Evergreen Solar Files A $500 Million Bankruptcy

bankruptcy sign 4x3

, a public company specializing in solar energy, has filed for bankruptcy.

Enthusiasm for alternative energy seems to wax and wane in the U.S., but the financial health of Evergreen has been consistently waning for some time. Falling prices and competition with manufacturers based in China have pushed this company to the brink.  

Closure of the company’s plant in Devens, Massachusetts, and the elimination of 800 jobs, represented a belated effort to bring down costs by shifting more production to China. The company received a “going concern” warning by its auditor in the spring.  In the end the cash burn at Evergreen outran efforts by management to fix the cost structure.

A quick analysis of LTM financials paints a picture of a highly levered ($395.8 million in long-term debt as of the last quarterly filing) company with unsustainably low levels of profitability and working capital trends moving in the wrong direction.  The highlights:

  • Sales of $295.6 million, with a gross margin of -28.2%
  • Operating margin of -163.5%, EBITDA margin of -45.9%
  • DSO of 135.8 (up from 57.8)
  • DIO of 111.2 (up from 55.3)

Given the financial performance of this company, the surprise it not that it filed for bankruptcy, the surprise is that it took so long to come to that obvious conclusion.

About the author:

David Johnson is a partner with ACM Partners, a boutique financial advisory firm providing due diligence, performance improvement, restructuring and turnaround services to companies and municipalities. He can be reached at 312-505-7238 or at [email protected].

 

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