518Commitments and contingencies (Note 7)





Stockholders' equity:Preferred stock, 10,000 shares authorized, none issued and outstanding





Common stock, $0.01 par value, 500,000 shares authorized; 143,318 and 143,048 shares issued and outstanding as of June 27, 2009 and March 28, 2009 respectively


1,433


1,431Additional paid-in capital


82,106


80,070Accumulated other comprehensive loss


(5,296
)

(8,389
)Retained earnings


16,572


8,793Total stockholders' equity


94,815


81,905Total liabilities and stockholders' equity

$
815,113

$
737,423


See accompanying notes to these condensed consolidated financial statements.

1

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Table of Contents



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

Three Months EndedJune 27,
2009

June 28,
2008Revenue

$
71,819

$
57,082Cost of revenue


36,854


32,785Gross profit


34,965


24,297Operating expenses:Research and development


6,399


3,816Selling and marketing


3,867


3,784General and administrative


8,329


7,775Amortization of intangible assets


791


792Total operating expenses


19,386


16,167Income from operations


15,579


8,130Other income (expense):Interest income


42


1,252Interest expense


(177
)

Interest component of forward foreign exchange contracts


(639
)

576Other expense, net


(2,363
)

(1,443
)Income before income taxes


12,442


8,515Provision for income taxes


4,663


3,373Net income

$
7,779

$
5,142Income per shareBasic

$
0.05

$
0.04Diluted

$
0.05

$
0.03Shares used to compute income per shareBasic


143,116


142,290Diluted


145,286


147,720


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 EndedJune 27,
2009

June 28,
2008Operating activities:Net income

$
7,779

$
5,142Adjustments to reconcile net income to net cash provided by operating activities:Amortization expense


791


792Depreciation expense


852


327Deferred income taxes expense (benefit)


1,377


(19,261
)Share-based compensation expense


1,052


3,311Other adjustments, net


231


Changes in operating assets and liabilities:Restricted cash





31,521Accounts receivable


(20,073
)

24,039Inventories


23,448


(26,400
)Advances on inventory purchases


43,111


(43,324
)Deferred costs


(108,873
)

(38,448
)Prepaid expenses and other assets


2,574


859Accounts payable, accrued expenses and other non-current liabilities


(25,168
)

7,975Customer deposits


(78,708
)

43,623Deferred revenue


169,017


70,592Refundable and prepaid income taxes


35,307


Accrued income taxes





463Other, net


776


(107
)Net cash provided by operating activities


53,493


61,104Investing activities:Purchase of property, plant and equipment


(174
)

(3,809
)Other investing activities, net





(3
)Net cash used in investing activities


(174
)

(3,812
)Financing activities:Excess tax benefits from share-based award activity


314


Minimum tax withholding payments for employee share-based awards


(68
)

Proceeds from exercise of stock options


705


Net cash provided by financing activities


951


Effect of foreign exchange rates on cash


(4
)

78Increase in cash and cash equivalents


54,266


57,370Cash and cash equivalents at beginning of period


107,148


54,839Cash and cash equivalents at end of period

$
161,414

$
112,209


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)June 27, 2009

1. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. 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 accompanying unaudited consolidated financial statements as of June 27, 2009 were prepared by the Company after evaluating subsequent events
through August 5, 2009, the date these financial statements were issued. The results for the three months ended June 27, 2009 are not necessarily indicative of the results to be expected
for the fiscal year ending April 3, 2010 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 March 28, 2009, filed with the Securities and Exchange
Commission on June 9, 2009.

The
condensed consolidated balance sheet as of March 28, 2009 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

Effective April 1, 2008, the Company elected to change its reporting period to be 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 will cover 13 week periods, unless otherwise noted. The
fiscal year ending April 3, 2010 will have 53 weeks with the extra week occurring in the fourth quarter of that year. The three month period ended June 28, 2008 includes two fewer
days than a 13 week period as a result of transitioning to the new reporting period. The Company will continue to use the terms quarterly, monthly, and annual in describing its financial
results.

Significant Accounting Policies

The Company's significant accounting policies are disclosed in its audited financial statements for the year ended March 28,
2009, included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 9, 2009 and have not changed materially as of June 27, 2009.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation.

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157,Fair Value
Measurements("SFAS No. 157"), which defines fair value, establishes a framework in generally accepted accounting principles for measuring fair value and expands
disclosures about fair value

4

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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)

June 27, 2009

1. Significant Accounting Policies (Continued)

measurements.
This standard only applies when other standards require or permit the fair value measurement of assets and liabilities. It does not increase the use of fair value measurement. SFAS
No. 157 is effective for fiscal years beginning after November 15, 2007, except as it relates to nonrecurring fair value measurements of nonfinancial assets and liabilities for which the
standard is effective for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 157 with respect to financial assets and liabilities effective April 1, 2008 did
not have a significant effect on the Company's consolidated results of operations or financial position (see Note 2, Fair Value of Financial Instruments, to the Condensed Consolidated Financial
Statements for additional information). In addition, the Company is required to apply the provision of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities effective for the interim
periods in fiscal years beginning after November 15, 2008. The adoption of SFAS No. 157, during the three months ended June 27, 2009 for measuring nonfinancial assets and
liabilities, essentially goodwill and identifiable intangible assets, did not have a material effect on the Company's financial statements.

In
December 2007, the FASB issued SFAS No. 141R,Business Combinations("SFAS No. 141R"). This pronouncement establishes
principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest
in the acquiree and the goodwill acquired in the business combination or a gain from a bargain purchase, and also establishes disclosure requirements to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No. 141R becomes effective for business combinations entered into during fiscal years beginning on or after
December 31, 2008 and thereafter. The adoption of SFAS 141R during the three months ended June 27, 2009 did not have a material impact on the Company's consolidated financial
statements.

In
April 2009, the FASB issued three FASB Staff Positions ("FSP") intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and
impairments of securities. FSP No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, provides additional guidelines for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements.FSP No. 115-2,Recognition and Presentation of
Other-Than-Temporary Impairments, provides additional guidance related to the disclosure of impairment losses on securities and the accounting for
impairment losses on debt securities. FSP No. 115-2 does not amend existing guidance related to other-than-temporary impairments of equity securities. FSP
No. 107-1 and Accounting Principles Board ("APB") Opinion No. 28-1,Interim Disclosures about Fair Value of Financial
Instruments, increases the frequency of fair value disclosures. These FSPs are effective for fiscal years and interim periods ended after June 15, 2009. The adoption of
these FSPs during the three months ended June 27, 2009 did not have a material impact on the Company's consolidated financial statements.

In
May 2009, the FASB issued Statements of Financial Accounting Standards No. 165,Subsequent Events("SFAS 165"), which
provides guidance to establish general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be
issued. SFAS 165 is effective for interim or fiscal periods ending after June 15, 2009. See Footnote No. 16 "Subsequent Events" for the related disclosures. The adoption of
SFAS 165 during the three months ended June 27, 2009 did not have a material impact on the Company's consolidated financial statements.

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)

June 27, 2009

1. Significant Accounting Policies (Continued)

Future Adoption of Accounting Pronouncements

In June 2009, the FASB issued SFAS 166,Accounting for Transfers of Financial Assetsan
amendment of FASB Statement No. 140("SFAS 166"). SFAS 166 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. SFAS 166 will be 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 Company is currently assessing the potential impacts, if any, the adoption of SFAS 166 will have on its consolidated financial statements.

