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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 September 27, 2008oro

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

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 November 3, 2008, the Company had 142,863,287 shares of common stock 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 SEPTEMBER 27, 2008        Table of Contents



PagePART I. FINANCIAL INFORMATIONItem 1.

Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of September 27, 2008 and
March 31, 2008


3Condensed Consolidated Statements of Operations for the three and six months ended
September 27, 2008 and September 30, 2007


4Condensed Consolidated Statements of Cash Flows for the six months ended
September 27, 2008 and September 30, 2007


5Notes to Condensed Consolidated Financial Statements


6Item 2.

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


20Item 3.

Quantitative and Qualitative Disclosures about Market Risk


30Item 4.

Controls and Procedures


31PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


32Item 1A.

Risk Factors


32Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


34Item 3.

Defaults Upon Senior Securities


34Item 4.

Submission of Matters to a Vote of Security Holders


34Item 5.

Other Information


35Item 6.

Exhibits


36


2

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Table of Contents

PART IFINANCIAL INFORMATION

Item 1Condensed Consolidated Financial Statements

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

September 27,
2008

March 31,
2008AssetsCurrent assets:Cash and cash equivalents

$
6,444

$
54,839Restricted cash and cash equivalents


103,292


164,028Accounts receivable, net


45,968


62,407Inventories


88,031


37,518Deferred costs


162,701


105,154Advances on inventory purchases


154,808


77,635Deferred income taxes


61,595


29,684Prepaid expenses and other current assets


4,894


6,625Total current assets


627,733


537,890Property, plant and equipment, net


15,960


10,433Other assets


1,060


74Intangible assets, net


7,471


9,024Goodwill


42,600


43,190Total assets

$
694,824

$
600,611Liabilities and stockholders' equityCurrent liabilities:Accounts payable

$
41,458

$
37,992Accrued expenses


20,563


16,725Customer deposits


310,490


263,628Deferred revenue


274,770


164,190Accrued income taxes


11,015


22,316Total current liabilities


658,296


504,851Deferred income taxes


3,087


3,380Other non-current liabilities


1,004


739Total liabilities


662,387


508,970Commitments and contingencies (Note 7)





Stockholders' equity:Common stock, $0.01 par value, 500,000 shares authorized; 143,033 and 142,375 shares issued and outstanding as of September 27, 2008 and
March 31, 2008, respectively


1,430


1,424Additional paid-in capital


77,690


73,817Accumulated other comprehensive (loss) income


(593
)

5,584Retained earnings (accumulated deficit)


(46,090
)

10,816Total stockholders' equity


32,437


91,641Total liabilities and stockholders' equity

$
694,824

$
600,611


See
accompanying notes to these condensed consolidated financial statements.

3

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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
Ended
September 27,
2008

Three Months
Ended
September 30,
2007

Six Months
Ended
September 27,
2008

Six Months
Ended
September 30,
2007Revenue

$
140,192

$
81,774

$
197,274

$
97,130Cost of revenue


78,821


52,190


111,606


62,224Gross profit


61,371


29,584


85,668


34,906Operating expenses:Research and development


4,049


1,846


7,865


2,929Selling and marketing


5,044


3,347


8,828


6,264General and administrative


8,348


4,447


16,124


8,870Amortization of intangible assets


762


750


1,553


1,452Total operating expenses


18,203


10,390


34,370


19,515Income from operations


43,168


19,194


51,298


15,391Other income (expense):Interest income


2,495


1,915


3,970


3,358Interest expense


(125
)

(667
)

228


(1,068
)Other expense, net


(1,657
)

(168
)

(3,099
)

(1,251
)Income before income taxes


43,881


20,274


52,397


16,430Provision for income taxes


15,939


3,198


19,312


4,382Net income

$
27,942

$
17,076

$
33,085

$
12,048Income per shareBasic

$
0.20

$
0.12

$
0.23

$
0.08Diluted

$
0.19

$
0.12

$
0.23

$
0.08Dividend paid per common share

$
0.632




$
0.632


Average number of common shares outstanding used for basic earnings per share


142,398


142,290


142,344


142,290Dilutive common stock options and awards


2,677


1,625


2,775


1,579Average number of common shares outstanding plus dilutive common stock options and awards


145,075


143,915


145,119


143,869Outstanding common stock options and awards having no dilutive effect


409





395





See
accompanying notes to these condensed consolidated financial statements.

4

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

Six Months
Ended
September 27,
2008

Six Months
Ended
September 30,
2007Operating activities:Net income

$
33,085

$
12,048Adjustments to reconcile net income to net cash provided by (used in) operating activities:Amortization expense


1,553


1,452Depreciation expense


783


423Deferred income tax benefit


(32,205
)

(1,037
)Stock-based compensation expense


3,070


938Amortization of credit facility issuance costs


61


Changes in operating assets and liabilities:Restricted cash


60,735


(133,340
)Accounts receivable


16,440


(6,272
)Short term notes receivables





1,585Inventories


(50,513
)

(22,651
)Deferred costs


(57,547
)

1,442Advances on inventory purchases


(77,173
)

(30,079
)Prepaid expenses and other current assets


1,732


(1,404
)Accounts payable and accrued expenses


3,039


6,500Customer deposits


46,862


162,048Deferred revenue


110,580


(1,854
)Accrued income taxes


(11,301
)

(4,356
)Other non-current liabilities


(1,728
)

1,035Net cash provided by (used in) operating activities


47,473


(13,522
)Investing activities:Purchase of property, plant and equipment


(6,310
)

(876
)Purchase of intangible assets





(350
)Decrease in other assets


590


172Net cash used in investing activities


(5,720
)

(1,054
)Financing activities:Proceeds from exercises of stock options


809


Payment of dividends to stockholders


(89,991
)

Credit facility issuance costs


(1,060
)

Payment of note payable





(15,934
)Net cash used in financing activities


(90,242
)

(15,934
)Effect of foreign exchange rates on cash


94


6Decrease in cash and cash equivalents


(48,395
)

(30,504
)Cash and cash equivalents at beginning of period


54,839


74,059Cash and cash equivalents at end of period

$
6,444

$
43,555


See
accompanying notes to these condensed consolidated financial statements.

5

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Table of Contents

GT Solar International, Inc. and Subsidiaries        Notes to Condensed Consolidated Financial Statements        September 27, 2008(In thousands, except per share data)

1. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

GT Solar International, Inc. and its subsidiaries (the "Company") provide specialized manufacturing equipment and services
essential for the production or photovoltaic, or PV, wafers, cells and modules and polysilicon. The Company's 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 PV 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.

The
Company operates through two segments: PV business and polysilicon business. The PV 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 services. The Company sells PV products separately and as part of premium "turnkey solutions," in
which the Company bundles equipment, including third party equipment, with design and integration expertise. The Company's polysilicon business sells CVD reactors and related equipment that facilitate
the entry of new participants into the polysilicon industry.

The
accompanying unaudited 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 results for the
six months ended
September 27, 2008 are not necessarily indicative of the results to be expected for the fiscal year ending March 28, 2009 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 Prospectus dated July 23, 2008 and filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the "Securities Act") with the Securities and Exchange Commission on July 24, 2008 (the "Prospectus").

The
condensed consolidated balance sheet as of March 31, 2008 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.

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 include 13 week periods, unless otherwise noted. The fiscal year ending March 31, 2010 will have
53 weeks, with the extra week occurring in the fourth quarter of that year. As a result of transitioning to the new reporting period, the six month period ended September 27, 2008
includes three fewer days than a 26-week period and three fewer days than the corresponding three month and nine months ended September 30, 2007. The Company will continue to use the terms
quarterly, monthly, and annual in describing its financial results.

