Tesla 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Tesla annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

TESLA MOTORS INC
FORM 10-K
(Annual Report)
Filed 02/26/14 for the Period Ending 12/31/13
Address 3500 DEER CREEK RD
PALO ALTO, CA 94070
Telephone 650-681-5000
CIK 0001318605
Symbol TSLA
SIC Code 3711 - Motor Vehicles and Passenger Car Bodies
Industry Auto & Truck Manufacturers
Sector Consumer Cyclical
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2014, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    TESLA MOTORS INC FORM 10-K (Annual Report) Filed 02/26/14 for the Period Ending 12/31/13 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 3500 DEER CREEK RD PALO ALTO, CA 94070 650-681-5000 0001318605 TSLA 3711 - Motor Vehicles and Passenger Car Bodies Auto & Truck Manufacturers ...

  • Page 2
    ... Alto, California (Address of principal executive offices) 94304 (Zip Code) (650) 681-5000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $0.001 par value...

  • Page 3
    .... Item 13. Item 14. PART IV. Item 15. Signatures 2 Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of...

  • Page 4
    ... limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market...

  • Page 5
    ... PART I ITEM 1. Overview We design, develop, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components. We have established our own network of sales and service centers and Supercharger stations globally thus creating a unique business model...

  • Page 6
    ...production of the Tesla Roadster and Model S. Our battery pack and electric powertrain system has enabled us to deliver market-leading range capability on our vehicles at what we believe is a compelling battery cost per kilowatt-hour. Our battery packs use custom electric vehicle lithium-ion battery...

  • Page 7
    ... Products We currently design, develop, manufacture and sell fully electric vehicles and electric powertrain components. We are currently selling primarily the Model S. Model S Model S is a fully electric, four-door, five-adult passenger sedan that offers compelling range and performance with zero...

  • Page 8
    ...and 85 kWh battery pack options, with pricing of each version similar to those of a comparably equipped Model S. We currently intend to target an initial annual production rate of approximately 20,000 vehicles per year from our Tesla Factory. We expect to have production design Model X prototypes on...

  • Page 9
    ... electric powertrain consists of the following: battery pack, power electronics, motor, gearbox and the control software which enables the components to operate as a system. We designed each of these major elements for our Tesla Roadster and Model S and plan to use much of this technology in Model...

  • Page 10
    ... manufacturing processes, customized motor design and the software and electronics management systems necessary to manage battery and vehicle performance under demanding reallife driving conditions. We have significant experience and expertise in the safety and management systems needed to work...

  • Page 11
    ... battery thermal management system and to operate without the energy generated from an internal combustion engine. In addition, low voltage electric systems which power features such as the radio, power windows, and heated seats also needed to be designed specifically for use in an electric vehicle...

  • Page 12
    ...Our customers deal directly with our own Tesla-employed sales and service staff, creating what we believe is a differentiated buying experience from the buying experience consumers have with franchised automobile dealers and service centers. We believe we will also be able to better control costs of...

  • Page 13
    ... to work closely with our engineers and research and development teams in Silicon Valley to identify problems, find solutions, and incorporate improvements faster than incumbent automobile manufacturers. New Vehicle Limited Warranty, Maintenance and Extended Service Plans For our Model S customers...

  • Page 14
    ..., we manufacture lithium-ion battery packs, electric motors, gearboxes and components both for our vehicles and for our original equipment manufacturer customers at the Tesla Factory. Several major component systems of our vehicles are purchased from suppliers; however we have a high level of...

  • Page 15
    ...not maintain long-term agreements with our suppliers. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term or at all at prices or costs that are...

  • Page 16
    ... and for us to receive Toyota's support with sourcing parts and production and engineering expertise for Model S. In July 2010, we entered into an early phase agreement to develop an electric powertrain for the Toyota RAV4. With an aim by Toyota to market the electric vehicle in the United States in...

  • Page 17
    ... and ending in December 2013. The equipment purchases were used only for three purposes: (i) to establish our production facility for Model S in California, (ii) to upgrade our Palo Alto powertrain production facility, and (iii) to expand our current Tesla Roadster assembly operations at our Menlo...

  • Page 18
    ... manufacturing capacity in California, (ii) to expand electric vehicle powertrain production in California, and (iii) Model S future electric vehicle development. Regulatory Credits In connection with the production, delivery and placement into service of our zero emission vehicles in global markets...

