FIRST SOLAR, INC. (FSLR, Financial) filed Quarterly Report for the period ended 2009-04-30.
FIRST SOLAR INC. manufactures solar modules with an advanced thin film semiconductor process that significantly lowers solar electricity costs. By enabling clean renewable electricity at affordable prices First Solar provides an economic alternative to peak conventional electricity and the related fossil fuel dependence greenhouse gas emissions and peak time grid constraints. FIRST SOLAR, INC. has a market cap of $15.29 billion; its shares were traded at around $187.29 with a P/E ratio of 44.2 and P/S ratio of 12.2.
With our acquisition of Turner Renewable Energy, LLC on November 30, 2007, we began accounting for a portion of our revenues using the percent of completion method of accounting. Net sales for our solar power systems and project development business for the three months ended March 28, 2009 and March 29, 2008 were $5.1 million and $3.1 million, respectively, and were not material to our consolidated results of operations.
Deferred project costs represent uninstalled materials we have procured for customer projects. We recognize these costs as deferred assets until we install the materials. Deferred project costs were $12.3 million and $1.2 million at March 28, 2009 and March 29, 2008, respectively.
The increase in our cost of sales was due to higher production and sales volumes, which resulted from the commencement of production at our four plant Malaysian manufacturing center. This increase in production and sales volume caused a $48.1 million increase in direct material expense, a $7.5 million increase in warranty expense and accruals for the costs of the end of life collection and recycling of our solar modules, a $2.2 million increase in sales freight and other costs and a $32.5 million increase in manufacturing overhead costs. The increase in manufacturing overhead costs was due to a $8.3 million increase in salaries and personnel related expenses, including a $1.3 million increase in share-based compensation expense, a $10.8 million increase in facility and related expenses and a $13.4 million increase in depreciation expense, in each case primarily resulting from increased infrastructure associated with the build out of our Malaysian manufacturing center. Our average manufacturing cost per watt declined by $0.21 per watt, or 18%, from $1.14 in the three months ended March 29, 2008 to $0.93 in the three months ended March 28, 2009 and included $0.02 of ramp penalty associated with the ramp and qualification of Malaysian manufacturing center and $0.01 of non-cash stock based compensation.
The increase in our research and development expense was due to a $5.6 million increase in personnel related expense, including a $0.9 million increase in share-based compensation expense, due to increased headcount and additional share-based compensation awards. In addition, consulting and other expenses increased by $0.9 million and grants received decreased by $0.4 million during the three months ended March 28, 2009, compared with the three months ended March 29, 2008. Throughout the fiscal period, we continued the development of solar modules with increased efficiencies at converting sunlight into electricity.
The increase in selling, general and administrative expense was due to a $12.1 million increase in salaries and personnel-related expenses, including a $2.5 million increase in share-based compensation. In addition, legal and professional service fees increased by $5.3 million, including $1.5 million of expenses associated with the acquisition of the solar power project development business of OptiSolar, and other expenses increased by $3.2 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008. The increase resulted primarily from the expansion of our solar power system and project development business and operating a global manufacturing business.
Read the The complete ReportFSLR is in the portfolios of Lee Ainslie, Lee Ainslie.
FIRST SOLAR INC. manufactures solar modules with an advanced thin film semiconductor process that significantly lowers solar electricity costs. By enabling clean renewable electricity at affordable prices First Solar provides an economic alternative to peak conventional electricity and the related fossil fuel dependence greenhouse gas emissions and peak time grid constraints. FIRST SOLAR, INC. has a market cap of $15.29 billion; its shares were traded at around $187.29 with a P/E ratio of 44.2 and P/S ratio of 12.2.