On
July 29, 2008, the Company completed an initial public offering of 30,300,000 shares of common stock by certain of its stockholders.

6

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

1. Significant Accounting Policies (Continued)

Significant Accounting Policies

The Company's significant accounting policies are disclosed in its audited financial statements for the year ended March 31,
2008, included in the Prospectus and have not changed materially as of September 27, 2008.

Reclassifications

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

Recently Adopted Accounting Policies

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("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 applies only 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 3, Fair Value of Financial Instruments, to the Condensed Consolidated Financial Statements for additional information). In addition, the Company is currently evaluating the impact of SFAS
No. 157 for measuring nonfinancial assets and liabilities will have on its financial position and results of operations.

In
February 2007, FASB released SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liability("SFAS
No. 159"). SFAS No. 159 allows entities to measure many financial instruments and certain other items at their fair value. The Company elected not to change the accounting for its
financial instruments and therefore the adoption of SFAS No. 159 effective April 1, 2008 did not have a material impact on its financial position and results of operations.

In
September 2007, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 07-03,Accounting for Advance Payments for Goods or Services
to Be Used in Future Research and Development Activities("EITF Issue No. 07-03"). EITF Issue No. 07-03 addresses the diversity which
exists with respect to the accounting for the nonrefundable portion of a payment made by a research and development entity for future research and development activities. Under EITF Issue
No. 07-03 an entity would defer and capitalize nonrefundable advance payments made for research and development activities until the related goods are delivered or the related
services are performed. The Company's adoption of EITF Issue No. 07-03 as of April 1, 2008 did not have a material impact on its financial position or results of operations.

7

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

2. Recently Issued Accounting Pronouncements

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.

In
December 2007, the FASB issued SFAS No. 160,Non-controlling Interests in Consolidated Financial Statementsan Amendment of APB
No. 51("SFAS No. 160"). This pronouncement requires non-controlling interests (previously referred to as minority interests) to be reported as a
component of equity, which changes the accounting for transactions with non-controlling interest holders. SFAS No. 160 becomes effective for fiscal years beginning on or after
December 31, 2008 and interim periods therein. The Company does not expect that the adoption of SFAS No. 160 will have a material impact on its financial statements.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities("SFAS
No. 161"). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations and (c) how
derivative instruments and related hedged items affect an entity's financial position, financial performance and
cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Since SFAS No. 161 addresses only disclosure requirements, the
adoption of SFAS No. 161 will have no impact on the Company's combined results of operation or combined financial position.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles("SFAS No. 162). SFAS
No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with
generally accepted accounting principles. SFAS No. 162 becomes effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU
Section 411,The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.The Company does not expect that the
adoption of SFAS No. 162 will have a material impact on its financial statements.

3. 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 provides a hierarchal disclosure framework
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:



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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

3. Fair Value of Financial Instruments (Continued)



The
following table provides the assets and liabilities carried at fair value measured on a recurring basis at September 27, 2008:

Fair Value Measurements UsingTotal
Carrying
Value(Level 1)

(Level 2)

(Level 3)Money market mutual funds

$
103,899

$
103,899





Foreign exchange forward contracts assets

$
1,084




$
1,084


Foreign exchange forward contracts liabilities

$
(4,265
)



$
(4,265
)




The
Company's counterparties to forward foreign exchange transactions are major financial institutions with an investment grade or better credit rating. 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.

4. Inventories

Inventories consist of the following:

September 27,
2008

March 31,
2008Raw materials

$
54,196

$
17,729Work-in-process


4,206


10,128Finished goods


29,629


9,661$
88,031

$
37,518


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 PV 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)

September 27, 2008

(In thousands, except per share data)

5. Warranty (Continued)

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

Six Months
Ended
September 27,
2008

Year Ended
March 31,
2008Product warranty liability, beginning of the period

$
1,957

$
977Accruals for new warranties issued


863


1,876Payments under warranty


(646
)

(896
)Product warranty liability, end of period

$
2,174

$
1,957


6. Income Taxes

The Company recorded a provision for Federal, state and foreign income taxes for the three and six months ended September 27, 2008 and September 30, 2007 in accordance with
SFAS 109,Accounting for Income Taxes. The Company's consolidated effective income tax rate was 36.3% for the three months ended
September 27, 2008, as compared to 15.8% for the comparable prior-year period.

The
Company's consolidated effective income tax rate was 36.9% for the six months ended September 27, 2008, as compared to 26.7% for the comparable prior-year period.
This rate is lower than the statutory rate for the period ended September 27, 2008 due primarily to the impact of discrete items, attributed mainly to tax benefits based upon recently completed
tax studies. The impact of these discrete items on the effective rate was to reduce the effective rate for the three and six month period ended September 27, 2008 by a net of 1.7%. In the six
months ended September 30, 2007, the effective rate included the reversal of a prior valuation allowance against the deferred tax assets of $3,047.

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. In addition, the Company identifies items which are not normal and recurring in nature and treats these as discrete events. The
tax effect of discrete items is booked entirely in the quarter in which the discrete event occurs. Due to the volatility of these
factors, the Company's consolidated effective income tax rate can change significantly on a quarterly basis.

In
June 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainties in Income Taxes("FIN 48") which
clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The
Company adopted the provisions of FIN 48 on April 1, 2007. The Company recognized no increase in tax liabilities as a result of the implementation of FIN 48. The Company did not
have any unrecognized tax benefits as of March 31, 2008. During the three months ended September 27, 2008, the Company recorded a long term payable for uncertain tax positions of $143.

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

6. Income Taxes (Continued)

The
Company recognizes accrued interest and penalties on unrecognized tax benefits in income tax expense. At September 27, 2008, accrued interest related to uncertain tax
positions was not significant.

7. 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 the Company's July 24, 2008 initial public offering and others (the "federal class actions"). On
October 3, 2008, the Court entered an order consolidating the federal class actions into a single action. The Court selected the lead plaintiff and lead plaintiff's counsel in the consolidated
matter on October 29, 2008. No amended consolidated complaint has yet been filed. The federal class action plaintiffs assert claims under various sections of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The federal class action complaints allege, among
other things, that the defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including the Registration Statement for the
Company's July 24, 2008 initial public offering, and other public statements, regarding the Company's business relationship with LDK Solar, Ltd., one of the Company's customers. Among
other relief, the federal class action complaints seek 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,
against the Company, certain of its officers and directors and certain underwriters of the Company's 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, where the matter is currently pending. The defendants anticipate that plaintiff
will seek to remand the state class action to New Hampshire state court. The state class action plaintiff asserts claims under various sections of the Securities Act of 1933, as amended. The state
class action complaint alleges, among other things, that the defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including
the Registration Statement for the Company's July 24, 2008 initial public offering, and other public statements, regarding the Company's business relationship with LDK Solar, Ltd., one
of the Company's customers. 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 court should deem just and proper.

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

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

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

8. Debt



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 letters of credit; provided that the aggregate principal amount of revolving loans shall not exceed
$50,000 at any time. The senior credit facility includes a sub limit of $25,000 for swingline loans. The senior credit facility will mature on July 29, 2011. The aggregate amount of borrowings
and outstanding standby letters of credit 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 Company's tangible and intangible assets and by a pledge of the capital stock of all domestic subsidiaries and 65% of the capital stock of foreign subsidiaries owned directly
by the Company or one of its domestic subsidiaries.

The
senior credit facility may be increased by an aggregate amount of up to $100,000, with additional commitments from the lenders under the senior credit facility or from new financial
institutions, if no default or event of default exists. The Company may exercise its option to increase the commitments not more than three times, and each increase will be in a minimum aggregate
principal amount of $10,000 and integral multiples of $5,000 in excess thereof. As of September 27, 2008, the Company had approximately $39,269 of outstanding letters of credit and no
borrowings, resulting in $50,731 of available credit under the senior credit agreement.

