Yingli Green Energy Holding Company Limited, the solar energy integrated photovoltaic manufacturer in China, announced that in the third quarter of 2010, Trustbridge Partners II, L.P. ("Trustbridge") converted US$26.2 million senior secured convertible notes due 2012 (the "Convertible Notes"). As a result, in the third quarter of 2010, the Company (i) issued an aggregate of 6,000,688 ordinary shares (the "Conversion Shares") to Trustbridge; and (ii) recorded an additional non-cash accounting charge of RMB 50.9 million (US$7.6 million) upon the conversion in the Company's GAAP income statement for the third quarter of 2010. This charge is a non-cash charge that will not impact the Company's cash flow. Further, this non-cash accounting charge will be added back in the Company's non-GAAP net income for the third quarter of 2010. The management also updated its financial outlook, providing upbeat comments on the Company's third quarter and 2010 full year financial outlook.
The Convertible Notes were issued pursuant to a previously announced note purchase agreement entered into between the Company and Trustbridge in January 2009. Trustbridge, the holder of the Convertible Notes, may, at any time prior to the maturity date of the Convertible Notes, convert the principal amount of the Convertible Notes into ordinary shares of the Company. After the aforementioned conversion, the principal amount of the Convertible Notes outstanding as of the date of this press release is US$14.6 million. Based on the conversion rate of 22,933 ordinary shares per US$100,000 in principal amount of the Convertible Notes, the Company would be required to issue an aggregate of 3,339,525 ordinary shares upon the conversion of the remaining outstanding principal amount of US$14.6 million in the future. The relevant non-cash accounting charge will be amortized over the holding period of the remaining Convertible Notes, or expensed upon their conversion.
"We expect the conversion of the Convertible Notes to further improve our liquidity by reducing our debt level and future interest expense," commented Mr. Zongwei Li, Director and Chief Financial Officer of Yingli Green Energy. "Although our outstanding share capital was diluted as a result of this conversion and a non-cash accounting charge was recorded in connection with this conversion, we believe they have a limited effect on our financial performance in the third quarter of 2010." Mr. Li further commented, "We expect a mid-20% increase in shipment quarter over quarter in the third quarter of 2010, in line with our previous estimates. With better than expected average selling price and improving operating efficiency of our new 400 MW production lines, we are confident in achieving a 30% to 32% gross margin in the third quarter of 2010, compared to previous estimated range of 28% to 30%."
Mr. Li continued, "Based on strong performance in the past three quarters of 2010 and more clear visibility for the fourth quarter, we expect that our gross margin for 2010 to reach 30% to 32%, compared to the previous estimated range of 28% to 30%."