First Solar, Inc. Announces Second Quarter 2013 Financial Results

First Solar, Inc. Announces Second Quarter 2013 Financial Results

  • Net sales of $520 million

  • GAAP EPS of $0.37 per fully diluted share, Non-GAAP EPS of $0.39 per fully diluted share

  • Cash and Marketable Securities of $1.3 billion, Net Cash of $1 billion

  • GE CdTe Intellectual Property Acquisition and Technology Partnership Announced

  • 1.5GW Element U.S. and Mexico Pipeline Acquisition Announced

TEMPE, Ariz.--(BUSINESS WIRE)-- First Solar, Inc. (NAS: FSLR) today announced financial results for the second quarter of 2013. Net sales were $520 million in the quarter, a decrease of $235 million from the prior quarter and a decrease of $438 million from the second quarter of 2012. The sequential decrease in net sales is primarily attributable to lower systems business project revenues as well as lower module-only sales volume to third-parties. Compared to the second quarter of 2012, the decrease in net sales is primarily attributable to lower systems business project revenue as initial revenue recognition for AVSR and the sale of Silver State North were both achieved in the second quarter of 2012, partially offset by higher sales volume to third-party module-only customers in the second quarter of 2013.

As a previously highlighted possibility, the Company did not complete the sale of the ABW projects in the second quarter of 2013 and such sale is expected to occur in the second half of this year.


The Company reported second quarter net income per fully diluted share of $0.37, compared to $0.66 in the first quarter of 2013 and $1.27 in the second quarter of 2012. The second quarter of 2013 was impacted by pre-tax restructuring charges of $2.4 million (reducing EPS by $0.02), compared to $2.3 million (reducing EPS by $0.03) in the first quarter. In both cases the pre-tax charges related to previously announced restructuring actions. The sequential decrease in earnings was primarily due to lower revenue recognition for AVSR and lower sales volumes to third-party module-only customers in the second quarter compared to the first quarter. The year over year decrease in earnings was primarily due to lower systems business revenue recognition, partially offset by higher manufacturing utilization and higher module sales to third-party customers in the second quarter of 2013 compared to the second quarter of 2012.

Cash and Marketable Securities at the end of the second quarter were approximately $1.3 billion, an increase of approximately $273 million compared to the end of the first quarter of 2013. The Company's Net Cash grew to approximately $1.0 billion, an increase of approximately $580 million from the first quarter of 2013. Cash flows from operations were $222 million in the second quarter, compared to $66 million for the first quarter of 2013.

The Company also announced the acquisition of all of GE's (NYS: GE) cadmium telluride (CdTe) solar intellectual property and entered into a technology collaboration agreement with GE, with the intent to advance thin-film solar cells and modules. Under the agreement, First Solar acquired GE's CdTe solar intellectual property, setting a course for advancement of photovoltaic (PV) thin-film solar technology and GE received 1.75 million shares of First Solar stock. Additional detail regarding the IP acquisition and technology collaboration agreement can be found in a separate press release, issued today, August 6, 2013, and can be accessed on the Investor section of the Company's website: investor.firstsolar.com.

Also announced today was the acquisition of a pipeline of U.S. and Mexico development assets from Element Power. The 1.5 GW portfolio includes geographically diverse projects in various stages of development. The terms of the deal were not disclosed.

Additionally, the Company provided updated full year 2013 financial guidance ranges to reflect the following: (1) a reduction in expected net sales associated with the decision to hold two system projects through construction and selling such projects after construction is completed, which action is expected to result in improved project economics, (2) incremental cost at AVSR due to delays related to the county approval process for materials used in construction, partially offset by an improvement in gross margin due to better than expected project economics for ABW, Campo Verde and Imperial Valley, (3) the impact of expected higher operating expenses associated with the newly announced GE technology partnership and (4) the per-share impact associated with the June 18, 2013 closing of the equity offering of 9,747,000 common shares and the impact of the issuance of 1,750,000 common shares to GE as part of the aforementioned IP acquisition.

The updated guidance is as follows:

2013 Guidance Update

Current

Prior

Net Sales

$3.6B to $3.8B

$3.8B to $4.0B

Gross Margin (%)

22% to 23%

20% to 22%

Operating Expenses

$390M to $410M

$380M to $400M

Operating Income

$405M to $435M

$430M to $460M

Effective Tax Rate

15% to 17%

12% to 14%

Earnings Per Share**

$3.75 to $4.25

$4.00 to $4.50

EPS including Equity Offering

$3.54 to $4.02

N/A

EPS including Equity Offering and GE Shares (rounded)

$3.50 to $4.00

N/A

Operating Cash Flow

$0.8B to $1.0B

$0.8B to $1.0B

Capital Expenditures

$350M to $400M

$350M to $400M

Working Capital*

$50M to $200M

$50M to $200M

* Expected decrease in working capital from Dec. 31, 2012

** EXCLUDES per-share impact of Equity Offering and GE Shares

"Although we worked diligently in the quarter to close the sale of the ABW projects, the sale was delayed and consequently, as we highlighted on our first quarter of 2013 earnings call, such delay caused a decline in our net sales and earnings for the second quarter from expectations. We still expect the closing of the ABW sale to occur in the current year, resulting in a corresponding increase in net sales and earnings in the second half of 2013," said Jim Hughes, CEO of First Solar. "The acquisition of GE's CdTe intellectual property and the formation of the new strategic collaboration partnership with GE, coupled with the growing pipeline of potential booking opportunities and continued improvements we are making on our module technology provide incremental value and confidence for our shareholders and demonstrate the progress we are making in achieving our strategic goals of delivering industry-leading PV power solutions to sustainable markets globally."