Borrowings
under the senior credit facility bear interest at a floating rate equal to, at the Company's option, either 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. The senior
credit facility contains customary covenants, which among other things limit the Company's ability to: incur indebtedness; make investments; engage in mergers and other fundamental changes; sell or
otherwise dispose of property or assets; pay dividends and other restricted payments; enter into transactions with affiliates; use proceeds to purchase or carry margin stock or extend credit to
others; make subordinated debt payments; make certain changes to the terms of material indebtedness; and other covenants customary for such a facility. The senior credit facility contains financial
covenants that require the Company to meet certain financial tests, including a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage ratio, calculated on a
consolidated basis for each consecutive four fiscal quarter period. The Company was in compliance with all of these covenants as of September 27, 2008.

12

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

8. Debt (Continued)



On July 29, 2008, the Company 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 $150,000, which is available for the issuance of cash-collateralized standby letters of credit. The letter of credit facility may be increased by an
aggregate amount of up to $50,000, 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. The Company may exercise its option to increase the commitments not more than three times, and each increase will be in a minimum aggregate principal amount of $10,000
and integral multiples of $5,000 in excess thereof. The Company pays letter of credit fees equal to 0.25% per annum on the maximum amount available to be drawn under each standby letter of credit. The
letter of credit facility is secured by an equal amount of cash pledged and delivered by the Company to the administrative agent for the benefit of all lenders. The letter of credit facility contains
customary covenants, which among other things limit the Company's 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. The Company was in compliance
with all of these covenants as of September 27, 2008. As of September 27, 2008, the Company has no outstanding letters of credit under this facility.

9. Stockholder's Equity

A summary of the changes in Stockholders' Equity for the six months ended September 27, 2008 is provided below:

Common
Stock
Shares

Par Value

Additional
Paid-in
Capital

Retained
Earnings
(Accumulated
Deficit)

Other
Comprehensive
Income (Loss)

Total
Stockholders'
EquityBalance at March 31, 2008


142,375

$
1,424

$
73,817

$
10,816

$
5,584

$
91,641Net income











33,085





33,085Other comprehensive loss(1)














(6,177
)

(6,177
)Common stock dividend











(89,991
)




(89,991
)Restricted stock units awarded


171


1


(1
)







Option exercises


487


5


804








809Stock compensation








3,070








3,070Balance at September 27, 2008


143,033

$
1,430

$
77,690

$
(46,090
)
$
(593
)
$
32,437


---

13

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

9. Stockholder's Equity (Continued)

Stock Split

The financial statements give retroactive effect to a July 23, 2008 increase in the number of authorized shares of common stock
from 10,000 to 500,000 and a 17-for-one stock split of the Company's common stock in connection with the Company's initial public offering.

Preferred Stock

In connection with the Company's initial public offering, the Company filed an amended and restated certificate of incorporation that
permits the board of directors, from time to time, to direct the issuance of up to 10,000 shares of preferred stock in series and may, at the time of issuance, determine the rights, preferences and
limitations of each series.

Common Stock Dividend

On June 30, 2008, the Company declared a cash dividend of approximately $90,000 to the stockholders of record as of
June 30, 2008 that was subsequently paid on August 1, 2008.

10. Share-Based Payments

Stock-based compensation expense recognized for the three and six months ended September 27, 2008 and September 30, 2007 was as follows:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007Cost of revenues

$
114

$


$
227

$
Research and development


131


59


259


127Selling and marketing


30


124


59


238General and administrative


(516
)

244


2,525


573Total

$
(241
)
$
427

$
3,070

$
938


The
following presents additional detail in connection with the Company's share-based payment activities:

Stock Option Plans

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 provides for grants of stock options, restricted stock, stock appreciation rights and other equity based awards to directors, officers and employees of the Company,
as well as independent contractors performing services for the Company. The Company anticipates that all future option grants will be made under
the 2008 Plan and does not intend to issue any further stock options under the 2006 Stock Option Plan.

14

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

10. Share-Based Payments (Continued)

As
of September 27, 2008, a total of 14,829,354 shares of the Company's common stock were available for issuance under the 2008 Plan.

Stock
option activity for the six months ended September 27, 2008 was as follows:

Options OutstandingNumber
of Shares

Weighted Average
Exercise PriceBalance March 31, 2008


6,537

$
3.86Options granted





Options exercised


(487
)
$
1.66Options canceled/expired


(127
)
$
4.41Balance September 27, 2008


5,923

$
4.02


The
following summarizes information regarding outstanding and exercisable stock options as of September 27, 2008:

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


2,401


7.8

$
19,075


1,203

$
1.66

$
9,557$
5.64


3,522


9.2


13,951








5,923




$
33,026


1,203

$
1.66

$
9,557


The
Company accounts for equity instruments issued in accordance with SFAS No. 123, EITF No. 96-18,Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Servicesand FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable
Stock Option or Award Plans. Accordingly, the Company will be required to measure the fair
value of such equity instruments at each reporting period prior to vesting and finally at the vesting date of the equity instruments.

Stock
based compensation recognized with respect to equity instruments issued to employees for the three and six months ended September 27, 2008 and September 30, 2007 was
$661 and $1,345 and $191 and $383, respectively. Stock compensation to non-employees for the three and six months ended September 27, 2008 and September 30, 2007 was ($1,147)
and $1,323, and $133 and $351, respectively. As of September 27, 2008, the Company had unrecorded deferred stock-based compensation expense related to stock options of approximately $25,670,
after estimated forfeitures, which will be recognized over an estimated weighted-average remaining requisite service period of 3.2 years.

Restricted Stock

The Company grants restricted stock and restricted stock units (collectively, "restricted shares") at the discretion of the Board of
Directors, to certain key employees and certain members of the Board of

15

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

10. Share-Based Payments (Continued)

Directors.
Restricted stock is common stock that is not fully transferable until certain conditions have been met, primarily the passage of time during a predetermined vesting period set by the
compensation committee and continued employment or engagement with the Company (the "restricted period"). Unvested restricted shares are forfeited in the event of termination of employment or
engagement with the Company. A holder of restricted stock generally has all of the rights of a stockholder. A restricted stock unit is a grant representing the right to receive a share of common stock
upon vesting of the restricted stock unit and satisfaction of other conditions but for which no share of common stock is issued until the restricted stock unit vests and any other applicable
conditions are satisfied. A holder of a restricted stock unit does not have any rights of a stockholder until the restricted stock unit vests and is converted to common stock.

The
fair value of restricted shares are based on the market price of the Company's stock on the date of grant and are recorded as compensation expense ratably over the applicable service
period, which is generally two to four years. Compensation expense recognized with respect to restricted shares for the three and six months ended September 27, 2008 was $203 and $321,
respectively. There was no compensation expense related to restricted shares for the six months ended September 30, 2007.

A
summary of activity related to the restricted shares for the six months ended September 27, 2008 is as follows:

Number of
Non-vested
Restricted
Shares

Weighted
Average
Grant-Date
Fair ValueBalance at March 31, 2008


85

$
5.64Granted


171


11.12Vested





Forfeited





Balance at September 27, 2008


256

$
9.30


As
of September 27, 2008, the Company had unrecorded deferred stock-based compensation expense related to restricted stock of approximately $2,529, before estimated forfeitures,
which will be recognized over an estimated weighted-average remaining requisite service period of 3.3 years.