In
June 2009, the FASB issued SFAS 167,Amendments to FASB Interpretation No. 46(R)("SFAS 167"). SFAS 167
eliminates FASB Interpretation 46(R)'s exceptions to consolidating qualifying special-purpose entities, contains new criteria for determining the primary beneficiary, and increases the frequency of
required reassessments to determine whether a company is the primary beneficiary of a variable interest entity. SFAS 167 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 FASB Interpretation 46(R)'s provisions. The elimination of the qualifying special-purpose entity concept and its
consolidation exceptions will be effective for the first fiscal year beginning after November 15, 2009, and for interim periods within that
first period, with earlier adoption prohibited. The Company is currently assessing the potential impacts, if any, the adoption of SFAS 167 will have on its consolidated financial statements.

In
June 2009, the FASB issued SFAS No. 168,The "FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles". This standard replaces SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles, and
establishes only two levels of U.S. generally accepted accounting principles ("GAAP"), authoritative and non-authoritative. The FASB Accounting Standards Codification (the "Codification")
will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission ("SEC"), which are sources of authoritative GAAP for
SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative. This standard is
effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company will begin to use the new guidelines and numbering system prescribed by
the Codification when referring to GAAP in the quarter ending September 26, 2009. As the Codification was not intended to change or alter existing GAAP, the adoption of SFAS 168 will not
have any impact on the Company's consolidated financial statements.

2. Fair Value of Financial Instruments

The Company's financial instruments are recorded at amounts that reflect the Company's estimate of their fair values. SFAS No. 157,Fair Value
Measurement,provides a hierarchal disclosure framework

6

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

June 27, 2009

2. Fair Value of Financial Instruments (Continued)

associated
with the level of subjectivity used in measuring assets and liabilities at fair value. The three levels defined by the SFAS No. 157 hierarchy are as
follows:



The
following table provides the assets and liabilities carried at fair value measured on a recurring basis at June 27, 2009:

Fair Value Measurements UsingTotal
Carrying
Value(Level 1)

(Level 2)

(Level 3)Cash equivalents

$
152,795

$
152,795





Forward foreign exchange contracts assets

$
91




$
91Forward foreign exchange contracts liabilities

$
(1,346
)



$
(1,346
)




The
Company's cash equivalents consist of money market mutual funds valued using readily available market prices. 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.

3. 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 into earnings losses of $2,112, 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 no longer qualified as cash flow hedges under SFAS No. 133 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. These contracts will mature at various dates within the next four
months. As of June 27, 2009, the Company had forward foreign exchange contracts with notional amounts of €2,760 that qualified as cash flow hedges under SFAS No. 133.

During
the three months ended June 27, 2009, the Company recognized a gain of approximately $255 against cost of revenue with respect to cash flow hedges where the underlying
hedged transaction had affected earnings. During the three months ended June 28, 2008, the Company did not recognize any gains

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)

June 27, 2009

3. Derivative and Hedging Activities (Continued)

or
losses to earnings with respect to its derivative cash flow hedges as the underlying hedged transactions had not yet affected earnings. Approximately $494 of accumulated other comprehensive income
will 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 June 27, 2009 and March 28, 2009:

Balance Sheet Location

June 27, 2009
Fair Value

March 28, 2009
Fair ValueEffective Cash Flow HedgesForward foreign exchange contractsassets

Prepaid expenses and other current assets

$


$
853Forward foreign exchange contractsliabilities

Accrued expenses

$
91

$
(4,447
)Other DerivativesForward foreign exchange contractsliabilities

Accrued expenses

$
(1,346
)
$
(227
)


The following table sets forth the effect of the Company's forward foreign exchange contact designated as hedging instruments under SFAS
No. 133 on the Statement of Operations for the three months ended June 27, 2009 and June 28, 2008.

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)June 27, 2009

$
(2,897
)
Cost of revenue

$
255

Other, net

$
(2,112
)June 28, 2008

$
625

Cost of revenue




Other, net





4. Inventories

Inventories consisted of the following:

June 27,
2009

March 28,
2009Raw materials

$
52,177

$
73,347Work-in-process


4,149


2,978Finished goods


23,700


27,151$
80,026

$
103,476


5. Warranty

The Company's polysilicon products are sold with a standard warranty for a period not exceeding twenty-four months from delivery. The Company's photovoltaic products are
generally sold with a standard warranty for a period equal to the shorter of (i) twelve months from the date of acceptance by the customer or (ii) fifteen months from the date of
shipment. A provision for estimated future costs related to

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

June 27, 2009

5. Warranty (Continued)

warranty
expense is recorded when products are shipped and accepted by the customer. The following table presents warranty activities:

Three Months EndedJune 27,
2009

June 28,
2008Product warranty liability, beginning of the period

$
2,231

$
1,957Accruals for new warranties issued


389


447Payments under warranty


(680
)

(334
)Product warranty liability, end of period

$
1,940

$
2,070


6. Income Taxes

The tax provision for the three months ended June 27, 2009 and June 28, 2008 represent federal, state and foreign income taxes. The Company's effective tax rate was 37.5%
and 39.6% for the three months ended June 27, 2009 and June 28, 2008, respectively. The Company reviews its 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, the
Company's consolidated effective income tax rate can change significantly on a quarterly basis.

The
Company recognizes accrued interest and penalties on unrecognized tax benefits in income tax expense. The Company did not have any significant unrecognized tax benefits as of
June 27, 2009 and March 28, 2009. As a result, the Company did not recognize interest expense, and additionally, did not record any penalties during the three months ended
June 27, 2009.

7. Commitments and Contingencies

Purchase Commitments

The Company enters into commitments to purchase raw materials from various suppliers. Some of these purchase commitments expire within
a few months and others continue into the fiscal year ending April 2, 2011. Estimated purchase commitments as of June 27, 2009 totaled $251,170 and are due as follows: $225,353 for the
remaining portion of fiscal year ending April 3, 2010 and $25,816 for fiscal year ending April 2, 2011. As of June 27, 2009, prepayments under certain of these purchase
commitments amounted to approximately $77.1 million.

During
the three months ended June 27, 2009, the Company rescheduled and/or cancelled a portion of its commitments to its vendors to procure materials in the photovoltaic business
to reflect a reduced rate of production and recognized losses of $512 from commitment terminations and have been included in cost of revenue.

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)

June 27, 2009

7. Commitments and Contingencies (Continued)

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 in the Company (the "federal class actions"). On October 3, 2008, the Court entered an order consolidating the federal class actions into a single action captioned Braun et al. v. GT Solar
International, Inc., et al. The Court selected the lead plaintiff and lead plaintiff's counsel in the consolidated
matter on October 29, 2008. The lead plaintiff filed an amended consolidated complaint on December 22, 2008. The defendants moved to dismiss the amended consolidated complaint on
February 5, 2009, but the Court has not yet scheduled a hearing on the motion. 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 July 24, 2008 initial public offering, and other public statements, regarding the Company business relationship with LDK Solar, Ltd., one of the
Company customers, JYT Corporation, one of the Company competitors, and certain of the Company products, including the Company DSS furnaces. 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.

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 captionHamel v. GT Solar International, Inc., et al.,against the Company, certain of the Company's officers and
directors and certain underwriters of the Company July 24, 2008 initial public offering (the "state class action"). 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 actions 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. 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 July 24, 2008
initial public offering, and other public statements, regarding the Company business relationship with LDK Solar, Ltd., one of the Company customers, JYT Corporation, one of
the Company competitors, and certain of the Company products, including the Company DSS furnaces. 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.

