First Solar, Inc. Announces Third Quarter 2017 Financial Results

October 26, 2017 at 4:02 PM EDT
  • Net sales of $1.1 billion
  • GAAP EPS of $1.95
  • Cash and marketable securities of $2.7 billion, net cash of $2.4 billion
  • 4.5GWdc quarterly net bookings, 6.7GWdc YTD net bookings
  • Raises EPS guidance for 2017

TEMPE, Ariz.--(BUSINESS WIRE)--Oct. 26, 2017-- First Solar, Inc. (Nasdaq: FSLR) today announced financial results for the third quarter of 2017. Net sales for the third quarter were $1.1 billion, an increase of $464 million from the prior quarter primarily due to the sale of the California Flats and Cuyama projects, and higher third-party module sales.

The Company reported third quarter earnings per share (“EPS”) of $1.95, compared to EPS of $0.50 in the prior quarter. The third quarter was impacted by pre-tax restructuring and asset impairment charges of less than $1 million, compared to $18 million in the second quarter. Net income increased versus the prior quarter primarily as a result of higher net sales, improved gross margin and lower restructuring charges. Third quarter non-GAAP EPS, adjusted for restructuring and asset impairment charges, was $1.95, compared to $0.64 in the second quarter.

Cash and marketable securities at the end of the third quarter increased to $2.7 billion from $2.2 billion in the prior quarter. The increase primarily resulted from cash received from projects sold in the third quarter. Cash flows from operations were $581 million in the third quarter.

“Third quarter results were highlighted by record bookings and strong earnings resulting from the sale of our California Flats project,” said Mark Widmar, CEO of First Solar. “Our 4.5GWdc of bookings demonstrates both the robust market demand for our Series 4 and Series 6 module technology, and the acceleration of procurement timing by certain customers. Closing the sale of our California Flats project was also an important milestone toward achieving our financial guidance for the year. While we are pleased with our recent results, we continue to be intently focused on the success of our Series 6 transition.”

Based on results for the third quarter, the Company updated 2017 guidance as follows:

2017 Guidance     Prior GAAP     Current GAAP     Prior Non-GAAP     Current Non-GAAP
Net Sales     $3.0B to $3.1B     Unchanged        
Gross Margin % 17.0% to 18.0% ~18.0%
Operating Expenses $370M to $395M $370M to $385M $330M to $340M Unchanged
Operating Income $115M to $180M $165M to $190M $170M to $220M $210M to $230M
Earnings per Share $1.55 to $2.20 $2.05 to $2.30 $2.00 to $2.50 $2.40 to $2.60
Net Cash Balance1 $2.1B to $2.3B Unchanged
Operating Cash Flow $850M to $950M Unchanged
Capital Expenditures $400M to $500M Unchanged
Shipments     2.6GW to 2.7GW     Unchanged            
 

1.  Defined as cash and marketable securities less expected debt at the end of 2017.

 
 

For a reconciliation of the non-GAAP measures presented above to measures presented in accordance with generally accepted accounting principles in the United States (“GAAP”), see the tables below.

First Solar has scheduled a conference call for today, October 26, 2017 at 4:30 p.m. ET to discuss this announcement. A live webcast of this conference call will be available at http://investor.firstsolar.com. 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 Nov 2, 2017 at 7:30 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 6807520. A replay of the webcast will be available on the Investors section of the Company’s website approximately two hours after the conclusion of the call and will 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 advanced module and system 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 safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements, among other things, concerning: effects on our financial statements and guidance resulting from certain module manufacturing changes and associated restructuring activities; our 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 (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, restructuring, product reliability, investments in unconsolidated affiliates and capital expenditures; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies, such as tariffs or other trade remedies imposed on solar cells and modules; our ability to expand manufacturing capacity worldwide; our ability to reduce the costs to construct PV solar power systems; research and development programs and our ability to improve the conversion efficiency of our solar modules; sales and marketing initiatives; and competition. These forward-looking statements are often characterized by the use of words such as "estimate," "expect," "anticipate," "project," "plan," "intend," "seek," "believe," "forecast," "foresee," "likely," "may," "should," "goal," "target," "might," "will," "could," "predict," "continue" and the negative or plural of these words and other comparable terminology. Forward-looking statements are only predictions based on our current expectations and our projections about future events. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the matters discussed in Item 1A "Risk Factors," of our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