GT Solar Holdings, LLC Shares

In conjunction with the January 1, 2006 acquisition of the Company by GT Solar Holdings, LLC, certain classes of shares
of GT Solar Holdings, LLC were issued to key employees of the Company, a portion of which were subject to continuing employment vesting over two and four year periods. As a result of these
ownership interests, these employees are entitled to participate in distributions from GT Solar Holdings, LLC. The Company has recorded compensation expense related to these ownership
interests in the amount of $41 and $81 for the three months and six months ended September 27, 2008 and $102 and $204 as of September 30, 2007, respectively. The remaining unamortized
compensation expense related to these shares is approximately $203 as of September 27, 2008.

16

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

11. Earning Per Share

Basic earnings per share ("EPS") is computed based on only the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the
weighted average number of common shares and, when dilutive, the weighted average number of potential common shares outstanding during the period, as determined using the treasury stock method.
Potential common shares consist of nonvested restricted common stock and common stock issuable upon the exercise of outstanding stock options and the vesting of restricted stock units.

12. Comprehensive Income (Loss)

The following table summarizes components of other comprehensive income that relate 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 Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007Net income

$
27,942

$
17,076

$
33,085

$
12,048Net gains (losses) on derivative instruments designated as cash flow hedges, net of tax effects


(5,886
)

961


(6,285
)

1,039Foreign currency translation adjustment


(4
)

(4
)

108


(4
)Comprehensive income

$
22,052

$
18,033

$
26,908

$
13,083


The
following table summarizes the Company's accumulated comprehensive income (loss) as of September 27, 2008 and March 31, 2008:

September 27,
2008

March 31,
2008Cash flow hedges of foreign exchange (net of tax)

$
(728
)
$
5,557Foreign currency translation adjustment


135


27Total

$
(593
)
$
5,584


Substantially
all of the accumulated gain (loss) related to cash flow hedges of foreign exchange will be reclassified into earnings over the next twelve months.

13. Segment Information

During the year ended March 31, 2008, the Company began reporting its results in two segments: the PV 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,

17

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

13. Segment Information (Continued)

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:

PV
Business

Polysilicon
Business

Corporate
Services

TotalThree months ended September 27, 2008Revenue

$
140,192

$


$


$
140,192Gross profit


61,629


(258
)




61,371Depreciation and amortization


775


102


346


1,223Income (loss) from operations


55,676


(5,350
)

(7,158
)

43,168Three months ended September 30, 2007Revenue

$
81,774

$


$


$
81,774Gross profit


29,584








29,584Depreciation and amortization


8


52


915


975Income (loss) from operations


26,927


(2,876
)

(4,857
)

19,194Six months ended September 27, 2008Revenue

$
197,274

$


$


$
197,274Gross profit


85,491


177





85,668Depreciation and amortization


1,665


111


560


2,336Income (loss) from operations


74,494


(9,425
)

(13,771
)

51,298Six months ended September 30, 2007Revenue

$
97,130

$


$


$
97,130Gross profit


34,906








34,906Depreciation and amortization


1,634


3


238


1,875Income (loss) from operations


27,725


(3,987
)

(8,347
)

15,391AssetsSeptember 27, 2008

$
335,049

$
285,781

$
73,994

$
694,824March 31, 2008

$
281,303

$
230,865

$
88,443

$
600,611


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

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007Asia

$
128,828

$
80,838

$
172,706

$
94,545Europe


7,334


417


14,279


1,631North America


4,030


519


10,289


954Total revenue

$
140,192

$
81,774

$
197,274

$
97,130


18

---



Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

September 27, 2008

(In thousands, except per share data)

13. Segment Information (Continued)

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

September 27,
2008

March 31,
2008United States

$
23,340

$
19,371Asia


91


86Total

$
23,431

$
19,457


14. Supplemental Financial Statement Information

Other Expense, net

The components of other expense, net are as follows:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007Initial public offering expenses

$
1,193

$
14

$
2,689

$
1,144Foreign currency revaluation (gain) loss


464


(34
)

410


(25
)Commissions, royalties and other





188





132Total other expense, net

$
1,657

$
168

$
3,099

$
1,251


Goodwill

During the three months ended September 27, 2008 the Company completed tax studies that resulted in additional tax benefits, of
which $590 related to periods prior to January 1, 2006 and therefore have been allocated as a reduction to goodwill.

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 prove incorrect or never materialize, 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, those identified under the section
titled "Risk Factors" below, and those discussed in the section titled "Risk Factors" included in our Prospectus dated July 23, 2008 filed pursuant to Rule 424(b) under the Securities
Act with the Securities and Exchange Commission on July 24, 2008. Furthermore, such forward-looking statements speak only as of the date of this report. All forward-looking statements are
qualified in their entirety by this cautionary statement, and we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such
statements.

Company Overview

GT Solar International, Inc., through its subsidiaries (referred to herein collectively as "we", "us", and "our"), is a provider
of specialized manufacturing equipment and services essential for the production of photovoltaic, or PV, 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 PV business and our polysilicon business.

Our
PV 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. In 2005, we made a strategic decision to develop the equipment and expertise necessary to facilitate the entry of new
participants into the polysilicon industry.

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.

20

---



Table of Contents

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 September 27, 2008 and March 31, 2008 by product category:

As of
September 27, 2008

As of
March 31, 2008Product Category

Amount

% of
Backlog

Amount

% of
Backlog(dollars in millions)PV business

$
541


38
%
$
648


50
%Polysilicon business


873


62
%

659


50
%Total

$
1,414


100
%
$
1,307


100
%


Our
order backlog as of September 27, 2008 included deferred revenue of $274.8 million, representing equipment that had been shipped to customers but not yet recognized as
revenue. In addition, $732.5 million of our order backlog as of September 27, 2008 was attributed to three customers. We generally would expect to deliver the solar products included in
our order backlog over a period ranging from six to twelve 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 25% to 30% of our order backlog as of September 27, 2008 to revenue by
March 31, 2009. Order backlog as of any particular date should not be relied upon as indicative of our revenues for any future period and we have only recently begun to track our order backlog
on a consistent basis.

Recent
developments in the global capital markets have resulted in a higher level of uncertainty experienced by some end-user solar cell module manufacturers. Although we
continue to believe that our backlog is somewhat insulated from these recent trends due to our requirement for substantial non-refundable deposits on most orders, we have been notified by
a few of our customers who are seeking to renegotiate the delivery schedules under their existing contracts with us. As of the date of this filing, we have not had any significant cancellations or
modifications to our contracts in backlog.

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 prices of conventional energy sources, the desire for energy security or 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), 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 also affected by a number of additional 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 in deliveries of ordered products and our rate of progress in the fulfillment of
our obligations under our contracts. Our quarterly results have fluctuated significantly in the past and we expect that our quarterly results will continue to fluctuate significantly in the future.

21

---



Table of Contents

Results of Operations

The following tables set forth the results of operations as a percentage of revenue for the three and six months ended
September 27, 2008 and September 30, 2007:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007Statement of Operations Data:*Revenue


100
%

100
%

100
%

100
%Cost of revenue


56


64


57


64Gross profit


44


36


43


36Research and development


3


2


4


3Selling and marketing


4


4


4


6General and administrative


6


5


8


9Amortization of intangible assets


1


1


1


1Income from operations


31


23


26


16Interest income, net


2


2


2


2Other expense, net


(1
)




(1
)

(1
)Income before income taxes


31


25


27


17Provision for income taxes


11


4


10


5Net income


20
%

21
%

17
%

12


---



Revenue.The following table sets forth total revenue and revenue by product category for the three and six months ended September 27, 2008 and
September 30, 2007:

Three Months Ended

Six Months EndedProduct Category

September 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007(dollars in thousands)

(dollars in thousands)PV equipment

$
135,006

$
74,010

$
189,510

$
88,486PV services, parts and other


5,186


7,764


7,764


8,644Total PV business revenue

$
140,192

$
81,774

$
197,274

$
97,130


For
the three months ended September 27, 2008 compared to the three months ended September 30, 2007, our total revenue increased 71.4%, or $58.4 million.
Specifically, our revenue from PV equipment sales increased 82.4% from $74.0 million for the three months ended September 30, 2007 to $135.0 million for the three months ended
September 27, 2008. During the three months ended September 27, 2008, our revenue from DSS sales was $129.1 million, compared to $58.3 million in the same quarter last
year. Sales of other solar equipment accounted for $5.9 million and $15.7 million of our revenue for the three months ended September 27, 2008 and September 30, 2007,
respectively.