A
derivative suit, captionedFan 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 the Company's directors and officers and alleges various claims for breach of
fiduciary duty, unjust enrichment, abuse of control and gross mismanagement and is premised on the

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)

June 27, 2009

7. Commitments and Contingencies (Continued)

same
purported misconduct alleged in the federal 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.

The
Company intends to defend the federal and state class actions, and the derivative action, 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 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 the Company believes will not have a material adverse effect on its
financial position, results of operations or cash flows.

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 obligations.

8. 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. As of June 27, 2009, the Company had $26,254 of outstanding LOCs and no borrowings under the senior credit
facility and $63,746 of availability under the senior credit facility. The senior credit facility will mature on July 29, 2011.

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. We may exercise our option to increase the commitments not more than

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)

June 27, 2009

8. Senior Credit Facility (Continued)

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.

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%. 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 June 27, 2009,
the 3 month LIBOR rate, Bank of America prime rate and federal funds rate were 0.6%, 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 the terms of material indebtedness; and other covenants customary for such a facility. As of June 27, 2009, the Company was in compliance
with all of these covenants.

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)

June 27, 2009

9. Stockholder's Equity

A summary of the changes in stockholders' equity for the three months ended June 27, 2009 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 March 28, 2009


143,048

$
1,431

$
80,070

$
8,793

$
(8,389
)
$
81,905Net income











7,779





7,779Other comprehensive income(1)














3,093


3,093Forfeiture of restricted stock and unvested dividend


(56
)

(1
)

36








35Option exercises and vesting of restricted stock units


337


3


702








705Stock compensation








1,052








1,052Excess tax benefit from share-based award activity








314








314Minimum tax withholding payments for employee share-based awards(2)


(11
)




(68
)







(68
)Balance at June 27, 2009


143,318

$
1,433

$
82,106

$
16,572

$
(5,296
)
$
94,815


---

10. Share-Based Compensation

The Company recorded $1,052 and $3,311 of expense related to share-based compensation in the three months ended June 27, 2009 and June 28, 2008 respectively and recorded
related income tax benefits of $395 and $1,042 for the corresponding periods noted above. Share-based compensation cost capitalized as part of inventory is insignificant for all periods presented.

As
of June 27, 2009, the Company had unrecorded deferred stock-based compensation expense related to fixed and variable stock options of approximately $4,425, after estimated
forfeitures, which will be recognized over an estimated weighted-average remaining requisite service period of 2.1 years. The unrecorded deferred stock-based compensation expense related to
restricted stock units was approximately $5,626, after estimated forfeitures, as of June 27, 2009 which will be recognized over an estimated weighted-average remaining requisite service period
of 3.5 years.

The
following presents additional detail in connection with the company's share-based activities.

13

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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)

June 27, 2009

10. Share-Based Compensation (Continued)

2006 Stock Option Plan

On January 1, 2006, the Company adopted the 2006 Stock Option Plan (the "2006 Plan"). Under the 2006 Plan, options may be
granted to persons who are, at the time of grant, employees, officers or directors of, or consultants or advisors to, the Company. The Plan reserves up to 10,710 shares of common stock for issuance
upon the exercise of the options. All of the options granted under the 2006 Plan were awarded prior to the Company's IPO and therefore the option price at the date of grant was determined by the Board
of Directors based upon contemporaneous valuations. The exercise of options is limited to the provisions of the Plan, but in no case may the exercise period extend beyond ten years from the date of
grant. There were no options granted during the three months ended June 27, 2009. The Company anticipates that any future option grants will be made under the 2008 Equity Incentive Plan and
does not intend to issue any further stock options under the 2006 Plan. Activities under the 2006 Plan are as follows:

Options
Outstanding

Weighted-Average
Exercise Price
Per ShareBalances, March 28, 2009


5,196

$
3.98Options exercised


(293
)

2.41Options canceled/expired


(291
)

5.53Balances, June 27, 2009


4,612

$
3.98


Substantially
all options under the 2006 Plan vest as follows: one quarter of the options vest on the first anniversary of the award and 1/48th of the options vest at the
end of each month during the subsequent three years. The following summarizes information regarding outstanding and exercisable stock options as of June 27, 2009:

Stock Options Outstanding

Stock Options ExercisableExercise Price
Per Share

Number

Weighted-Average
Remaining Life
(in years)

Intrinsic
Value

Number

Weighted-Average
Exercise Price
Per Share

Intrinsic
Value$
1.66


1,926


7.02

$
7,839


1,345

$
1.66

$
5,474$
5.64


2,686


8.04


242


1,083

$
5.64


974,612


7.61

$
8,081


2,428

$
3.44

$
5,571


During
the three months ended June 27, 2009, the total intrinsic value of stock options exercised was $1,213 and cash received from stock option exercises was $705.

2008 Equity Incentive Plan

On June 30, 2008, in connection with the Company's initial public offering, the Company adopted the 2008 Equity Incentive Plan
(the "2008 Plan."). The 2008 Plan reserves up to 15,000 shares of common stock for grants of stock options and other equity based awards to directors, officers and employees of the Company, as well as
independent contractors performing services for the Company. Substantially all restricted stock units awarded under the 2008 Plan vest as follows: one quarter of the restricted stock units

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)

June 27, 2009

10. Share-Based Compensation (Continued)

vest
on the first anniversary of the award and one quarter of the restricted stock units vest at the end of each year during the subsequent three years. Activities under the 2008 Plan are as follows:

Shares Available
for Grant

Non-Vested
Restricted
Stock Units

Weighted-Average
Grant-Date
Fair Value
Per ShareBalance at March 28, 2009


13,066


1,934

$
4.10Granted


(79
)

79


6.07Vested





(44
)

6.18Forfeited


140


(140
)

5.64Balance at June 27, 2009


13,127


1,829

$
3.78


Restricted Stock

On January 2, 2008, the Company granted 85 shares of restricted stock. At the time of the award, the shares had an estimated
value of approximately $479. One quarter of the shares of restricted stock vested on January 2, 2009, the first anniversary of the award, and 1/48th of the shares vested at
the end of each month through May 2, 2009. All unvested shares thereafter were forfeited due to termination of employment. Restricted stock that vested during the three months ended
June 27, 2009 had a grant-date fair value of $20.

Activity
related to non-vested restricted stock is as follows:

Non-Vested
Restricted Stock

Weighted-Average
Grant-Date
Fair Value
Per ShareBalance at March 28, 2009


60

$
5.64Granted


Vested


(4
)
$
5.64Forfeited


(56
)
$
5.64Balance at June 27, 2009








15

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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)

June 27, 2009

11. Earning 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 EndedJune 27,
2009

June 28,
2008Net income

$
7,779

$
5,142Weighted average sharesbasic


143,116


142,290Dilutive common stock options and awards


2,170


5,430Weighted average common and common equivalent sharesdiluted


145,286


147,720Income per shareBasic

$
0.05

$
0.04Diluted

$
0.05

$
0.03


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

June 27,
2009

June 27,
2008Weighted average common stock options and awards having no dilutive effect


2,442





12. Comprehensive Income

The following table summarizes components of comprehensive income related to derivatives classified as cash flow hedges 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 EndedJune 27,
2009

June 28,
2008Net income

$
7,779

$
5,142Change in derivative instruments, net of tax effect of $1,657 and $253, respectively


3,097


(372
)Foreign currency translation adjustment


(4
)

77Comprehensive income

$
10,872

$
4,847


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)

June 27, 2009

12. Comprehensive Income (Continued)

The
following table summarizes the Company's accumulated other comprehensive income (loss) as of June 27, 2009 and March 28, 2009:

June 27,
2009

March 28,
2009Cash flow hedges of foreign exchange, net of tax effect of $3,073 and $4,730, respectively

$
(5,406
)
$
(8,503
)Foreign currency translation adjustment


110


114Total

$
(5,296
)
$
(8,389
)


13. Segment Information

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

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, general and administrative and corporate marketing expenses. Corporate Services assets include deferred tax assets, cash and cash equivalents and other
non-allocated assets.