  • Page 19
    ...and received type approval for delivery of 85kWh equipped Model S vehicles to China. Plans are currently underway to obtain type approval for the 60kWh equipped Model S vehicle in China and both battery pack variants for markets in Japan and Australia, including a forthcoming righthand drive version...

  • Page 20
    ... for emissions control for certain regulated pollutants for new vehicles and engines sold in California are set by CARB. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. Regulation-Battery Safety and Testing Our battery...

  • Page 21
    ...us to open a store in such state in order to sell vehicles to its residents. In some states where we have opened a viewing "gallery" that is not a full retail location, it is possible that a state regulator could take the position that activities at our gallery constitute an unlicensed motor vehicle...

  • Page 22
    ...energy storage system (battery pack or fuel cell) which is refueled directly from an electricity source. Both the Tesla Roadster and Model S are examples of electric vehicles. Plug-in Hybrid Vehicles are vehicles powered by both a battery pack with an electric motor and an internal combustion engine...

  • Page 23
    ...we operate as one reporting segment, which is the design, development, manufacturing and sales of electric vehicles and electric powertrain components. For information regarding financial data by geographic areas, see Note 10 to our Consolidated Financial Statements included in this Annual Report on...

  • Page 24
    ... brand, business, prospects, financial condition and operating results. We have only recently increased our Model S delivery rates in the United States to match our current and anticipated Model S production capacity. We have limited experience in the high volume delivery of our Model S vehicles. We...

  • Page 25
    ... long-term agreements with a number of our suppliers. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term, or at all, at prices or costs...

  • Page 26
    ... effect on our business, prospects, financial condition and operating results. Finally, in October 2013, we entered into an amendment to our existing supply agreement with Panasonic Corporation in order to address our anticipated short- to medium-term lithium ion battery cell needs. While we expect...

  • Page 27
    ...vehicles exceeds current expectations without significant expansion in battery cell production capacity and advancements in battery cell technology, shortages could occur which would result in increased material costs to us or potentially limit our ability to expand production. Our long-term success...

  • Page 28
    ... we expect, our business, prospects, financial condition and operating results will be harmed. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and...

  • Page 29
    ... cause current or potential customers not to purchase our electric vehicles, which would materially and adversely affect our business, operating results, financial condition and prospects. If we fail to manage future growth effectively as we rapidly grow our company, especially internationally, we...

  • Page 30
    ...for Asia. Our vehicle design and our engineering, manufacturing and component supply plans for Model S may continue to be adjusted. In addition, our powertrain component sales, development services revenue and powertrain research and development compensation have been almost entirely generated under...

  • Page 31
    ...our brand and harm our business, prospects, financial condition and operating results. If our vehicles or vehicles that contain our powertrains fail to perform as expected, or if we suffer product recalls for Model S, our ability to develop, market and sell our electric vehicles could be harmed. Our...

  • Page 32
    ... as long-term commercial success, we must continue to achieve our planned cost reductions and control our operational costs while producing quality Model S vehicles at volume, maintain and increase our Model S delivery rates to match our current and anticipated Model S production capacity, maintain...

  • Page 33
    ... or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the electric or plug-in hybrid vehicle industry as demand for such cells increases; disruption in the supply of cells...

  • Page 34
    ... period of time. We have relatively limited experience distributing and selling our performance vehicles through our Tesla stores. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies. Implementing our business model is subject...

  • Page 35
    ... chain and sales and service processes that may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver and service vehicles, or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations...

  • Page 36
    ..., engineering or component sourcing plans for Gen III and there are no assurances that we will be able to bring this vehicle to market at the price point and in the volume that we currently intend, if at all. The market for vehicles in the price range we expect for Gen III is much more competitive...

  • Page 37
    ... and development time, pricing, reliability, safety, fuel economy, customer service and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure and adversely affect our business, financial condition...

  • Page 38
    ...manufacture Model X and future products, increase the production capacity at our manufacturing facilities to produce vehicles at higher volumes, develop the Tesla Gigafactory, open new Tesla service centers with maintenance and repair capabilities, open new Supercharger locations, increase our sales...

  • Page 39
    ... related issues that they are facing and may face in the future, our ability to generate customer loyalty, grow our business and sell additional Model S vehicles could be impaired. We service our performance electric vehicles through our company-owned Tesla service centers, certain of our stores...

  • Page 40
    ... resources to meet these service requirements in a timely manner as the volume of vehicles we are able to deliver annually increases. We do not expect to be able to open Tesla service centers in all the geographic areas in which our existing and potential customers may reside. In order to address...