For
the six months ended September 27, 2008 compared to the six months ended September 30, 2007, our total revenue increased 103.1%, or $100.1 million. During the
six months ended September 27, 2008, our revenue from DSS sales was $180.1 million compared to $72.6 million in the same period last year.

22

---



Table of Contents

Sales
of other solar equipment accounted for $9.4 million and $15.9 million of our revenue for the six months ended September 27, 2008, and September 30, 2007 respectively.

Revenue
from PV services, parts and other equipment sales can fluctuate based upon specific customer requirements. Overall revenue increases were primarily related to our PV equipment
including sales of our next generation DSS furnaces. As of September 27, 2008, we had deferred revenue of $119.7 million attributable to PV contracts.

Our
polysilicon business commenced in April 2006, and as of the three and six months ended September 27, 2008 and September 30, 2007 we had not recognized any revenue from
our CVD reactors or converters. As of September 27, 2008, we had delivered CVD reactors to certain customers. However, revenue will be recognized related to these orders when
pre-established reactor output performance criteria have been met and final acceptance by the respective customer has been confirmed. As of September 27, 2008, we had deferred
revenue of $155.1 million attributable to polysilicon contracts.

In
the three and six months ended September 27, 2008 and three and six months ended September 30, 2007, a substantial percentage of our revenue resulted from sales to a
small number of customers. Three of our customers accounted for 77% and 70% of our revenue for the three and six months ended September 27, 2008, and one customer accounted for 96% of our
revenue for the three months ended September 30, 2007 and two customers accounted for 90% of our revenue for the six months ended September 30, 2007. No other customer accounted for more
than 10% of our revenue during the respective periods. For the fiscal year ended March 28, 2009, we believe that no one customer will account for more than 25% of our total annual revenue.

Cost of Revenue and Gross Profit.The following table sets forth total cost of revenue and gross profit (loss) for the three and six months ended
September 27, 2008 and September 30, 2007:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007(dollars in thousands)

(dollars in thousands)Cost of revenuePV business

$
78,563

$
52,190

$
111,783

$
62,224Polysilicon business


258





(177
)

Total

$
78,821

$
52,190

$
111,606

$
62,224Gross profit (loss)PV business

$
61,629

$
29,584

$
85,491

$
34,906Polysilicon business


(258
)




177


Total

$
61,371

$
29,584

$
85,668

$
34,906


Cost
of revenue increased $26.6 million, or 51.0%, to $78.8 million for the three months ended September 27, 2008 compared to $52.2 million for the three
months ended September 30, 2007. Gross profit increased $31.8 million, or 107.4%, to $61.4 million for the three months ended September 27, 2008 compared to gross profit of
$29.6 million for the three months ended September 30, 2007. Gross profit as a percentage of revenue, or gross margin, increased to 43.8% for the three months ended September 27,
2008 from 36.2% for the three months ended September 30, 2007. Gross margin increased
due primarily to the higher gross margins on our DSS units that were introduced during the second quarter of fiscal 2008 and higher costs in the three months ended September 30, 2007 of
approximately $6.5 million due to the impact of a non-recurring purchase accounting fair value adjustment and higher than expected costs on a completed turnkey contract.

Cost
of revenue increased $49.4 million, or 79.4%, to $111.6 million for the six months ended September 27, 2008 compared to $62.2 million for the six months
ended September 30, 2007. Gross profit

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for
the six months ended September 27, 2008 increased $50.8, or 145.4%, to $85.7 million compared to $34.9 million for the six months ended September 30, 2007. Gross margin
increased to 43.4% for the six months ended September 27, 2008 from 35.9% for the six months ended September 30, 2007. Gross margin increased due primarily to the higher gross margins on
our DSS units that were introduced during the second quarter of fiscal 2008 and higher costs in the six months ended September 30, 2007 of approximately $6.5 million due to the impact of
non-recurring charges as noted above.

For
the balance of the fiscal year ending March 28, 2009, we anticipate our revenue will include higher revenue from other equipment sales, turnkey projects and polysilicon
reactors, all of which are expected to slightly reduce overall gross margins compared to those of our DSS units.

Research and Development.The following table sets forth total research and development expenses for the three and six months ended September 27, 2008 and
September 30, 2007:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007(dollars in thousands)

(dollars in thousands)Research and developmentPV business

$
2,066

$
689

$
3,522

$
1,178Polysilicon business


1,983


1,157


4,343


1,751Total

$
4,049

$
1,846

$
7,865

$
2,929


Research
and development expenses increased 119.3%, or $2.2 million, during the three months ended September 27, 2008 compared to September 30, 2007. Of this
increase, approximately $0.9 million relates to outside consulting services related to the continued development of our CVD reactor technology and the development of our
next-generation DSS products and $0.7 million related to increased purchases of R&D material during the quarter.

During
the six months ended September 27, 2008 compared to September 30, 2007, research and development expenses increase by approximately 168.5%, or $4.9 million.
Of the year-to-date increase in research and development expenses, approximately $1.8 million can be attributed to increased material spending and outside consulting
services associated with the development of new Polysilicon business products, particularly our CVD reactor technology, as well as costs associated with the development of our
next-generation DSS products. Additional cost increases relate to payroll and benefits related to increased headcount as we continued to grow and expand.

Selling and Marketing.The following table sets forth total selling and marketing expenses for the three and six months ended September 27, 2008 and
September 30, 2007:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007(dollars in thousands)

(dollars in thousands)Selling and marketingPV business

$
2,677

$
1,676

$
4,916

$
4,029Polysilicon business


2,367


1,671


3,912


2,235Total

$
5,044

$
3,347

$
8,828

$
6,264


Selling
and marketing expenses increased 50.7%, or $1.7 million, during the three months ended September 27, 2008 compared to September 30, 2007 primarily all of
which related to increases in third party commissions. However, sales commissions do not directly correlate to increases in revenue since sales

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commissions
are accrued based on operational factors such as deposits, shipments and final acceptances received from customers rather than when revenue is recognized.

During
the six months ended September 27, 2008 compared to September 30, 2007, selling and marketing expenses increased 40.9%, or $2.6 million, of which the majority
can be attributed to increased third party sales commissions of approximately $2.2 million. As noted above, sales commissions do not directly correlate to increases in revenue since sales
commissions are accrued based on operational factors such as deposits, shipments and final acceptances received from customers rather than when revenue is recognized. Additionally,
year-to-date selling and marketing expenses increased as a result of increased headcount as we continued to grow and expand.

General and Administrative.The following table sets forth total general and administrative expenses for the three and six months ended September 27, 2008
and September 30, 2007:

Three Months Ended

Six Months EndedSeptember 27,
2008

September 30,
2007

September 27,
2008

September 30,
2007(dollars in thousands)

(dollars in thousands)General and administrativePV business

$
7,696

$
4,447

$
14,867

$
8,870Polysilicon business


652





1,257


Total

$
8,348

$
4,447

$
16,124

$
8,870


General
and administrative expenses increased 87.7%, or $3.9 million during the three months ended September 27, 2008 compared to September 30, 2007. The most
significant factors affecting this increase include spending related to legal and tax consulting services of approximately $1.5 million, as well as, increased software consulting costs of
$1.0 million related to the implementation of a new ERP system.

