-First Solar, Inc. recently announced financial results for the third quarter of 2016. Net sales were $688 million, a decrease of $246 million from the prior quarter, due to the completion of multiple systems projects during the quarter, partially offset by higher module-only sales. The Company reported third quarter earnings per share of $1.49, compared to $0.13 in the prior quarter. The third quarter was impacted by pre-tax charges of $4 million, related to previously announced restructuring actions. Restructuring related charges in the second quarter were $86 million. Third quarter non-GAAP earnings per share, adjusted for restructuring charges and a foreign tax benefit, were $1.22, compared to $0.87 in the second quarter. Net income was higher versus the prior quarter as a result of lower restructuring charges and the aforementioned foreign tax benefit.
Cash and marketable securities at the end of the third quarter increased to $2.1 billion, primarily due to borrowing under the Company’s revolving credit facility. The short-term borrowing is a result of the ongoing construction of large scale projects which have not yet been sold. Cash flows used in operations were $76 million in the third quarter. “In the third quarter our operational and financial results were solid,” said Mark Widmar, CEO of First Solar. “Our entire fleet module efficiency for the past quarter was 16.5% and our lead line efficiency exited the quarter at 16.9%, demonstrating continued execution on our technology roadmap. We are pleased with our current year financial performance; however, current market conditions are extremely challenging and require us to carefully assess our short and long-term strategic response.”
The Company updated its 2016 guidance based on third quarter results and the revised sale timing for the California Flats and Moapa projects. These projects are now expected to be sold in 2017. The updated guidance is as follows:
|2016 Guidance||Prior GAAP||Current GAAP||Prior Non-GAAP||Current Non-GAAP|
|Net Sales||$3.8B to $4.0B||$2.8B to $2.9B|
|Gross Margin %||18.5% to 19.0%||25.5% to 26.0%|
|Operating Expenses||$485M to $520M||$480M to $500M||$380M to $400M||$375M to $385M|
|Operating Income||$205M to $250M||$235M to $255M||$310M to $370M||$340M to $370M|
|Effective Tax Rate||4% to 6%||(5%) to (3%)||16% to 18%||8% to 10%|
|Earnings per Share1||$3.65 to $3.90||$3.75 to $3.90||$4.20 to $4.50||$4.30 to $4.50|
|Net Cash Balance2||$1.9B to $2.2B||$1.4B to $1.5B|
|Operating Cash Flow3||$500M to $650M||($100M) to $0M|
|Capital Expenditures||$275M to $325M||$225M to $275M|
|Shipments||2.9GW to 3.0GW||2.8GW to 2.9GW|
1. Includes a gain of approximately $110 million, net of tax, from the expected sale of an equity method investment and our share of 8point3 earnings and 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. Excludes cash from the sale of an equity method investment treated as an investing cash flow
For a reconciliation of the non-GAAP measures presented above to measures presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”), see the tables below. First Solar has scheduled a conference call for today, November 2, 2016, at 4:30 p.m. ET to discuss this announcement. A live webcast of this conference call is available at http://investor.firstsolar.com/events.cfm.
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 November 9, 2016 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 4525767. 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 remain available for approximately 90 calendar days.