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

Photovoltaic
Business

Polysilicon
Business

Corporate
Services

TotalThree 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
)
$
15,579Three months ended June 28, 2008Revenue

$
57,082

$


$


$
57,082Gross profit


23,862


435





24,297Depreciation and amortization


793


102


224


1,119Income (loss) from operations

$
18,908

$
(4,164
)
$
(6,614
)
$
8,130AssetsJune 27, 2009

$
231,474

$
369,794

$
213,845

$
815,113March 28, 2009

$
240,904

$
310,768

$
185,751

$
737,423


17

---



Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

June 27, 2009

13. Segment Information (Continued)

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

Three Months EndedJune 27,
2009

June 28,
2008China

$
17,964

$
36,239Korea


4,592


682Other Asia


137


6,994Europe


48,660


6,907United States


456


6,251Other


10


9Total

$
71,819

$
57,082


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

June 27,
2009

March 28,
2009United States

$
66,199

$
67,752China


156


72Total

$
66,355

$
67,824


14. Other Expense, net

The components of other expense, net were as follows:

Three Months EndedJune 27,
2009

June 28,
2008Initial public offering expenses

$


$
(1,496
)Foreign currency gain (loss)


(261
)

53Loss on derivatives-ineffective portion (See Note 3)


(2,112
)

Other


10


Total other expense, net

$
(2,363
)
$
(1,443
)


18

---



Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

June 27, 2009

15. Customer Concentrations

The following table summarizes net revenue and accounts receivable for customers who accounted for 10% or more of accounts receivable or net revenue, respectively:

Revenue for the
Three Months Ended

Accounts
Receivable as ofJune 27,
2009

June 28,
2008

June 27,
2009

March 28,
2009CustomerA


66
%

*


*


*B


11
%

*


*


*C


*


53
%

55
%

31
%D


*


12
%

*


*E


*


*


14
%

19
%






Concentration
of credit risk with respect to accounts receivable is limited to certain customers to whom the Company makes substantial sales. To reduce risk, the Company requires that
certain customers either post letters of credit or make advances payments prior to delivery.

16. Subsequent Events

The Company assessed events occurring subsequent to June 27, 2009 and through August 5, 2009 for potential recognition and disclosure in the consolidated financial
statements. No events have occurred that would require adjustments to or disclosure in the consolidated financial statements which were issued on August 5, 2009.

19

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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. These statements are
based on the beliefs 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 March 28, 2009 filed on June 9, 2009:



20

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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 March 28, 2009 filed on June 9, 2009 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.

Company Overview

GT Solar International, Inc. and its subsidiaries (referred to herein collectively as "we", "us", and "our") are a provider of
specialized manufacturing equipment and services essential for the production of photovoltaic wafers, cells and modules and polysilicon. Our principal products are directional solidification systems,
or DSS units, and chemical vapor deposition, or CVD, reactors and related equipment. DSS units are specialized furnaces used to melt polysilicon and cast multicrystalline ingots from which solar
wafers are made. CVD reactors are used to react gases at high temperatures and pressures to produce polysilicon, the key raw material used in solar cells. Our customers include several of the world's
largest solar companies as well as companies in the chemical industry. The use of our products requires substantial technical know-how and most of our customers rely on us to design and
optimize their production processes as well as train their employees in the use of our equipment. We operated through two segments: our photovoltaic business and our polysilicon business.

Our
photovoltaic business manufactures and sells DSS units, wafer cleaning and etch systems, slurry recovery systems, cell testing and sorting equipment, and tabber/stringer machines, as
well as related parts and consumables. We sell our products separately and as part of "turnkey solutions," where we bundle equipment, including third party equipment, with design and integration
expertise.

Our
polysilicon business offers CVD reactors and related equipment specifically designed for the efficient production of polysilicon. Polysilicon is a highly purified form of silicon
that is used to make semiconductor wafers for microelectronics applications and is the key raw material used to produce solar wafers. The CVD process involved in the production of polysilicon takes
place in a specialized CVD

21

---



Table of Contents

reactor
using a variety of complex chemical processes, the most widely used being the Siemens process, which has been in existence for nearly fifty years. Our CVD reactors utilize the Siemens process.

Our
business was founded in 1994. Effective January 1, 2006, our business was acquired by GT Solar Holdings, LLC, a newly formed company controlled by GFI Energy
Ventures LLC, a private equity investment firm focused on the energy sector, and Oaktree Capital Management, L.P., a global alternative and non-traditional investment
manager. We refer to this transaction as the "Acquisition." On July 29, 2008, we completed an initial public offering of 30,300,000 shares of common stock by certain of our stockholders (the
"IPO").

Factors Affecting Our Results of Operations

Demand for our products and services is driven by end-user demand for solar power. Key drivers of the growing demand for
solar power include increasing scarcity and rising prices of conventional energy sources, the desire for energy security/energy independence to counter perceived geopolitical supply risks surrounding
fossil fuels, environmental pollution from fossil fuels and the resulting tightening of emission controls, the increasingly competitive cost of energy from 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 price of polysilicon in the market, availability of raw materials,
foreign exchange rates, interest rates, commodity prices (particularly steel and graphite prices) and macro economic, factors including the availability of capital that may be needed by our customers,
and political, regulatory and legal conditions in the markets in which we conduct business (including China).

Our
results of operations are affected by a number of other factors including, among other things, the size of new contracts and when we are able to recognize the related revenue
(especially with respect to our polysilicon products), 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.

Disruptions
in the global capital markets have resulted in reduced availability of capital worldwide and have contributed to a slower rate of spending by our customers. Although we
continue to believe that the effect of these uncertainties is somewhat mitigated by our requirement of substantial non-refundable deposits on most orders, we have negotiated extensions of
the delivery schedules and other modifications under some of our existing contracts. In addition, some of our customers failed to make deposits when due under their contracts and we terminated those
contracts.

Current
economic conditions have negatively impacted the availability of financing for major solar projects and, as a result, solar market demand has slowed. Although we believe our long
term prospects are in line with solar industry forecasts, the current underutilization of both solar cell and polysilicon manufacturing capacity is expected to impact our results for future periods.
Due to these current economic conditions, we have reduced our production plans for the year ended April 3, 2010, as compared to March 28, 2009.

We
have rescheduled and/or cancelled over half of our commitments to our vendors to procure materials in our photovoltaic business to reflect our reduced production plan. As a result, we
had recorded charges for expected deposit forfeitures and reserves against vendor advances totaling $11.3 million during the three months ended March 28, 2009 and recorded charges of
$0.5 million from commitment terminations during the three months ended June 27, 2009. We anticipate recording additional charges

22

---



Table of Contents

with
respect to vendor commitments of up to $1.5 million during the remaining portion of fiscal year ending April 3, 2010.

