Table of Contents



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

FORM 10-Q

ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended October 2, 2010oro

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


Commission file number: 001-34133

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

Delaware(State of incorporation)

03-0606749(I.R.S. Employer Identification No.)243 Daniel Webster Highway
Merrimack, New Hampshire(Address of principal executive offices)

03054(Zip Code)


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

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

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

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

Large accelerated filer o

Accelerated filer ý

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

Smaller reporting company o


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

As of November 2, 2010, approximately 150,939,452 shares of the registrant's common stock, $0.01 par value per share, were issued and outstanding.



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Table of Contents



GT SOLAR INTERNATIONAL, INC. AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  FOR THE QUARTERLY PERIOD ENDED OCTOBER 2, 2010        Table of Contents



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements:Condensed Consolidated Balance Sheets (unaudited) as of October 2, 2010 and April 3, 2010

1Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended October 2, 2010 and
September 26, 2009

2Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended October 2, 2010 and
September 26, 2009

3Notes to Condensed Consolidated Financial Statements (unaudited)

4Item 2.

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

21Item 3.

Quantitative and Qualitative Disclosures about Market Risk

40Item 4.

Controls and Procedures

41PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

42Item 1A.

Risk Factors

43Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53Item 3.

Defaults Upon Senior Securities

53Item 4.

(Removed and Reserved)

53Item 5.

Other Information

53Item 6.

Exhibits

54Signatures

55


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PART IFINANCIAL INFORMATION



Item 1Unaudited Condensed Consolidated Financial Statements



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

Assets

October 2,
2010

April 3,
2010Current assets:Cash and cash equivalents

$
244,633

$
230,748Restricted cash


34,547


Short-term investments


14,995


19,967Accounts receivable, net of allowance for doubtful accounts of $2,420 and $2,620, respectively


71,747


52,620Inventories


113,842


68,858Deferred costs


102,050


131,986Vendor advances


37,270


17,110Deferred income taxes


58,993


72,868Refundable income taxes


1,516


1,516Prepaid expenses and other current assets


3,407


4,340Total current assets


683,000


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


29,804


19,359Other assets


390


639Intangible assets, net


19,648


3,205Deferred costs


62,747


66,265Goodwill


89,500


42,600Total assets

$
885,089

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

$
42,086

$
22,132Accrued expenses


24,149


17,543Contingent consideration


8,464


Customer deposits


194,788


119,616Deferred revenue


192,724


229,951Accrued income taxes


5,194


33,621Total current liabilities


467,405


422,863Non-current liabilities:Deferred income taxes


29,673


25,661Deferred revenue


104,118


104,396Contingent consideration long-term portion


5,479


Other non-current liabilities


162


175Total liabilities


606,837


553,095Commitments and contingencies (Note 12)





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





Common stock, $0.01 par value, 500,000 shares authorized; 150,915 and 143,815 shares issued and outstanding as of October 2, 2010 and April 3, 2010
respectively


1,509


1,438Additional paid-in capital


126,417


86,644Accumulated other comprehensive loss


(5,000
)

(5,145
)Retained earnings


155,326


96,049Total stockholders' equity


278,252


178,986Total liabilities and stockholders' equity

$
885,089

$
732,081


See accompanying notes to these condensed consolidated financial statements.

1

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

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Revenue

$
229,293

$
104,193

$
364,459

$
176,012Cost of revenue


136,168


69,934


225,411


106,788Gross profit


93,125


34,259


139,048


69,224Operating expenses:Research and development


5,290


4,637


9,037


11,036Selling and marketing


5,328


3,158


9,039


7,025General and administrative


12,999


10,237


23,587


18,566Amortization of intangible assets


866


791


1,657


1,582Total operating expenses


24,483


18,823


43,320


38,209Income from operations


68,642


15,436


95,728


31,015Other income (expense):Interest income


197


122


360


164Interest expense


(413
)

(204
)

(582
)

(381
)Interest component of forward foreign exchange contracts


(44
)




(14
)

(639
)Other income (expense), net


(856
)

182


(672
)

(2,181
)Income before income taxes


67,526


15,536


94,820


27,978Provision for income taxes


24,747


6,101


35,543


10,764Net income

$
42,779

$
9,435

$
59,277

$
17,214


Net income per share:Basic

$
0.29

$
0.07

$
0.40

$
0.12Diluted

$
0.28

$
0.06

$
0.40

$
0.12Weighted average number of shares used in per share calculations:Basic


148,835


143,339


146,406


143,228Diluted


150,845


145,198


148,261


145,265


See
accompanying notes to these condensed consolidated financial statements.

2

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

Six Months EndedOctober 2,
2010

September 26,
2009Cash flows from operating activitiesNet income

$
59,277

$
17,214Adjustments to reconcile net income to net cash provided by operating activities:Amortization expense


1,657


1,582Depreciation expense


2,046


1,721Contingent consideration expense


343


Deferred income tax benefit


9,715


1,885Provision for excess and obsolete inventory


1,849


2,162Share-based compensation expense


3,902


2,456Other adjustments, net


429


817Changes in operating assets and liabilities (excluding impact of acquired assets and assumed liabilities):Restricted cash


(34,547
)

Accounts receivable


(17,730
)

32,604Inventories


(43,981
)

22,649Deferred costs


33,453


(81,394
)Vendor advances


(19,731
)

54,290Prepaid expenses and other current assets


1,043


4,594Accounts payable and accrued expenses


25,292


(34,920
)Customer deposits


74,183


(87,220
)Deferred revenue


(37,505
)

123,395Accrued income taxes


(28,434
)

(158
)Refundable income taxes





35,307Other assets and liabilities, net


(706
)

(177
)Net cash provided by operating activities


30,555


96,807Cash flows from investing activitiesProceeds from sales of short-term investments


5,000


Purchase of property, plant and equipment


(4,177
)

(774
)Acquisition of Crystal Systems, net of acquired cash


(22,770
)

Net cash used in investing activities


(21,947
)

(774
)Cash flows from financing activitiesProceeds and related excess tax benefits from exercise of stock options


5,463


1,146Payments related to share repurchases to satisfy statutory minimum tax withholdings


(459
)

(68
)Net cash provided by financing activities


5,004


1,078Effect of foreign exchange rates on cash


273


(2
)Increase in cash and cash equivalents


13,885


97,109Cash and cash equivalents at beginning of period


230,748


107,148Cash and cash equivalents at end of period

$
244,633

$
204,257


See accompanying notes to these condensed consolidated financial statements.

3

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

1. Basis of Presentation

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

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

Fiscal Year End

The Company's reporting period is based on a 52 week year that ends on the Saturday closest to March 31 which in certain
years results in a 53 week fiscal year. The Company's quarterly reporting includes 13 week periods, unless otherwise noted. The Company uses the terms quarterly, monthly, and annual in
describing its financial results.

Reclassifications

Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Specifically,
the charge for excess and obsolete inventory of $2,162 for the six month period ended September 26, 2009 was previously included in the change in inventories, but is now stated separately in
the Company's condensed consolidated statement of cash flows.

2. Significant Accounting Policies

The Company's significant accounting policies are disclosed in its audited financial statements for the year ended April 3, 2010, included in the Annual Report on
Form 10-K filed with the SEC on June 4, 2010 and have not changed materially as of October 2, 2010.

3. Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In October 2009, the FASB issued authoritative guidance that provides amendments to the revenue recognition criteria for separating
consideration in multiple-deliverable revenue arrangements. It establishes a hierarchy of selling prices to determine the selling price of each specific deliverable which includes vendor-specific
objective evidence (if available), third-party evidence (if vendor-specific evidence is not available), or estimated selling price if neither of the first two are available. This guidance also
eliminates the residual method for allocating revenue between the elements of an arrangement and requires that arrangement consideration be allocated at the inception of the arrangement and expands
the

4

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

3. Recent Accounting Pronouncements (Continued)

disclosure
requirements regarding a vendor's multiple-deliverable revenue arrangements. This guidance is effective for fiscal years beginning on or after June 15, 2010 and early adoption is
permitted. The Company has elected not to adopt this authoritative guidance early and is currently assessing the potential impact, if any, the adoption of this guidance will have on the Company's
consolidated financial statements.

4. Acquisition of Crystal Systems, Inc.

On July 29, 2010, the Company acquired 100% of the outstanding shares of common stock of privately-held Crystal Systems, Inc., ("Crystal Systems") a crystalline
growth technology company that manufactures sapphire materials used in LED applications, and other sapphire components used in the defense, medical and aerospace industries. The acquisition of Crystal
Systems provides the Company access to certain technologies and an expanded product portfolio. The purchase consideration consisted of $24,798 in cash, 5,446 shares of the Company's common stock
valued at $30,938 and a potential additional $20,300 contingent consideration based on the attainment of certain financial and technical targets through the period ending March 31, 2012. The
fair value of the contingent consideration was $13,600 at acquisition. A component of the purchase price remains subject to working capital adjustments that have not been finalized through the date of
this filing.

The
transaction has been accounted for as a business combination and is included in the Company's results of operations from July 29, 2010, the date of acquisition. The acquired
business contributed revenues of $3,234 to the Company for the period from acquisition to October 2, 2010. The results of the acquired business are included in the Company's sapphire business
reporting segment.

Significant
judgment is required in estimating the fair value of intangible assets acquired in a business combination and in assigning their respective useful lives. The fair value
estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management.

The
Company employs the income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective
assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants, and include the amount and timing of future cash flows (including
expected growth rates and profitability), the underlying product life cycles, economic barriers to entry, a brand's relative market position and the discount rate applied to the cash flows, among
others.

Each
period the Company will revalue the contingent consideration obligations associated with the acquisition to fair value and record changes in the fair value as contingent
consideration expense. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed discount periods and rates, changes in the assumed timing
and amount of revenue and expense estimates and changes in assumed probability with respect to the attainment of certain financial and operational metrics. Significant judgment is employed in
determining these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described
above, can materially impact the amount of contingent consideration expense recorded in any given period.

As
of October 2, 2010, the purchase price (including the estimated contingent consideration) and related allocations for the acquisition are preliminary. The Company is currently
in the process of investigating the facts and circumstances existing as of the acquisition date in order to finalize its valuation

5

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

4. Acquisition of Crystal Systems, Inc. (Continued)

and
establish the related tax basis. As a result of the preliminary purchase price allocation, the Company recognized approximately $46,900 of goodwill, which is primarily due to the expected future
cash flows from yet undeveloped intangible assets such as future technology and the assembled workforce. The goodwill created by the transaction is nondeductible for tax purposes. A summary of the
preliminary purchase price allocation for the acquisition of Crystal Systems is as follows:

Fair value of consideration transferred:

Cash

$
24,798Common stock


30,938Contingent consideration obligations


13,600Total fair value of consideration

$
69,336Fair value of assets acquired and liabilities assumed:Cash

$
2,028Accounts receivable


1,320Inventories


2,841Prepaid expenses and other assets


589Property, plant and equipment


8,309Intangible assets


18,100Deferred income taxes


743Goodwill


46,900Customer deposits


(974
)Accounts payable, accrued expenses and other non-current liabilities


(1,508
)Deferred income taxes


(9,012
)Total net assets acquired

$
69,336


The
purchase consideration includes contingent consideration payable by the Company upon the attainment of certain financial and technical targets through the period ending
March 31, 2012. Specifically, the contingent consideration is based upon the achievement of certain revenue targets for calendar year 2010 and revenue and gross margin targets for fiscal year
ending March 31, 2012, as well as technical targets relating to the commissioning of a predetermined number of crystal-growth furnaces and development of ingot growth processes. The Company
determined the fair value of the contingent consideration obligations based on a probability-weighted income approach derived from financial performance estimates and probability assessments of the
attainment of certain technical targets. The undiscounted range of outcomes that the Company used to value the contingent consideration arrangement is between $16,000 and $20,300.

The
Company incurred transaction costs of $735, which consisted primarily of legal and accounting fees. These costs have been recorded as general and administrative expense for the three
and six months ended October 2, 2010.

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

4. Acquisition of Crystal Systems, Inc. (Continued)

The
acquisition of Crystal Systems did not have a material effect on the Company's results of operations. Pro forma results of operations have not been presented due to the immaterial
nature of these amounts.

5. Fair Value Measurements

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market
participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying such assumptions, a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value, was established as follows: (Level 1) observable inputs such as quoted prices in active markets for identical assets or liabilities;
(Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market
data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when
determining fair value.

The
following table provides the assets and liabilities carried at fair value measured on a recurring basis at October 2, 2010 and April 3, 2010:

October 2, 2010Fair Value Measurements UsingTotal
Carrying
Value(Level 1)

(Level 2)

(Level 3)Bank time deposits (restricted cash)

$
34,547




$
34,547


Money market mutual funds

$
188,395

$
188,395





Commercial paper

$
14,995




$
14,995


Forward foreign exchange contractsassets

$
158




$
158


Contingent consideration

$
13,943







$
13,943




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

(Level 2)

(Level 3)Money market mutual funds

$
226,052

$
226,052





Commercial paper

$
19,967




$
19,967


Forward foreign exchange contractsliabilities

$
(229
)



$
(229
)




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

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

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

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GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

5. Fair Value Measurements (Continued)

The
Company's counterparties to its forward foreign exchange transactions are financial institutions. These forward foreign exchange contracts are measured at fair value using a
valuation which represents a good faith estimate of the midmarket value of the position, based on estimated or actual bids and offers for the positions. The Company considers the effect of credit
standings in these fair value measurements.

