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FIRST SOLAR, INC. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 3, 2012 05:25PM
FIRST SOLAR, INC. (FSLR) filed Quarterly Report for the period ended 2012-06-30. First Solar, Inc. has a market cap of $1.26 billion; its shares were traded at around $17.07 with a P/E ratio of 3.5 and P/S ratio of 0.5. First Solar, Inc. had an annual average earning growth of 63.4% over the past 5 years.
Highlight of Business Operations:The 80% increase in net sales during the three months ended June 30, 2012 compared with the three months ended June 30, 2011 was primarily due to a 1,685% increase in net sales recognized by the systems segment, partially offset by a 42% decrease in the components segment. The components segment change is attributed to a 79% decrease in volume and a 38% decrease in average selling price of modules sold to third parties, partially offset by a 243% increase in module revenue for modules used in our systems projects.
The 111% increase in cost of sales during the three months ended June 30, 2012 compared with the three months ended June 30, 2011 was primarily due to a $359.7 million increase in balance of systems and other construction costs related to an increase in the number and size of various utility-scale solar power systems under construction between the periods. There was also a $36.3 million increase related to the underutilization of our manufacturing capacity primarily related to the idling of manufacturing lines in Malaysia and Germany, an $8.9 million increase in expense for costs associated with voluntary remediation efforts for our 2008-2009 manufacturing excursion, and a $7.4 million increase related to accelerated depreciation for certain manufacturing equipment that will be replaced as part of our planned equipment upgrade program. These increases were partially offset by a reduction in the total volume of modules sold.
The 32% increase in net sales during the six months ended June 30, 2012 compared with the six months ended June 30, 2011 was primarily due to a 1,209% increase in net sales recognized by the systems segment, partially offset by a 55% decrease in the components segment. The components segment change is attributed to an 80% decrease in volume and a 35% decrease in the average selling price of modules sold to third parties, partially offset by a 268% increase in module revenue for modules used in our systems projects.
Income tax expense decreased by $10.6 million during the six months ended June 30, 2012 compared with the six months ended June 30, 2011. The reduction in income tax expense was primarily attributable to loss from operations during the six months ended June 30, 2012 as compared to having an operating profit during the six months ended June 30, 2011, offset by an increase in tax expense related to the establishment of valuation allowances of $12.3 million against previously established deferred tax assets, operating losses being generated in jurisdictions for which no tax benefit is recorded, and a greater percentage of profits earned in higher tax jurisdictions. The tax expense of $17.3 million for the six months ended June 30, 2012 resulted from our pre-tax losses, exclusive of the $420.1 million of restructuring expenses, for which a nominal net tax benefit was recognized. See Note 17. “Income Taxes,” to our condensed consolidated financial statements included with this Quarterly Report on Form 10-Q for additional information.
There may be a delay in when our solar module inventory and balance of systems parts can be converted into cash compared to a typical third-party module sale. Such timing differences temporarily reduce our liquidity to the extent that we have already paid for our balance of system parts or the underlying costs to produce our solar module inventories. As previously announced, we have reduced our manufacturing capacity and planned solar module production levels, to match expected market demand, which considers our project pipeline. This decrease in planned production reduces our risk and the impact on liquidity of having excess solar module inventories that we must sell to third parties as we implement our Long Term Strategic Plan and respond to market pricing uncertainties for solar modules. Our solar module inventory as of June 30, 2012, is expected to primarily support our systems business with the remaining amounts being used to support expected near term demand for third-party module sales. As of June 30, 2012, approximately $300 million or 58% of our solar module inventory was either on-site or in-transit to our systems projects. Of this amount, approximately $69 million of solar module inventories or 13% of the total solar module inventory balance was physically segregated for certain projects for the purpose of qualifying such projects for the Department of Treasury s Section 1603 cash grant program prior to the program s expiration in December 2011. Such segregated solar module inventories will be installed in the underlying systems projects in the normal course of our construction, which has not yet begun. All balance of systems parts are for our systems business projects.
Stocks Discussed: FSLR,