During
the three months ended June 27, 2009, due to requested delays from our customers, we began discussions with certain of our polysilicon suppliers to delay or otherwise
modify certain of our euro denominated purchase commitments. As a result, we recorded a charge of $2.1 million in connection with forward foreign exchange contracts that were no longer deemed
highly effective as a cash flow hedge. We continue to negotiate with our customers and vendors and are unable to estimate the additional impact, if any, on our financial statements until such
negotiations conclude and the timing of deliveries and other terms are finalized.

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 June 27, 2009 and March 28, 2009 by product category:

As of
June 27, 2009

As of
March 28, 2009Product Category

Amount

% of
Backlog

Amount

% of
Backlog(dollars in millions)Photovoltaic business

$
330


30
%
$
341


29
%Polysilicon business


785


70
%

836


71
%Total

$
1,115


100
%
$
1,177


100
%


Our
order backlog as of June 27, 2009 and March 28, 2009, included deferred revenue of $517.1 million and $348.1 million, respectively, representing equipment
that had been shipped to customers but not yet recognized as revenue. Cash deposits related to our order backlog were $143.9 million as of June 27, 2009, and substantially all of the
contracts in our order backlog require the customer to either post a standby letter of credit in our favor or make advance payment prior to shipment of equipment. We generally would expect to deliver
the photovoltaic products included in our order backlog over a period ranging from three to nine months and the polysilicon products included in our order backlog over a period ranging from twelve to
eighteen months, although portions of the related revenue are expected to be recognized over a longer period. We expect to convert approximately 30-35% of our order backlog as of June 27, 2009
to revenue through the period ending April 3, 2010. 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. There is no assurance that contracts
will not be cancelled or modified in the future.

If
a customer fails to perform its contractual obligations and we do not reasonably expect such customer to perform its obligation going forward, we may terminate such contract. As a
result of terminations and other contract revisions, our order backlog was reduced by approximately $7 million during the three months ended June 27, 2009.

In
addition, negotiations are continuing with certain of our large customers who have requested that we extend the delivery schedules and other modifications under their contracts in our
order backlog. If we cannot come to an agreement with these customers, our order backlog could be reduced. Our contracts do not contain cancellation provisions and in the event of a contract breach,
the customer may be liable for contractual damages.

23

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Table of Contents

As of June 27, 2009, our order backlog consisted of contracts with 38 photovoltaic customers, 19 of which have orders in excess of $3 million, and
12 polysilicon customers, 11 of which have orders in excess of $3 million. Our order backlog as of June 27, 2009 includes $721 million attributed to three customers with no other
one customer represented more than 10% of our order backlog.

Results of Operations

The following tables set forth the results of operations as a percentage of revenue for the three months ended June 27, 2009 and
June 28, 2008:

Three Months EndedJune 27, 2009

June 28, 2008Statement of Operations Data:*Revenue


100
%

100
%Cost of revenue


51


57Gross profit


49


43Research and development


9


7Selling and marketing


5


7General and administrative


12


14Amortization of intangible assets


1


1Income from operations


22


14Interest income (expense), net


(1
)

4Other expense, net


(4
)

(3
)Income before income taxes


17


15Provision for income taxes


6


6Net income


11
%

9
%


---

Three Months Ended June 27, 2009 compared to Three Months Ended June 28, 2008.

Revenue.The following table sets forth total revenue for the three months ended June 27, 2009 and June 28, 2008:

Three Months EndedBusiness Category

June 27, 2009

June 28, 2008

Change

% Change(dollars in thousands)Photovoltaic equipment

$
19,039

$
54,375

$
(35,336
)Photovoltaic services, parts and other


895


2,707


(1,812
)Total photovoltaic business


19,934


57,082


(37,148
)Polysilicon business


51,885





51,885Total revenue

$
71,819

$
57,082

$
14,737


26
%


Our
total revenue increased 26% from $57.1 million for the three months ended June 28, 2008 to $71.8 million for the three months ended June 27, 2009.

Our
revenue from photovoltaic equipment sales decreased 65% to $19.0 million for the three months ended June 27, 2009 from $54.4 million for the three months ended
June 28, 2008. Photovoltaic equipment revenue includes sales of DSS units as well as other photovoltaic equipment. During the three months ended June 27, 2009, our revenue from DSS sales
were $17.0 million as compared to $50.9 million in the

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same
quarter last year. Sales of other photovoltaic equipment accounted for $2.0 million and $3.5 million of our revenue for the three months ended June 27, 2009 and
June 28, 2008, respectively. Revenue from other photovoltaic equipment can fluctuate based upon specific customer requirements. Revenue from photovoltaic services, parts and other decreased to
$0.9 million for the three months ended June 27, 2009 from $2.7 million for the three months ended June 28, 2008. The overall decrease in our
photovoltaic business is substantially related to delays in deliveries requested by our customers on existing contracts as a result of the economic downturn.

Many
of our DSS contracts include both the delivery of DSS furnaces as well as ancillary equipment. We do not often sell ancillary equipment separately from our DSS furnaces and
therefore we have not been able to establish stand-alone objective evidence of their fair value in all cases. For revenue recognition purposes, we defer the revenue for shipped and accepted equipment
until all equipment and services for which we have been unable to establish objective evidence of fair value have been shipped and accepted. When negotiating contracts with our customers, we attempt
to establish delivery schedules so that we deliver ancillary equipment in the earlier stages of the contract to facilitate revenue recognition.

Revenue
from turnkey contracts accounted for none of our revenue for the three months ended June 27, 2009 or June 28, 2008. Turnkey revenue is recorded after final
production line acceptance and therefore is periodic in nature.

During
the three months ended June 27, 2009, we recognized polysilicon revenue of $51.9 million related to our CVD reactors and related equipment. We did not recognize any
polysilicon revenue in the three months ended June 28, 2008.

In
both the three months ended June 27, 2009 and June 28, 2008, a substantial percentage of our revenue resulted from sales to a small number of customers. Two of our
customers accounted for 77% of our revenue for the three months ended June 27, 2009 and two customers accounted for 65% of our revenue for the three months ended June 28, 2008. No other
customer accounted for more than 10% of our revenue during the respective periods. For the fiscal year ending April 3, 2010, we believe that no one customer will account for more than 35% 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
June 27, 2009 and June 28, 2008:

Three Months EndedJune 27, 2009

June 28, 2008

Change

% Change(dollars in thousands)Cost of revenuePhotovoltaic business

$
13,251

$
33,220

$
(19,969
)Polysilicon business


23,603


(435
)

24,038Total

$
36,854

$
32,785

$
4,069


12
%Gross profitPhotovoltaic business

$
6,683

$
23,862

$
(17,179
)Polysilicon business


28,282


435


27,847Total

$
34,965

$
24,297

$
10,668


44
%


Our
photovoltaic cost of revenue and gross profit decreased $20.0 million, or 60%, and $17.2 million, or 72%, respectively, for the three months ended June 27, 2009
compared to the three months ended June 28, 2008. This decrease reflects the delays in deliveries on existing contracts requested by our customers as a result of recent the economic downturn.
Our polysilicon cost of revenue and gross profit increased by $24.0 million and $27.8 million, respectively, for the three months ended June 27, 2009 compared to the three months
ended June 28, 2008. This increase relates to polysilicon revenue that was

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recognized
during the three months ended June 27, 2009 which is periodic in nature. We did not recognize any polysilicon revenue in the three months ended June 28, 2008.