In
connection with the acquisition of Crystal Systems, the Company recorded contingent consideration with an estimated fair value of $13,600. The Company determined the fair value of the
contingent consideration obligations based on a probability-weighted income approach derived from financial performance estimates and probability assessments of the attainment of certain technical
targets. The key assumptions used in the model include: (i) discount rates of 2.1% for the purpose of discounting the expected cash flows for one of the technical targets and 17.5% for the
financial and remaining technical targets; (ii) probability adjusted levels of revenue for the year ending December 31, 2010 and probability adjusted revenue and gross margin levels for
the period ending March 31, 2012; and (iii) probability factors related to the attainment of certain technical targets. The undiscounted range of outcomes that the Company used to value
the contingent consideration arrangement is between $16,000 and $20,300. (See Note 4 for further discussion of the Crystal Systems, Inc. acquisition).

Changes
in the fair value of the contingent consideration obligations are recorded within general and administrative expense in the condensed consolidated statements of operations and
amounts to a total of $343 for the three and six months ended October 2, 2010 all of which was allocated to the corporate services reporting segment.

Changes
in the fair value of the Company's Level 3 contingent consideration obligations during the three and six months ended October 2, 2010 were as follows:

Acquisition date fair value of contingent consideration obligations

$
13,600Changes in the fair value of contingent consideration obligations


343Fair value at the end of the period

$
13,943


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

Original Maturity

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair ValueOctober 2, 2010:Commercial papershort-term investments

Less than 1 year

$
14,993

$
2

$


$
14,995April 3, 2010:Commercial papershort-term investments

Less than 1 year

$
19,962

$
6

$
(1
)
$
19,967


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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

5. Fair Value Measurements (Continued)

The carrying amounts reflected in the Company's condensed consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued
expenses and customer deposits approximate fair value due to their short-term maturities.

6. Goodwill and Other Intangible Assets

The following table contains the change in the Company's goodwill during the six months ended October 2, 2010:

Photovoltaic
Business

Sapphire
Business

TotalBalance as of April 3, 2010

$
42,600

$


$
42,600Acquisition of Crystal Systems, Inc.





46,900


46,900Balance as of October 2, 2010

$
42,600

$
46,900

$
89,500


No
impairment losses or other adjustments have been recorded on the Company's goodwill.

Acquired
intangible assets subject to amortization at October 2, 2010 and April 3, 2010 consisted of the following:

October 2, 2010

April 3, 2010Weighted
Average
Amortization
PeriodGross
Amount

Accumulated
Amortization

Net

Gross
Amount

Accumulated
Amortization

NetPhotovoltaic & Polysilicon:Customer relationships

6.0 years

$
4,200

$
3,325

$
875

$
4,200

$
2,975

$
1,225Technology

4.5 years


8,000


7,700


300


8,000


6,885


1,115Trade names

6.0 years


2,400


1,900


500


2,400


1,700


700Supplier relationships

5.0 years


1,100


1,045


55


1,100


935


165Subtotal:




15,700


13,970


1,730


15,700


12,495


3,205Sapphire:Customer relationships

6.0 years


4,400


10


4,390








Technology

10.0 years


11,100


43


11,057








Order backlog

1.3 years


700


110


590








Trade names

8.0 years


1,100


13


1,087








Non-compete agreements

6.3 years


800


6


794








Subtotal:




18,100


182


17,918





$
33,800

$
14,152

$
19,648

$
15,700

$
12,495

$
3,205


The
weighted average remaining amortization period for our Photovoltaic and Polysilicon intangibles, and our Sapphire intangibles was 1.0 years and 8.3 years, respectively,
as of October 2, 2010.

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

6. Goodwill and Other Intangible Assets (Continued)

As
of October 2, 2010, the estimated future amortization expense for our intangible assets for the remainder of fiscal year 2011, the four succeeding fiscal years and thereafter
is as follows (amounts in thousands):

Fiscal Year Ending

Amortization
Expense2011 (remaining six months)

$
1,4522012


3,8542013


2,3462014


2,5962015


2,449Thereafter


6,951


7. Customer Concentrations

The following customers comprised 10% or more of the Company's total revenues or total accounts receivable as of or for the periods indicated:

Three Months Ended

Six Months EndedRevenue

Revenue

Accounts ReceivableOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009

October 2,
2010

April 3,
2010Photovoltaic CustomersCustomer #1

$137,609

*

$137,650

*

$22,963

*Customer #2

*

*

40,389

*

*

*Customer #3

*

$25,474

*

$25,517

*

*Customer #4

*

*

*

*

9,501

*Customer #5

*

*

*

*

*

$8,391Customer #6

*

*

*

*

*

7,570Polysilicon CustomersCustomer #7

*

32,762

*

32,762

*

12,127Customer #8

*

*

*

47,569

*

*Customer #9

*

*

36,551

*

*

*


---

The
Company requires most of its PV and polysilicon customers to either post letters of credit or make advance payments prior to delivery. Approximately $63,343 (or 88%) and $41,583 (or
79%) of total accounts receivable as of October 2, 2010 and April 3, 2010, respectively, were secured by letters of credit.

8. Derivative and Hedging Activities

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

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

8. Derivative and Hedging Activities (Continued)

As
of October 2, 2010, the Company had forward foreign exchange contracts with notional amounts of €9,360 that qualified as cash flow hedges.

The
following table sets forth the balance sheet location and fair value of the Company's forward foreign exchange contracts at October 2, 2010 and April 3, 2010:

Balance Sheet Location

October 2, 2010
Fair Value

April 3, 2010
Fair ValueCash Flow HedgesForward foreign exchange contractsassets

Other current assets

$
158

$
Forward foreign exchange contractsliabilities

Accrued expenses

$


$
(229
)


The
following table sets forth the effect of the Company's forward foreign exchange contracts designated as hedging instruments on the consolidated statement of operations for the three
and six months ended October 2, 2010 and September 26, 2009.

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

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

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

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

Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion)Three months ended:October 2, 2010

$
(1,475
)
Cost of revenue

$
(496
)
Other, net

$
September 26, 2009

$
(233
)
Cost of revenue

$
(26
)
Other, net

$
58Six months ended:October 2, 2010

$
409

Cost of revenue

$
(196
)
Other, net

$
September 26, 2009

$
(3,131
)
Cost of revenue

$
230

Other, net

$
(2,054
)


Approximately $1,960 of accumulated loss as of October 2, 2010 is expected to be reclassified into earnings over the next twelve months.

The
interest component of forward foreign exchange contracts has been expensed and was not material during the six months ended October 2, 2010.

9. Inventories

Inventories consisted of the following:

October 2, 2010

April 3, 2010Raw materials

$
77,474

$
42,846Work-in-process


7,455


12,260Finished goods


28,913


13,752$
113,842

$
68,858


Inventory-related
excess and obsolete charges of $1,849 and $2,162 were recorded in cost of revenue for the six months ended October 2, 2010 and September 26, 2009,
respectively.

11

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

10. Warranty

The following table presents warranty activities:

Six Months EndedOctober 2, 2010

September 26, 2009Product warranty liability, beginning of the period

$
1,280

$
2,231Accruals for new warranties issued


4,040


286Payments under warranty


(1,286
)

(1,069
)Product warranty liability, end of period

$
4,034

$
1,448


11. Income Taxes

The Company accounts for income taxes at each interim period using its estimated annual effective tax rate. The provision for income taxes represents current and future amounts owed for
federal, state and foreign taxes.

The
Company's effective tax rate was 36.6% and 39.3% for the three months ended October 2, 2010 and September 26, 2009, respectively, and 37.5% and 38.5% for the six months
ended October 2, 2010
and September 26, 2009, respectively. The change in the Company's reported tax rate for the second quarter and first half of 2010, as compared to the same periods in 2009, relates to
proportionally higher expected levels of income in lower tax jurisdictions as a result of the Company's continued transition of its base of operations to Hong Kong. The Company reviews its expected
annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors, including changes in forecasted annual operating income by jurisdiction, changes to
forecasted permanent book to tax differences, impacts from tax settlements with state, federal or foreign tax authorities, and impacts from tax law changes. Due to the volatility of these factors, the
Company's consolidated effective income tax rate can change significantly on a quarterly basis.

The
Company's policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. As of October 2, 2010, interest or penalties related to
uncertain tax positions accrued by the Company were not material. The Company files U.S., state and foreign income returns in jurisdictions with varying statutes of limitation.

12. Commitments and Contingencies

Lease Commitments

In connection with the acquisition of Crystal Systems, Inc., the Company has assumed, subject to finalizing an assignment
agreement, an operating lease for office and manufacturing facilities to support its sapphire business. The lease has a remaining term of 13 years with future minimum lease payments of $9,656
due under the agreement.

Purchase Commitments

The Company's commitments to purchase raw materials, research and development and other services from various suppliers and vendors are
estimated to be $313,000 and $219,139 as of October 2, 2010 and April 3, 2010, respectively, substantially all of which are due within the next twelve months.

12

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

12. Commitments and Contingencies (Continued)

Contingencies

Beginning on August 1, 2008, seven putative securities class action lawsuits were commenced in the United States District Court
for the District of New Hampshire (the "Court"), against the Company, certain of its officers and directors, certain underwriters of its July 24, 2008 initial public offering and others,
including certain investors in the Company (the "federal class actions"). On October 3, 2008, the Court entered an order consolidating the federal class actions into a single action captioned Braun et al. v. GT Solar
International, Inc., et al. The Court selected the lead plaintiff and lead plaintiff's counsel in the consolidated
matter on October 29, 2008. The lead plaintiff filed an amended consolidated complaint on December 22, 2008. The defendants moved to dismiss the amended consolidated complaint on
February 5, 2009. On September 22, 2009, the Court denied the defendants' motion. Following the Court's denial of the motion, the parties submitted a proposed joint case management order
to the Court on November 6, 2009. The lead plaintiff asserts claims under various sections of the Securities Act. The amended consolidated complaint alleges, among other things, that the
defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including the registration statement and Prospectus for the Company's
July 24, 2008 initial public offering, and other public statements, regarding the Company's business relationship with LDK Solar, Ltd., one of the Company's customers, JYT Corporation,
one of the Company's competitors, and certain of the Company's products, including the Company's DSS furnaces. Among other relief, the amended consolidated complaint seeks class certification,
unspecified compensatory damages, rescission, interest, attorneys' fees, costs and such other relief as the Court should deem just and proper.

The
defendants moved to dismiss the amended consolidated complaint on February 5, 2009. On September 22, 2009, the Court denied the defendant's motion. Following the
Court's denial of the motion, the parties submitted a proposed joint case management order, which the Court approved on November 6, 2009. The case management order provides for discovery to
close on May 25, 2011.

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

The
Company removed the state class action to the United States District Court for the District of New Hampshire on October 22, 2008. The state class action was consolidated with
the federal class action on November 25, 2008. On February 2, 2009, the federal Court granted the plaintiff's motion to remand the state class action to New Hampshire State Court. On
May 4, 2009, the parties agreed to a stay of the state class action, pending resolution of the motion to dismiss in the consolidated federal case. At a case structuring conference on
June 3, 2009, the state court endorsed the proposed joint case management

13

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

12. Commitments and Contingencies (Continued)

order
filed by the parties which requires coordination of any discovery to be taken in the state class action with that taken in the federal class action. With the denial of the motion to dismiss the
federal action, the parties submitted a proposed joint case management order to the State Court on November 6, 2009. On January 12, 2010, the State Court granted a joint motion of the
parties to transfer the state class action to the State Court's Business and Commercial Dispute Docket.

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

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

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

Customer Indemnifications

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

13. Senior Credit Facility

On July 28, 2008, the Company entered into a senior credit agreement and cash-collateralized letter of credit facility with Bank of America, N.A. as sole
administrative and collateral agent, and a syndicate of financial institutions. On July 29, 2010, the Company elected to terminate both its senior credit facility and its
cash-collateralized letter of credit facility. At the time of termination, the senior credit facility had no outstanding borrowings and was only being used to secure standby letters of
credit. The Company had never utilized the cash-collateralized letter of credit facility. The Company was in compliance with the covenants of these facilities at the time of termination.
On July 29, 2010, the outstanding standby letters of credit under the senior credit facility amounted to $29,952 and were subsequently cash collateralized under a separate agreement with the
Bank of America, N.A. which required this amount to be transferred into a restricted cash account.

14

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

13. Senior Credit Facility (Continued)

As of October 2, 2010, the Company had $34,547 of outstanding standby letters of credit that were collateralized by restricted cash. The majority of the standby letters of credit
are related to customer deposits.

14. Stockholders' Equity

A summary of the changes in stockholders' equity for the six months ended October 2, 2010 is provided below:

Common
Stock
Shares

Common
Stock
Par Value

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders'
EquityBalance at April 3, 2010


143,815

$
1,438

$
86,644

$
96,049

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











59,277





59,277Other comprehensive loss(1)














(128
)

(128
)Common stock issued for Crystal Systems acquisition


5,446


54


30,884








30,938Foreign currency translation and other adjustments














273


273Option exercises and vesting of restricted stock units


1,713


17


4,956








4,973Share based compensation expense








3,902








3,902Excess tax benefit from share-based award activity








490








490Minimum tax withholding payments for employee share-based awards(2)


(59
)




(459
)







(459
)Balance at October 2, 2010


150,915

$
1,509

$
126,417

$
155,326

$
(5,000
)
$
278,252


(1)The
$(128) Other Comprehensive loss for the six month period ended October 2, 2010 is comprised of $(127) change in derivative instruments and a $(1)
change in the unrealized gain/loss on available for sale securities.(2)Purchase
of shares surrendered by employees to satisfy minimum tax withholding obligations on the vesting of restricted stock unit awards and subsequently
retired.


15. Share-Based Compensation

The Company recorded $2,325 and $1,404 of expense related to share-based compensation during the three months ended October 2, 2010 and September 26, 2009, respectively.
The Company recorded $3,902 and $2,456 of expense related to share-based compensation during the six months ended October 2, 2010 and September 26, 2009, respectively. Share-based
compensation cost capitalized as part of inventory was not material for all periods presented.