During
the six months ended September 27, 2008 compared to September 30, 2007, general and administrative expenses increase by 81.8%, or approximately $7.3 million.
The most significant factors affecting this increase relates to stock compensation expense, as compared to prior periods, which increased $2.1 million primarily due to the variable nature of
awards granted to non-employees. Additionally, on a year-to-date basis, the Company incurred spending of approximately $2.0 million related to legal and tax
consulting services, as well as, increased software consulting costs of $1.2 million related to the implementation of a new ERP system.

Amortization of Intangible Assets.Amortization expense attributed to intangible assets has remained essentially unchanged for all periods presented.

Interest Income and Interest Expense.We typically invest our excess cash in exchange-traded money market mutual funds. During the three and six months ended
September 27, 2008 and 2007, we recorded $2.5 million and $4.0 million and $1.9 million and $3.4 million of interest income, respectively. During the three and six
months ended September 30, 2008 and 2007, we recorded $0.1 million and $(0.2) million and $0.7 million and $1.1 million related to the interest component of foreign
exchange forward contracts.

Other Expense, net.During the three and six months ended September 27, 2008, other expense was $1.7 million and $3.1 million, respectively,
and during the three and six months ended September 30, 2007, other expense was $0.2 million and $1.3 million, respectively, related primarily to our initial public offering which
was completed on July 29, 2008.

Provision for Income Taxes.Our effective income tax rate was 36.3% for the three months ended September 27, 2008, compared to 15.8% for the comparable
prior-year period. For the six months ended September 27, 2008, our effective tax rate was 36.9%, compared to 26.7% for the same period ended September 30, 2007. The
effective rate for both the three months ended and six months ended

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September 27,
2008 was lower than the statutory rate due primarily to the impact of discrete items, mainly attributed to tax benefits based upon recently completed tax studies. The impact of
these discrete items was to reduce the effective rate for the six month period ended September 27, 2008 by a net of 1.7%. In the six month period ended September 30, 2007, the effective
rate included the reversal of a prior valuation allowance against the deferred tax assets of $3.0 million.

Net Income.As a result of the foregoing factors, for the three and six months ended September 27, 2008, we recorded net income of $27.9 million and
$33.1 million, respectively, compared to net income of $17.1 million and $12.0 million for the three and six months ended September 30, 2007.

Liquidity and Capital Resources

Overview

Overall our cash balances decreased by $48.4 million during the six months ended September 27, 2008, from
$54.8 million as of March 31, 2008 to $6.4 million as of September 27, 2008. During the six months ended September 30, 2008 our cash balance decreased by
$30.5 million, from $74.1 million as of March 31, 2007 to $43.6 million as of September 30, 2007. In the six months ended September 27, 2008, the cash decrease was
related primarily to the payment of a dividend in the amount of approximately $90 million. 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 consist primarily 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

We generated $47.5 million of cash from operations during the six months ended September 27, 2008, compared to
$13.5 million of cash used in operations for the same period last year. The increase in customer deposits of $46.9 million for the six months ended September 27, 2008, compared to
$162.0 million for the six months ended September 30, 2007, corresponds with the overall increase in our order backlog, as we require deposits under our contractual arrangements with our
customers. The increase in deferred costs of $57.5 million corresponds with the increase in deferred revenue of $110.6 million for the six months ended September 27, 2008, as
compared to decreases of $1.4 million in deferred costs and $1.9 million in deferred revenue for the six months ended September 30, 2007. We generally collect a customer deposit
of approximately 10% to 30% of the value of the contract when an order is received. Customer deposits are reclassified as deferred revenue when equipment has been shipped or services have been
provided but revenue has not yet been recognized. We also experienced an increase in advances to our vendors of $77.2 million and an increase in inventory of $50.5 million during the six
months ended September 27, 2008, compared to 30.1 million and $22.7 million, respectively, for the same period last year as we continued to procure materials to deliver on our
backlog.

In
connection with customer deposits, customers may require us to provide a standby letter of credit, or standby LOC, as security for their deposit. The practice of using cash to
collateralize our standby LOCs has had a negative impact on the working capital available to us. On July 29, 2008, we entered into a new senior credit facility with a syndicate of financial
institutions, which permits us to issue standby letters of credit without providing cash collateral. (See "New Senior Credit Facility" below.) Our restricted cash decreased by $60.7 million for
the six months ended September 27, 2008 as we began utilizing this new facility.

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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 six months ended September 27, 2008 and September 30, 2007, were approximately $6.3 million and $0.9 million, respectively, which
were used primarily for improving our business information systems and expansion of our principal facility in New Hampshire. We expect total capital expenditures in the fiscal year ending
March 31, 2009 to be approximately $16.8 million, consisting primarily of improvements to our business information systems and expansion of our facilities both in New Hampshire and
Montana.

Cash Flows from Financing Activities

During the six months ended September 27, 2008, we paid a cash dividend of approximately $90 million to shareholders of
record at June 30, 2008. During the six months ended September 30, 2007, we used $15.9 million of cash for financing activities to repay our senior secured exchangeable promissory
note.

As
of September 27, 2008, we had $103.3 million of restricted cash that is used to collateralize certain outstanding standby LOCs. Generally, a letter of credit expires
upon shipment to the customer which in turn reduces the restricted cash by a similar amount.

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

Derivatives and Hedging Activities

We enter into forward foreign exchange contracts to offset certain operational exposures from the impact of changes on foreign currency
exchange rates. These foreign exchange contracts are entered into to support purchases made in the normal course of business, and accordingly, are not speculative in nature.

The
notional amount of our Euro-denominated cash flow hedges was €99.8 million at September 27, 2008. These contracts had a net fair value
liability of $3.4 million at September 27, 2008 primarily as a result of changes in the Euro to U.S. dollar exchange rates. Changes in the fair value of these contracts are recognized in
stockholders' equity as a component of accumulated other comprehensive income as these financial instruments qualify for hedge accounting.

New 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; provided that the aggregate principal amount of revolving loans shall 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 September 27, 2008, we had approximately
$39.3 million of outstanding letters of credit and no borrowings under the senior credit facility and $50.7 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

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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 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 LOC.

The
senior credit facility contains customary 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; enter into transactions with affiliates; enter into burdensome agreements; use proceeds to
purchase or carry margin stock or extend credit to others; make subordinated debt payments; make certain changes to the terms of material indebtedness; and other covenants customary for such a
facility. The 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. We were in compliance with
all of these covenants as of September 27, 2008.

Recent
volatility in the financial markets has severely diminished liquidity and capital availability worldwide. We believe that 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.

New 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 September 27, 2008, we had no letters of credit outstanding under this facility.

The
letter of credit facility is secured by an equal amount of cash pledged and delivered by us to the administrative agent for the benefit of all lenders. 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 September 27, 2008.

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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 September 27, 2008, we had approximately $168.7 million of standby letters of credit outstanding representing primarily performance guarantees issued against customer
deposits. These letters of credit as of September 27, 2008 have not been included in the consolidated financial statements included herein. Letters of credit entered into prior to
July 29, 2008, the effective date of our New Security Credit Facility, are secured by restricted cash.

Contractual Obligations

As of September 27, 2008, our contractual obligations by fiscal year for operating were as follows:

Total

Remainder
of 2009

2010

2011

2012

2013

2014 and
thereafter(dollars in thousands)Operating leases (a)

$
613

$
141

$
244

$
135

$
93








---

Recent Accounting Pronouncements

In September 2006, the 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 applies only 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. In addition, we are currently evaluating the impact of SFAS No. 157 for measuring nonfinancial assets and
liabilities will have on our financial position and results of operations.

