Michael Carboy (Signal Hill Capital Group LLC): People see a lot of value on these multi-year forward deals in coming and contracting with you. What specifically is it that you think is giving them the confidence to put ink to paper over as many years for the sizable volumes that they are taking down?
Richard M. Feldt: We have had a lot of discussions with our customers so there are a few dimensions. The first, our customers do have confidence that we will deliver as advertised and so although some investors have had concerns our customers have not. They have seen how we helped EverQ up and going and they visited a couple times, the progress that we were making here in Massachusetts on Devens. So they felt good about our ability to deliver.
Secondly, we are told this repeatedly, although we are a small company we have had focus groups who had a lot of discussions with our customers, listened hard to what they say is important to them and so we have made it easier to sell our product. We have the tightest specs in the industry regarding power ratings. We are getting feedback from customers that in side by side evaluations with many named companies that for a rated system we deliver more power than our competitors do because we are judicious about our power ratings. If we say it is 200 watts on our high quality products, it is at least 200 watts or greater and in our lowest quality, it is 196 watts at the worst case. They like our power ratings, they like the fact that we use anti-reflective glass to absorb more sunlight when it is at lower angles of infinite, when it is either rising or declining in the evening. They like the fact that we use heavier grade aluminum so that the snow loads our panels can withstand are the highest in the industry. We have done a lot of things to make the customer like our product and so even though we are small and in a marketplace where solar is as good as a commodity, we have done things to make our product not just like everyone else’s. Our customers have confidence in our ability to deliver as advertised. They have confidence in the product itself and they have confidence that we are going to be a long term player. We have articulated to everybody our cost reduction plan for the next couple of years. Although we do not have everything solutioned on it we feel good about achieving the cost targets that we said. The world knows that prices are going to drop a lot in the next five years and so our customers have said we are betting you are going to be one of the long term players here. It is multi-dimensional.
Michael Carboy (Signal Hill Capital Group LLC): Do those customers ask you at all about your exposure on the capital cost side of building the future plants between DI and DII given the way that steel and various other component costs are running?
Richard M. Feldt: No, that has not been an issue especially once we get up and going with Devens I and II. I can not wait until we have these calls and we talk about how much money we made versus what our losses were and why and why we spent investors’ money we think wisely. Once we start making money, our ability to finance going forward goes up a lot.
Ben Pang (Harris and Company): You talked about the timeline in terms of moving from the cell to the module for your Devens I in the first quarter, does that timing change as you go into the Devens II start up?
Richard M. Feldt: You want to get the first up and going. You want to build some inventory of wafers and given how well our vendor is delivering furnaces, how well they are starting up and the vendor’s capacity, it is easier for us to get furnaces than it is for us to get some cell and panel equipment. The industry is growing rapidly so we are pushing hard to get the cell and panel equipment in ASAP. We are about two weeks later than I would have liked to have been in the cell fab. That is not bad given the timing of the industry but I would like to be two weeks ahead of where I am but I have all the equipment in now to get up and going. I am just commissioning the last few devices. It is desire on our part to get some wafers built up and it is also just a reality that our furnace supplier is doing a good job and all the other equipment in the industry is tight and it is hard to manage lead times. We have done a good job, we are not materially late but it is hard to manage lead times. Everyone is buying the same kind of equipment.
Pavel Molchanov (Raymond James): You have a number of contracts with a few new entrants in the silicon arena. Could you go over those and update on where they stand in terms of ramping up production?
Richard M. Feldt: It is important to note that we have two contracts with DC Chemical, they will be our primary supplier and looking to 2009 they will supply about 75% or so of our needs. The balance will come from REC on a small contract and then NETOL. NETOL is a couple of months away from getting a lot of reactors from GT Solar, so they are on schedule. We expect to start taking delivery of small quantities from them in the first quarter and more as the year goes on. In 2009 it is predominantly DC with a small amount coming from NETOL and REC.
Stephen Chin (UBS): Do you think that US ITC will be passed this year?
Richard M. Feldt: I have no clue. You ask 100 people, you get 100 opinions. Who knows what the politicians will do. I think it would be foolhardy not to. I think that with gasoline prices as high as they are and our reliance on oil going up. [T Boom Pickens] now says in 1970 it was about 30%, now it is 75% or something. It would be ridiculous not to, but who knows. For us given our volumes and given the relationships and what we have scheduled with different customers, it is a good thing for the industry if it happens, but in the short term it is not going to affect our sales.
Sam Dubinsky (Oppenheimer & Co.): On the gross margin front, currently 6% to 8% is light and you have a $2.7 million accelerated depreciation charge in there. Am I correct that gross margin would have been about 17% and change without that?
Michael El-Hillow: No, the $2.7 million is not even included in that, that will be below the line.
Sam Dubinsky (Oppenheimer & Co.): You have 20% gross margin after fourth quarter and 30% for first quarter of next year. Could you discuss cost per watt once a plant is up and running with silicon, non silicon and then how do you model in start up costs for a factory, how you ramp Devens II?
Michael El-Hillow: The fact is when Devens reaches full capacity mid-next year, it will be at about $2 a watt, that is Devens I and Devens II could get there faster because it is an expansion of Devens I. Start up costs, we talked about typically they will be about $12 million to $15 million per expansion with Devens I being an expansion, six months to fully open and that quarter you get about a third of it, you get the other two-thirds thereafter, so $5 million to $10 million. As we move to the next location, if we go to low cost rates, those costs would go down. But yields as a frame of reference you should get there. So next generation of factories at full capacity $2 per watt. The generation thereafter we talked about it at the Analyst Day we expect that cost to be about 10% to 12% even lower than that.
Sam Dubinsky (Oppenheimer & Co.): As new lines come on line, how do you think about COGs and gross margin just because next quarter is lighter?
Michael El-Hillow: We are taking the hit this quarter on Devens I as a significant ramp up. It should not be that difficult going forward.
Jeff Osborne (Thomas Weisel Partners): When would you need to put cash down payments on equipment on the early 2010 expansion?
Michael El-Hillow: To get the next factory going, it is not so much equipment per se, but to acquire the land, get the contractors going. We will start spending some money later this year. This recent raise that we did gives us sufficient capital to move forward fast with that expansion. But to complete that expansion we have said all along in 2009 we will have to access the market again somewhat. We do hope to go get some asset backed lending and we have said upwards of about $400 million over the year, not all at once. But that should be the last I will say need for outside infusion of capital. Between asset backed lending hopefully the EverQ IPO and we will be generating some cash from operations, that should do it.
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