During
the six months ended October 2, 2010, the Company granted 1,010 options to purchase shares of the Company's common stock to certain employees of the Company. The stock
options are exercisable at a weighted average price of $5.77 per share, which is based on the fair value of the Company's common stock on the date of grant, and expire 10 years from the date of
grant. The total fair value of the stock

15

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

15. Share-Based Compensation (Continued)

options
granted during this six month period was $2,880, or $2.85 per share. The fair value of the stock options was estimated using the Black-Scholes option pricing model which uses highly subjective
assumptions including the expected stock price volatility. The fair value of the Company's stock options was estimated using the following assumptions: no expected dividends, risk free interest rate
of 2.4%, expected average life of 6 years and an expected stock price volatility of 49.5%.

During
the six months ended October 2, 2010, the Company granted 798 restricted stock units to certain employees and directors of the Company. Restricted stock units provide for
the holder to receive shares of the Company's common stock at the time such units vest or restrictions on such units lapse in accordance with the terms of the restricted stock unit agreement. The
total fair value of the restricted stock units, which was based on the fair value of the Company's common stock on the date of grant was $4,895, or $6.13 on a weighted average per share basis.

As
of October 2, 2010, the Company had unrecorded deferred share-based compensation expense of approximately $17,141, after estimated forfeitures, which will be recognized over an
estimated weighted-average remaining requisite service period of approximately 3.0 years.

16. Earnings Per Share

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

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Weighted average common sharesbasic


148,835


143,339


146,406


143,228Dilutive common stock options and awards


2,010


1,859


1,855


2,037Weighted average common and common equivalent sharesdiluted


150,845


145,198


148,261


145,265


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

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Weighted average restricted stock units and common stock options having no dilutive effect


1,313


3,142


2,945


2,503


16

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

17. Comprehensive Income

The following table summarizes components of comprehensive income:

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Net income

$
42,779

$
9,435

$
59,277

$
17,214Change in derivative instruments, net of tax effect of $(792), $280, $86 and $(1,377), respectively


1,179


481


(127
)

3,578Changes in unrealized gain/loss on available for sale securities, net of tax effect of $7, $0, $(1) and $0, respectively


11





(1
)

Foreign currency translation adjustment


212


2


273


(2
)Comprehensive income

$
44,181

$
9,918

$
59,422

$
20,790


The
following table summarizes the Company's accumulated other comprehensive loss as of October 2, 2010 and April 3, 2010:

October 2,
2010

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

$
(5,391
)
$
(5,264
)Unrealized gain on available for sale securities, net of tax


2


3Foreign currency translation adjustment


389


116Total

$
(5,000
)
$
(5,145
)


18. Segment Information

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

The
PV business manufactures and sells directional solidification, or DSS, crystallization furnaces, ancillary equipment used in the operation of the DSS unit as well as services related
to the production of PV wafers, cells and modules.

The
polysilicon business manufactures and sells chemical vapor deposition, or CVD, reactors, used to react gases at high temperatures to produce polysilicon, the key raw material used in
solar cells, as well as engineering services and related equipment.

The
sapphire business manufactures and sells sapphire materials used in LED applications, and other sapphire components used in the defense, medical and aerospace industries.

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

17

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

18. Segment Information (Continued)

marketing
expenses. Corporate services assets include deferred tax assets, cash and cash equivalents and other non-allocated assets.

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

Photovoltaic
Business

Polysilicon
Business

Sapphire
Business

Corporate
Services

TotalThree months ended October 2, 2010Revenue

$
202,774

$
23,285

$
3,234

$


$
229,293Gross profit


80,587


11,539


999





93,125Depreciation and amortization


813


208


410


577


2,008Income (loss) from operations

$
71,622

$
7,898

$
(231
)
$
(10,647
)
$
68,642Three months ended September 26, 2009Revenue

$
62,402

$
41,791

$


$


$
104,193Gross profit


18,421


15,838








34,259Depreciation and amortization


753


387





520


1,660Income (loss) from operations

$
12,270

$
12,280

$


$
(9,114
)
$
15,436Six months ended October 2, 2010Revenue

$
314,215

$
47,010

$
3,234

$


$
364,459Gross profit


117,279


20,770


999





139,048Depreciation and amortization


1,628


527


410


1,138


3,703Income (loss) from operations

$
102,142

$
13,743

$
(231
)
$
(19,926
)
$
95,728Six months ended September 26, 2009Revenue

$
82,336

$
93,676

$


$


$
176,012Gross profit


25,104


44,120








69,224Depreciation and amortization


1,474


789





1,040


3,303Income (loss) from operations

$
13,325

$
33,896

$


$
(16,206
)
$
31,015AssetsOctober 2, 2010

$
246,785

$
228,227

$
80,971

$
329,106

$
885,089April 3, 2010

$
198,451

$
195,134

$


$
338,496

$
732,081


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

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009China

$
187,288

$
45,775

$
244,090

$
63,739Korea


16,418


7,491


37,486


12,083Other Asia


20,308


10,157


29,826


10,294Europe


1,095


33,059


48,114


81,719United States


3,515


7,711


4,220


8,167Other


669





723


10Total

$
229,293

$
104,193

$
364,459

$
176,012


18

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

18. Segment Information (Continued)

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

October 2, 2010

April 3, 2010United States

$
137,157

$
64,020China


1,510


1,019Taiwan


105


125Hong Kong


180


Total

$
138,952

$
65,164


19. Other income (expense), net

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

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Foreign currency gain (loss)

$
(13
)
$
(45
)
$
55

$
(305
)Offering costs


(940
)




(940
)

Gain (loss) on derivatives-ineffective portion





58





(2,054
)Other


97


169


213


178Total other income (expense), net

$
(856
)
$
182

$
(672
)
$
(2,181
)


Shares
of the Company's common stock held by GT Solar Holdings, LLC, are subject to certain registration rights. In September 2010, GT Solar Holdings, LLC sold 25,650 shares of
the Company's common stock in two concurrent secondary offerings. During the three months ended October 2, 2010, the Company incurred costs related to offerings of its common stock by GT Solar
Holdings, LLC. As the Company did not receive proceeds from these offerings, these costs are expensed in the periods incurred.

20. Subsequent Events

On November 5, 2010, the Company entered into a share repurchase agreement (the "Repurchase Agreement") with GT Solar Holdings, LLC ("Holdings"), pursuant to which the Company will
purchase from Holdings 26,500 shares of the Company's common stock at a per share price of $7.66, or an aggregate of approximately $203,000. The repurchase is expected to close (the "Closing") on or
before November 12, 2010. The Company will fund the repurchase of these shares of common stock with its available cash.

Concurrently
with Holdings' sale to the Company, Holdings has agreed to sell 7,000 shares of Company common stock to a third party in a transaction at a price higher than the $7.66 per
share paid by the Company. The closing of this sale is a condition precedent to the Closing of the repurchase of shares by the Company pursuant to the Repurchase Agreement. Upon the completion of
these two transactions, GT Solar Holdings, LLC will own or control approximately 14% of the Company's outstanding common stock.

On
November 5, 2010, the Company also entered into a commitment letter for a senior secured credit facility in an aggregate principal amount of up to $200,000 with Credit Suisse AG and
Credit Suisse

19

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Table of Contents

GT Solar International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(In thousands, except per share data)

20. Subsequent Events (Continued)

Securities
(USA) LLC. The credit facility is expected to consist of a three-year revolving credit facility and a three-year term loan facility. The loan documentation process has commenced and a
definitive credit facility is expected to close on or before the end of the Company's third fiscal quarter, subject to customary closing conditions.

20

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Table of Contents

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

This quarterly report on Form 10-Q contains "forward-looking statements" that involve risks
and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking
statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by the use of words such as, but not
limited to, "anticipate," "believe," "continue," "could," "estimate," "prospects," "forecasts," "expect," "intend," "may," "will," "plan," "target," "continue," and similar expressions or variations
intended to identify forward-looking
statements and include statements about our expectations for future periods with respect to, among other things, backlog, gross margins, customer concentrations, demand for our products, change in tax
rates and the reasons therefore, cost of solar equipment, investments in solar energy, growth of our business and product portfolio, fluctuation of polysilicon revenue, PV business accounting for a
majority of our revenue for fiscal year 2011, research and development expense, tax rates, our plans to sell crystal sapphire materials and advanced sapphire crystal growth furnaces and our plans to
repurchase shares of our common stock for GT Solar Holdings, LLC and enter into a new credit facility. These statements are based on the beliefs and assumptions of our management based on information
currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to
differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the following
factors and any other factors discussed under the heading titled "Risk Factors" included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010 filed on
June 4, 2010, and our Quarterly Report Form 10-Q for the quarter ended July 3, 2010, filed on August 6, 2010, as updated in this
report:



21

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Table of Contents



The foregoing factors should not be construed as exhaustive and should be read in conjunction with the factors that are included under the
heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended April 3, 2010 filed with the SEC on June 4, 2010 and the factors indentified in
Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date of this report or, as of the date given if provided in
another filing with the Securities and Exchange Commission. We undertake no obligation to publicly update or review any forward-looking statements to reflect events or circumstances after the date of
such statements.

22

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Table of Contents

Company Overview

GT Solar is a global provider of polysilicon production technology, silicon and sapphire crystalline growth systems for the solar, LED
and other specialty markets. Our customers include several of the world's largest solar companies as well as companies in the chemical industry.

As
of October 3, 2010, we operated through three segments: our polysilicon business, our photovoltaic, or PV, business and our sapphire business.



The principal products of our polysilicon business are chemical vapor deposition, or CVD, reactors, as well as engineering services and
related equipment used to produce polysilicon, the key raw material used in silicon-based solar wafers and cells. Our CVD reactors utilize the widely-used and proven Siemens polysilicon
production process.



The primary focus of our PV business is the manufacture and sale of directional solidification, or DSS, crystallization furnaces and
ancillary equipment used to cast multicrystalline silicon ingots by melting and cooling polysilicon in a precisely controlled process. These ingots are used to make photovoltaic (PV) wafers which are,
in turn, used to make solar cells. Our PV business also provides services related to the production of PV wafers, cells and modules.



On July 29, 2010, we acquired privately-held Crystal Systems, Inc., a crystal growth technology company that
produces sapphire material used to manufacture material for LED applications, as well as other sapphire components used in the defense, medical and aerospace industries. This sapphire business
manufactures its products with advanced sapphire crystal growth furnaces that incorporate the Heat Exchanger Method, or HEM, technology. We are in the process of commercializing Crystal Systems'
advanced sapphire crystal growth furnaces and intend to enter into contracts to supply such furnaces to sapphire wafer manufacturers and new entrants prior to the end of the current fiscal year and,
if we are able to enter into such contracts, we plan to begin shipping such furnaces in the first-half of the fiscal year ending March 31, 2012. Our strategy to sell our sapphire crystal furnaces may
be materially delayed, or we may be prevented from selling these furnaces, for reasons within or outside of our control, and even if we are able to sell these furnaces, we may be unable to recognize
revenue on them in a timely manner, or at all. In addition to selling advanced sapphire crystal growth furnaces, we intend to continue production and sale of sapphire materials in selected markets.

Factors Affecting the Results of Our PV and Polysilicon Operations

Demand for our polysilicon and PV products and services are driven by end-user demand for solar power. Key drivers of the
demand for solar power include: volatile prices of conventional energy sources; the desire for energy independence to counter perceived geopolitical supply risks surrounding fossil fuels;
environmental pollution from fossil fuels and the resulting tightening of emission controls; the competitive cost of energy from alternative renewable energy sources; government incentive programs
that make 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 other factors including the availability and market price of polysilicon and LED and sapphire materials, availability
of raw materials, foreign exchange rates, interest rates, commodity prices (particularly steel and graphite prices) and macroeconomic factors, including the availability of capital that may be needed
by our customers, and

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political,
regulatory and legal conditions in the international markets in which we conduct business, including China.

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

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

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

Demand
for PV on-grid applications, which in turn impacts the demand for PV manufacturing equipment, has historically been dependent in part on the availability and size of
government subsidies and economic incentives. The ability of governments to provide economic incentives may be adversely impacted by the recent economic downturn. For example, Germany, which has the
world's largest PV installed base, has implemented reductions in solar feed-in tariff rates for certain solar systems and the further reductions in solar feed-in tariff rates may be made
in the future. Spain, which has also been a major market for PV products, reduced availability of subsidies in 2009 from 2,400 MW per year to 500 MW per year for solar projects. It is difficult to
determine the impact that a changing incentive program has on solar module demand and our customers' ability to sell solar modules in a particular geographic market. We believe decreasing module costs
will reduce the effect of tariffs on the investment returns for solar projects. In contrast to decreasing incentives in Europe, China has recently announced policies designed to stimulate its
renewable energy sector, including solar power. The changing environment for such government incentive programs creates uncertainty for the solar industry.

Although
we believe the long-term prospects of our PV segment are in line with solar industry forecasts which generally predict increasing PV demand through 2014, those
forecasts vary widely due to the current uncertainties in the capital markets and end-user solar markets. The current excess capacity in

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solar
manufacturing, as well as increased competition, is expected to result in fluctuating demand and lower prices for our PV products which could result in reduced margins if we are unable to reduce
our costs. We are taking steps in an effort to mitigate the effect of these factors, including adjusting our pricing policies as necessary, seeking cost reduction opportunities including
diversification into lower cost manufacturing regions and focusing our research and development efforts on improvements that reduce the total production costs to our customers.

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

Acquisition of Crystal Systems, Inc.

