Tesla 2012 Annual Report Download - page 97

Table of Contents
minimize any credit losses that could occur and which could adversely affect our financial condition and results of operations. We require
deposits from customers electing a lease option for vehicles built to a customer’s specifications on the same timeframe and under the same
circumstances as from customers purchasing our vehicles outright. During the years ended December 31, 2011 and 2010, approximately 6% and
14% of the vehicles delivered during these periods were under operating leases. As of December 31, 2011 and 2010, we had deferred revenues
of $0.8 million and $1.1 million of down payments which will be recognized over the term of the individual leases. Through December 31, 2011,
our leasing activity has not had a significant adverse impact on our liquidity.
Reservation Payments
A source of our cash flows from operations has been through our receipt of reservation payments from our customers. Reservation
payments consist of reservation payments that allow potential customers to hold a reservation for the future purchase of a Tesla Roadster,
Model S or Model X. For our Tesla Roadsters manufactured to specification, our current purchase agreement requires the payment of an initial
nonrefundable deposit which varies based on the country of purchase. For Model S and Model X, we require an initial refundable reservation
payment of at least $5,000. For Tesla Roadsters purchased directly from our showrooms, no deposit is required. Prior to the second quarter of
2010, our reservation policy was to accept reservation payments from all customers who wished to purchase a Tesla Roadster and require full
payment of the purchase price of the vehicle at the time the customer selected their vehicle specifications. During the second quarter of 2010, we
changed our policy to require nonrefundable deposits for Tesla Roadsters manufactured to specification at the time a customer enters into a
purchase agreement. However, we also occasionally accept reservation payments for the Tesla Roadster if a customer is interested in purchasing
a vehicle but not yet prepared to select the vehicle specifications. For customers who have placed a reservation payment with us, the reservation
payment becomes a nonrefundable deposit once the customer has selected the vehicle specifications and enters into a purchase agreement. The
full payment of the purchase price of the vehicle is required only upon delivery of the vehicle to the customer. Reservation payments for a
vehicle are recorded as a current liability when received. No later than upon the delivery of a vehicle, the reservation payments collected on a
customer’s account are applied against the total purchase price of the vehicle.
Summary of Cash Flows
Cash Flows from Operating Activities
We continue to experience negative cash flows from operations as we expand our business and build our infrastructure both in the United
States and internationally. Our cash flows from operating activities are significantly affected by our cash investments to support the growth of
our business in areas such as research and development and selling, general and administrative. Our operating cash flows are also affected by our
working capital needs to support growth and fluctuations in inventory, personnel related expenditures, accounts payable and other current assets
and liabilities.
Net cash used in operating activities was $114.4 million for the year ended December 31, 2011. The largest component of our cash used
during this period related to our net loss of $254.4 million, which included non-cash charges of $29.4 million related to stock-based
compensation expense, $16.9 million related to depreciation and amortization and $2.8 million related to the fair value change in our warrant
liability. Significant operating cash outflows were primarily related to $313.1 million of operating expenses, $142.6 million of cost of revenues
and a $13.6 million increase in inventory and operating lease vehicles, partially offset by a $44.2 million increase in
96
Year Ended December 31,
2011 2010 2009
Net cash used in operating activities
$
(114,364
)
$
(127,817
)
$
(80,825
)
Net cash used in investing activities
(175,928
)
(180,297
)
(14,244
)
Net cash provided by financing activities
446,000
338,045
155,419