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FIRST SOLAR, INC. Reports Operating Results (10-Q)

November 02, 2012 | About:
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10qk

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FIRST SOLAR, INC. (FSLR) filed Quarterly Report for the period ended 2012-09-30.

First Solar, Inc. has a market cap of $2.08 billion; its shares were traded at around $22.3 with a P/E ratio of 4.8 and P/S ratio of 0.8. First Solar, Inc. had an annual average earning growth of 63.4% over the past 5 years.
This is the annual revenues and earnings per share of FSLR over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of FSLR.


Highlight of Business Operations:

The 4% decrease in cost of sales during the three months ended September 30, 2012 compared with the three months ended September 30, 2011 was primarily due to a reduction in the total volume of solar modules sold and continuous cost reductions in our manufacturing process and a $22.1 million decrease from expense for costs associated with voluntary remediation efforts incurred in the third quarter of 2011 for our manufacturing excursion occurring during the period between June 2008 and June 2009 (“2008-2009 manufacturing excursion”). These items were partially offset by a $73.5 million increase in BoS 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, a $15.8 million increase in expense for costs associated with voluntary remediation efforts for workmanship issues affecting a limited number of solar modules manufactured between October 2008 and June 2009, a $5.3 million increase related to accelerated depreciation for manufacturing equipment that will be replaced as part of our planned equipment upgrade programs and a $3.0 million increase for certain lower of cost or market inventory write-downs primarily as a result of declines in market pricing.

The 36% increase in cost of sales during the nine months ended September 30, 2012 compared with the nine months ended September 30, 2011 was primarily due to a $616.5 million increase in BoS 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 $42.4 million increase related to the underutilization of our manufacturing capacity primarily related to the idling of manufacturing lines in Perrysburg, Malaysia and Germany during portions of the first nine months of 2012, a $24.4 million increase related to accelerated depreciation for certain manufacturing equipment that will be replaced as part of our planned equipment upgrade programs, a $16.2 million increase for certain lower of cost or market inventory write-downs primarily as a result of declines in market pricing, a $15.8 million increase in expense for costs associated with voluntary remediation efforts for a workmanship issue affecting a limited number of solar modules manufactured between October 2008 and June 2009 and a $13.8 million increase in expense for costs associated with voluntary remediation efforts for our 2008-2009 manufacturing excursion. These increases were partially offset by reductions in the total volume of modules sold and continuous cost reductions in our manufacturing process.

Components segment net sales decreased by 48% in the three months ended September 30, 2012 compared with the three months ended September 30, 2011, primarily due to a 76% decrease in volume and a 31% decrease in average selling price of modules sold to third parties, partially offset by a 15% increase in net sales for modules used in our systems projects. The 15% increase in net sales for modules used in our systems business was primarily related to our AV Solar Ranch One, Topaz and Copper Mountain 2 projects, partially offset by decreases in net sales from our Agua Caliente and Amherstburg 2 projects.

Components segment net sales decreased by 53% in the nine months ended September 30, 2012 compared with the nine months ended September 30, 2011, primarily due to a 79% decrease in volume and a 34% decrease in the average selling price of modules sold to third parties, partially offset by a 95% increase in module net sales for modules used in our systems projects. The 95% increase in net sales for modules used in our systems business was primarily related to our Copper Mountain 2, AV Solar Ranch One, Silver State North and Topaz projects, partially offset by decreases in net sales from our Agua Caliente project.

There may be a delay in when our solar module inventory and BoS 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 BoS 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 systems 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 execute our Long Term Strategic Plan and respond to market pricing uncertainties for solar modules. Our solar module inventory as of September 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 September 30, 2012, approximately $304 million or 64% 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 15% 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 are expected to be installed in the underlying systems projects in the normal course of our construction, which has not yet begun. All BoS parts are for our systems business projects.

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