First Solar, Inc.recently announced financial results for the first quarter of 2016. Net sales were $848 million in the quarter, a decrease of $94 million from the fourth quarter of 2015. The decrease in net sales from the prior quarter was primarily due to the timing of systems revenue recognition across multiple projects, partially offset by higher revenue from the Desert Stateline project. In addition, net sales from module plus offerings decreased versus the fourth quarter.
The increase in Desert Stateline revenue in the first quarter resulted from an amendment to the original sale agreement with Southern Company to include an additional 15% interest in the project. This amendment did not impact expected full year 2016 earnings, but did accelerate the timing of certain earnings, relative to prior expectations, from the second half of the year to the first quarter.
The Company reported first quarter earnings per share of $1.66, compared to $1.60 in the prior quarter. The increase in net income versus the fourth quarter resulted from higher Desert Stateline revenue, systems cost improvements and a one-time gain on the sale of certain restricted investments. These items were partially offset by an increase in tax expense.
Cash and marketable securities at the end of the first quarter increased to $1.9 billion. Cash flows from operations were $50 million in the first quarter.
“Our first quarter results represent a very strong start to 2016,” said Jim Hughes, CEO of First Solar. “The sale of additional economic interests in our Stateline project further strengthens our relationship with a strategic business partner, and the transaction provides greater flexibility for future dropdowns to 8point3. We continue to operate our business with a disciplined approach and are focused on achieving our 2016 objectives communicated at our recent Analyst Day.”
The Company raised the low end of its 2016 earnings per share guidance to $4.10 and updated other forecasted financial items as follows:
2016 Guidance Prior Current Net Sales $3.8B to $4.0B Unchanged Gross Margin % 17% to 18% 18% to 19% Operating Expenses $380M to $400M Unchanged Operating Income $260M to $330M $300M to $370M Effective Tax Rate 16% to 18% Unchanged Earnings per Share1 $4.00 to $4.50 $4.10 to $4.50 Net Cash Balance2 $1.9B to $2.2B Unchanged Operating Cash Flow3 $400M to $600M $500M to $700M Capital Expenditures $300M to $400M Unchanged Shipments 2.9GW to 3.0GW Unchanged
1 – Includes a gain of approximately $145 million, net of tax, from the expected sale of an equity method investment and our share of 8point3 earnings. Also includes a gain in Other Income of approximately $20 million, net of tax, from the sale of restricted investments in Q1 2016.
2 – Defined as cash and marketable securities less expected debt at the end of 2016
3 – Does not include approximately $320 million from the expected sale of an equity method investment treated as an investing cash flow