On July 29, 2010, we acquired 100% of the outstanding shares of common stock of privately-held Crystal
Systems, Inc., or Crystal Systems a crystalline growth technology company that manufactures sapphire materials used in LED applications, and other sapphire components used in the defense,
medical and aerospace industries. The purchase consideration consisted of $24.8 million in cash, approximately 5.4 million shares of our common stock valued at $30.9 million
(based on the closing market price of our common stock on the date of the acquisition) and a potential additional $20.3 million of contingent consideration based on the attainment of certain
financial and technical targets through the period ending March 31, 2012. The preliminary measure of the fair value of the contingent consideration was $13.6 million at acquisition. A
component of the purchase price remains subject to working capital adjustments that have not been finalized through the date of this filing.

The
transaction has been accounted for as a business combination and is included in our results of operations beginning on July 29, 2010, the date of acquisition. The acquired
business contributed revenues of $3.2 million for the period from July 29, 2010 to October 2, 2010. The results of the acquired business are included in our sapphire business
segment.

We
incurred transaction costs of $0.7 million, which consisted primarily of legal and accounting fees, in connection with the Crystal Systems acquisition. These costs have been
recorded as general and administrative expense for the three and six months ended October 2, 2010.

In
connection with our acquisition of Crystal Systems, we have agreed to make capital expenditures of at least $22 million through March 31, 2012 to develop the sapphire
material business and, in part, to support the achievement of the financial and technical targets associated with the contingent consideration.

Order Backlog

The table below sets forth our order backlog as of October 2, 2010 and April 3, 2010 by product category:

October 2, 2010

April 3, 2010Product Category

Amount

% of
Backlog

Amount

% of
Backlog(dollars in millions)Photovoltaic business

$
601


52
%
$
441


49
%Polysilicon business


545


47
%

465


51
%Sapphire business


13


1
%




Total

$
1,159


100
%
$
906


100
%




Our order backlog for our PV and polysilicon businesses consists of written contractual commitments and signed purchase orders. Our
order backlog includes deferred revenue which represents equipment that

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had
been shipped to customers but not yet recognized as revenue. Substantially all of the contracts in our order backlog for these businesses require the customer to either post a standby letter of
credit in our favor and/or make advance payment prior to shipment of equipment. Our order backlog as of October 2, 2010, included deferred revenue of $80.6 million related to our PV
business and $216.2 million related to our polysilicon business. Cash received in deposits related to our order backlog where deliveries had not yet occurred was $194.8 million as of
October 2, 2010.

From
the date of a written commitment, we generally would expect to deliver PV products over a period ranging from three to nine months and polysilicon products over a period ranging
from twelve to eighteen months, however, in certain cases revenue may be recognized over longer periods. Disregarding the effect of any contract terminations or modifications, we would expect to
convert approximately 70% of our October 2, 2010 order backlog into revenue during the next twelve months and approximately 30% thereafter. Although most of our orders require substantial
non-refundable deposits, our order backlog as of any particular date should not be relied upon as indicative of our revenues for any future period. We began tracking our backlog as a
performance measure on a consistent basis during 2007.

If
a customer fails to perform on a timely basis, and such failure continues after notice of breach and a cure period, we may terminate the contract. Our contracts generally do not
contain cancellation provisions and in the event of a customer breach, the customer may be liable for contractual damages. During the six months ended October 2, 2010, we terminated or modified
contracts resulting in a $9.3 million reduction in our order backlog (85% of the reduction was from two contracts). During the fiscal year ended April 3, 2010, we terminated or modified
contracts resulting in a $105 million reduction in our order backlog (95% of the reduction was from 9 contracts). During the six months ended October 2, 2010, we recorded revenues of
$44.4 million from terminated contracts and during the fiscal year ended April 3, 2010, we recorded revenues of $21.1 million from terminated contracts.

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

As
of October 2, 2010, our order backlog consisted of contracts with 39 PV customers, 28 of which have orders of $3 million or greater and contracts with 7 polysilicon
customers, all of which have orders of $3 million or greater. Our order backlog as of October 2, 2010, included $440 million attributed to two customers each representing 10% or
more our order backlog.



As of October 2, 2010, our order backlog for our sapphire business was primarily comprised of short-term contracts or sales
orders for sapphire materials. From the date of a written committment, we generally would expect to deliver sapphire material products over a period ranging from three to six months. Prior to our
acquisition of Crystal Systems, backlog was not tracked as a performance measure in the same manner as our PV or polysilicon business. As of October 2, 2010, our sapphire business backlog
consisted of numerous customers, one of which had orders of greater than $3 million.

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Results of Operations

The following tables set forth the results of operations as a percentage of revenue for the three and six months ended
October 2, 2010 and September 26, 2009:

Three Months Ended

Six Months EndedOctober 2,
2010

September 26,
2009

October 2,
2010

September 26,
2009Statement of Operations Data:*Revenue


100
%

100
%

100
%

100
%Cost of revenue


59


67


62


61Gross profit


41


33


38


39Research and development


2


4


3


6Selling and marketing


2


3


3


4General and administrative


6


10


6


10Amortization of intangible assets


1


1





1Income from operations


30


15


26


18Interest income











(1
)Interest expense











Interest component of forward foreign exchange contracts











Other income (expense), net











(1
)Income before income taxes


30


15


26


16Provision for income taxes


11


6


10


6Net income


19
%

9
%

16
%

10
%


*percentages
subject to rounding.


Three Months Ended October 2, 2010 compared to Three Months Ended September 26, 2009.

On July 29, 2010, we acquired Crystal Systems. This sapphire business is being treated as a separate segment for financial
reporting purposes. Our revenue for the three months ended October 2, 2010 include revenue from our sapphire business from the date of acquisition.

Revenue.The following table sets forth total revenue for the three months ended October 2, 2010 and September 26, 2009:

Three Months EndedBusiness Category

October 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Photovoltaic equipment

$
192,623

$
60,687

$
131,936Photovoltaic services, parts and other


10,151


1,715


8,436Total photovoltaic business


202,774


62,402


140,372Polysilicon business


23,285


41,791


(18,506
)Sapphire business


3,234





3,234Total revenue

$
229,293

$
104,193

$
125,100


120
%


Our
total revenue increased 120% for the three months ended October 2, 2010 as compared to the three months ended September 26, 2009, primarily due to increased demand in
our PV business.

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Revenue
from our PV business increased 225% to $202.8 million for the three months ended October 2, 2010 as compared to $62.4 million for the three months ended
September 26, 2009. The increase is primarily due to increased demand for our DSS products from solar manufacturers over the past several months and the introduction of our DSS 450HP
units.

Our
PV equipment revenue includes sales of DSS units as well as other PV equipment. During the three months ended October 2, 2010, revenue from DSS sales increased 442% to
$188.7 million as compared to $34.8 million for the three months ended September 26, 2009. The increase in the sale of DSS units is primarily attributed to near-term demand for
ingot manufacturing capacity by our Asian customers and the favorable response to our recently introduced DSS 450HP unit. During the three months ended July 3, 2010 we began shipping these
units and during the three months ended October 2, 2010, we began to recognize revenue on these units when we were able to obtain sufficient evidence of customer acceptance in accordance with
our revenue recognition policy. Sales of other PV equipment accounted for $3.9 million of our revenue for the three months ended October 2, 2010 and $25.9 million of our revenue
for the three months ended September 26, 2009. Other PV equipment revenue is primarily attributed to ancillary equipment under our DSS contracts, which can vary based upon specific customer
requirements, as well as revenue from turnkey contracts. Revenue from turnkey contracts was not significant for the three months ended October 2, 2010 and $25.5 million for the three
months ended September 26, 2009. Included in turnkey revenue for the three months ended September 26, 2009 was revenue of $5.8 million from the sale of DSS units and
$19.7 million from the sale of other PV equipment.

During
the three months ended July 3, 2010, we completed a review of our PV turnkey business and decided to no longer offer PV turnkey integration services. This decision was
based our assessment of reduced market opportunities, as well as low gross margins compared to our other product lines. Our decision did not impact the recoverability of any tangible or intangible
assets, nor did we incur any significant costs to eliminate this product offering.

Revenue
from PV services, parts and other was $10.2 million for the three months ended October 2, 2010 and $1.7 million for the three months ended
September 26, 2009. This increase is primarily related to the sale of upgrade kits that convert our standard DSS 450 unit to a DSS 450HP unit, which we introduced during the three months ended
July 3, 2010.

Revenue
from our polysilicon business decreased by 44% to $23.3 million for the three months ended October 2, 2010 as compared to $41.8 million for the three months
ended September 26, 2009. Polysilicon revenue may fluctuate significantly from period to period due to the cyclical nature of our business and the variability inherent in meeting
post-delivery customer acceptance provisions related to reactor performance. Polysilicon revenue for the three months ended October 2, 2010 substantially relates to contracts that
were in our order backlog as of March 28, 2009.

Included
in our backlog are polysilicon contracts that grant contractual rights which require revenue to be recognized ratably over the contract period. Revenue is recognized when all
other elements have been delivered and other contract criteria have been met. During the three months ended October 2, 2010 and September 26, 2009, we recognized revenue on a ratable
basis from one of these customers of $14.2 million and $6.9 million, respectively. As of October 2, 2010 our deferred revenue balance included $121.3 million related to this
customer which is expected to be recognized as revenue ratably through fiscal year 2013.

Revenue
from our sapphire business was $3.2 million for the three months ended October 2, 2010. Our sapphire business revenue is primarily attributed to the sale of
sapphire material used in LED applications, as well as other sapphire components used in the defense, medical and aerospace industries. Our sapphire business was acquired on July 29, 2010 and
therefore, there is no prior year comparison.

In
both the three months ended October 2, 2010, and September 26, 2009, a substantial percentage of our revenue resulted from sales to a small number of customers. One of
our customers accounted for 60% of our revenue for the three months ended October 2, 2010 and two customers accounted for 55% of our revenue for the three months ended September 26,
2009. No other customer accounted for more than 10% of our revenue during the respective periods.

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Based on our results through October 2, 2010 and our order backlog as of that date, we believe our PV business will account for a majority of our revenue
for fiscal year 2011. For the fiscal year ending April 2, 2011, we believe that no one customer will account for more than 25% of our total annual revenue.

Cost of Revenue, Gross Profit and Gross Margins.The following table sets forth total cost of revenue and gross profit for the three
months ended
October 2, 2010 and September 26, 2009:

Three Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Cost of revenuePhotovoltaic business

$
122,187

$
43,981

$
78,206Polysilicon business


11,746


25,953


(14,207
)Sapphire business


2,235





2,235Total

$
136,168

$
69,934

$
66,234


95
%Gross profitPhotovoltaic business

$
80,587

$
18,421

$
62,166Polysilicon business


11,539


15,838


(4,299
)Sapphire business


999





999Total

$
93,125

$
34,259

$
58,866


172
%


Our
PV cost of revenue and gross profit increased $78.2 million, or 178%, and $62.2 million, or 337%, respectively, for the three months ended October 2, 2010 as
compared to the three months ended September 26, 2009, respectively, primarily due to an overall increase in PV revenue. Our polysilicon cost of revenue and gross profit decreased by
$14.2 million and $4.3 million, respectively, for the three months ended October 2, 2010 as compared to the three months ended September 26, 2009 primarily due to an
overall decrease in polysilicon revenue. Our sapphire business was acquired on July 29, 2010 and therefore, there is no prior year comparison.

The
following table sets forth total gross margins for the three months ended October 2, 2010 and September 26, 2009 and, for comparative purposes, the fiscal year ended
April 3, 2010:

Three Months Ended

Fiscal
Year EndedOctober 2,
2010

September 26,
2009

April 3,
2010Gross marginsPhotovoltaic business


40
%

30
%

34
%Polysilicon business


50
%

38
%

44
%Sapphire business


31
%




Overall


41
%

33
%

40
%


Overall
gross profit as a percentage of revenue, or gross margin, increased to 41% for the three months ended October 2, 2010 from 33% for the three months ended
September 26, 2009.

Our
PV gross margins for the three months ended October 2, 2010 were 40% as compared to 30% for the three months ended September 26, 2009. The increase was primarily due to
improved factory utilization and other costs as a result of an increase in sales and order volume in the three months ended October 2, 2010. For the three months ended September 26,
2009, the Company incurred unusual costs associated with low factory utilization as well as other costs due to the reduction in order volume. In

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addition,
during the same period in fiscal 2010, we recognized revenue of $25.5 million on a turnkey contract that generated a gross margin of approximately 28%.

Our
polysilicon gross margins for the three months ended October 2, 2010 were 50% as compared to 38% for the three months ended September 26, 2009. The increase was
primarily due to the timing of final acceptance on certain contracts.

Our
gross margins in our PV and polysilicon business tend to vary depending on the volume, pricing and timing of revenue recognition.

We
expect that the effect of both the anticipated levels of manufacturing and the mix of revenue to be recognized for the remaining portion of the fiscal year ending April 2,
2011, will result in annual gross margins for our polysilicon and PV segments for the balance of the fiscal year ending April 2, 2011 that are comparable to overall gross margins earned in the
three months ended October 2, 2010.

Our
sapphire business gross margins were 31% for the three months ended October 2, 2010 from the sale of sapphire materials. Our sapphire business margins may vary depending on
the demand for LED materials, as well as volume and customer and product mix. Our sapphire business was acquired on July 29, 2010 and, therefore, there is no prior year comparison. With respect
to the materials segment of our sapphire business, we expect that the gross margins will fluctuate more than in our PV or polysilicon businesses.

Research and Development.The following table sets forth total research and development expenses for the three months ended
October 2, 2010
and September 26, 2009:

Three Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Research and developmentPhotovoltaic business

$
4,200

$
3,126

$
1,074Polysilicon business


1,003


1,511


(508
)Sapphire business


87





87Total

$
5,290

$
4,637

$
653


14
%


Research
and development expenses increased 14% to $5.3 million for the three months ended October 2, 2010, as compared to $4.6 million for the three months ended
September 26, 2009. The increase was primarily related to an increase in payroll and payroll related costs due to increased headcount in our PV business, which was offset in part by the
reallocation of polysilicon engineering resources to support customer contracts. Our spending on research and development activities is directly related to projects under development and the timing of
the spending associated with each of the projects may vary from quarter to quarter. We expect our rate of spending in research and development to increase over the remainder of the fiscal year ended
April 2, 2011, as we expect to continue to invest in new product development and expand our product base in each of our businesses.