 

       

 

September 30,
2017

December 31,
2016

ASSETS
Current assets:
Cash and cash equivalents $ 2,019,073 $ 1,347,155
Marketable securities 699,544 607,991
Accounts receivable trade, net 344,645 266,687
Accounts receivable, unbilled and retainage 455,118 206,739
Inventories 217,555 363,219
Balance of systems parts 20,892 62,776
Project assets 67,263 700,800
Note receivable, affiliate 15,000
Prepaid expenses and other current assets 142,404   217,462  
Total current assets 3,966,494 3,787,829
Property, plant and equipment, net 940,119 629,142
PV solar power systems, net 454,483 448,601
Project assets 406,396 762,148
Deferred tax assets, net 276,423 255,152
Restricted cash and investments 408,873 371,307
Investments in unconsolidated affiliates and joint ventures 227,661 234,610
Goodwill 14,462 14,462
Other intangibles, net 81,765 87,970
Inventories 110,412 100,512
Notes receivable, affiliates 69,432 54,737
Other assets 98,173   77,898  
Total assets $ 7,054,693   $ 6,824,368  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 130,704 $ 148,730
Income taxes payable 4,396 12,562
Accrued expenses 317,325 262,977
Current portion of long-term debt 13,451 27,966
Deferred revenue 69,095 308,704
Other current liabilities 44,046   146,942  
Total current liabilities 579,017 907,881
Accrued solar module collection and recycling liability 163,707 166,277
Long-term debt 330,209 160,422
Other liabilities 469,364   371,439  
Total liabilities 1,542,297   1,606,019  
Commitments and contingencies
Stockholders’ equity:

Common stock, $0.001 par value per share; 500,000,000 shares authorized; 104,431,990
and 104,034,731 shares issued and outstanding at September 30, 2017 and
December 31, 2016, respectively

104 104
Additional paid-in capital 2,788,467 2,765,310
Accumulated earnings 2,729,681 2,462,842
Accumulated other comprehensive loss (5,856 ) (9,907 )
Total stockholders’ equity 5,512,396   5,218,349  
Total liabilities and stockholders’ equity $ 7,054,693   $ 6,824,368  
 
 

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

       

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017   2016 2017   2016
 
Net sales $ 1,087,026 $ 681,276 $ 2,602,143 $ 2,573,768
Cost of sales 795,226   510,368   2,115,266   1,943,198  
Gross profit 291,800 170,908 486,877 630,570
Operating expenses:
Selling, general and administrative 50,546 60,345 147,702 191,624
Research and development 20,850 32,173 64,990 95,291
Production start-up 12,624 752 22,155 807
Restructuring and asset impairments 791   4,314   39,108   89,846  
Total operating expenses 84,811   97,584   273,955   377,568  
Operating income 206,989 73,324 212,922 253,002
Foreign currency loss, net (3,968 ) (2,296 ) (6,166 ) (8,259 )
Interest income 8,392 5,894 22,364 18,829
Interest expense, net (4,149 ) (5,563 ) (19,692 ) (17,356 )
Other income, net 2,018   6,419   25,180   48,725  
Income before taxes and equity in earnings of unconsolidated affiliates 209,282 77,778 234,608 294,941
Income tax (expense) benefit (7,580 ) 68,205 26,769 32,886
Equity in earnings of unconsolidated affiliates, net of tax 4,045   4,474   5,462   6,851  
Net income $ 205,747   $ 150,457   $ 266,839   $ 334,678  
Net income per share:
Basic $ 1.97   $ 1.46   $ 2.56   $ 3.27  
Diluted $ 1.95   $ 1.45   $ 2.54   $ 3.25  
Weighted-average number of shares used in per share calculations:
Basic 104,432   103,339   104,287   102,496  
Diluted 105,660   103,684   104,889   103,110  
 
 