In
February 2007, the FASB released SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liability("SFAS
No. 159"). SFAS No. 159 allows entities to measure many financial instruments and certain other items at their fair value. We elected not to change the accounting for our financial
instruments and therefore the adoption of SFAS No. 159 effective April 1, 2008 did not have a material impact on our financial position and results of operations.

In
September 2007, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 07-03,Accounting for Advance Payments for Goods or Services
to Be Used in Future Research and Development Activities("EITF Issue No. 07-03"). EITF Issue No. 07-03 addresses the diversity which
exists with respect to the accounting for the nonrefundable portion of a payment made by a research and development entity for future research and development activities. Under EITF Issue
No. 07-03 an entity would defer and capitalize nonrefundable advance payments made for research and development activities until the related goods are delivered or the related
services are performed. EITF Issue No. 07-03 is effective for fiscal years

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beginning
after December 15, 2007 and interim periods within those years. We adopted EITF Issue No. 07-03 effective April 1, 2008 with no material impact on our
financial position or results of operations.

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.

In
December 2007, the FASB issued SFAS No. 160,Non-controlling Interests in Consolidated Financial Statementsan Amendment of APB
No. 51, or ("SFAS No. 160"). This pronouncement requires non-controlling interests (previously referred to as minority interests) to be reported as a
component of equity, which changes the accounting for transactions with non-controlling interest holders. SFAS No. 160 becomes effective for fiscal years beginning on or after
December 31, 2008 and interim periods therein. We have not yet completed our evaluation of the impact of SFAS No. 160.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities("SFAS
No. 161"). SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations and (c) how
derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods
beginning after November 15, 2008. Since SFAS No. 161 addresses only disclosure requirements, the adoption of SFAS No. 161 will have no impact on our combined results of operation
or combined financial position.

In
May 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 162,The Hierarchy of Generally
Accepted Accounting Principles("SFAS No. 162"). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used
in the preparation of financial statements that are presented in conformity with generally accepted accounting principles. SFAS No. 162 becomes effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." We do not
expect that the adoption of SFAS No. 162 will have a material impact on our financial statements.

Critical Accounting Policies and Estimates

For the three months ended September 27, 2008, there were no changes to our critical accounting policies as identified in our
consolidated financial statements for the year ended March 31, 2008 included in our Prospectus dated July 23, 2008 filed pursuant to Rule 424(b) under the Securities Act with the
Securities and Exchange Commission on July 24, 2008.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk



Although our reporting currency is the U.S. dollar and almost all of our sales contracts are currently denominated in U.S. dollars, we
do incur costs in foreign currencies. In addition, although we maintain our cash balances primarily in the U.S. dollar, from time to time, we will maintain cash balances in currencies other than the
U.S. dollar. As a result, we may be subject to currency translation risk. Exchange rates

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between
a number of currencies and U.S. dollars have fluctuated significantly over the last few years and future exchange rate fluctuations may occur.

We
enter into foreign exchange forward contracts that qualify as cash flow hedges under SFAS No. 133,Accounting for Derivative Instruments and Hedging
Activities,to hedge portions of our anticipated foreign currency denominated inventory purchases. These contracts typically expire within 12 months. Consistent with the
nature of the economic hedges provided by these foreign exchange forward contracts, increases or decreases in their fair values would be effectively offset by corresponding decreases or increases in
the U.S. dollar value of our future foreign currency denominated inventory purchases (i.e., "hedged items"). The information provided below relates only to the hedging instruments and does not
represent the corresponding changes in the underlying hedged items.

Currently,
our largest foreign currency exposure is the Euro and to a lesser degree the Swiss Franc, primarily from foreign currency denominated purchases of third party equipment from
vendors located in Europe. Relative to our foreign currency exposures existing at September 27, 2008, a 10% appreciation of the Euro against the U.S. dollar would result in an increase in the
fair value of $14.0 million of these derivative financial instruments. Conversely, a 10% appreciation of the U.S. dollar against the Euro would result in a decrease in the fair value of
approximately $14.0 million of these instruments.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures as of September 27, 2008. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 27, 2008, our Chief Executive
Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

We have implemented new company-wide enterprise resource planning software. As of May 5, 2008 we have completed the
conversion to this new platform in our business locations other than at our Shanghai location. We continue to enhance the processing and reporting capabilities of this software. As a result, certain
changes have been made to our internal controls, which management believes will strengthen our internal control structure. There have been no other significant changes in our internal controls or
other factors during the fiscal quarter ended September 27, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

Beginning on August 1, 2008, a series of putative securities class action lawsuits were commenced in the United States District
Court for the District of New Hampshire and the New Hampshire state court in the Superior Court for Hillsborough County, Southern District, alleging that we, certain of our officers and directors, the
underwriters of our July 2008 initial public offering and others violated various sections of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The
complaints allege that the Registration Statement for our July 2008 initial public offering contained material misstatements and omissions regarding our business relationship with LDK
Solar, Ltd., one of our customers. See Note 7 to our Condensed Consolidated Financial Statements for a further discussion of these legal matters.

The
Company intends to defend the federal and state court class actions 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. We believe the ultimate result from these actions 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 Prospectus dated July 23, 2008 (the "Prospectus") filed pursuant to Rule 424(b) under the Securities Act with the
Securities and Exchange Commission on July 24, 2008. Except as set
forth below, there have been no material changes to the risk factors previously disclosed under the caption "Risk Factors" in the Prospectus.

Current or future credit and financial market conditions could materially and adversely affect our business and results of operations in several ways.

As widely reported, financial markets in the United States, Europe and Asia have been experiencing extreme disruption in recent months,
including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of
others. There can be no assurance that there will not be further deterioration in credit and financial markets and confidence in economic conditions. These economic developments affect businesses such
as ours in a number of ways. The current tightening of credit in financial markets may delay or prevent our customers from securing funding adequate to honor their existing contracts with us or to
enter into new contracts to purchase our products and could result in a decrease in or cancellation of orders for our products which in turn could result in a condition where we have inventories in
excess of our short-term needs. Our customers may also seek to delay deliveries of our products under existing contracts, which may postpone our ability to recognize revenue on contracts in our order
backlog. We have recently been notified by a few of our customers who are seeking to renegotiate the delivery schedules under their existing contracts with us.

In
addition, the volatility in the credit markets has severely diminished liquidity and capital availability. While the ultimate outcome of the disruptions in the credit markets cannot
be predicted, they may result in events that could prevent us from borrowing money from our existing lenders under our senior credit facility. If the credit crisis continues, the senior credit
facility may not continue to be available to us in accordance with terms of the agreement.

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We
are unable to predict the likely duration and severity of the current disruption in financial markets and adverse economic conditions in the U.S. and other countries, and any
resulting effects or changes, including those described above, may have a material and adverse effect on our business, results of operations and financial condition.

We are subject to securities class action lawsuits that could adversely affect our business. This litigation, and potential similar or related litigation, could result in
substantial damages and may divert management's time and attention from our business.

Beginning on August 1, 2008, a series of putative securities class action lawsuits were commenced in both the United States
District Court for the District of New Hampshire as well as New Hampshire state court in the Superior Court for Hillsborough County, Southern District, alleging that we, certain of our officers and
directors, the underwriters in our July 2008 initial public offering and others violated various sections of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended. The complaints allege that the Registration Statement for our July 2008 initial public offering contained material misstatements and omissions regarding our business relationship with LDK
Solar, Ltd., one of our customers. The lawsuits seek unspecified compensatory damages plus rescission, interest and attorneys' fees. The federal court has entered orders providing that the
federal cases may be consolidated for all purposes and setting deadlines for any objections thereto. (See Item 1Legal Proceedings)

We
intend to defend these claims vigorously. Nonetheless, the lawsuits discussed above may result in costly and protracted litigation, which may require significant commitment of our
financial and management resources and time. The ultimate outcome of any litigation is uncertain and could result in substantial damages. Either favorable or unfavorable outcomes could have a material
negative impact on our financial condition or results of operations, due to defense costs, diversion of management resources and other factors. In addition, we may in the future be the target of
securities class action lawsuits similar to those described above.