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Selling and Marketing.The following table sets forth total selling and marketing expenses for the three months ended October 2,
2010 and
September 26, 2009:

Three Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Selling and marketingPhotovoltaic business

$
3,364

$
1,710

$
1,654Polysilicon business


1,882


1,448


434Sapphire business


82





82Total

$
5,328

$
3,158

$
2,170


69
%


Selling
and marketing expenses increased 69% to $5.3 million for the three months ended October 2, 2010 from $3.2 million for the three months ended
September 26, 2009. Selling and marketing expenses for our PV business increased by approximately $1.7 million, primarily due to an increase in sales
commissions of $0.7 million and payroll and payroll-related costs of $0.7 million. Selling and marketing expenses for our polysilicon business increased by approximately
$0.4 million primarily due to an increase in sales commissions. Sales commissions are accrued based on operational factors such as deposits, shipments and final acceptances received from
customers rather than when revenue is recognized and thus may vary from quarter to quarter.

General and Administrative.General and administrative expenses increased 27% to $13.0 million for the three months ended
October 2,
2010 from $10.2 million for the three months ended September 26, 2009. The increase was primarily due to higher payroll and payroll-related costs of $1.4 million, in part due to
higher incentive compensation due to our strong operational performance and consulting expense of $1.2 million, including consulting related to our transition of our base of operations to Hong
Kong and the acquisition of Crystal Systems.

Amortization of Intangible Assets.Amortization expense attributed to intangible assets increased 9% to $0.9 million for the three
months
ended October 2, 2010 from $0.8 million for the three months ended September 26, 2009. The increase is due to the amortization of intangible assets related to the Crystal Systems
acquisition.

Interest Income.Interest income increased to $0.2 million for the three months ended October 2, 2010 from approximately
$0.1 million for the three months ended September 26, 2009. We invest our excess cash in exchange traded money market mutual funds, bank time deposits and short term commercial paper.

Interest Expense.Interest expense increased to $0.4 million for the three months ended October 2, 2010 from
$0.2 million for
the three months ended September 26, 2009 due to the write-off of debt issuance costs related to the termination of our senior credit facility and cash-collateralized
letter of credit facility.

Interest Component of Forward Foreign Exchange Contracts.The interest component of forward foreign exchange contracts represents the
interest rate
differential between the two currencies involved in our forward foreign exchange contracts for the specified period of time and can be either a premium or discount at the beginning of the contract and
are adjusted to reflect interest rate market condition changes. Such changes can result in interest income or interest expense over the life of the contract. These amounts were not significant for the
three months ended October 2, 2010 or September 26, 2009.

Other Income (Expense), net.Other expense, net was $0.9 million for the three months ended October 2, 2010 versus other
income, net of
$0.2 million for the three months ended September 26, 2009.

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The
increase in expense was primarily due to transaction costs related to the two concurrent secondary offerings of our common stock.

Provision for Income Taxes.Our effective tax rate was 36.6% and 39.3% for the three months ended October 2, 2010 and
September 26,
2009, respectively. The change in our reported tax rate for the three and six months ended October 2, 2010, as compared to the same periods in 2009, relates to proportionally higher expected
levels of income in lower tax jurisdictions as a result of our continued transition of our base of operations to Hong Kong. We review the expected annual effective income tax rates and make changes on
a quarterly basis as necessary based on certain factors including changes in forecasted annual operating income by jurisdiction, changes to the valuation allowance for net deferred tax assets, changes
to actual or forecasted permanent book to tax differences, impacts from future tax settlements with state, federal or foreign tax authorities, and impacts from tax law changes. Due to the volatility
of these factors, our consolidated effective income tax rate can change significantly on a quarterly basis.

Net Income.As a result of the foregoing factors, for the three months ended October 2, 2010, we recorded net income of
$42.8 million
compared to a net income of $9.4 million for the three months ended September 26, 2009.

Six Months Ended October 2, 2010 compared to Six Months Ended September 26, 2009.

As noted above, we acquired privately-held Crystal Systems on July 29, 2010. This sapphire business is being treated
as a separate segment for financial reporting purposes. Our revenues for the six months ended October 2, 2010 include revenue from our sapphire business.

Revenue.The following table sets forth total revenue for the six months ended October 2, 2010 and September 26, 2009:

Six Months EndedBusiness Category

October 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Photovoltaic equipment

$
301,907

$
79,726

$
222,181Photovoltaic services, parts and other


12,308


2,610


9,698Total photovoltaic business


314,215


82,336


231,879Polysilicon business


47,010


93,676


(46,666
)Sapphire business


3,234





3,234Total revenue

$
364,459

$
176,012

$
188,447


107
%


Our
total revenue increased 107% to $364.5 million for the six months ended October 2, 2010 as compared to $176.0 million for the six months ended
September 26, 2009, primarily due to strong demand in our PV business.

Revenue
from our PV business increased 282% to $314.2 million for the six months ended October 2, 2010 as compared to $82.3 million for the six months ended
September 26, 2009. The increase is primarily due to increased demand for our DSS products from solar manufacturers over the past several months and the introduction of our DSS 450HP
unit.

Our
PV equipment revenue includes sales of DSS units as well as other PV equipment. During the six months ended October 2, 2010, revenue from DSS sales increased 399% to
$258.4 million as compared to $51.8 million for the six months ended September 26, 2009. The increase in the sale of DSS units is primarily attributed to near-term demand for
ingot manufacturing capacity by our Asian customers and the favorable response to our recently introduced DSS 450HP unit. During the three months ended July 3, 2010 we began shipping these
units and during the three months ended October 2, 2010, we began to

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recognize
revenue on these units when we were able to obtain sufficient evidence of customer acceptance in accordance with our revenue recognition policy. Sales of other PV equipment accounted for
$43.5 million of our revenue for the six months ended October 2, 2010 and $27.9 million of our revenue for the six months ended September 26, 2009. Other PV equipment
revenue is primarily attributed to ancillary equipment under our DSS contracts, which can vary based upon specific customer requirements, as well as revenue from turnkey contracts. During the six
months ended October 2, 2010, we recognized turnkey revenue of $41.2 million, including $5.7 million from the sale of DSS units and $35.5 million from the sale of other PV
equipment. During the six months ended September 26, 2009, we recognized turnkey revenue of $25.5 million, including $5.8 million from the sale of DSS units and
$19.7 million from the sale of other PV equipment.

During
the three months ended July 3, 2010, we completed a review of our PV turnkey business and decided to no longer offer PV turnkey integration services. This decision was
based our assessment of reduced market opportunities, as well as low gross margins compared to our other product lines. Our decision did not impact the recoverability of any tangible or intangible
assets, nor did we incur any significant costs to eliminate this product offering.

Revenue
from PV services, parts and other was $12.3 million for the six months ended October 2, 2010 and $2.6 million for the six months ended September 26,
2009. This increase is primarily related to the sale of upgrade kits that convert our standard DSS 450 units to a DSS 450HP unit.

Revenue
from our polysilicon business decreased by 50% to $47.0 million for the six months ended October 2, 2010 as compared to $93.7 million for the six months
ended September 26, 2009. Polysilicon revenue may fluctuate significantly from period to period due to the cyclical nature of this business and the variability inherent in meeting
post-delivery customer acceptance provisions related to reactor performance. Polysilicon revenue for the six months ended October 2, 2010 substantially relates to contracts that
were in our order backlog as of March 28, 2009.

Included
in our backlog are polysilicon contracts that grant contractual rights which require revenue to be recognized ratably over the contract period. Revenue recognition from these
contracts commences when all other elements have been delivered and other contract criteria have been met. During the six months ended October 2, 2010 and September 26, 2009, we
recognized revenue on a ratable basis from one of these customers of $35.0 million and $6.9 million, respectively. As of October 2, 2010, our deferred revenue balance included
$121.3 million related to this customer, which is expected to be recognized as revenue ratably through fiscal year 2013.

Revenue
from our sapphire business was $3.2 million for the six months ended October 2, 2010. Our sapphire business revenue is attributed to the sale of sapphire material
used in LED applications, as well as other sapphire components used in the defense, medical and aerospace industries. Our sapphire business was acquired on July 29, 2010 and therefore, there is
no prior year comparison.

In
both the six months ended October 2, 2010, and September 26, 2009, a substantial percentage of our revenue resulted from sales to a small number of customers. Three of
our customers accounted for 59% of our revenue for the six months ended October 2, 2010 and three customers accounted for 60% of our revenue for the six months ended September 26, 2009.
No other customer accounted for more than 10% of our revenue during the respective periods.

Based
on our results through October 2, 2010 and our order backlog as of that date, we believe our PV business will account for a majority of our revenue for fiscal year 2011. For
the fiscal year ending April 2, 2011, we believe that no one customer will account for more than 25% of our total annual revenue.

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Cost of Revenue, Gross Profit and Gross Margins.The following table sets forth total cost of revenue and gross profit for the six
months ended
October 2, 2010 and September 26, 2009:

Six Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Cost of revenuePhotovoltaic business

$
196,936

$
57,232

$
139,704Polysilicon business


26,240


49,556


(23,316
)Sapphire business


2,235





2,235Total

$
225,411

$
106,788

$
118,623


111
%Gross profitPhotovoltaic business

$
117,279

$
25,104

$
92,175Polysilicon business


20,770


44,120


(23,350
)Sapphire business


999





999Total

$
139,048

$
69,224

$
69,824


101
%


Our
PV cost of revenue and gross profit increased $139.7 million, or 244%, and $92.2 million, or 367%, respectively, for the six months ended October 2, 2010 as
compared to the six months ended September 26, 2009 reflective of an overall increase in PV revenue. Our polysilicon cost of revenue and gross profit decreased by $23.3 million and
$23.4 million for the six months ended October 2, 2010, respectively, as compared to the six months ended September 26, 2009, reflective of an overall decrease in polysilicon
revenue. Our sapphire business was acquired on July 29, 2010, and therefore there is no prior year comparison.

The
following table sets forth total gross margins for the six months ended October 2, 2010 and September 26, 2009 and, for comparative purposes, the fiscal year ended
April 3, 2010:

Six Months Ended

Fiscal
Year EndedOctober 2,
2010

September 26,
2009

April 3,
2010Gross marginsPhotovoltaic business


37
%

30
%

34
%Polysilicon business


44
%

47
%

44
%Sapphire business


31
%


%


%Overall


38
%

39
%

40
%


Overall
gross profit as a percentage of revenue, or gross margin, decreased to 38% for the six months ended October 2, 2010 from 39% for the six months ended September 26,
2009.

Our
PV gross margins for the six months ended October 2, 2010 were 37% as compared to 30% for the six months ended September 26, 2009. The increase was primarily due to
improved factory utilization as a result of an increase in sales and order volume as well as reductions in other costs in the six month period ended October 2, 2010. In the six months ended
September 26, 2009 we incurred costs associated
with low factory utilization as well as other costs related to lower order volume, including $1.0 million of charges as we rescheduled and/or cancelled a portion of our commitments to our
vendors to procure materials.

Our
polysilicon gross margins for the six months ended October 2, 2010 were 44% as compared to 47% for the six months ended September 26, 2009. Our gross margins tend to
vary depending on the volume, pricing and timing of revenue recognition for our polysilicon contracts.

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

Our
sapphire gross margins were 31% for the six months ended October 2, 2010. Our sapphire margins may vary depending on volume and customer and product mix. Our sapphire business
was acquired on July 29, 2010 and therefore, there is no prior year comparison.

Research and Development.The following table sets forth total research and development expenses for the six months ended October 2,
 2010 and
September 26, 2009:

Six Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Research and developmentPhotovoltaic business

$
7,276

$
6,366

$
910Polysilicon business


1,674


4,670


(2,996
)Sapphire business


87





87Total

$
9,037

$
11,036

$
(1,999
)

(18
)%


Research
and development expenses decreased 18% to $9.0 million for the six months ended October 2, 2010, as compared to $11.0 million for the six months ended
September 26, 2009. The decrease was
primarily related to the timing of certain polysilicon project costs, as well as the reallocation of polysilicon engineering resources to support polysilicon customer related activities offset in part
due to increased spending of $0.9 million in our PV business as we continue to incur labor and material costs associated with our next generation of DSS products. Our spending on research and
development activities is directly related to projects under development and the timing of the spending associated with each of the projects may vary from quarter to quarter. We expect our rate of
spending in research and development to increase over the remainder of the fiscal year ended April 2, 2011, as we continue to invest in new product development and expand our product base in
each of our businesses.

Selling and Marketing.The following table sets forth total selling and marketing expenses for the six months ended October 2, 2010
and
September 26, 2009:

Six Months EndedOctober 2,
2010

September 26,
2009

Change

% Change(dollars in thousands)Selling and marketingPhotovoltaic business

$
5,121

$
2,680

$
2,441Polysilicon business


3,836


4,345


(509
)Sapphire business


82





82Total

$
9,039

$
7,025

$
2,014


29
%


Selling
and marketing expenses increased 29% to $9.0 million for the six months ended October 2, 2010 from $7.0 million for the six months ended September 26,
2009. Selling and marketing expenses for our PV business increased by approximately $2.4 million, primarily due to an increase in payroll and payroll-related costs of $1.1 million and
sales commissions of $0.8 million. Selling and marketing expenses for our polysilicon business decreased by approximately $0.5 million, primarily due to a decrease in sales

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

General and Administrative.General and administrative expenses increased 27% to $23.6 million for the six months ended
October 2, 2010
from $18.6 million for the six months ended September 26, 2009. The increase was primarily due to higher payroll and payroll-related costs of $2.4 million, in part due to higher
incentive compensation due to our strong operational performance and consulting expense of $1.6 million, including consulting expenses related to the transition of our base of operations into
Hong Kong and the acquisition of Crystal Systems.