  • Page 41
    ... manufacturers headquartered in Detroit, Japan and the European Union, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating...

  • Page 42
    ... be able to expand at a sufficient rate and our planned expansion will require significant cash investment and management resources, as well as efficiency in the execution of establishing these locations and in hiring and training the necessary employees to effectively sell and service our vehicles...

  • Page 43
    ... automobile markets and our business, prospects, financial condition and operating results. Our growth depends in part on the availability and amounts of government subsidies and economic incentives for alternative fuel vehicles generally and performance electric vehicles specifically. For example...

  • Page 44
    ... level over tax reform. Discussions have included reducing or even eliminating the current $7,500 tax credit available to purchasers of qualified alternative fuel vehicles, including Model S. Also, government programs have been enacted in Europe favoring the purchase of electric vehicles, including...

  • Page 45
    ... affect our business, prospects, operating results and financial condition. Our research and development efforts may not be sufficient to adapt to changes in electric vehicle technology. As technologies change, we plan to upgrade or adapt our vehicles and introduce new models in order to continue...

  • Page 46
    ... natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results. We may face unexpected delays in...

  • Page 47
    ... Air Act emission regulations affecting power plants used to generate electricity could increase the cost of electricity; changes to the regulations governing the assembly and transportation of lithium-ion battery packs, such as the UN Recommendations of the Safe Transport of Dangerous Goods Model...

  • Page 48
    ... of California's zero emission vehicle regulations administered by the California Air Resources Board under the California Health & Safety Code could reduce new business opportunities for our powertrain sales and development activities, as well as our ability to monetize ZEV credits not only...

  • Page 49
    ... involve significant expense and diversion of management attention and other resources, and could adversely affect our brand image in our target markets, as well as our business, prospects, financial condition and results of operations. Our current and future warranty reserves may be insufficient to...

  • Page 50
    ... 2013, as part of our ongoing efforts to improve the customer ownership experience, we expanded the battery pack warranty and also eliminated the annual service requirement that was needed to keep the New Vehicle Limited Warranty in effect. Should this change in warranty coverage lead to an increase...

  • Page 51
    ... comply with applicable state motor vehicle industry laws. For example, in October 2012, vehicle dealer associations in New York and Massachusetts filed lawsuits to revoke the dealer license issued to Tesla Motors New York in New York and to limit the business activity of Tesla Motors MA, Inc. in...

  • Page 52
    ... our competitive advantage, a decrease in our revenue and an attribution of potentially lower quality products to us, which would adversely affect our business, prospects, financial condition and operating results. Our success depends, at least in part, on our ability to protect our core technology...

  • Page 53
    ... financial and marketing resources on establishing an alternative brand identity in these markets. Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events. Our corporate headquarters in Palo Alto and Tesla Factory in Fremont are located...

  • Page 54
    ... of developing, improving and expanding our core information technology systems as well as implementing new systems to support our sales, engineering, supply chain and manufacturing activities, all of which require significant management time and support, we may not be able to complete our internal...

  • Page 55
    ...our Notes may have a material effect on our reported financial results. Holders may convert their Notes at their option at any time prior to the close of business on the business day immediately preceding March 1, 2018 only under certain circumstances. For example, holders may convert their Notes at...

  • Page 56
    ... reported financial results for such quarter, and could have an adverse impact on the market price of our common stock. Risks Related to the Ownership of our Common Stock Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from...

  • Page 57
    ... convertible during the first quarter of 2014, they may again become convertible in future periods if a condition to conversion for the Notes is met. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock...

  • Page 58
    ...effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock. In addition, the terms of the convertible notes...

  • Page 59
    ... commenced the production of our Model S vehicle and powertrain components and systems in June 2012 at the Tesla Factory. We also intend to build our future vehicles at the Tesla Factory. In July 2013, we completed the purchase of approximately 31 acres of land located in Fremont, California that is...

  • Page 60
    ...stores and galleries, service locations and Supercharger sites. We believe that suitable additional or alternative space will be available in the future on commercially reasonable terms to accommodate our foreseeable future expansion. ITEM 3. LEGAL PROCEEDINGS Securities Litigation In November 2013...

  • Page 61
    ... since it began trading on June 29, 2010. Our initial public offering was priced at $17.00 per share on June 28, 2010. The following table sets forth, for the time period indicated, the high and low closing sales price of our common stock as reported on The NASDAQ Global Select Market. 2013 High Low...