The
following table sets forth total gross margins for the three months ended June 27, 2009 and June 28, 2008 and, for comparative purposes, the fiscal year ended
March 28, 2009:

Three Months Ended

Fiscal
Year EndedJune 27, 2009

June 28, 2008

March 28, 2009Gross marginsPhotovoltaic business


34%


42%


40%Polysilicon business


55%





38%Overall


49%


43%


40%


Overall
gross profit as a percentage of revenue, or gross margin, increased to 49% for the three months ended June 27, 2009 from 43% for the three months ended June 28,
2008.

Gross
margins for the photovoltaic business during the three month ended June 27, 2009 were 34% as compared to gross margins of 42% during the three months ended June 28,
2008 and were adversely impacted by approximately $0.7 million of unabsorbed manufacturing costs as a result of 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 photovoltaic business to reflect a reduced rate of production.

Gross
margins within our polysilicon business during the three months ended June 27, 2009 were 55% as compared to gross margins of 38% during the year ended March 28, 2009.
We did not recognize any polysilicon revenue during the three months ended June 28, 2008.

Our
gross margins tend to vary depending on the volume and pricing of our contracts. We expect that the effect of both the anticipated low levels of manufacturing volumes and the mix of
revenue to be recognized for the remaining portion of April 3, 2010 will result in reduced overall annual gross margins for the balance of the fiscal year ended April 3, 2010 as compared
to the overall gross margins earned through the three months ended June 27, 2009 and therefore, is expected to be more comparable to margins earned through the fiscal year ended
March 28, 2009.

Research and Development.The following table sets forth total research and development expenses for the three months ended
June 27, 2009 and
June 28, 2008:

Three Months EndedJune 27, 2009

June 28, 2008

Change

% Change(dollars in thousands)Research and developmentPhotovoltaic business

$
3,240

$
1,456

$
1,784Polysilicon business


3,159


2,360


799Total

$
6,399

$
3,816

$
2,583


68
%


Research
and development expenses were $6.4 million for the three months ended June 27, 2009, compared to $3.8 million for the three months ended June 28,
2008, an increase of 68%. The increase was a result of increased labor, subcontracting costs and material spending associated with the development of new polysilicon business products, particularly
our CVD reactor and trichlorsilane technologies, as well as costs associated with the development of our next-generation DSS product. We expect our R&D spending to remain at similar levels
as compared to the three months ended June 27, 2009 for the remainder of our fiscal year ended April 3, 2010, as we continue to invest in new product development and expand our product
base in both our polysilicon and photovoltaic businesses.

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Selling and Marketing.The following table sets forth total selling and marketing expenses for the three months ended June 27, 2009
and
June 28, 2008:

Three Months EndedJune 27, 2009

June 28, 2008

Change

% Change(dollars in thousands)Selling and marketingPhotovoltaic business

$
970

$
2,239

$
(1,269
)Polysilicon business


2,897


1,545


1,352Total

$
3,867

$
3,784

$
83


2
%


Selling
and marketing expenses increased 2% to $3.9 million for the three months ended June 27, 2009 from $3.8 million for the three months ended June 28,
2008. Photovoltaic business selling and marketing expenses decreased approximately $1.3 million substantially related to decreased sales commissions. Additionally, during the three months ended
June 28, 2009, polysilicon business selling and marketing expenses increased by $1.4 million of which approximately $1.1 million related to increased sales commissions from
continued growth in our polysilicon business. 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 7% to $8.3 million for the three months ended
June 27, 2009
from $7.8 million for the three months ended June 28, 2008. Increased general and administrative expenses were primarily related to payroll and payroll related costs of
$1.6 million, as well as, higher insurance and rent expense of $0.4 million and other general costs of $0.8 million. These increases were partially offset by lower stock
compensation expense of $2.3 million due to the variable nature of the stock options awarded to non-employees.

Amortization of Intangible Assets.Amortization expense attributed to intangible assets has remained essentially unchanged for the three
months ended
June 27, 2009 as compared to the three months ended June 28, 2008.

Interest Income.We typically invest our excess cash in exchange traded money market mutual funds. During the three months ended
June 27,
2009, we recorded an immaterial amount of interest income. During the three months ended June 28, 2008, we recorded $1.3 million of interest income. Interest income decreased due to
substantially lower interest rates earned on our investments.

Interest Expense.During the three months ended June 27, 2009, we recorded interest expense of $0.2 million primarily
attributed to the
expensing of deferred debt costs in connection with our credit facility and other related credit facility fees. During the three months ended June 28, 2008 we did not record any interest
expense.

Interest Component of Forward Foreign Exchange Contracts.During the three months ended June 27, 2009 and June 28, 2008, we
recorded
forward point interest expense of $0.6 million and forward point interest income of $0.6 million, respectively. Forward points represent the interest rate differential between the two
countries involved in the forward foreign exchange contract for the specified period of time and can be either a premium or discount at the beginning of the contract. Forward points are adjusted to
reflect interest rate market condition changes and such changes can result in interest income or interest expense over the life of the contract.

Other Expense, net.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. During the three months ended June 28, 2008,

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other
expense, net was $1.4 million of which $1.5 million related to expenses associated with our initial public offering.

Provision for Income Taxes.Our effective income tax expense rate was 37.5% in the three months ended June 27, 2009 and 39.6% in
the three
months ended June 28, 2008. 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 June 27, 2009, we recorded net income of
$7.8 million
compared to a net income of $5.1 million for the three months ended June 28, 2008.

Liquidity and Capital Resources

Overview

Our cash balances increased by $54.3 million during the first three months of fiscal 2010, from $107.1 million as of
March 28, 2009 to $161.4 million as of June 27, 2009. During the same period of fiscal 2009, our cash balance increased by $57.4 million, from $54.8 million as of
March 31, 2008 to $112.2 million as of June 28, 2008. 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 June 27, 2009 our cash provided by operations was $53.5 million which was significantly
impacted by the receipt of cash of approximately $35.3 million for refundable income taxes due to an election of a change in accounting method for tax purposes. 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 $66.6 million reflecting the slow down 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.

For
the three months ended June 28, 2008, our cash provided by operations was $61.1 million which was favorably impacted by the release of restricted cash of
$31.5 million as discussed below. Other significant sources of cash included $5.1 million of net income, $32.1 million of a net increase in deferred revenue less deferred costs
along with a decrease in accounts receivable of $24.0 million and an increase in customer deposits of $43.6 million. The significant uses of cash included increases in inventory and
advance payments on inventory purchases of $69.7 million in order to fund the growth and expansion anticipated at the time.

In
connection with customer deposits, customers may require us to provide a standby letter of credit, or standby LOC, as security for their deposit. During the period of
September 24, 2007 to July 29, 2008 we had been issuing standby letters of credit on a cash collateralized basis. This cash collateral is classified as restricted cash in the
consolidated balance sheet and increased by $31.5 million for the three months ended June 28, 2008. The practice of using cash to collateralize our standby LOCs had a negative impact on
the

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working
capital available to us. On July 29, 2008, we entered into a new senior credit facility and a new letter of credit facility, in each case with a syndicate of financial institutions.
(See "Senior Credit Facility" and "Cash-Collateralized Letter of Credit Facility" below).

