8-KFinancial EventsRegulation FDOther Events+1

FIRST SOLAR, INC. 8-K Report, Exit or Disposal Costs (Apr 17, 2012)

Filed April 17, 2012For Securities:FSLR

Summary

First Solar, Inc. (FSLR) announced significant restructuring initiatives on April 16, 2012, aimed at reducing costs and aligning operations with long-term market opportunities. The most impactful changes include the closure of its manufacturing facility in Frankfurt (Oder), Germany, by the end of Q4 2012, which will result in approximately 1,200 job losses. This decision is attributed to a lack of legislative support for utility-scale solar projects in Europe. In addition to the German closure, First Solar will reduce its European sales and service headcount by about 150 positions and indefinitely idle four production lines at its Kulim, Malaysia facility, impacting another 550 employees. These global workforce reductions, totaling around 2,000 associates (nearly 30% of its workforce), are expected to generate substantial pre-tax restructuring charges ranging from $230 million to $350 million. These charges include asset impairments, severance costs, and the repayment of a German government grant.

Key Highlights

  • 1First Solar is closing its manufacturing operations in Frankfurt (Oder), Germany, by the end of 2012, citing a lack of legislative support for utility-scale solar projects in Europe.
  • 2The restructuring will lead to a global workforce reduction of approximately 2,000 employees, representing nearly 30% of its total workforce.
  • 3Expected pre-tax restructuring charges are estimated to be between $230 million and $350 million.
  • 4These charges include significant asset impairments (primarily for the German plant), severance costs, and repayment of a German government grant.
  • 5Four production lines at the Kulim, Malaysia manufacturing facility will be idled indefinitely starting May 2012.
  • 6The company has prepaid approximately $145 million in outstanding indebtedness related to the Frankfurt (Oder) plant.
  • 7First Solar expects its global annual manufacturing run-rate capacity exiting 2012 to be approximately 1.7 GW.

Frequently Asked Questions

The primary reason cited by First Solar for this restructuring is to reduce costs and align the company's organization with its long-term strategic plan and expected sustainable market opportunities, particularly due to a lack of legislative support for utility-scale solar projects in Europe.

The restructuring will result in a significant reduction of approximately 2,000 employees globally, which is nearly 30% of First Solar's approximate 6,800 total workforce at the time.

First Solar expects to incur pre-tax restructuring charges totaling between $230 million and $350 million. These charges are primarily for asset impairments, severance, and repayment of a German government grant. The company anticipates that between $80 million and $120 million of these charges will be cash expenditures.

Yes, the closure of the German plant is a significant factor. The company also plans to idle four production lines in Malaysia and expects its global annual manufacturing run-rate capacity exiting 2012 to be approximately 1.7 GW, down from previous levels reflecting these operational adjustments.