FIRST SOLAR, INC. (FSLR, Financial) filed Quarterly Report for the period ended 2010-03-27.
First Solar, Inc. has a market cap of $10.92 billion; its shares were traded at around $128.13 with a P/E ratio of 17 and P/S ratio of 5.3. FSLR is in the portfolios of Richard Perry of Perry Capital, Steven Cohen of SAC Capital Advisors, NWQ Managers of NWQ Investment Management Co, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
We account for these rebates as a reduction to the selling price of our solar modules and, therefore, as a reduction in revenue at the time of sale. No rebates granted under this program can be claimed in cash; instead, rebates may only be applied to reduce outstanding accounts receivable balances. During the three months ended March 27, 2010, we extended rebates to customers in the amount of €20.0 million ($27.8 million at an average exchange rate of $1.39/€1.00).
Deferred project costs represent capitalized costs related to the deferred revenue for project development or project construction activities sold to a third party typically under an EPC agreement, for which the revenue recognition criteria have not been met. We recognize these costs as we recognize the revenue for these projects. Deferred project costs at March 27, 2010 and December 26, 2009 were $66.3 million and $36.7 million, respectively.
The increase in our cost of sales was due to higher production and sales volumes, which resulted from the full production ramp of our four-plant Malaysian manufacturing center, production ramp of our Perrysburg, Ohio expansion, and an increase in business activity associated with our systems business segment. The increased production and sales volumes in our components business and increased volume sold through our systems business had the following effects: a $63.3 million increase in direct material expense, a $5.8 million increase in warranty expense and accruals for the estimated future costs associated with the collection and recycling of our solar modules due to increased sales, a $9.8 million increase in sales freight and other costs, and a $24.1 million increase in manufacturing overhead costs. The increase in manufacturing overhead costs was due to a $10.0 million increase in salaries and personnel-related expenses (including a $2.1 million increase in share-based compensation expense), a $2.4 million increase in facility and related expenses, an $11.1 million increase in depreciation and equipment expenses, and a $0.6 million increase in other expenses. Each of these manufacturing overhead cost increases primarily resulted from increased infrastructure associated with the build out of our Malaysian manufacturing center and start-up of
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First Solar, Inc. has a market cap of $10.92 billion; its shares were traded at around $128.13 with a P/E ratio of 17 and P/S ratio of 5.3. FSLR is in the portfolios of Richard Perry of Perry Capital, Steven Cohen of SAC Capital Advisors, NWQ Managers of NWQ Investment Management Co, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
In the PV module segment, we continue to face intense competition from manufacturers of crystalline silicon solar modules and other types of solar modules and photovoltaic systems. Solar module manufacturers compete with one another in several product performance attributes, including reliability and module cost per watt, and, with respect to solar power systems, return on equity (ROE) and levelized cost of electricity (LCOE), meaning the net present value of total life cycle costs of the solar power project divided by the quantity of energy which is expected to be produced over the system s life. The ability to expand manufacturing capacity quickly is another source of differentiation among solar module manufacturers, and certain of our competitors may have a faster response time to capacity expansion than we do. We are the lowest cost PV module manufacturer in the solar industry, based on publicly available information, as evidenced by the further reduction in our average manufacturing cost per watt from $0.93 during the three months ended March 28, 2009 to $0.81 during the three months ended March 27, 2010. 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 in respect of their ROE or LCOE. Our cost competitiveness is based in large part on our proprietary technology (which enables conversion efficiency improvements and permits a continuous and 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 between approximately $50 and $55 per kilogram (Kg) enables us to remain one of the lowest cost module manufacturers in the solar industry. However, the timing and rate 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. 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 LCOE, our modules may 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 modules of 10% per year. During the three months ended March 27, 2010, we reduced our manufacturing cost per watt by 13% from our cost per watt in the three months ended March 28, 2009.We account for these rebates as a reduction to the selling price of our solar modules and, therefore, as a reduction in revenue at the time of sale. No rebates granted under this program can be claimed in cash; instead, rebates may only be applied to reduce outstanding accounts receivable balances. During the three months ended March 27, 2010, we extended rebates to customers in the amount of €20.0 million ($27.8 million at an average exchange rate of $1.39/€1.00).
Deferred project costs represent capitalized costs related to the deferred revenue for project development or project construction activities sold to a third party typically under an EPC agreement, for which the revenue recognition criteria have not been met. We recognize these costs as we recognize the revenue for these projects. Deferred project costs at March 27, 2010 and December 26, 2009 were $66.3 million and $36.7 million, respectively.
The increase in our cost of sales was due to higher production and sales volumes, which resulted from the full production ramp of our four-plant Malaysian manufacturing center, production ramp of our Perrysburg, Ohio expansion, and an increase in business activity associated with our systems business segment. The increased production and sales volumes in our components business and increased volume sold through our systems business had the following effects: a $63.3 million increase in direct material expense, a $5.8 million increase in warranty expense and accruals for the estimated future costs associated with the collection and recycling of our solar modules due to increased sales, a $9.8 million increase in sales freight and other costs, and a $24.1 million increase in manufacturing overhead costs. The increase in manufacturing overhead costs was due to a $10.0 million increase in salaries and personnel-related expenses (including a $2.1 million increase in share-based compensation expense), a $2.4 million increase in facility and related expenses, an $11.1 million increase in depreciation and equipment expenses, and a $0.6 million increase in other expenses. Each of these manufacturing overhead cost increases primarily resulted from increased infrastructure associated with the build out of our Malaysian manufacturing center and start-up of
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