Amortization of Intangible Assets.Amortization expense attributed to intangible assets increased 5% to $1.7 million for the six
months ended
October 2, 2010 from $1.6 million for the six months ended September 26, 2009. The increase is due to the amortization of intangible assets related to the Crystal Systems
acquisition.

Interest Income.Interest income increased to $0.4 million for the six months ended October 2, 2010 from approximately
$0.2 million for the three months ended September 26, 2009. We invest our excess cash in exchange traded money market mutual funds, bank time deposits and short term commercial paper.

Interest Expense.Interest expense increased to $0.6 million for the six months ended October 2, 2010 from $0.4 million
for the
six months ended September 26, 2009 due to the write-off of debt issuance costs related to the termination of our senior credit facility and cash-collateralized letter
of credit facility.

Interest Component of Forward Foreign Exchange Contracts.The interest component of forward foreign exchange contracts represent the
interest rate
differential between the two currencies involved in our forward foreign exchange contracts for the specified period of time and can be either a premium or discount at the beginning of the contract and
are adjusted to reflect interest rate market condition changes. Such changes can result in interest income or interest expense over the life of the contract. The interest component of forward foreign
exchange contracts was not significant for the six months ended October 2, 2010. During the six months ended September 26, 2009, we recorded forward point interest expense of
$0.6 million on forward foreign exchange contracts.

Other Expense, net.Other expense, net decreased to $0.7 million for the six months ended October 2, 2010 from
$2.2 million for
the six months ended September 26, 2009. Included in the expense for the six months October 2, 2010, were transaction costs related to the two concurrent secondary offerings of our
common stock of $0.9 million. Included in the expense for the six months ended September 26, 2009 was a $2.1 million loss on certain forward foreign exchange contracts that no
longer qualified as a cash flow hedge.

Provision for Income Taxes.Our effective tax rate was 37.5% and 38.5% for the six months ended October 2, 2010 and
September 26, 2009,
respectively. The change in our reported tax rate for the three and six months ended October 2, 2010, as compared to the same periods in 2009, relates to proportionally higher expected levels
of income in lower tax jurisdictions as a result of our continued transition of our base of operations to Hong Kong. We review the expected annual effective income tax rates and makes changes on a
quarterly basis as necessary based on certain factors including changes in forecasted annual operating income by jurisdiction, changes to the valuation allowance for net deferred tax assets, changes
to actual or forecasted permanent book to tax differences, impacts from future tax settlements with state, federal or foreign tax authorities, and impacts from tax law changes. Due to the volatility
of these factors, our consolidated effective income tax rate can change significantly on a quarterly basis.

Net Income.As a result of the foregoing factors, for the six months ended October 2, 2010, we recorded net income of
$59.3 million
compared to a net income of $17.2 million for the six months ended September 26, 2009.

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Liquidity and Capital Resources

Overview

Our cash balances increased by $13.9 million during the six months ended October 2, 2010, from $230.7 million as
of April 3, 2010 to $244.6 million as of October 2, 2010 primarily related to increases in cash flow from operating activities. During the six months ended September 26,
2009, our cash balance increased $97.1 million, from $107.1 million as of March 28, 2009 to $204.2 million as of September 26, 2009, a portion of which related to a
tax refund of $35.3 million. We manage our cash inflows through the use of customer deposits and milestone billings intended to allow us in turn to meet our cash outflow requirements, which
primarily consist of vendor payments and prepayments for contract related costs (raw material and components costs) and payroll and overhead costs as we perform on our customer contracts. The
following discussion of the changes in our cash balance refers to the various sections of our Condensed Consolidated Statements of Cash Flows, which appears in Item 1 of this quarterly report
on Form 10-Q.

The
following table summarizes our primary cash flows in the periods presented:

Six Months EndedOctober 2,
2010

September 26,
2009(dollars in thousands)Cash provided by (used in):Operating activities

$
30,555

$
96,807Investing activities


(21,947
)

(774
)Financing activities


5,004


1,078Effect of foreign exchange rates on cash


273


(2
)Net increase in cash and cash equivalents

$
13,885

$
97,109


Cash Flows from Operating Activities

For the six months ended October 2, 2010, our cash provided by operations was $30.6 million. Our cash flow from
operations was driven by net income of $59.3 million, an increase in customer deposits of $74.2 million due to new orders in our PV and polysilicon businesses, as well as an increase in
accounts payable and accrued expenses of $25.3 million. These items were partially offset by an increase in inventories and vendor advances of $63.7 million, an increase in restricted
cash of $34.5 million related to collateralizing our outstanding standby letters of credit, and a decrease in accrued income taxes of $28.4 million.

For
the six months ended September 26, 2009 our cash provided by operations was $96.8 million. Our cash flow from operations was driven by net income of
$17.2 million, reductions in inventory and vendor advances of $76.9 million reflecting the slowdown in our business as a result of economic uncertainties during the period, an increase
in deferred revenue less deferred costs of $42.0 million, and an income tax refund of $35.3 million due to an election of a change in accounting method for tax purposes. As a result of
this change in methodology, we were in an overpayment position regarding our estimated income taxes for the year ended March 28, 2009. We filed for a refund of Federal income taxes in May 2009
in the amount of $35.3 million, which was received in June 2009. These items were partially offset by a decrease in customer deposits of $87.2 million and a decrease in accounts payable
and accrued expenses $34.9 million.

Cash Flows from Investing Activities

For the six months ended October 2, 2010, our cash used in investing activities was $21.9 million. The acquisition of
Crystal Systems, net of cash acquired, consumed approximately $22.7 million of cash. Capital expenditures were approximately $4.2 million and were primarily used for improving our
business

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information
systems and expanding our sapphire business. These items were partially offset by the sale of $5.0 million of short-term investments.

We
expect total capital expenditures in the fiscal year ending April 2, 2011 to be up to $35 million, consisting primarily of improvements and expansion of our sapphire
facilities in Massachusetts.

For
the six months ended September 26, 2009, our cash used in investing activities was $0.8 million, consisting entirely of capital expenditures to improve our information
systems and facility in Merrimack, New Hampshire.

Cash Flows from Financing Activities

For the six months ended October 2, 2010 and September 26, 2009, cash provided by financing activities was
$5.0 million and $1.1 million, respectively, primarily related to cash received by us for the exercise of stock options.

After
taking into account the expected use of approximately $203 million of cash to purchase 26.5 million shares of our common stock from GT Solar Holdings, LLC (as
described below), we believe that cash generated from operations together with our existing cash and customer deposits will be sufficient to satisfy working capital requirements, commitments for
capital expenditures, and other cash requirements for the foreseeable future, including at least the next twelve months.

Senior Credit Facility

On July 29, 2010, we elected to terminate both our senior credit facility and our cash-collateralized letter of
credit facility. The senior credit facility had no outstanding borrowings and was only being used to secure standby letters of credit with Bank of America, N.A. We had never utilized the
cash-collateralized letter of credit facility. We were in compliance with the covenants contained in these facilities at the time of termination. On July 29, 2010, the outstanding
standby letters of credit under the senior credit facility amounted to $30.0 million and were subsequently cash collateralized under a separate agreement with the Bank of America, N.A. which
required this amount to be transferred into a restricted cash account.

As
of October 2, 2010, we had $34.5 million of outstanding standby letters of credit, representing primarily performance guarantees issued against customer deposits, that
were collateralized by restricted cash.

Share Repurchase and Financing Commitment

On November 5, 2010, we entered into a share repurchase agreement, the Repurchase Agreement, with GT Solar Holdings, LLC, or Holdings,
pursuant to which we will purchase from Holdings 26.5 million shares of our common stock at a per share price of $7.66, or an aggregate of approximately $203 million. The repurchase is
expected to close on or before November 12, 2010. We will fund the repurchase of these shares of common stock with our available cash. Concurrently with Holdings' sale to us, Holdings has
agreed to sell an additional 7 million shares of common stock to a third party in a transaction at a price higher than the $7.66 per share paid by us. The closing of the sale by Holdings
to the third party is a condition precedent to the closing of the repurchase of shares by us pursuant to the Repurchase Agreement. Upon completion of these two transactions, Holdings will own or
control approximately 14% of our outstanding common stock.

On
November 5, 2010, we also entered into a commitment letter for a senior secured credit facility in an aggregate principal amount of up to $200 million with Credit Suisse AG and
Credit Suisse Securities (USA) LLC. The credit facility is expected to consist of a three-year revolving credit facility and a
three-year term loan facility and to be used for general corporate purposes. The loan documentation process has commenced and a definitive credit facility is expected to close on or before the end of
our third fiscal quarter, subject to customary closing conditions.

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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.

Contractual Obligations and Commercial Commitments

There have been no material changes to our "Contractual Obligations and Commercial Commitments" table in Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the year ended April 3, 2010, other than as described
below:



Accounting Pronouncements Not Yet Adopted

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

Critical Accounting Policies and Estimates

For the six months ended October 2, 2010, there were no significant changes to our critical accounting policies and estimates as
identified in our consolidated financial statements for the fiscal year ended April 3, 2010 included in our Annual Report on Form 10-K for the fiscal year ended
April 3, 2010, filed on June 4, 2010, with the exception of the following policy for accounting for business combinations.

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Business Combinations

Business combinations are accounted for at fair value. Acquisition costs are generally expensed as incurred and recorded in general and
administrative expenses; in process research and development is recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business
combination are generally expensed subsequent to the acquisition date; contingent consideration obligations are recorded at fair value on the date of acquisition, with increases or decreases in the
fair value arising from changes in assumptions or discount periods recorded as contingent consideration expenses in the statement of operations in subsequent periods; and changes in deferred tax asset
valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. All changes that do not qualify as measurement period adjustments are included in
current period earnings. The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash
flows to identifiable intangible assets, to determine the estimated fair value for assets and liabilities acquired. The fair values assigned to tangible and intangible assets acquired and liabilities
assumed, including contingent consideration, are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary
valuation procedures and techniques. Significant judgment is required in estimating the fair value of intangible assets acquired in a business combination and in assigning their respective useful
lives. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management.

If
the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the
intangible assets and goodwill, or require acceleration of the amortization expense of finite-lived intangible assets.

Significant
judgment is required in estimating the fair value of the contingent consideration obligations. Increases or decreases in the fair value of the contingent consideration
obligations can result from changes in assumed discount periods and rates, changes in the assumed timing and amount of revenue and expense estimates and changes in assumed probability adjustments with
respect to the attainment of certain financial and operational metrics. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can
materially impact the amount of contingent consideration expense recorded in any given period.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Investment Risks

We maintain an investment portfolio which, at October 2, 2010, consisted of $188.4 million of exchange traded money
market funds, $34.5 million in bank time deposits, and $15.0 million in short-term commercial paper. At any time a sharp rise in market interest rates could have an adverse
impact on the fair value of our investment portfolio. Conversely, declines in market interest rates could have a material impact on the interest earnings of our investment portfolio. We do not
currently hedge these interest rate exposures. We place our investments with high quality issuers and have policies limiting, among other things, the amount of credit exposure to any one issuer. We
seek to limit default risk by purchasing only investment grade securities. A hypothetical movement of plus or minus 50 basis points in market interest rates would not have a material impact to the
value of our investment portfolio. We also have the ability to hold our investments until maturity, and therefore do not expect our operating results or cash flows to be affected to any significant
degree by the effect of a sudden change in market interest rates on our investment portfolio.

Foreign Currency Risk

Although our reporting currency is the U.S. dollar and substantially all of our sales contracts are currently denominated in U.S.
dollars, we incur costs denominated in other currencies. In addition,

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although
we maintain our cash balances primarily in the U.S. dollar, from time to time, we maintain cash balances in currencies other than the U.S. dollar. As a result, we will be subject to currency
translation risk.

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

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

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

As
of October 2, 2010, we had Euro forward foreign exchange contracts with notional amounts of €9.4 million, all of which expire within twelve months. As of
October 2, 2010, the fair value and carrying amount of our forward foreign exchange contracts was a net asset of $0.2 million. Relative to our foreign currency exposures existing at
October 2, 2010, a 10% appreciation (depreciation) of the Euro against the U.S. dollar would result in an increase (decrease) in the fair value of these derivative instruments of approximately
$1.3 million.

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 October 2, 2010. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of October 2, 2010, our Chief Executive Officer
and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal controls over financial reporting during the three months ended
October 2, 2010 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

General

Beginning on August 1, 2008, seven putative securities class action lawsuits were commenced in the United States District Court
for the District of New Hampshire (the "Court"), against us, certain of our officers and directors, certain underwriters of our July 24, 2008 initial public offering and others, including
certain of our investors (the "federal class actions"). On October 3, 2008, the Court entered an order consolidating the federal class actions into a single action captioned Braun et al. v. GT Solar International,
 Inc., et al. The Court selected the lead plaintiff and lead plaintiff's
counsel in the consolidated matter on October 29, 2008. The lead plaintiff filed an amended consolidated complaint on December 22, 2008. The defendants moved to dismiss the amended
consolidated complaint on February 5, 2009. On September 22, 2009, the Court denied the defendants' motion. Following the Court's denial of the motion, the parties submitted a proposed
joint case management order to the Court on November 6, 2009. The lead plaintiff asserts claims under various sections of the Securities Act. The amended consolidated complaint alleges, among
other things, that the defendants made false and materially misleading statements and failed to disclose material information in certain SEC filings, including the registration statement and
Prospectus for our July 24, 2008 initial public offering, and other public statements, regarding our business relationship with LDK Solar, Ltd., one of our customers, JYT Corporation,
one of our competitors, and certain of our products, including the DSS furnaces. Among other relief, the amended consolidated complaint seeks class certification, unspecified compensatory damages,
rescission, interest, attorneys' fees, costs and such other relief as the Court should deem just and proper.

