For the most part, the solar industry has reported strong earnings for the third quarter. Canadian Solar, Trina Solar, and JinkoSolar all returned to profitability, and strong demand has led to improving margins across the industry. But that doesn't mean that everyone is faring so well.

Two such companies are JA Solar (NASDAQ: JASO) and LDK Solar (NYSE: LDK), which both reported earnings this morning. Losses continue to pile up and debt is a huge problem to the survival of both companies. Here's what you need to know.

The numbers
JA Solar is clearly the better of these two solar companies, reporting 500.2 MW of shipments, including 305.0 MW of modules and module tolling. Revenue was $287.3 million and gross margin improved sequentially from 8.1% to 11.3%.  

The problem is that net loss was $37.1 million, or $1.11 per share. Even on a non-GAAP basis, JA Solar lost $14.7 million, or $0.59 per share. If you can't make money in today's solar, there's not a lot of hope for the future.

Debt was down to $628.2 million in the third quarter, but cash is down 24% from the beginning of the year to $401.1 million because management paid off convertible debt. It's worth wondering if Chinese banks are pulling back the easy money on JA Solar, as well as others in the industry.

LDK Solar's numbers were far worse, reporting sales of $156.6 million, gross margin of -24%, and a net loss of $127.0 million. Debt currently stands at $2.8 billion and with just $225.8 million in cash there's little chance that will be paid off. An interest payment due on August 28 still hasn't been paid and LDK will likely need to be liquidated at some point.  

What this means for JA Solar and LDK Solar
LDK Solar is finished as a viable company and is hands-off from an investment standpoint. Equity investors will likely wind up with nothing if the company enters bankruptcy or is liquidated like Suntech Power was.

JA Solar is in a better position but is still in rough shape. It doesn't have the downstream projects that have made Canadian Solar and JinkoSolar profitable and is still shipping wafers in a highly competitive environment.

Solar companies that are still reporting losses are simply being left behind by the industry. Those making a profit will be more bankable to customers today and have better balance sheets to upgrade equipment and invest in their futures over the next few years. I would avoid these two stocks in favor of higher-quality companies that are actually posting a profit.