  • Page 62
    Table of Contents Unregistered Sales of Equity Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 61

  • Page 63
    ... common stock effected in May 2010. 2013 Year Ended December 31, 2012 2011 2010 (in thousands, except share and per share data) 2009 Consolidated Statements of Operations Data: Revenues: Automotive sales Development services Total revenues Cost of revenues (1): Automotive sales Development services...

  • Page 64
    ...the closing of our initial public offering (IPO). The warrant provided that beginning on December 15, 2018 and until December 14, 2022, the shares subject to purchase under the warrant would become exercisable in quarterly amounts depending on the average outstanding balance of the DOE Loan Facility...

  • Page 65
    ... Consolidated Balance Sheet Data: Cash and cash equivalents Short-term marketable securities Restricted cash-current (1) Property, plant and equipment, net (2) Working capital (deficit) Total assets Convertible preferred stock warrant liability (3) Common stock warrant liability (3) Capital lease...

  • Page 66
    ...of European Model S deliveries which commenced in August 2013, regulatory credit sales and powertrain component sales to Toyota Motor Corporation (Toyota) for the Toyota RAV4 EV; partially offset by a decrease in development services activity related to the Daimler AG (Daimler) Mercedes-Benz B-Class...

  • Page 67
    ... supplier brings new production capacity online. Based on our higher production level, we currently expect to deliver over 35,000 Model S vehicles in 2014, representing a more than 55% increase over 2013. In 2013, Model S was the top selling vehicle in North America among comparably priced vehicles...

  • Page 68
    ...global financial partners. If customer interest in these options is significant, we may be directly or indirectly subject to resale value risks for the Model S. We are currently evaluating a number of other customer financing products, including direct small business leases, as a way to better serve...

  • Page 69
    ... of achieving further component cost reductions and benefit from economies of scale. We therefore expect our automotive gross margin to increase to about 28% in the fourth quarter of 2014, excluding potential zero emission vehicle (ZEV) credit sales and assuming a lower option take rate as we get...

  • Page 70
    ... company. In 2014, we plan to significantly expand production capacity for Model S and Model X, invest in our customer support infrastructure, complete the development of Model X and start early design work on our third generation vehicle, which we refer to as "Gen III". Our research and development...

  • Page 71
    ...vehicle service and sales of regulatory credits, such as ZEV and greenhouse gas emission (GHG) credits. We also recognize automotive sales revenue from the sales of electric vehicle powertrain components and systems, such as battery packs and drive units, to other manufacturers. We recognize revenue...

  • Page 72
    ... of time. For customers that are not covered by our New Vehicle Limited Warranties or our extended service plans, we offer Tesla Ranger service at a higher cost. Payments collected in advance of the performance of service are initially recorded in deferred revenues on the consolidated balance sheets...

  • Page 73
    ... from development services arrangements consist of revenue earned from the development of electric vehicle powertrain components and systems for other automobile manufacturers, including the design and development of battery packs, drive units and sample vehicles to meet a customer's specifications...

  • Page 74
    ... fair value of stock options and the ESPP were estimated on the grant date for the periods below using the Black-Scholes option-pricing model and the following assumptions. Year Ended December 31, 2012 2013 2011 Risk-free interest rate: Stock options ESPP Expected term (in years): Stock options...

  • Page 75
    ... parts and battery technology industries, because we have limited trading history on our common stock. When making the selections of our peer companies within industries related to our business to be used in the volatility calculation, we also considered the stage of development, size and financial...

  • Page 76
    ... options will be forfeited if our CEO is no longer in that role, whether for cause or otherwise. Based on our current market valuation and operating plans, we believe that up to the first three tranches of the 2012 CEO Grant (all relating to Model X) will vest during 2014. We measured the fair value...

  • Page 77
    ...Automotive sales, which include vehicle, options and related sales, and powertrain component and related sales, consisted of the following for the periods presented (in thousands): 2013 Year Ended December 31, 2012 2011 Vehicle, options and related sales Powertrain component and related sales Total...

  • Page 78
    ... deliveries of Model S, including vehicle options, accessories and destination charges, vehicle service and sales of regulatory credits to other automotive manufacturers. Powertrain component and related sales represent the sales of electric vehicle powertrain components and systems, such as battery...