The
defendants moved to dismiss the amended consolidated complaint on February 5, 2009. On September 22, 2009, the Court denied the defendant's motion. Following the
Court's denial of the motion, the parties submitted a proposed joint case management order, which the Court approved on November 6, 2009. The case management order provides for discovery to
close on May 25, 2011.

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

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

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

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

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

Item 1A.    Risk Factors

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

Modification of Risk Factors

Our Annual Report on Form 10-K for the fiscal year ended April 3, 2010, filed with the Commission on
June 4, 2010, included a risk factor under the heading "Item 1A. Risk FactorsRisks Relating to Our Business Generally" which was captioned "Our credit facilities contain
covenants that impose significant restrictions on us". On July 29, 2010, we elected to terminate both our senior credit facility and our cash-collateralized letter of credit
facility. Our Annual Report on Form 10-K for the fiscal year ended April 3, 2010, filed with the Commission on June 4, 2010, also included risk factors under the
heading "Item 1A. Risk FactorsRisks Relating to Our Common Stock" which were captioned "The owners of our major stockholder, OCM and G3W, have significant influence over all
matters submitted to a stockholder vote, which limit the ability of other stockholders to influence corporate activities and may adversely affect the market price of our common stock" and "Conflicts
of interest may arise because some of our directors are principals of our principal stockholder." On November 5, 2010, we entered into a repurchase agreement with GT Solar Holdings, LLC to
purchase 26.5 million shares of our common stock, and, on the same date, GT Solar Holdings, LLC sold an additional 7 million shares to a third party. Subject to closing both of
these transactions, which are expected to occur on November 12, 2010, the number of shares owned by GT Solar Holdings, LLC will be reduced to approximately 14% of our outstanding shares, and
reducing OCM and G3W's beneficial interest in our common stock to approximately 9.4% of our outstanding shares. In connection with this repurchase, J. Bradford Forth and Chad Van Sweden submitted
their resignations as directors, such resignations to be effective on the closing of the sale of the 26,500,000 shares to us. As a result of the foregoing transactions, we have removed these three
risks from "Item 1A. Risk Factors" for this Quarterly Report on Form 10-Q.

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We have modified or updated the following risk factors to take into account developments in our business, industry or general economic conditions and the sale of
certain shares of our common stock by our principal stockholder:

Risks Related to Our Business Generally

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 experienced extreme disruption recently, 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 adversely affect businesses such as ours in a
number of ways. The current tightening of credit in financial markets has resulted in reduced funding worldwide and a higher level of uncertainty for solar module manufacturers. As a result, some of
our customers have been delayed in securing, or prevented from securing, funding adequate to honor their existing contracts with us or to enter into new contracts to purchase our products. We believe
a reduction in the availability of funding for new manufacturing facilities and facility expansions, or reduction demand for solar panels, could cause a decrease in orders for our products. We
currently require most of our customers to prepay a portion of the purchase price of their orders. We use these customer deposits to prepay our suppliers to reduce the need to borrow to cover our cash
needs for working capital. This practice may not be sustainable if the recent market conditions continue. Some of our customers who have become financially distressed have failed to provide letters of
credit or make payments in accordance with the terms of their existing contracts. If customers fail to post letters of credit or make payments, and we do not agree to revised terms, it could have a
significant impact on our business, results of operations and financial condition.

During
the fiscal years ended March 28, 2009 and April 3, 2010 and the sixth months ended October 2, 2010, some of our PV and polysilicon customers failed to make
deposits when due under their contracts, and we terminated some of those contracts. In addition, certain of these customers requested extensions of delivery dates and other modifications. The
resulting contract modifications included lower pricing and reductions in the number of units deliverable under the contracts, thereby reducing our order backlog. As a result of these terminations and
other contract modifications, our PV and polysilicon order backlog was reduced by $39.0 million during the fiscal year ended March 28, 2009, by $105.0 million during the fiscal
year ended April 3, 2010, and by $9.3 million during the six months ended October 2, 2010.

As
a result of PV and polysilicon customer delays or contract terminations, we often reschedule or cancel purchase orders with our vendors to procure materials and reimburse the vendor
for costs incurred to the date of termination plus predetermined profits. In addition, in the past, certain of the vendors from whom we purchased materials were unable to deliver their components
because economic conditions had an adverse impact on their ability to operate their businesses and, in some cases, we were unable to recover advances paid to those vendors for components that were not
delivered. For example, during the fiscal year ended March 28, 2009, we rescheduled and/or cancelled commitments to our vendors as a result of customer delays, contract modifications and
terminations and we recorded losses of $11.3 million relating to expected forfeitures of vendor advances and reserves against advances on inventory purchases with vendors that had become
financially distressed. In cases where we are not able to cancel or modify purchase orders impacted by customer delays or terminations, our purchase commitments may exceed our order backlog
requirements and we may be unable to redeploy the undelivered equipment. In addition, we may be required to pay advances to vendors in the future without being able to recover that advance if the
vendor is placed in bankruptcy, becomes insolvent or otherwise experiences financial distress.

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Delays
in deliveries could cause us to have inventories in excess of our short-term needs and may delay our ability to recognize revenue on contracts in our order backlog.
Contract breaches or cancellation of orders would prevent us from recognizing revenue on contracts in our order backlog and may require us to reschedule and/or cancel additional commitments to vendors
in the future.

Credit
and financial market conditions may similarly affect our suppliers. We may lose advances we make to our suppliers in the event they become insolvent because our advances are not
secured or backed by letters of credit. The inability of our suppliers to obtain credit to finance development or manufacture our products could result in delivery delays or prevent us from delivering
our products to our customers.

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 obtaining new financing in the future on commercially acceptable terms, or at all.

We
are unable to predict the likely duration and severity of the disruption in financial markets and adverse worldwide economic conditions 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 depend on a limited number of third party suppliers.

We use component parts supplied by a small number of third party suppliers in our polysilicon and PV products and ancillary equipment,
and certain of these components, such as power supplies and vessels, are critical to the manufacture and operation of certain of our products. There is no guarantee that we will maintain relationships
with our existing suppliers or develop new relationships with other suppliers. In the ordinary course of business, we are also exposed to market risk from fluctuations in the price of raw materials
necessary in the manufacture of our products. In addition, certain of our suppliers are small companies that may cease operations for any reason, including financial viability reasons, and/or may be
unable to meet any increases in our demand for component parts and equipment. We are also dependent on our suppliers to maintain the quality of the components and equipment we use and the increased
demands placed on these suppliers as we expect to continue to grow may result in quality control problems. We may be unable to identify
replacement or additional suppliers or qualify their products in a timely manner and on commercially reasonable terms, or at all. Component parts supplied by new suppliers may also be less suited to
our products than the component parts supplied by our existing suppliers. Certain of the component parts used in our products have been developed, made or adapted specifically for us. Such parts are
not generally available from many vendors and could be difficult or impossible to obtain elsewhere. As a result, there may be a significant time lag in securing an alternative source of supply.

Our
failure to obtain sufficient component parts and/or third party equipment that meet our requirements in a timely manner and on commercially reasonable terms could interrupt or impair
our ability to assemble our products, and may adversely impact our plans to expand and grow our business, as well as result in a loss of market share. Further, such failure may prevent us from
delivering our products as required by the terms of our contracts with our customers, and may harm our reputation and result in breach of contract and other claims being brought against us by our
customers. Any changes to our current supply arrangements, whether to the terms of supply from existing suppliers or a change in our suppliers, may also increase our costs.

As
a result of any of the foregoing factors, our financial condition, results of operations, business and/or prospects could be materially adversely affected.

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We may face product liability claims and/or claims in relation to third party equipment.

It is possible that our products could result in property damage and/or personal injury, whether by product malfunctions, defects,
improper use or installation or other causes. We cannot predict whether or not product liability claims will be brought against us or the effect of any resulting negative publicity on our business,
which may include loss of existing customers, failure to attract new customers and a decline in sales. The successful assertion of product liability claims against us could result in potentially
significant monetary damages being payable by us, and we may not have adequate resources to satisfy any judgment against us. Furthermore, it may be difficult to determine whether any damage or injury
was due to product malfunction, operator error, failure of the product to be operated and maintained in accordance with our specifications or the failure of the facility in which our products are used
to comply with the facility specifications provided to our customers. For example, one of our significant customers has recently experienced chamber leakage involving a number of DSS units in its
facilities which we believe was the result of their facility failing to conform to specifications. We have, nonetheless agreed to replace certain chambers at our cost. Other customers may experience
similar issues in the future as a result of product defects, facilities not complying with specifications or other reasons. To date, we have not received any product liability or other claims with
respect to these or any other accidents. The bringing of product liability claims against us, whether ultimately successful or not, could have a material adverse effect on our financial condition,
results of operations, business and/or prospects.

We
have provided third party equipment in connection with our product sales. There can be no guarantee that such third party equipment will function in accordance with our intended or
specified purpose or that the customer's personnel, in particular those who are inexperienced in the use of the specialized equipment sold by us, will be able to correctly install and operate it,
which may result in the return of products and/or claims by the customer against us. In the event of a claim against us, there is no guarantee that we will be able to recover all or any of our loss
from the third party equipment provider. Any such claim could have a material adverse effect on our financial condition, results of operations, business and/or prospects.

The international nature of our business subjects us to a number of risks, including unfavorable political, regulatory, labor and tax conditions in foreign countries.

A substantial majority of our marketing and distribution takes place outside the United States, primarily in China, and a substantial
percentage of our sales are to customers outside the United States. We also have contracts with customers in Europe and expect to recognize revenue from sales to customers in Asia and Europe in the
future. As a result, we are subject to the legal, political, social and regulatory requirements and economic conditions of many jurisdictions other than the United States. Risks inherent to
maintaining international operations, include, but are not limited to, the following:



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Our
business in foreign markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, on our ability
to succeed under differing legal, regulatory, economic, social and political conditions. There can be no assurance that we will be able to develop, implement and maintain policies and strategies that
will be effective in each location where we do business. As a result of any of the foregoing factors, our financial condition, results of operations, business and/or prospects could be materially
adversely affected.

Risks Relating to the Photovoltaic Industry

We face competition from other manufacturers of equipment for photovoltaic products.

The solar energy industry and wider renewable energy industry are both highly competitive and continually evolving as participants
strive to distinguish themselves within their niche markets and compete with the larger conventional electric power industry. In addition to solar equipment manufacturers, we face competition from
companies producing and/or developing other PV technologies. Many of these competitors have, and future competitors may also have, substantially greater financial, technical, manufacturing and other
resources than we do. These resources may
provide these other manufacturers with a competitive advantage because they can realize economies of scale, synergies and purchase certain raw materials and key components at lower prices. Current and
potential competitors of ours may also have greater brand name recognition, more established distribution networks and larger customer bases, and may be able to devote more resources to the research,
development, promotion and sale of their products or to respond more quickly to evolving industry standards and changes in market conditions. We may not be able to maintain our current share of the
market for PV equipment as competitive intensity increases and our customers are targeted by local competitors in China and other countries. Customers may place orders to supply equipment for new
facilities or future expansions with our competitors, and we believe the likelihood that our customers and others will go to competitors has increased over time. Our failure to adapt to changing
market conditions and to compete successfully with existing or new competitors may have a material adverse effect on our financial condition, results of operations, business and/or prospects.

Risks Relating to Our Common Stock

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

Our quarterly operating results have fluctuated significantly in the past and we expect that our quarterly results will continue to
fluctuate significantly in the future. Future quarterly fluctuations may result from a number of factors, including:



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Based
on these factors, we believe our future operating results will vary significantly from quarter-to-quarter and year-to-year. As a
result, quarter-to-quarter and year-to-year comparisons of operating results are not necessarily meaningful nor do they indicate what our future
performance will be.

Additional Risk Factors

Our Annual Report on Form 10-K for the fiscal year ended April 3, 2010, filed with the Commission on
June 4, 2010, included risk factors under the heading "Item 1A. Risk Factors." In addition, we have added the following risk factors to those contained in such
Form 10-K to take into account developments in our business, industry or general economic conditions, the sale of certain shares of our common stock by a major shareholder and entry
into a financing commitment letter.

We may be subject to export restrictions and laws affecting trade and investments, and the future sale of our products, including our sapphire materials and furnaces, may be
limited or prohibited in the future by a government agency or authority.

As a global company headquartered in the United States, our products and services are subject to U.S. laws and regulations that may
limit and/or restrict the export of some of our products, services and related product information, as well as laws of those foreign jurisdictions in which we sell products. Compliance with these laws
and regulations could significantly limit our operations and our sales in the future. In certain circumstances, these restrictions may affect our ability to interact with our foreign subsidiaries and
otherwise limit our trade and investments with third parties operating outside the U.S. In addition, certain customers of our sapphire materials business operate in the defense sector or are
subcontractors of companies in the defense industry, and our products are incorporated in, among other things, missiles and aerospace systems. In addition, Crystal Systems has received funding from
the Department of Defense in connection with certain research work for the U.S. government. The work performed pursuant to the contract with the Department of Defense is not commercially available,
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making
such technology available beyond the U.S. government. The Defense Department, the Commerce Department or other agency may, however, determine that our sapphire material or other products,
including our advanced sapphire growth furnaces incorporating HEM technology or PV furnaces, are important to the military potential of the U.S. If so, we may be subject to more stringent export
licensing requirements or prohibited from selling our sapphire materials, sapphire furnaces and/or PV furnaces to any customer outside the U.S. The government has, and will likely to continue to,
vigorously enforce these laws in light of continuing security concerns. If the export or sale of any of our current or future products outside the U.S. are limited or restricted by the U.S. government
or any foreign government, our operations and results of operations would be negatively impacted.

