Summary
First Solar, Inc. (FSLR) in its February 29, 2012, 10-K filing, reported a challenging year marked by significant industry-wide price pressures and a strategic shift towards "sustainable markets." The company, a leader in thin-film solar technology, saw its net sales increase by 8% to $2.77 billion, largely driven by its systems business, which grew by 85%. However, the components business experienced a 5% decline in net sales due to a 10% decrease in average selling prices (ASPs) for solar modules, a direct result of intense competition and an oversupply in the global market. The company recorded a significant net loss of $39.5 million for the year, a stark contrast to the $664.2 million profit in 2010. This downturn was heavily influenced by a $393.4 million goodwill impairment charge related to its components segment and $60.4 million in restructuring charges. The report also details a voluntary remediation program for a past manufacturing excursion, which incurred significant costs, and an increase in warranty reserves related to module performance in non-temperate climates. First Solar's Long Term Strategic Plan (LTSP) aims to transition the company towards competing directly with fossil fuels on a levelized cost of energy basis by the end of 2014, focusing on new markets in the Americas, Asia, the Middle East, and Africa, while de-emphasizing rooftop solar. Financially, the company utilized $33.5 million in cash from operations, a significant decrease from the prior year, primarily due to inventory build-up and timing differences in receivables. Investing activities used $676.5 million, largely for capital expenditures related to manufacturing plant expansions, though plans for Vietnam and Arizona were postponed. Financing activities provided $571.2 million, mainly from new debt facilities. The company maintained compliance with debt covenants and expressed confidence in its liquidity to meet near-term obligations.
Financial Highlights
58 data points| Revenue | $2.77B |
| Cost of Revenue | $1.79B |
| Gross Profit | $971.75M |
| R&D Expenses | $140.52M |
| SG&A Expenses | $412.54M |
| Operating Expenses | $1.04B |
| Operating Income | -$68.66M |
| Interest Expense | $100K |
| Net Income | -$39.49M |
| EPS (Basic) | $-0.46 |
| EPS (Diluted) | $-0.46 |
| Shares Outstanding (Basic) | 86.07M |
| Shares Outstanding (Diluted) | 86.07M |
Key Highlights
- 1Net sales grew 8% to $2.77 billion, driven by an 85% increase in the systems business, though module ASP declined 10% due to intense competition.
- 2The company reported a net loss of $39.5 million, a significant reversal from a $664.2 million profit in the prior year, heavily impacted by a $393.4 million goodwill impairment and $60.4 million in restructuring charges.
- 3First Solar is executing a Long Term Strategic Plan (LTSP) to focus on sustainable markets and compete on a levelized cost of energy basis with fossil fuels, shifting away from rooftop solar.
- 4Manufacturing costs per watt continued to decline (3% to $0.75), but cost of sales increased significantly (30%) due to higher system costs, remediation expenses, and warranty provisions.
- 5The company is adjusting manufacturing capacity utilization downwards (expected 60-70% in 2012) and has postponed planned expansions in Vietnam, Mesa, Arizona, and France due to market demand dynamics.
- 6Cash used in operating activities was $33.5 million, a sharp decline from $705.5 million provided in the prior year, attributed to inventory buildup and timing differences in receivables.
- 7Accrued warranty liability increased significantly to $155.5 million, reflecting higher warranty terms and estimated costs for a past manufacturing excursion.