  • Page 79
    ... as deliveries of electric powertrain component and systems to Toyota under the Toyota RAV4 EV supply and services agreement. In April 2013, we began offering a resale value guarantee to all customers who purchased a Model S in the United States and financed their vehicle and vehicle options through...

  • Page 80
    ... as electric powertrain component and systems sales to Toyota as we began to deliver under the Toyota RAV4 EV supply and services agreement, partially offset by a decrease in the number of Tesla Roadster deliveries and battery packs and chargers delivered to Daimler. Cost of development services for...

  • Page 81
    ...higher sales and marketing headcount to support sales activities worldwide and higher general and administrative headcount to support the expansion of the business, a $9.4 million increase in office, information technology and facilities-related costs to support an expanded store and service network...

  • Page 82
    ... the change in the fair value of our DOE common stock warrant liability and foreign exchange gains and losses related to our foreign currency-denominated assets and liabilities. We expect our foreign exchange gains and losses will vary depending upon movements in the underlying exchange rates. Prior...

  • Page 83
    ... of money market funds. Other sources of cash include cash from our deliveries of Model S, customer deposits for Model S and Model X, sales of regulatory credits, cash from the provision of development services, and sales of powertrain components and systems. In the short term, we expect that our...

  • Page 84
    ... as long-term debt. Should the closing price conditions be met in the first quarter of 2014 or a future quarter, the Notes will be convertible at their holders' option during the immediately following quarter. For more information on the Notes, see Note 6 to our Consolidated Financial Statements...

  • Page 85
    ... long-term liabilities primarily associated with Model S deliveries with the resale value guarantee, $15.7 million of development services revenue and a $24.2 million net increase in customer deposits, partially offset by a $21.9 million increase in accounts receivable due to regulatory credit sales...

  • Page 86
    ... expenses and other current assets. Inventory increased to meet our planned production requirements for Model S and powertrain component and system sales while the net increase in accounts payable and accrued liabilities was due to both the growth of our business and the timing of vendor payments...

  • Page 87
    ... of the DOE Loan Facility and $40.0 million from the maturity of short-term marketable securities. The increase in capital purchases was primarily due to significant development and construction activities at the Tesla Factory as well as purchases of Model S related manufacturing equipment and...

  • Page 88
    ... the purchase of our Tesla Factory located in Fremont, California from New United Motor Manufacturing, Inc. (NUMMI). NUMMI has previously identified environmental conditions at the Fremont site which could affect soil and groundwater, and is currently undertaking efforts to address these conditions...

  • Page 89
    ... any material exposure to changes in the fair value as a result of changes in interest rates due to the short term nature of our cash equivalents. As of December 31, 2013, we had $660.0 million aggregate principal amount of convertible senior notes outstanding and capital lease obligations of $20...

  • Page 90
    ... Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Loss Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes...

  • Page 91
    ... Public Accounting Firm To the Board of Directors and Stockholders of Tesla Motors, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive loss, of stockholders' equity (deficit) and of cash flows present fairly...

  • Page 92
    ... Customer deposits Convertible debt, current portion Long-term debt, current portion Total current liabilities Common stock warrant liability Capital lease obligations, less current portion Deferred revenue, less current portion Convertible debt, less current portion Resale value guarantee Long-term...

  • Page 93
    ... Contents Tesla Motors, Inc. Consolidated Statements of Operations (in thousands, except share and per share data) 2013 Year Ended December 31, 2012 2011 Revenues Automotive sales Development services Total revenues Cost of revenues Automotive sales Development services Total cost of revenues Gross...

  • Page 94
    Table of Contents Tesla Motors, Inc. Consolidated Statements of Comprehensive Loss (in thousands) 2013 Year Ended December 31, 2012 2011 Net loss Other comprehensive income (loss), net of tax: Unrealized net loss on short-term marketable securities Reclassification adjustment for gain included in ...

  • Page 95
    ... Issuance of common stock under employee stock purchase plan Stock-based compensation Comprehensive loss: Net loss Unrealized loss on short-term marketable securities, net Total comprehensive loss Balance as of December 31, 2012 Issuance of common stock in May 2013 public offering at $92.20...

  • Page 96
    ... Deferred revenue Customer deposits Resale value guarantee Other long-term liabilities Net cash provided by (used in) operating activities Cash Flows From Investing Activities Purchases of property and equipment excluding capital leases Withdrawals out of our dedicated Department of Energy account...