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 June 27, 2009 and June 28, 2008, were approximately $0.2 million and $3.8 million, respectively. Our capital
expenditures for the three months ended June 28, 2008 were primarily used for improving our business information systems and improving our principal facility. We expect total capital
expenditures in the fiscal year ending April 3, 2010 to be approximately $5.0 million, consisting primarily of improvements to our business information systems and expansion of our
facilities in China and Montana.

Cash Flows from Financing Activities

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

As
of June 27, 2009, we had $26.3 million of standby LOCs outstanding under our senior credit facility. Generally, a letter of credit expires upon shipment to the customer.

We
believe that cash generated from operations together with our existing cash, customer deposits and our senior credit facility (see below) 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. As of June 27, 2009, we had
approximately $26.3 million of outstanding LOCs and no borrowings under the senior credit facility and $63.7 million of availability under the senior credit facility. The senior credit
facility will mature on July 29, 2011.

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.

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

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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 0.6%, 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 the terms of material indebtedness; and other covenants customary for such a facility. We were in compliance with all of these covenants as of
June 27, 2009.

Recent
volatility in the financial markets has severely diminished liquidity and capital availability worldwide. We believe the risk that we will not be able to use the facility in the
future due to these recent events is mitigated to some degree by the fact that there are several banks participating in the facility. However, we cannot fully predict the long-term impact
on the facility of a continued credit crisis.

Cash-Collateralized Letter of Credit Facility

On July 29, 2008, we also entered into a letter of credit agreement with Bank of America, N.A., as sole administrative and
collateral agent, and a syndicate of financial institutions. The letter of credit agreement provides for a three-year cash-collateralized letter of credit facility in an
aggregate principal amount of up to $150.0 million, which is available for the issuance of cash-collateralized standby LOCs.
The letter of credit facility may be increased by an aggregate amount of up to $50.0 million, at our election, with additional commitments from the lenders under the letter of credit facility
or from new financial institutions, if no default or event of default exists under the letter of credit facility. We 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 $10.0 million and integral multiples of $5.0 million in excess thereof. We pay letter of credit fees equal to 0.25% per
annum on the maximum amount available to be drawn under each standby letter of credit. As of June 27, 2009, we had no letters of credit outstanding under this facility.

The
letter of credit facility is secured by an amount of cash equal to the dollar amount of outstanding standby letters of credit. The letter of credit facility contains customary
covenants, which among other things limit our ability to: incur liens on the cash collateral; engage in mergers or other fundamental changes; sell or otherwise dispose of the registrant's or its
subsidiaries' assets; use proceeds to purchase or carry margin stock or extend credit to others; and other covenants customary for such a facility. We were in compliance with all of these covenants as
of June 27, 2009.

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.

As
of June 27, 2009, we had approximately $26.3 million of standby letters of credit outstanding representing primarily performance guarantees issued against customer
deposits. These letters of credit have been issued under our secured credit facility and have not been included in the consolidated financial statements included herein.

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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 March 28, 2009, other than those
resulting from changes in the amount of purchase commitments under agreement as described below.

As
of March 28, 2009, purchase commitments under agreements totaled $343.8 million. As of June 27, 2009, purchase commitments under agreement totaled
$251.2 million and are due as follows: $225.4 million for the remaining portion of the fiscal year ended April 3, 2010 and $25.8 million in the fiscal year ended
April 2, 2011. As of June 27, 2009, prepayments under certain of these purchase commitments amounted to $77.1 million.

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157,Fair Value
Measurements("SFAS No. 157"), which defines fair value, establishes a framework in generally accepted accounting principles for measuring fair value and expands
disclosures about fair value measurements. This standard only applies when other standards require or permit the fair value measurement of assets and liabilities. It does not increase the use of fair
value measurement. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, except as it relates to nonrecurring fair value measurements of nonfinancial assets and
liabilities for which the standard is effective for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 157 with respect to financial assets and liabilities
effective April 1, 2008 did not have a significant effect on our consolidated results of operations or financial position (see Note 2, Fair Value of Financial Instruments, to the
Condensed Consolidated Financial Statements for additional information). In addition, we are required to apply the provision of SFAS No. 157 to nonfinancial assets and nonfinancial liabilities
effective for the interim periods in fiscal years beginning after November 15, 2008. The adoption of SFAS No. 157, during the three months ended June 27, 2009 for measuring
nonfinancial assets and liabilities, essentially goodwill and identifiable intangible assets, did not have a material effect on our financial statements.

In
December 2007, the FASB issued SFAS No. 141R,Business Combinations("SFAS No. 141R"). This pronouncement establishes
principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest
in the acquiree and the goodwill acquired in the business combination or a gain from a bargain purchase, and also establishes disclosure requirements to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS No. 141R becomes effective for business combinations entered into during fiscal years beginning on or after
December 31, 2008 and thereafter and does not have any impact on business combinations prior to such date. The adoption of SFAS 141R during the three months ended June 27, 2009
did not have a material impact on our consolidated financial statements.

In
April 2009, the FASB issued three FASB Staff Positions ("FSP") intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and
impairments of securities. FSP No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, provides additional guidelines for estimating fair value in accordance with SFAS No. 157, Fair Value Measurements.FSP No. 115-2,Recognition and Presentation of
Other-Than-Temporary Impairments, provides additional guidance related to the disclosure of impairment losses on securities and the accounting for
impairment losses on debt securities. FSP No. 115-2 does not amend existing guidance related to other-than-temporary impairments of equity securities. FSP
No. 107-1 and Accounting Principles Board ("APB") Opinion No. 28-1,Interim Disclosures about Fair Value of Financial
Instruments, increases the frequency of fair value disclosures. These FSPs are effective for fiscal years and interim periods ended after June 15, 2009. The

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adoption
of these FSPs during the three months ended June 27, 2009 did not have a material impact on our consolidated financial statements.

In
May 2009, the FASB issued Statements of Financial Accounting Standards No. 165,Subsequent Events("SFAS 165"), which
provides guidance to establish general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be
issued. SFAS 165 is effective for interim or fiscal periods ending after June 15, 2009. See Footnote No. 16 "Subsequent Events" for the related disclosures. The adoption of
SFAS 165 during the three months ended June 27, 2009 did not have a material impact on our consolidated financial statements.

Future Adoption of Accounting Pronouncements

In June 2009, the FASB issued SFAS 166,Accounting for Transfers of Financial Assetsan
amendment of FASB Statement No. 140("SFAS 166"). SFAS 166 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. SFAS 166 will be 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. We are currently assessing the potential impacts, if any, the adoption of SFAS 166 will have on our consolidated financial statements.

In
June 2009, the FASB issued SFAS 167,Amendments to FASB Interpretation No. 46(R)("SFAS 167"). SFAS 167
eliminates FASB Interpretation 46(R)'s exceptions to consolidating qualifying special-purpose
entities, contains new criteria for determining the primary beneficiary, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a variable
interest entity. SFAS 167 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 FASB Interpretation 46(R)'s
provisions. The elimination of the qualifying special-purpose entity concept and its consolidation exceptions will be effective for the first fiscal year beginning after November 15, 2009, and
for interim periods within that first period, with earlier adoption prohibited. We are currently assessing the potential impacts, if any, the adoption of SFAS 167 will have on our consolidated
financial statements.

