10-QPeriod: Q1 FY2011

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported revenues of $567.3 million for the first quarter of 2011, largely in line with the prior year's $568.0 million. However, net income saw a significant decline, falling to $116.0 million ($1.33 diluted EPS) from $172.3 million ($2.00 diluted EPS) in the same period last year. This decrease was primarily driven by higher operating expenses, particularly in research and development, selling, general and administrative costs, and production start-up expenses. The company's balance sheet reflects a substantial decrease in cash and cash equivalents, from $765.7 million at the end of 2010 to $355.7 million at the end of the quarter. This was largely due to operating activities using cash, significant capital expenditures for manufacturing expansions, and debt repayments. Despite the increased expenses and lower profitability, First Solar continues to invest in manufacturing capacity and product development, aiming to maintain its cost leadership in the solar module market.

Financial Highlights

55 data points
Beta

Revenue

$567.29M

45.8% Gross Margin

Net Income

$115.97M

20.4% Net Margin

EPS (Diluted)

$1.33

Total Assets

$4.43B

Cash & Equivalents

$355.73M

Free Cash Flow

-$212.80M

Financial Statements
Beta
Revenue$567.29M
Cost of Revenue$307.63M
Gross Profit$259.67M
R&D Expenses$31.35M
SG&A Expenses$87.00M
Operating Expenses$130.28M
Operating Income$129.38M
Interest Expense$0
Net Income$115.97M
EPS (Basic)$1.36
EPS (Diluted)$1.33
Shares Outstanding (Basic)85.32M
Shares Outstanding (Diluted)87.05M

Key Highlights

  • 1Net sales remained stable at $567.3 million, compared to $568.0 million in the prior year's quarter.
  • 2Net income decreased by 32.8% to $116.0 million from $172.3 million year-over-year.
  • 3Diluted Earnings Per Share (EPS) declined to $1.33 from $2.00 year-over-year.
  • 4Operating expenses increased significantly, with R&D up 37%, SG&A up 30%, and production start-up expenses up 944%.
  • 5Cash and cash equivalents decreased substantially from $765.7 million at year-end 2010 to $355.7 million.
  • 6The company continued to invest heavily in property, plant, and equipment, with capital expenditures of $169.0 million.
  • 7Gross profit margin decreased from 49.7% to 45.8% due to lower average selling prices and increased costs.

Frequently Asked Questions

The decline in net income and EPS is primarily attributable to a significant increase in operating expenses, particularly in research and development, selling, general and administrative costs, and production start-up expenses, which outpaced the stable revenue figures. Additionally, a decrease in the gross profit margin, resulting from lower average selling prices and increased cost of sales, also contributed to the lower net income.

First Solar's cash and cash equivalents decreased significantly from $765.7 million at the end of 2010 to $355.7 million at the end of the first quarter of 2011. This decrease was driven by several factors, including $43.8 million used in operating activities, substantial investments in property, plant, and equipment ($169.0 million) for manufacturing expansions, and $111.3 million used in financing activities, largely for debt repayment.

First Solar is addressing competition and pricing pressures through continuous cost reduction efforts, aiming to maintain its position as the lowest-cost PV module manufacturer. This includes improving manufacturing efficiency, reducing module manufacturing costs per watt, and leveraging its integrated systems business to drive module throughput. The company also notes that its supply contracts are subject to amendments to remain competitive, and a customer rebate program is in place to support customer competitiveness in core markets.