We may potentially be subject to concentration of credit risk related to our cash equivalents.

We may potentially be exposed to losses in the event of nonperformance by the financial counterparties to our cash investments. This
risk may be heightened as a result of the current financial crisis and volatility in the markets. We manage the concentration risk by making investments that comply with our investment policy.
Currently, most of our cash is invested in exchange traded money market mutual funds. Although we do not currently believe the principal amounts of these investments are subject to any material risk
of loss, the recent volatility in the financial markets is likely to significantly impact the investment income we receive from these investments. In general, increases of credit risk related to our
cash equivalents could have a material adverse effect on our financial condition, results of operations, business and/or prospects.

Our actual operating results may differ significantly from our guidance.

From time to time, we release guidance in our quarterly earnings releases, quarterly earnings conference call or otherwise, regarding
our future performance that represent our management's estimates as of the date of release. This guidance, which includes forward-looking statements, is based on projections prepared by our
management. These projections are not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our registered public
accountants nor any other independent expert or outside party compiles or examines the projections and, accordingly, no such person expresses any opinion or any other form of assurance with respect
thereto.

Projections
are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and
competitive uncertainties

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and
contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We generally state possible
outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent that actual results could not fall outside of the
suggested ranges. The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any
responsibility for any projections or reports published by any such persons.

Guidance
is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly
from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from our guidance and the variations
may be material. In light of the foregoing, investors are urged not to rely upon, or otherwise consider, our guidance in making an investment decision in respect of our common stock.

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 Prospectus for our initial
public offering and in this quarterly report on Form 10-Q could result in the actual operating results being different from our guidance, and such differences may be adverse and
material.

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



Item 3.    Defaults Upon Senior Securities



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

Prior to the completion of our initial public offering on July 29, 2008, we had 142,389,994 shares of common stock outstanding,
99.9% of which was owned by GT Solar Holdings, LLC, a company controlled by investment funds managed by GFI Energy Ventures LLC and Oaktree Capital Management, L.P., and the rest of
which was owned by two current employees and one former employee.

On
June 30, 2008, holders of 142,290,000 shares of our common stock, or 99.9% of our then-outstanding common stock, executed a written consent in accordance with our
then-existing certificate of incorporation in order to approve matters:



Copies
of our amended and restated certificate of incorporation and our amended and restated bylaws are filed as Exhibits 3.1 and 3.2 to our Quarterly Report on
Form 10-Q (File No. 001-34133) filed on August 27, 2008 and are incorporated in this quarterly report on Form 10-Q by reference to such
filing. Copies of our amended and restated registration rights agreement and our amended and restated

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employee
stockholders' agreement are filed as Exhibits 10.40 and 4.4 to our Registration Statement on Form S-1 (File No. 333-142383) and are incorporated
in this quarterly report on Form 10-Q by reference to such filing. A copy of our 2008 equity incentive plan is filed as Exhibit 10.1 to this quarterly report on
Form 10-Q.

Item 5.    Other Information

On August 21, 2008, the our executive management team approved the Fiscal Year 2009 Management Incentive Program (the
"Management Incentive Program"). Daniel F. Lyman, our deputy general counsel and one of our "named executive officers" (as defined in Item 402(a)(3) of Regulation S-K) for
the fiscal year ended March 31, 2008, is a participant in the Management Incentive Program. On August 21, 2008, the executive management team approved an increase in Mr. Lyman's
target bonus opportunity from 15% of base salary to 20% of base salary.

The
Management Incentive Program is effective for our fiscal year ending March 28, 2009 ("Fiscal Year 2009") and is administered by our executive management team pursuant to
authority delegated by the compensation committee of our board of directors. Our executive management team determines which of our employees are eligible to participate in the Management Incentive
Program. The amount, if any, payable to each participant shall be determined by our executive management team after the conclusion of Fiscal Year 2009 and following the receipt of our audited
financial statements by our independent accountants. The bonus payment for a participant will (i) be determined in reference to a target bonus level for such participant calculated as a
percentage of the participant's base salary and specified in a participation agreement between the participant and us, and (ii) will equal the product of (A) a financial performance
component equal to the product of the participant's target bonus and a bonus multiplier (not exceeding 2 and which is further described below) and (B) a performance achievement component
(based upon such participant's achievement of certain performance objectives), equal to a percentage between 0% and 100% (depending on the achievement of the participant's performance objectives). The
bonus multiplier is based upon our achievement relative to an operating income target. If we meet the operating income target in Fiscal Year 2009, the bonus multiplier shall equal 1. If our
Fiscal Year 2009 operating income is less than the operating income target, the bonus multiplier shall be decreased by 0.02 for each one percent (1%) by which our Fiscal Year 2009 operating
income is less than the operating income target (using linear interpolation to determine the applicable
bonus multiplier for any intermediate decrease). If our Fiscal Year 2009 operating income is greater than the operating income target, the bonus multiplier shall be increased by 0.05 for each one
percent (1%) by which our Fiscal Year 2009 operating income is greater than the operating income target (using linear interpolation to determine the applicable bonus multiplier for any intermediate
increase). No bonus will be available to any participant under the Management Incentive Program in the event our Fiscal Year 2009 operating income is under a certain amount as set forth in each
participant's participant agreement. The individual performance objectives for each participant are determined by our executive management team upon consultation with other parties at our executive
management's discretion.

A
copy of the Management Incentive Program is filed as Exhibit 10.6 to this Quarterly Report on Form 10-Q and is incorporated by reference herein. The foregoing
description of the material terms of the Management Incentive Program is qualified in its entirety by reference to such exhibit.

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Item 6.    Exhibits

Exhibit No.

Description10.1

2008 Equity Incentive Plan.10.2

Credit Agreement, dated as of July 29, 2008, among the registrant, the subsidiary guarantors identified therein, Bank of America, N.A., and the other lenders party thereto (incorporated by reference to
Exhibit 10.1 to the registrant's current report on Form 8-K (File No. 001-34133) filed on July 31, 2008).10.3

Letter of Credit Facility Agreement, dated as of July 29, 2008, among the registrant, Bank of America, N.A., and the other lenders party thereto (incorporated by reference to Exhibit 10.2 to the registrant's
current report on Form 8-K (File No. 001-34133) filed on July 31, 2008).10.4

Letter Agreement, dated as of July 29, 2008, among the registrant, Thomas M. Zarrella, GT Solar Holdings, LLC and certain members of GT Solar Holdings, LLC (incorporated by reference to
Exhibit 10.3 to the registrant's current report on Form 8-K (File No. 001-34133) filed on July 31, 2008).10.5

Letter Agreement, dated September 11, 2008, by and between the registrant and Matthew E. Massengill (incorporated by reference to Exhibit 10.1 to the registrant's current report on Form 8-K (File
No. 001-34133) filed on September 19, 2008).10.6

Fiscal Year 2009 Management Incentive Program.31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a)/15d-14(a), by Chief Executive Officer.31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a)/15d-14(a), by Chief Financial Officer.32.1

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.32.2

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


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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. ZarrellaDate: November 7, 2008



President and Chief Executive Officer
(Principal Executive Officer)By:

/s/ ROBERT W. WOODBURY, JR. Robert W. Woodbury, Jr.Date: November 7, 2008



Chief Financial Officer
(Principal Financial Officer)


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