In
June 2009, the FASB issued SFAS No. 168,The "FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles"("SFAS 168"). This standard replaces SFAS No. 162,The Hierarchy of Generally Accepted Accounting
Principles, and establishes only two levels of U.S. generally accepted accounting principles ("GAAP"), authoritative and nonauthoritative. The FASB Accounting Standards
Codification (the "Codification") will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission ("SEC"), which are
sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is
effective for financial statements for interim or annual reporting periods ending after September 15, 2009. We will begin to use the new guidelines and numbering system prescribed by the
Codification when referring to GAAP in the third quarter of fiscal 2010. As the Codification was not intended to change or alter existing GAAP, the adoption of SFAS 168 will not have any impact
on our consolidated financial statements.

Critical Accounting Policies and Estimates

For the three months ended June 27, 2009, there were no significant changes to our critical accounting policies as identified in
our consolidated financial statements for the year ended March 28, 2009 included in our Annual Report on Form 10-K for the fiscal year ended March 28, 2009, filed on
June 9, 2009.

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Item 3.    Quantitative and Qualitative Disclosures about Market 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 in the local currency of one or more of the countries in which we operate. 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 polysilicon 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.

Due
to recent delays in deliveries requested by our polysilicon customers, we requested our vendors to delay deliveries. As a result, certain of our forward foreign exchange contracts to
purchase euros no longer qualified as cash flow hedges under SFAS No. 133 because the hedging relationship was no longer deemed to be highly effective. We entered into offsetting forward
foreign exchange contracts to sell euros with notional amounts of €26.6 million to eliminate any further foreign exchange risk related to those foreign exchange contracts.

As
of June 27, 2009, we had unhedged euro denominated purchase commitments of approximately €35.2 million, net of advances on inventory purchases and
available euros in our ending cash balances. A 10% appreciation or depreciation of the euro against the U.S. dollar would increase or decrease the costs of the related inventory to be purchased by
approximately $4.9 million. We will evaluate whether or not to initiate new foreign forward exchange contracts against these purchase commitments when negotiations with such vendors are
finalized.

As
of June 27, 2009, we had outstanding forward foreign exchange contracts of €2.8 million which generally 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 (the "hedged items"). A 10% appreciation or depreciation of the euro against the U.S. dollar would not have a
material impact on the fair value of these derivative financial instruments.

Item 4T.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Principal Financial Officer, evaluated the effectiveness
of our disclosure controls and procedures as of June 27, 2009. 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

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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 June 27, 2009, our Chief Executive Officer and Principal 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 or other factors during the three months ended June 27, 2009
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 (the "federal class actions"). On October 3, 2008, the Court entered an order consolidating the federal class actions into a single action captioned Braun et al. v. GT Solar International,
 Inc., et al. The Court selected the lead plaintiff and lead plaintiff's counsel in the consolidated
matter on October 29, 2008. The lead plaintiff filed an amended consolidated complaint on December 22, 2008. The defendants moved to dismiss the amended consolidated complaint on
February 5, 2009, but the Court has not yet scheduled a hearing on the motion. 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 our business relationship with LDK Solar, Ltd., one of our customers, JYT
Corporation, one of our competitors, and certain of our products, including our DSS furnaces. 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.

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 captionHamel 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"). 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 actions 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. 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 our business relationship with LDK Solar, Ltd., one of our customers, JYT Corporation, one of our competitors, and certain of our products, including our DSS furnaces.
Among other relief, the state class

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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.

A
derivative suit, captionedFan 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 and is premised on the same purported misconduct alleged in the federal 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.

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 March 28, 2009 filed with the Securities and Exchange
Commission on June 9, 2009. 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 in our "Risk Factors" in the Annual Report on Form 10-K could result in the actual operating results being different from our guidance, and such differences
may be adverse and material.

Under
the heading "Item 1A. Risk FactorsRisk Related to Our Business Generally"Our future success depends on our management team and on our ability to
attract and retain key employees and to integrate new employees into our management team successfully" in our Annual Report on Form 10-K for the fiscal year ended March 28,
2009 filed on June 9, 2009, we included a discussion about the potential adverse impact to us of losing a member of our senior management team. On May 22, 2009, Robert Woodbury, our
Chief Financial Officer and a member of our senior management team, resigned. We have begun the process of selecting a new Chief Financial Officer but are unable to predict how long the selection
process, which could be challenging, will take and when we will name a new Chief Financial Officer. In the meantime, our finance organization is being led by Richard Johnson, our Vice President,
Finance and Corporate Controller, on whom we will be more dependent during this transition period.

Under
the heading "Item 1A. Risk FactorsRisk Related to Our Business Generally"Exchange rate fluctuations may make our products less attractive to
non-U.S. customers and otherwise have a negative impact on our operating results" in our Annual Report on Form 10-K for the fiscal year ended March 28, 2009 filed
on June 9, 2009, we included a discussion of the potential adverse effect of future exchange rate fluctuations and the related material effect these fluctuations could have on our financial
condition. Our largest foreign currency exposure is the euro. In order to mitigate foreign currency fluctuations, we typically enter into forward foreign exchange contracts to hedge portions of
equipment purchases from vendors located in primarily Europe. Due to recent delays in deliveries requested by our

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polysilicon
customers, we began negotiations with vendors to delay deliveries under certain of our inventory purchase commitments. As a result, during the three months ended June 27, 2009,
certain of our forward foreign exchange contracts to purchase euros no longer qualified as cash flow hedges under SFAS No. 133 because the hedging relationship was no longer deemed to be highly
effective. We entered into offsetting forward foreign exchange contracts to sell euros to mitigate any further foreign exchange risk related to those foreign exchange contracts. As a result, we had
euro denominated purchase commitments of approximately €35.2 million, net of advances on inventory purchases and available euro in our ending cash balances, that were unhedged
at June 27, 2009. Once negotiations with these vendors have been finalized, we will evaluate whether or not to initiate new foreign forward exchange contracts against these purchase
commitments.

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 June 27, 2009:

(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 (March 29, 2009 through May 2, 2009)


9,726

$
6.78





Month #2 (May 3, 2009 through May 30, 2009)











Month # 3 (May 31, 2009 through June 27, 2009)


622

$
6.42








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 June 27, 2009; however, our employees
surrendered, and we subsequently retired, 10,348 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

None

Item 4.    Submission of Matter to a Vote of Security Holders

None

Item 5.    Other Information

None

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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

Amendment to Employment Agreement, dated as of June 4, 2009, by and between the Registrant and David W. Keck.


10-K


6/9/09


10.5510.2
*
Letter Agreement, dated as of December 16, 2008, by and between the registrant and Edwin L. Lewis.










X10.3
*
Consulting Agreement, dated as of December 17, 2008, by and between the registrant and Edwin L. Lewis.










X10.4
*
General Release, dated as of December 17, 2008, by and between the registrant and Edwin Lewis.










X31.1

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 Principal 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.










X32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Principal 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 M. ZARRELLA Thomas M. Zarrella                                                      
|Date: August 5, 2009 |  |                              |  | President and Chief Executive Officer
(Principal Executive Officer)                            
|                     |  | By:                          |  | /s/ RICHARD E. JOHNSON Richard E. Johnson                                                      
|Date: August 5, 2009 |  |                              |  | Vice President of Finance and
Corporate Controller
(Principal Financial and Accounting Officer)

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