  • Page 97
    ... to Consolidated Financial Statements 1. Overview of the Company Tesla Motors, Inc. (Tesla, we, us or our) was incorporated in the state of Delaware on July 1, 2003. We design, develop, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components...

  • Page 98
    ...from the sales of the Model S, Tesla Roadster, vehicle service, and vehicle options, accessories and destination charges as well as sales of regulatory credits. Automotive sales also consist of revenue earned from the sales of electric vehicle powertrain components and systems, such as battery packs...

  • Page 99
    ...revenue the initial purchase consideration less resale value guarantee amount on a straight-line basis, over the contractual term of the guarantee program (i.e., the proxy operating lease term). Similarly, we capitalize and depreciate the cost of the respective operating lease vehicles less expected...

  • Page 100
    ... from development services arrangements consist of revenue earned from the development of electric vehicle powertrain components and systems for other automobile manufacturers, including the design and development of battery packs, drive units and sample vehicles to meet a customer's specifications...

  • Page 101
    ... by the DOE. Current and noncurrent restricted cash as of December 31, 2013 was comprised primarily of security deposits held by vendors as part of the vendors' standard credit policies, security deposits related to lease agreements and equipment financing, and certain refundable customer deposits...

  • Page 102
    ... derived primarily from sales of regulatory credits, as well as the development and sales of powertrain components and systems to OEMs. Accounts receivable also included amounts to be received from commercial financial institutions for approved financing arrangements between our customers and the...

  • Page 103
    ...-line method over the expected operating lease term. The total cost of operating lease vehicles recorded in the consolidated balance sheets as of December 31, 2013 and 2012 was $401.9 million and $13.4 million, respectively. Accumulated depreciation related to leased vehicles as of December 31...

  • Page 104
    ... employee stock purchase plan (the ESPP). The fair value of stock options and the ESPP are estimated on the grant date and offering date using an option pricing model, respectively. The fair value of RSUs is measured on the grant date based on the closing fair market value of our common stock. Stock...

  • Page 105
    ... is recorded as a component of cost of revenues in the consolidated statements of operations. The portion of the warranty provision which is expected to be incurred within 12 months from the balance sheet date is classified as current, while the remaining amount is classified as long-term. We began...

  • Page 106
    ... and diluted net loss per share of common stock for the periods, related to the following securities: 2013 Year Ended December 31, 2012 2011 Stock options Convertible senior notes Employee stock purchase plan Restricted stock units DOE warrant Common stock subject to repurchase 13,881,355 411,560...

  • Page 107
    ... related to assets under capital lease as of these dates were $5.0 million and $1.0 million, respectively. Other Assets As of December 31, 2013 and 2012, our other assets consisted of the following (in thousands): December 31, 2013 December 31, 2012 Emission permits Debt issuance costs, net Loan...

  • Page 108
    ... are valued using quoted market prices or market prices for similar securities. Our common stock warrant liability (see Note 6) was classified within Level III of the fair value hierarchy. As of December 31, 2013 and 2012, the fair value hierarchy for our financial assets and financial liabilities...

  • Page 109
    ... vehicle specifications and entered into a purchase agreement. We have eliminated the reservation process for Model S in North America and in most of our markets in Europe, as vehicle production became more reliable and customer wait times decreased. Customers now initiate their purchase by ordering...

  • Page 110
    ... 2014 and are classified as long-term debt. Should the closing price conditions be met in the first quarter of 2014 or a future quarter, the Notes will be convertible at their holders' option during the immediately following quarters. Full Repayment of Department of Energy Loan Facility In May 2013...

  • Page 111
    ... In connection with the closing of the DOE Loan Facility, we issued in January 2010 a warrant to the DOE to purchase up to 9,255,035 shares of our Series E convertible preferred stock at an exercise price of $2.51 per share. Upon the completion of our initial public offering on July 2, 2010, this...

  • Page 112
    ...on our consolidated balance sheets. Changes to the fair value of the embedded derivative were reflected as part of the warrant liability re-measurement to fair value at each balance sheet reporting date. The warrant was recorded at its estimated fair value with changes in its fair value reflected in...

  • Page 113
    ...table summarizes stock option and RSU activity under the Plan: Outstanding Stock Options Shares Available for Grant Number of Options Weighted Average Exercise Price Outstanding RSUs Weighted Average Grant Number Date Fair of RSUs Value Balance, December 31, 2010 Additional options reserved Granted...

  • Page 114
    ... December 31, 2013 is summarized below: Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Number Options Exercisable Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Range of Exercise Price Number $0.15...

