10-QPeriod: Q1 FY2014

FIRST SOLAR, INC. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 7, 2014For Securities:FSLR

Summary

First Solar, Inc. (FSLR) reported a significant increase in net sales for the first quarter of 2014, up 26% year-over-year to $950.2 million. This growth was primarily driven by the systems business, which saw a 59% increase in net sales, largely due to revenue recognition on large projects like Campo Verde. The company also reported a substantial improvement in gross profit, which rose by 40% and expanded by 2.5 percentage points to 24.9% of net sales, attributed to a favorable project mix, improved capacity utilization, and lower manufacturing costs. While the systems segment experienced robust growth, the components segment saw a decline in net sales. Despite this, the company's overall financial performance improved considerably with net income more than doubling to $112.0 million, leading to diluted earnings per share of $1.10. First Solar maintained a strong balance sheet with a decrease in total liabilities and an increase in stockholders' equity. The company also highlighted ongoing R&D efforts, including a new world record for CdTe PV module conversion efficiency.

Financial Highlights

54 data points
Beta

Revenue

$950.16M

24.9% Gross Margin

Net Income

$112.01M

11.8% Net Margin

EPS (Diluted)

$1.10

Total Assets

$6.38B

Cash & Equivalents

$975.19M

Free Cash Flow

-$368.99M

Financial Statements
Beta
Revenue$950.16M
Cost of Revenue$713.45M
Gross Profit$236.71M
R&D Expenses$38.77M
SG&A Expenses$58.66M
Operating Expenses$97.44M
Operating Income$139.27M
Interest Expense$410K
Net Income$112.01M
EPS (Basic)$1.12
EPS (Diluted)$1.10
Shares Outstanding (Basic)99.59M
Shares Outstanding (Diluted)101.82M

Key Highlights

  • 1Net sales increased 26% year-over-year to $950.2 million, driven by a 59% increase in the systems business.
  • 2Gross profit increased 40% to $236.7 million, with gross profit margin expanding by 2.5 percentage points to 24.9%.
  • 3Net income more than doubled to $112.0 million, resulting in diluted EPS of $1.10, up from $0.66 in the prior year.
  • 4The company announced a world record CdTe PV module conversion efficiency of 17.0%, signaling continued technological advancement.
  • 5Manufacturing capacity utilization improved to 82%, up from 75% in the prior year's quarter.
  • 6Cash and cash equivalents decreased to $975.2 million from $1.3 billion at year-end 2013, largely due to operating activities and debt repayments.
  • 7Total assets decreased to $6.4 billion from $6.9 billion at year-end 2013, while total liabilities decreased significantly by approximately $637 million.

Frequently Asked Questions

The primary driver was a substantial increase in the systems business, up 59% year-over-year, largely due to the timing of revenue recognition on large projects such as Campo Verde, which reached commercial operation and met sales criteria. Construction and revenue recognition also continued on other major projects like Desert Sunlight and Topaz.

Profitability improved significantly, with gross profit rising 40% and gross profit margin expanding by 2.5 percentage points to 24.9%. This was driven by a more favorable mix of higher gross profit projects, improved capacity utilization in manufacturing, throughput improvements, and lower manufacturing and raw material costs. Net income more than doubled.

While cash, cash equivalents, and marketable securities decreased to $1.38 billion from $1.76 billion at year-end 2013, primarily due to cash used in operating activities and debt repayments, the company believes its current liquidity, combined with availability under its Revolving Credit Facility and access to capital markets, is sufficient to meet its needs for at least the next 12 months. The company continues to manage its working capital and capital expenditures diligently.

The company continues to operate in a highly competitive market characterized by intense pricing pressure at both the module and system levels, with production capacity often exceeding global demand. Potential adverse impacts on pricing, margins, and market share due to competition are ongoing risks. Additionally, the company is subject to risks related to the timing and recognition of revenue for its large-scale systems projects, which can lead to uneven period-over-period financial results.