First Solar, Inc. Announces 2Q 2013 Financial Results

First Solar, Inc. announced financial results for the second quarter of 2013. Net sales were $520 million in the quarter, a decrease of $235 million from the prior quarter and a decrease of $438 million from the second quarter of 2012. The sequential decrease in net sales is primarily attributable to lower systems business project revenues as well as lower module-only sales volume to third-parties.

Compared to the second quarter of 2012, the decrease in net sales is primarily attributable to lower systems business project revenue as initial revenue recognition for AVSR and the sale of Silver State North were both achieved in the second quarter of 2012, partially offset by higher sales volume to third-party module-only customers in the second quarter of 2013.

As a previously highlighted possibility, the company did not complete the sale of the ABW projects in the second quarter of 2013, and such sale is expected to occur in the second half of this year.

The company reported second quarter net income per fully diluted share of $0.37, compared to $0.66 in the first quarter of 2013 and $1.27 in the second quarter of 2012. The second quarter of 2013 was impacted by pre-tax restructuring charges of $2.4 million (reducing EPS by $0.02), compared to $2.3 million (reducing EPS by $0.03) in the first quarter. In both cases the pre-tax charges related to previously announced restructuring actions. The sequential decrease in earnings was primarily due to lower revenue recognition for AVSR and lower sales volumes to third-party module-only customers in the second quarter compared to the first quarter. The year over year decrease in earnings was primarily due to lower systems business revenue recognition, partially offset by higher manufacturing utilization and higher module sales to third-party customers in the second quarter of 2013 compared to the second quarter of 2012.

Cash and marketable securities at the end of the second quarter were approximately $1.3 billion, an increase of approximately $273 million compared to the end of the first quarter of 2013. The company’s net cash grew to approximately $1.0 billion, an increase of approximately $580 million from the first quarter of 2013. Cash flows from operations were $222 million in the second quarter, compared to $66 million for the first quarter of 2013.

The company also announced the acquisition of all of GE’s cadmium telluride (CdTe) solar intellectual property and entered into a technology collaboration agreement with GE, with the intent to advance thin-film solar cells and modules. Under the agreement, First Solar acquired GE’s CdTe solar intellectual property, setting a course for advancement of photovoltaic (PV) thin-film solar technology and GE received 1.75 million shares of First Solar stock.

Also announced was the acquisition of a pipeline of U.S. and Mexico development assets from Element Power. The 1.5 GW portfolio includes geographically diverse projects in various stages of development. The terms of the deal were not disclosed.

Additionally, the company provided updated full year 2013 financial guidance ranges to reflect the following: a reduction in expected net sales associated with the decision to hold two system projects through construction and selling such projects after construction is completed, which action is expected to result in improved project economics; incremental cost at AVSR due to delays related to the county approval process for materials used in construction, partially offset by an improvement in gross margin due to better than expected project economics for ABW, Campo Verde and Imperial Valley; the impact of expected higher operating expenses associated with the newly announced GE technology partnership; and the per-share impact associated with the June 18, 2013 closing of the equity offering of 9,747,000 common shares and the impact of the issuance of 1,750,000 common shares to GE as part of the IP acquisition.

“Although we worked diligently in the quarter to close the sale of the ABW projects, the sale was delayed and consequently, as we highlighted on our first quarter of 2013 earnings call, such delay caused a decline in our net sales and earnings for the second quarter from expectations. We still expect the closing of the ABW sale to occur in the current year, resulting in a corresponding increase in net sales and earnings in the second half of 2013,” said Jim Hughes, CEO of First Solar.

“The acquisition of GE’s CdTe intellectual property and the formation of the new strategic collaboration partnership with GE, coupled with the growing pipeline of potential booking opportunities and continued improvements we are making on our module technology provide incremental value and confidence for our shareholders and demonstrate the progress we are making in achieving our strategic goals of delivering industry-leading PV power solutions to sustainable markets globally,” Hughes added.