Highlight of Business Operations:
We face intense competition from manufacturers of crystalline silicon solar modules as well as other types of solar modules and photovoltaic systems. Solar module manufacturers compete with one another in several product performance attributes, including module cost-per-watt and levelized cost of electricity, meaning the net present value of total life cycle costs of the solar power project divided by the quantity of energy produced over the system life. We are one of the lowest cost module manufacturers in the solar industry, as evidenced by the further reduction in our average manufacturing cost per watt from $0.98 in the three months ended December 27, 2008 to $0.93 in the three months ended March 28, 2009. This cost advantage is reflected in the price at which we sell our modules or fully integrated systems and enables our systems to compete favorably on the levelized cost of electricity generated by our systems. Our cost competitiveness is based on our proprietary technology, which provides lower cost from a continuous highly automated industrial manufacturing process, our scale and our operational excellence. In addition, our modules use approximately 1% of the amount of semiconductor material that is used to manufacture traditional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules. The current spot market price of polysilicon of approximately between $80 and $100 per kilogram (Kg) is at a level that enables us to remain one of the lowest cost module manufacturers in the solar industry. However, the timing and velocity of decrease in the cost of silicon feedstock could lead to pricing pressure for solar modules. Although we are not a crystalline silicon module manufacturer, we estimate based on industry research and public disclosures of our competitors, that a $10 per Kg increase or decrease in the price of polysilicon could increase or decrease, respectively, our competitors manufacturing cost per watt by approximately $0.07 to $0.08. Given the lower conversion efficiency of our modules compared to crystalline silicon modules, there are higher balance-of-system costs associated with systems using our modules. Thus, to compete effectively on the basis of levelized cost of electricity our modules need to maintain a certain cost advantage per watt compared to crystalline silicon based modules. Our cost reduction roadmap anticipates manufacturing cost per watt reductions for our product of 10% per year. In 2008, we reduced our manufacturing cost per watt by 12%.With our acquisition of Turner Renewable Energy, LLC on November 30, 2007, we began accounting for a portion of our revenues using the percent of completion method of accounting. Net sales for our solar power systems and project development business for the three months ended March 28, 2009 and March 29, 2008 were $5.1 million and $3.1 million, respectively, and were not material to our consolidated results of operations.
Deferred project costs represent uninstalled materials we have procured for customer projects. We recognize these costs as deferred assets until we install the materials. Deferred project costs were $12.3 million and $1.2 million at March 28, 2009 and March 29, 2008, respectively.
The increase in our cost of sales was due to higher production and sales volumes, which resulted from the commencement of production at our four plant Malaysian manufacturing center. This increase in production and sales volume caused a $48.1 million increase in direct material expense, a $7.5 million increase in warranty expense and accruals for the costs of the end of life collection and recycling of our solar modules, a $2.2 million increase in sales freight and other costs and a $32.5 million increase in manufacturing overhead costs. The increase in manufacturing overhead costs was due to a $8.3 million increase in salaries and personnel related expenses, including a $1.3 million increase in share-based compensation expense, a $10.8 million increase in facility and related expenses and a $13.4 million increase in depreciation expense, in each case primarily resulting from increased infrastructure associated with the build out of our Malaysian manufacturing center. Our average manufacturing cost per watt declined by $0.21 per watt, or 18%, from $1.14 in the three months ended March 29, 2008 to $0.93 in the three months ended March 28, 2009 and included $0.02 of ramp penalty associated with the ramp and qualification of Malaysian manufacturing center and $0.01 of non-cash stock based compensation.
The increase in our research and development expense was due to a $5.6 million increase in personnel related expense, including a $0.9 million increase in share-based compensation expense, due to increased headcount and additional share-based compensation awards. In addition, consulting and other expenses increased by $0.9 million and grants received decreased by $0.4 million during the three months ended March 28, 2009, compared with the three months ended March 29, 2008. Throughout the fiscal period, we continued the development of solar modules with increased efficiencies at converting sunlight into electricity.
The increase in selling, general and administrative expense was due to a $12.1 million increase in salaries and personnel-related expenses, including a $2.5 million increase in share-based compensation. In addition, legal and professional service fees increased by $5.3 million, including $1.5 million of expenses associated with the acquisition of the solar power project development business of OptiSolar, and other expenses increased by $3.2 million during the three months ended March 28, 2009 compared with the three months ended March 29, 2008. The increase resulted primarily from the expansion of our solar power system and project development business and operating a global manufacturing business.
Read the The complete ReportFSLR is in the portfolios of Lee Ainslie, Lee Ainslie.