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

If acquisition opportunities arise in the future, we may seek to enter into business combinations or purchases. For example, on
July 29, 2010, we completed the acquisition of Crystal Systems, Inc., a crystal growth technology company that manufactures sapphire substrates used in the LED, defense, medical and
aerospace industries. Acquisitions and combinations, including the acquisition of Crystal Systems, Inc., are accompanied by a number of risks, including the difficulty of integrating the
operations and personnel of the acquired companies, the potential disruption of our ongoing business, the potential distraction of management, expenses related to the acquisition and potential unknown
liabilities and claims associated with acquired businesses. For example, we sought and have not yet received a required consent from a landlord in connection with our acquisition of Crystal
Systems, Inc. and we may be required to pay additional amounts to obtain such consent. In the event we are unable to obtain such consent we may be forced to seek a new lease location. It may be
difficult to find appropriate lease space on substantially similar terms and our business could suffer from the time, expense and distraction of moving our operations. We may be subject to
(i) liability for activities of the acquired company prior to the acquisition, including violations of laws, commercial disputes and tax and other known and unknown liabilities and
(ii) litigation or other claims in connection with the acquired company, including claims brought by terminated employees, customers, former stockholders or other third parties. In addition,
there may, in particular, be risks and uncertainties in connection with the intellectual property rights of an acquired company, including (i) the nature, extent and value of the intellectual
property assets of an acquired company, (ii) the rights that an acquired company has to utilize intellectual property that it claims to have developed or to have licensed, (iii) the
validity of intellectual property transfers to or from third parties, (iv) the enforceability of registered and other intellectual property rights, and (v) actions by third parties
against the acquired company for intellectual property infringement and the extent of the potential loss relating thereto. Third parties may also be more likely to assert claims against the acquired
company, including claims for breach of intellectual property rights, once the company has been acquired by us. Any inability to integrate completed acquisitions or combinations in an efficient and
timely manner or the inability to properly assess and utilize the intellectual property portfolio without infringing the rights of a third party could have an adverse impact on our results of
operations. In addition, we may not be able to recognize any expected synergies or benefits in connection with a future acquisition or combination or we may be unable to effectively implement the
business plan for the acquired company, which would prevent us from achieving our financial and business goals for the business. If we are not successful in completing acquisitions or combinations
that we may pursue in the future, we may incur substantial expenses and devote significant management time and resources without a successful result. In addition, future acquisitions could require use
of substantial portions of our available cash or result in the incurrence of debt or dilutive issuances of securities. Acquisitions and combinations also frequently require the acquiring company to
recognize significant amounts of intangible assets, such as goodwill, patents and trademarks and customer lists, in an acquisition, which amounts may be subject to a future impairment if we are unable
to successfully implement the operating strategy for the acquired company.

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If high quality, low cost crystal sapphire products do not achieve market acceptance, or if alternative technologies are developed, prospects for our sapphire business would
be limited.

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

Moreover,
if effective new sources of light other than LED devices are developed, our sapphire business' current products and technologies could become less competitive or obsolete. Any
of these factors could have an adverse impact on the growth of that portion of our business and the recoverability of our investment in Crystal Systems. Historically, the sapphire industry has
experienced volatility in product demand and pricing. Changes in average selling prices of the Crystal Systems products as a result of competitive pricing pressures, increased sales discounts and new
product introductions by competitors could have an adverse impact on the results of operations.

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

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

In
connection with the business plan for our sapphire business we intend to enter into contracts to supply our advanced sapphire crystal growth furnaces that incorporate advanced Heat
Exchange Method, or HEM, technology prior to the end of the fiscal year and plan to begin shipping such furnaces in the first half of the fiscal year ending March 31, 2012. We may not be able
to execute on our strategy to enter into contracts or to sell sapphire furnaces in a timely manner, or at all, for reasons within or outside of our control and we may be unable to ship such furnaces
if we are unable to obtain the necessary components from third parties. Among the factors that may delay or prevent the realization of our business plan include: limited resources that we can utilize
to manufacture such furnaces; developments by competitors and others in the sapphire crystal market that make the sapphire furnaces inefficient or obsolete; or power demands of these furnaces that
limit broad market acceptance. We may not be able to execute on our strategy to sell sapphire crystal furnaces for reasons within or outside of our control, and even if we are able to sell these
furnaces, we may be unable to recognize revenue on these furnaces in a timely manner, or at all.

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While
we believe that the advanced HEM technology provides advantages in sapphire crystal growth there are other competitors in the market that also utilize this and other processes for
sapphire crystal growing that could compete with our technology and they may be able to more cost-effectively produce high quality, large diameter boules. These competitors include
existing sapphire crystal growing companies and new entrants to the industry attracted by the prospects of the LED and other sapphire markets. In addition, other companies may also begin to offer
furnaces to sapphire crystal growers. If any current or potential competitor develops or purchases comparable or superior technology that enables the growing of higher quality, larger diameter
sapphire crystals or that offers for sale a furnace that grows sapphire crystals more cost effectively than ours, our business, financial condition and results of operations could be materially
adversely affected.

Our sapphire business relies on a limited number of suppliers for raw materials and key components

Our sapphire business depends on a small number of suppliers for certain raw materials, components, services and equipment used in
manufacturing our products and our advanced crystal growth furnaces. In particular, (i) the supply of meltstock we use to grow sapphire materials is limited and there may be an insufficient
amount to grow our sapphire materials business as currently planned or available for the purchasers of our crystal growth furnaces and (ii) the supply of crucibles used in our crystal growth
furnace, which require specialized manufacturing processes, may not be adequate to support the expected increase in the use of the crystal growth furnace by us or by purchasers of our crystal growth
furnaces. We generally purchase these items with purchase orders, and we have no guaranteed supply arrangements with such suppliers. We do not control the time and resources that these suppliers
devote to our business, and we cannot be sure that these suppliers will perform their obligations to us or do so on a timely basis.

Any
significant delay in material or component delivery or other interruption or variation in supply from our key suppliers could prevent us from meeting demand for our products and from
obtaining future business. If we were to lose key suppliers or our key suppliers were unable to support our demand, our sapphire material growth operations and furnace sales could be interrupted and
we could be required to attempt to establish supply arrangements with other suppliers. In addition, the inability of our suppliers to support our demand could be indicative of a marketwide scarcity of
the materials, which could result in even longer interruptions. Any such delay or interruption would impair our ability to meet our customers' needs and, therefore, could damage our customer
relationships and have a material adverse effect on our business and operating results.

Crystal growth using the advanced crystal growth furnace requires a consistent supply of power and any interruption in the supply of power may result in sapphire crystal
material that has reduced or no sales value.

The process by which we grow sapphire crystal boules using the advanced crystal growth furnace technology requires that the furnace be
supplied with a consistent supply of power during the cycle required to grow a boule. If there are certain types of power interruptions, which we have experienced at our Salem facility, even for a
brief period of time, the crystal sapphire boule being generated by that furnace will be of inferior quality and we would likely be unable to sell that sapphire crystal material to a customer.

On November 5, 2010, we entered into a commitment letter for a senior secured credit facility in an aggregate principal amount of up to $200 million, and if we
are unable to reach final agreement on this facility our ability to operate our business may be constrained in the future.

On November 5, 2010, we entered into a commitment letter for a senior secured credit facility in an aggregate principal amount
of up to $200 million with Credit Suisse AG and Credit Suisse Securities (USA) LLC, collectively referred to herein as Credit Suisse. The credit facility is expected to consist of a
three-year revolving credit facility and a three-year term loan facility and to be used for general corporate purposes. GT Solar International, Inc. is the borrower
under the commitment letter. Execution of the final

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credit
facility is subject to negotiation and execution of the applicable documents. We may be unable to reach agreement with Credit Suisse due to extraordinary intervening events, or we may decide
not to close the facility at our discretion, or we may not be able to satisfy all of the conditions for borrowing, in which case, those funds will not be available to us. As a result, our ability to
undertake certain strategic activities may be restricted because we do not have sufficient cash on hand to finance those activities, particularly following the expected payment of approximately
$203 million in connection with
our stock repurchase from GT Solar Holdings, LLC. Such restrictions may have a negative impact on our business and results of operations.

The
facility anticipated under the commitment letter will include negative covenants customary for such facilities. Among other things, the credit facility would place restrictions on
our ability to incur certain additional debt, place liens on property, pay dividends and make distributions, and enter into specified transactions with affiliates. The terms of the credit facility
would also require us to maintain a specified minimum fixed charge coverage ratio and total leverage ratio. The foregoing restrictions, and any others that will be included in the credit facility, may
limit our ability to operate our business and our failure to comply with any of the covenants set forth in the final credit facility could result in the acceleration of our outstanding indebtedness
under this facility. If such acceleration occurs, we would be required to repay our indebtedness, and we may not have the ability to do so or the ability to refinance our indebtedness.

Hedging activity and sales of our common stock related to the Mandatorily Exchangeable Notes issued by UBS AG and/or the expectation of distribution of our common stock at
maturity of the exchangeable notes could depress our stock price.

During September 2010, UBS AG sold its Mandatorily Exchangeable Notes due 2013, or the exchangeable notes, pursuant to which UBS AG
will deliver to holders of the exchangeable notes at maturity up to 17,500,000 shares of our common stock or the value of such shares in cash, or a combination of cash and shares, based on a formula
linked to the price of our common stock. In connection with the issuance by UBS AG of its exchangeable notes, GT Solar Holdings, LLC sold an aggregate of 14,000,000 shares of our common stock
to UBS Securities LLC, an affiliate of UBS AG. We understand that UBS AG and one or more of its affiliates expect to enter into hedging arrangements related to UBS AG's obligations under the
exchangeable notes. This hedging activity will likely involve trading in our common stock or in other instruments, such as options or swaps, based upon our common stock, and may include sales of
common stock acquired by an affiliate of UBS AG upon early exchange of exchangeable notes. This hedging activity could affect our stock price, including by depressing it. Also, the price of our common
stock could be depressed by possible sales of our common stock by investors who view the exchangeable notes as a more attractive means of equity participation in us and by hedging or arbitrage trading
activity that we expect to occur involving our common stock by investors in the exchangeable notes. Our stock price could become more volatile and could be depressed by investors' anticipation of the
potential distribution into the market of substantial additional amounts of our common stock at the maturity of the exchangeable notes.

UBS AG and/or its affiliates hold a portion of our common stock and could influence matters requiring stockholder approval.

UBS AG and/or its affiliates have the right to vote all shares of our common stock that they beneficially own on the record date with
respect to such vote, including the 14,000,000 shares they purchased in connection with the exchangeable notes offering, to the extent that UBS AG and/or its affiliates have not, prior to the
applicable record date, sold or delivered such shares of our common stock. UBS AG and its affiliates are not prohibited from buying shares of our common stock in public or private transactions. As a
result, UBS AG and its affiliates may be able to exercise significant influence over matters requiring stockholder approval, including the election of directors, the adoption of amendments to our
certificate of incorporation and bylaws and approval of significant corporate transactions.

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Table of Contents

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

Item 2(b)
is not applicable



On August 11, 2010, the date of our 2010 Annual Meeting, we issued an aggregate of 20,254 restricted stock units to OCM FIE,
L.P. in lieu of issuing restricted stock units as compensation to J. Bradford Forth and R. Chad Van Sweden, for services as directors. The restricted
stock units were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Act and Section 506 of Regulation D promulgated thereunder.

Each
restricted stock unit represents the right to receive one share of common stock of GT Solar International, Inc. and will vest one year from the date of grant, subject to the
continued service of Messrs. Forth and Van Sweden as directors.

The
following table sets forth information in connection with purchases made by, or on behalf of, us or any affiliated purchaser, of shares of our common stock during the six months
ended October 2, 2010:

(a)
Total Number of
Shares Purchased

(b)
Average Price
Paid per Share

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

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


1,757

$
5.80





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


6,465

$
5.48





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


1,725

$
5.63





Month #4 (July 4, 2010 through August 7, 2010)


1,724

$
7.46





Month #5 (August 8, 2010 through September 4, 2010)


45,593

$
8.24





Month #6 (September 5, 2010 through October 2, 2010)


1,725

$
7.93








We
did not repurchase any of our common stock on the open market as part of a stock repurchase program during the six months ended October 2, 2010; however, our employees
surrendered, and we subsequently retired, 58,989 shares of our common stock to satisfy the tax withholding obligations on the vesting of restricted stock unit awards issued under our 2008 Equity
Incentive Plan.

Item 3.    Defaults Upon Senior Securities



Item 4.    (Removed and Reserved)

Item 5.    Other Information



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Table of Contents

Item 6.    Exhibits

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

Incorporated by ReferenceExhibit
Number

Description of Document

Form

Date
Filed

Exhibit #

Filed
Herewith10.1

GT Solar International, Inc. fiscal year 2011 Executive Incentive Plan

8-K

8/17/10

10.110.2

GT Solar International, Inc. Fiscal Year 2011 Management Incentive Plan

8-K

11/3/10

10.110.3

Amendment to Letter Agreement between Richard E Johnson and GT Solar Incorporated dated October 28, 2010

8-K

11/3/10

10.231.1

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







X31.2

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







X32

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







X


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Table of Contents

SIGNATURES

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

GT SOLAR INTERNATIONAL, INC.By:

/s/ THOMAS GUTIERREZ Thomas GutierrezDate: November 10, 2010



President and Chief Executive OfficerBy:

/s/ RICHARD J. GAYNOR Richard J. GaynorDate: November 10, 2010



Vice President and Chief Financial Officer


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