For a reconciliation of non-GAAP measures to measures presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), see the tables below.

First Solar has scheduled a conference call for today, August 6, 2013 at 4:30 p.m. ET to discuss this announcement. Investors may access a live webcast of this conference call by visiting http://investor.firstsolar.com/events.cfm.

An audio replay of the conference call will also be available approximately two hours after the conclusion of the call. The audio replay will remain available until Monday, August 12, 2013 at 11:59 p.m. ET and can be accessed by dialing 888-203-1112 if you are calling from within the United States or 719-457-0820 if you are calling from outside the United States and entering the replay pass code 2349040. A replay of the webcast will be available on the Investors section of the Company's web site approximately two hours after the conclusion of the call and remain available for approximately 90 calendar days.

About First Solar, Inc.

First Solar is a leading global provider of comprehensive photovoltaic (PV) solar systems which use its module and systems technology. The Company's integrated power plant solutions deliver an economically attractive alternative to fossil-fuel electricity generation today. From raw material sourcing through end-of-life module recycling, First Solar's renewable energy systems protect and enhance the environment. For more information about First Solar, please visit www.firstsolar.com.

For First Solar Investors

This release contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. The forward-looking statements in this release do not constitute guarantees of future performance. Those statements involve a number of factors that could cause actual results to differ materially, including risks associated with the Company's business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, revenues, gross margin, operating expenses, products, projected costs, warranties, balance of systems roadmap, restructuring, product reliability and capital expenditures; our ability to continue to reduce the cost per watt of our solar modules; research and development programs and our ability to improve the conversion efficiency of our solar modules; sales and marketing initiatives; competition, including alternative sources of energy generation such as natural gas or coal; retention of key associates and management team, and other risks detailed in the Company's filings with the Securities and Exchange Commission. First Solar assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


(Unaudited)

June 30, 2013

December 31,
2012

ASSETS

Current assets:

Cash and cash equivalents

$

928,657

$

901,294

Marketable securities

356,615

102,578

Accounts receivable trade, net

192,580

553,567

Accounts receivable, unbilled and retainage

460,438

400,987

Inventories

334,261

434,921

Balance of systems parts

128,384

98,903

Deferred project costs

1,004,778

21,390

Deferred tax assets, net

28,878

44,070

Assets held for sale

49,521

49,521

Note receivable affiliate

17,725

Prepaid expenses and other current assets

117,167

207,368

Total current assets

3,601,279

2,832,324

Property, plant and equipment, net

1,560,908

1,525,382

Project assets and deferred project costs

559,151

845,478

Deferred tax assets, net

332,688

317,473

Restricted cash and investments

275,183

301,400

Goodwill

74,930

65,444

Inventories

132,668

134,375

Retainage

237,594

270,364

Other assets

93,725

56,452

Total assets

$

6,868,126

$

6,348,692

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

217,587

$

350,230

Income taxes payable

4,749

5,474

Accrued expenses

391,764

554,433

Current portion of long-term debt

61,194

62,349

Deferred revenue

1,682

2,056

Payments and billings for deferred project costs

1,116,670

94,535

Other current liabilities

61,149

32,297

Total current liabilities

1,854,795

1,101,374

Accrued solar module collection and recycling liability

248,178

212,835

Long-term debt

194,570

500,223

Payments and billings for deferred project costs

38,974

636,518

Other liabilities

374,871

292,216

Total liabilities

2,711,388

2,743,166

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value per share; 500,000,000 shares authorized; 97,629,891 and 87,145,323
shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

98

87

Additional paid-in capital

2,555,872

2,065,527

Accumulated earnings

1,622,473

1,529,733

Accumulated other comprehensive (loss) income

(21,705

)

10,179

Total stockholders' equity

4,156,738

3,605,526

Total liabilities and stockholders' equity

$

6,868,126

$

6,348,692

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)


(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2013

June 30, 2012

June 30, 2013

June 30, 2012

Net sales

$

519,760

$

957,332

$

1,274,965

$

1,454,387

Cost of sales

379,662

713,591

965,541

1,133,901

Gross profit

140,098

243,741

309,424

320,486

Operating expenses:

Research and development

30,964

32,365

60,895

68,449

Selling, general and administrative

66,265

52,184

140,730

144,004

Production start-up

1,392

533

2,768

4,591

Restructuring

2,381

19,000

4,728

420,065

Total operating expenses

101,002

104,082

209,121

637,109

Operating income (loss)

39,096

139,659

100,303

(316,623

)

Foreign currency (loss) gain

(1,068

)

1,015

550

31

Interest income

3,405

3,379

8,352

6,290

Interest expense, net

(875

)

(7,372

)

(1,625

)

(8,292

)

Other income (expense), net

504

(1,334

)

(329

)

(2,545

)

Income (loss) before income taxes

41,062

135,347

107,251

(321,139

)

Income tax expense

7,464

24,364

14,511

17,294

Net income (loss)

$

33,598

$

110,983

$

92,740

$

(338,433

)

Net income (loss) per share:

Basic

$

0.38

$

1.28

$

1.05

$

(3.90

)

Diluted

$

0.37

$

1.27

$

1.03

$

(3.90

)

Weighted-average number of shares used in per share calculations:

Basic

89,201

86,855

88,209

86,681

Diluted

91,142

87,653

90,265

86,681

Non-GAAP Financial Measures

The non-GAAP financial measures included in the tables below are non-GAAP net income and non-GAAP net income per share, which adjust for Restructuring Expense. We believe the presentation of these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provides meaningful supple