01—Abstract
Summary
Summary of the 10-Q filed May 5, 2011. Cited figures are marked; the original filing is the authoritative source.
First Solar, Inc. (FSLR) reported revenues of $567.3 milliona 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 millionb ($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.
02—Key points
Key Highlights
- Net sales remained stable at $567.3 million, compared to $568.0 million in the prior year's quarter.
- Net income decreased by 32.8% to $116.0 million from $172.3 million year-over-year.
- Diluted Earnings Per Share (EPS) declined to $1.33 from $2.00 year-over-year.
- Operating expenses increased significantly, with R&D up 37%, SG&A up 30%, and production start-up expenses up 944%.
- Cash and cash equivalents decreased substantially from $765.7 million at year-end 2010 to $355.7 million.
- The company continued to invest heavily in property, plant, and equipment, with capital expenditures of $169.0 million.
- Gross profit margin decreased from 49.7% to 45.8% due to lower average selling prices and increased costs.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2011, First Solar, Inc. kept $0.20.
- Revenue$567.3M100.0%
- Cost of revenue−$307.6M54.2%
- Gross profit$259.7M45.8%
- Operating costs−$130.3M23.0%
- Operating income$129.4M22.8%
- Interest, other & tax−$13.4M2.4%
- Net income$116.0M20.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed May 5, 2011Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Revenue | $567.29M$567.96M | −0.1% |
| Cost of Revenue | $307.63M$285.93M | +7.6% |
| Gross Profit | $259.67M$282.04M | −7.9% |
| R&D Expenses | $31.35M$22.89M | +37.0% |
| SG&A Expenses | $87.00M$66.86M | +30.1% |
| Operating Expenses | $130.28M$90.89M | +43.3% |
| Operating Income | $129.38M$191.14M | −32.3% |
| Interest Expense | $0$0 | — |
| Net Income | $115.97M$172.34M | −32.7% |
| EPS (Basic) | $1.36$2.04 | −33.3% |
| EPS (Diluted) | $1.33$2.00 | −33.5% |
| Shares Outstanding (Basic) | 85.32M84.50M | +1.0% |
| Shares Outstanding (Diluted) | 87.05M86.09M | +1.1% |
05—Questions
Frequently Asked Questions
What is the primary reason for the decline in net income and EPS compared to the previous year?
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.
What is the company's cash position, and what are the main drivers of the change?
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.
How is First Solar managing competition and pricing pressures in the solar module market?
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.
06—Continue