  • Page 115
    ...fair value of each option award and the ESPP on the grant date generally using the Black-Scholes option pricing model and the weighted average assumptions noted in the following table. 2013 Year Ended December 31, 2012 2011 Risk-free interest rate: Stock options ESPP Expected term (in years): Stock...

  • Page 116
    ... compared to the initial market capitalization of $3.2 billion measured at the time of the 2012 CEO Grant Successful completion of the Model X Engineering Prototype (Alpha); Successful completion of the Model X Vehicle Prototype (Beta); Completion of the first Model X Production Vehicle; Successful...

  • Page 117
    ...compensation, subject to any plan limitations. The purchase price of the shares on each purchase date is equal to 85% of the lower of the fair market value of our common stock on the first and last trading days of each six-month offering period. During the years ended December 31, 2013 and 2012, 518...

  • Page 118
    ... 23 $489 December 31, 2013 December 31, 2012 Deferred tax assets: Net operating loss carry-forwards Research and development credits Other tax credits Deferred revenue Inventory and warranty reserves Depreciation and amortization Stock-based compensation Convertible debt Accruals and others Total...

  • Page 119
    ...significant limitation would be placed on the utilization of our net operating loss and tax credit carry-forwards as a result of prior ownership changes. Uncertain Tax Positions The aggregate changes in the balance of our gross unrecognized tax benefits during the years ended December 31, 2013, 2012...

  • Page 120
    ... determined that we operate as one reportable segment which is the design, development, manufacturing and sales of electric vehicles and electric vehicle powertrain components. The following tables set forth revenues and long-lived assets by geographic area (in thousands). Revenues 2013 Year Ended...

  • Page 121
    ... 31, 2013 and 2012. In October 2010, we entered into a Phase 1 contract services agreement with Toyota for the development of a validated powertrain system, including a battery pack, power electronics module, motor, gearbox and associated software to be integrated into an electric vehicle version of...

  • Page 122
    ... 31, 2013 are as follows (in thousands): Operating Leases Capital Leases 2014 2015 2016 2017 2018 and thereafter Total minimum lease payments Less: Amounts representing interest not yet incurred Present value of capital lease obligations Less: Current portion Long-term portion of capital lease...

  • Page 123
    ... safety of the Model S vehicle and Tesla's ability to meet public expectations with respect to its financial performance. The current complaint is brought on behalf of a putative class consisting of "all persons other than Defendants who purchased Tesla's securities between May 10, 2013 and November...

  • Page 124
    ...quarterly results of operations data for the years ended December 31, 2013 and 2012 (in thousands, except per share data): March 31 Three months ended June 30 September 30 December 31 2013 Total revenues...for the four quarters of each fiscal year may not sum to the total for the fiscal year ...

  • Page 125
    ... that a material weakness existed in our internal control over financial reporting related to the presentation and disclosure of non-cash capital expenditures in our consolidated statements of cash flows. Specifically, we did not design effective controls to determine and review the total unpaid...

  • Page 126
    ... December 31, 2013 which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION In January 2014, to create incentives for continued long term success beyond the Model S program and to closely align executive...

  • Page 127
    ... submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. Exhibits. The exhibits listed in the accompanying "Index to Exhibits" are filed or incorporated by reference as part of this Annual Report on Form 10-K. 126 3.

  • Page 128
    ... Amendment to Fifth Amended and Restated Investors' S-1/A Rights Agreement between Registrant, Toyota Motor Corporation and certain holders of the Registrant's capital stock named therein Amendment to Fifth Amended and Restated Investor's S-1/A Rights Agreement, dated as of June 14, 2010, between...

  • Page 129
    ..., dated as of May 22, 2013, by and between Tesla Motors, Inc. and U.S. Bank National Association. Form of 1.50% Convertible Senior Note Due June 1, 2018 (included in Exhibit 4.4). Form of Indemnification Agreement between the Registrant and its directors and officers 2003 Equity Incentive Plan Form...

  • Page 130
    ...Number Exhibit Description Incorporated by Reference Exhibit Filed Herewith Form File No. Filing Date 10.5 10.6 10.7 10.8 10.9 10.10 Form of Stock Option Agreement under 2010 Equity S-1/A Incentive Plan Form of Restricted Stock Unit Award Agreement under 2010 Equity Incentive Plan 2010 Employee...