Non-GAAP Financial Measures

In the press release above, we provided non-GAAP earnings per share for the three months ended September 30, 2017 and June 30, 2017. We have included these non-GAAP financial measures to adjust for (i) restructuring, asset impairment and related charges primarily associated with the transition from Series 4 to Series 6 production and (ii) the tax effect associated with these items. We believe non-GAAP earnings per share, when taken together with corresponding GAAP financial measures, to be relevant and useful information to our investors because it provides them with additional information in assessing our financial operating results. Our management uses this non-GAAP financial measure in evaluating our operating performance. However, this measure has limitations, including that it excludes the effect of certain changes to our assets and liabilities and certain amounts that we may ultimately have to pay in cash. Accordingly, this non-GAAP financial measure should be considered in addition to, and not as a substitute for, or superior to earnings per share prepared in accordance with GAAP. The following is the reconciliation of earnings per share prepared in accordance with GAAP to non-GAAP earnings per share for each period presented (in millions, except per share amounts):

   

Three Months Ended
September 30, 2017

 
Net income $ 205.7
 
Restructuring and asset impairments 0.8
Tax effect* (0.1 )
Non-GAAP net income $ 206.4  
 
Weighted-average number of shares used for diluted earnings per share 105.7
 
Diluted GAAP earnings per share $ 1.95
Diluted Non-GAAP earnings per share $ 1.95
 

*  Restructuring treated as a non-discrete item for tax purposes and will be reflected in the effective tax rate over the
duration of 2017.

 
 
 

Three Months Ended
June 30, 2017

Net income $ 52.0
 
Restructuring and asset impairments 18.3
Tax effect* (3.8 )
Non-GAAP net income $ 66.5  
 
Weighted-average number of shares used for diluted earnings per share 104.6
 
Diluted GAAP earnings per share $ 0.50
Diluted Non-GAAP earnings per share $ 0.64
 

*  Restructuring treated as a non-discrete item for tax purposes and will be reflected in the effective tax rate over the
duration of 2017.

 
 

In the press release above, we provided non-GAAP guidance as of the date of this press release for our operating expenses, operating income and earnings per share for the year ending December 31, 2017. We have included these forward-looking non-GAAP financial measures to adjust our GAAP projections of such financial measures for, as applicable, (i) restructuring, asset impairment and related charges primarily associated with the transition from Series 4 to Series 6 production and (ii) additional restructuring activities expected during the remainder of the year. Other GAAP charges, including those related to certain asset impairments or restructuring programs, that would be excluded from non-GAAP earnings per share are possible for the periods presented, but such amounts are dependent on numerous factors that we currently cannot ascertain with sufficient certainty or are presently unknown. These GAAP charges are also dependent upon future events and valuations that have not yet occurred or been performed. We believe these forward-looking non-GAAP financial measures, when taken together with our corresponding financial guidance based on GAAP, to be relevant and useful information to our investors because they provide them with additional information in assessing our financial operating results. Our management also uses such non-GAAP guidance in evaluating our operating performance. However, such measures have limitations, including that they exclude the effect of certain changes to our assets and liabilities, certain amounts that we may ultimately have to pay in cash and certain tax impacts. Accordingly, these forward-looking non-GAAP financial measures that exclude the aforementioned items should be considered in addition to, and not as substitutes for or superior to, financial guidance based on GAAP. The following are the reconciliations of our current and prior non-GAAP 2017 guidance to our current and prior GAAP 2017 guidance (in millions, except per share amounts):

Reconciliation of Non-GAAP 2017 Guidance to GAAP 2017 Guidance

           
GAAP Guidance

Restructuring
Charges

Non-GAAP Guidance

Operating Expenses $370 to $385 $(40) to $(45) $330 to $340
Operating Income $165 to $190 $45 to $40 $210 to $230
Earnings per Share $2.05 to $2.30 $0.35 to $0.30 $2.40 to $2.60
 

1.  $40 to $45 million of restructuring related charges associated with our transition from Series 4 to Series 6 module
manufacturing.

 
 

Reconciliation of Prior Non-GAAP 2017 Guidance to Prior GAAP 2017 Guidance

           
GAAP Guidance

Restructuring
Charges1

Non-GAAP Guidance
Operating Expenses $370 to $395 $(40) to $(55) $330 to $340
Operating Income $115 to $180 $55 to $40 $170 to $220
Earnings per Share $1.55 to $2.20 $0.45 to $0.30 $2.00 to $2.50
 

1.  $40 to $55 million of restructuring related charges associated with our transition from Series 4 to Series 6 module
manufacturing.

 

Source: First Solar, Inc.

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