10-QPeriod: Q1 FY2012

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 4, 2012For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported a significant net loss of $(449.4 million) for the first quarter of 2012, a stark contrast to the net income of $116.0 million in the prior year's comparable quarter. This downturn was primarily driven by substantial restructuring charges totaling $401.1 million, including asset impairments related to manufacturing capacity adjustments and European operations. Revenue also declined by 12% year-over-year to $497.1 million, impacted by lower module sales volumes and average selling prices, although this was partially offset by a significant increase in the systems business. Despite the challenging top-line performance and substantial losses, the company maintained a healthy cash position with $610.5 million in cash and cash equivalents, supported by new borrowings under its revolving credit facility. The company is actively implementing a long-term strategic plan to focus on sustainable markets and reduce costs, which will involve significant workforce reductions and facility closures.

Financial Highlights

56 data points
Beta

Revenue

$497.06M

15.4% Gross Margin

Net Income

-$449.42M

-90.4% Net Margin

EPS (Diluted)

$-5.20

Total Assets

$5.77B

Cash & Equivalents

$610.48M

Free Cash Flow

-$140.63M

Financial Statements
Beta
Revenue$497.06M
Cost of Revenue$420.31M
Gross Profit$76.75M
R&D Expenses$36.08M
SG&A Expenses$91.82M
Operating Expenses$533.03M
Operating Income-$456.28M
Interest Expense$920K
Net Income-$449.42M
EPS (Basic)$-5.20
EPS (Diluted)$-5.20
Shares Outstanding (Basic)86.51M
Shares Outstanding (Diluted)86.51M

Key Highlights

  • 1Reported a net loss of $(449.4) million for the quarter, compared to a net income of $116.0 million in Q1 2011.
  • 2Net sales decreased by 12% to $497.1 million, primarily due to lower module volumes and prices, although the systems business saw significant growth.
  • 3Incurred substantial restructuring charges of $401.1 million, largely related to manufacturing footprint adjustments and European operations closures.
  • 4Gross profit margin significantly compressed to 15.4% from 45.8% in the prior year's quarter.
  • 5Company maintained a strong liquidity position with $610.5 million in cash and cash equivalents.
  • 6Announced a long-term strategic plan focused on shifting resources to sustainable geographic markets and improving cost efficiencies.
  • 7The company announced the appointment of James A. Hughes as Chief Executive Officer, effective May 3, 2012.

Frequently Asked Questions

The significant net loss of $(449.4) million was primarily due to substantial restructuring charges totaling $401.1 million. These charges included asset impairments related to decisions to cease manufacturing in Vietnam, adjust manufacturing capacity, and close European operations, as well as severance and related costs.

Net sales decreased by 12% year-over-year to $497.1 million. This decline was mainly driven by a 55% decrease in the volume of solar modules sold and a 10% decrease in average selling prices for modules. However, net sales from the systems business increased significantly by 453% due to an increase in utility-scale solar power systems under construction.

First Solar is implementing a 'Long Term Strategic Plan' to focus on 'sustainable geographic markets' with a strong need for mass-scale PV electricity, such as in the Americas, Asia, the Middle East, and Africa. This plan includes significant restructuring, workforce reductions, and a focus on competing directly with fossil fuels on a Levelized Cost of Energy (LCOE) basis. The company aims to reduce overall costs and optimize its manufacturing capacity to align with demand.

The company maintained a strong liquidity position, with $610.5 million in cash and cash equivalents as of March 31, 2012. This was supported by borrowings under its revolving credit facility and cash generated from customer payments for systems projects. Despite the net loss and cash used in operating activities, management believes it has sufficient resources for the next 12 months and to execute its strategic plan.