  • Page 131
    ... of Contents Exhibit Number Exhibit Description Incorporated by Reference Exhibit Filed Herewith Form File No. Filing Date 10.19†Supply Agreement by and among Sanyo Electric Co. Ltd. Mobile Energy Company, Sanyo Energy (USA) Corporation and the Registrant dated February 1, 2007 Amendment...

  • Page 132
    Table of Contents Exhibit Number Exhibit Description Incorporated by Reference Exhibit Filed Herewith Form File No. Filing Date 10.25†Supply Agreement by and among Panasonic Industrial Company, Panasonic Corporation, acting through Energy Company, and the Registrant dated July 21, 2009 S-1...

  • Page 133
    ... Sale and Purchase Agreement between Registrant and New United Motor Manufacturing, Inc., dated September 23, 2010 Phase 1 Contract Services Agreement between Registrant and Toyota Motor Corporation dated October 6, 2010 Supply and Services Agreement between Toyota Motor Engineering & Manufacturing...

  • Page 134
    ... herewith ** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934...

  • Page 135
    ... Tesla Motors, Inc. Date: February 26, 2014 /s/ Elon Musk Elon Musk Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities...

  • Page 136
    ... at Tesla Motors dated June 22, 2012 , which is hereby incorporated by reference into the Agreement." The last sentence of Section 8(a) of the Agreement is hereby deleted in its entirety and replaced with the following: "Panasonic may, for good cause, propose a change to the payment terms and...

  • Page 137
    ... DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY WORK DELAYS, LOST GOODWILL, PROFIT, REVENUE OR SAVINGS, LOSS OF USE, COST OF CAPITAL, COST OF SUBSTITUTE EQUIPMENT, FACILITIES OR SERVICES, OR DOWNTIME COSTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OR IS...

  • Page 138
    ... Treatment Requested by Tesla Motors, Inc. 10. 11. The current version Attachment 1 of the Agreement is no longer in effect and is hereby replaced in its entirety by Attachment 1-A , attached hereto. This Amendment, together with the Agreement (including any open purchase orders), constitutes the...

  • Page 139
    ... Treatment Requested by Tesla Motors, Inc. Attachment 1-A List of Items, Pricing Mechanism 1. Pricing for Cells Delivered Through December 31, 2013 [***]. 2. (a) Pricing for Cells Delivered After January 1, 2014 Cell Pricing . 1Q14 2Q14* 3Q14* 4Q14* 1Q15* 2Q15* 3Q15* 4Q15* 2014-2015 Price for Li...

  • Page 140
    ... certain capital investments to enable production of cells for Tesla under the Agreement at Panasonic's factories at [***], Japan, consisting of [***] (the cost of the foregoing investments is the " Investment Cost "). Panasonic will use reasonable efforts to limit the amount of the Investment Cost...

  • Page 141
    Confidential Treatment Requested by Tesla Motors, Inc. Exhibit 1 Material Adjustment Calculator [***] [***] Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential Treatment has been requested with respect to the omitted portions.

  • Page 142
    ... at Tesla Motors Process incorporates language of Section 7 of Supply Agreement between Tesla Motors and Panasonic Industrial Company and Panasonic Corporation dated Oct. 5, 2011 (the "Agreement") 1 1. Tesla will inspect shipments promptly upon delivery: within [***] of receipt at the DAP Point...

  • Page 143
    ... upon delivery to Tesla), Panasonic shall: a. b. c. Replace the affected Items. [***]; Reimburse Tesla for the reasonable costs of transporting the Items to Panasonic or an alternate designated location for inspection and testing (if transport was conducted at Tesla expense); and Reimburse Tesla for...

  • Page 144
    ...2013 2009 Ratio of earnings to fixed charges (1) (1) - - - - - For the purpose of calculating such ratios, "earnings" consist of income from continuing operations before income taxes plus fixed charges and "fixed charges" consist of interest expense (net of capitalized portion), capitalized...

  • Page 145
    ...333-188625) of Tesla Motors, Inc. of our report dated February 26, 2014 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP San Jose, California February 26...

  • Page 146
    ...'s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2014 /s/ Elon Musk Elon...

  • Page 147
    ...'s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2014 /s/ Deepak Ahuja Deepak...

  • Page 148
    ... the Securities Exchange Act of 1934 and (ii) that the information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Tesla Motors, Inc. Date: February 26, 2014 /s/ Deepak Ahuja Deepak Ahuja Chief Financial Officer (Principal...