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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-33156
First Solar, Inc.
(Exact name of registrant as specified in its charter) | | | | | |
| Delaware | 20-4623678 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
350 West Washington Street, Suite 600
Tempe, Arizona 85288
(Address of principal executive offices, including zip code)
(602) 414-9300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common stock, $0.001 par value | FSLR | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ | Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 21, 2023, 106,825,674 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.
FIRST SOLAR, INC.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
Throughout this Quarterly Report on Form 10-Q, we refer to First Solar, Inc. and its consolidated subsidiaries as “First Solar,” “the Company,” “we,” “us,” and “our.” When referring to our manufacturing capacity, total sales, and solar module sales, the unit of electricity in watts for megawatts (“MW”) and gigawatts (“GW”) is direct current (“DC” or “DC”) unless otherwise noted.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
FIRST SOLAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited) | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| | 2023 | | 2022 | | | | |
| Net sales | | $ | 548,286 | | | $ | 367,040 | | | | | |
| Cost of sales | | 436,235 | | | 355,577 | | | | | |
| Gross profit | | 112,051 | | | 11,463 | | | | | |
| Operating expenses: | | | | | | | | |
| Selling, general and administrative | | 44,028 | | | 36,728 | | | | | |
| Research and development | | 30,510 | | | 27,108 | | | | | |
| Production start-up | | 19,494 | | | 7,338 | | | | | |
| Total operating expenses | | 94,032 | | | 71,174 | | | | | |
| Gain on sales of businesses, net | | (17) | | | 1,907 | | | | | |
| Operating income (loss) | | 18,002 | | | (57,804) | | | | | |
| Foreign currency loss, net | | (5,947) | | | (4,198) | | | | | |
| Interest income | | 25,822 | | | 2,325 | | | | | |
| Interest expense, net | | (748) | | | (2,865) | | | | | |
| Other expense, net | | (1,456) | | | (212) | | | | | |
| Income (loss) before taxes | | 35,673 | | | (62,754) | | | | | |
| Income tax benefit | | 6,888 | | | 19,499 | | | | | |
| Net income (loss) | | $ | 42,561 | | | $ | (43,255) | | | | | |
| | | | | | | | |
| Net income (loss) per share: | | | | | | | | |
| Basic | | $ | 0.40 | | | $ | (0.41) | | | | | |
| Diluted | | $ | 0.40 | | | $ | (0.41) | | | | | |
Weighted-average number of shares used in per share calculations: | | | | | | | | |
| Basic | | 106,675 | | | 106,412 | | | | | |
| Diluted | | 107,154 | | | 106,412 | | | | | |
See accompanying notes to these condensed consolidated financial statements.
FIRST SOLAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | |
| | 2023 | | 2022 | | | | |
| Net income (loss) | | $ | 42,561 | | | $ | (43,255) | | | | | |
| Other comprehensive income (loss): | | | | | | | | |
Foreign currency translation adjustments | | 2,655 | | | (10,125) | | | | | |
Unrealized gain (loss) on marketable securities and restricted marketable securities, net of tax of $(402) and $1,246 | | 6,966 | | | (22,521) | | | | | |
Unrealized gain (loss) on derivative instruments, net of tax of $(708) and $94 | | 2,214 | | | (442) | | | | | |
| Other comprehensive income (loss) | | 11,835 | | | (33,088) | | | | | |
| Comprehensive income (loss) | | $ | 54,396 | | | $ | (76,343) | | | | | |
See accompanying notes to these condensed consolidated financial statements.
FIRST SOLAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited) | | | | | | | | | | | | | | |
| | March 31,
2023 | | December 31,
2022 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 906,634 | | | $ | 1,481,269 | |
| Marketable securities | | 1,364,607 | | | 1,096,712 | |
| Accounts receivable trade, net | | 298,620 | | | 324,337 | |
| Accounts receivable unbilled | | 25,894 | | | 30,654 | |
| Inventories | | 751,407 | | | 621,376 | |
| Other current assets | | 272,702 | | | 237,073 | |
| Total current assets | | 3,619,864 | | | 3,791,421 | |
| Property, plant and equipment, net | | 3,858,604 | | | 3,536,902 | |
| Deferred tax assets, net | | 136,411 | | | 78,680 | |
| Restricted marketable securities | | 196,591 | | | 182,070 | |
| Government grants receivable | | 70,114 | | | — | |
| Goodwill | | 14,462 | | | 14,462 | |
| Intangible assets, net | | 28,477 | | | 31,106 | |
| Inventories | | 253,353 | | | 260,395 | |
| Other assets | | 386,720 | | | 356,192 | |
| Total assets | | $ | 8,564,596 | | | $ | 8,251,228 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 285,760 | | | $ | 341,409 | |
| Income taxes payable | | 77,176 | | | 29,397 | |
| Accrued expenses | | 391,912 | | | 382,782 | |
| Deferred revenue | | 398,694 | | | 263,215 | |
| Other current liabilities | | 20,631 | | | 21,245 | |
| Total current liabilities | | 1,174,173 | | | 1,038,048 | |
| Accrued solar module collection and recycling liability | | 130,258 | | | 128,114 | |
| Long-term debt | | 320,378 | | | 184,349 | |
| Deferred revenue | | 949,687 | | | 944,725 | |
| Other liabilities | | 121,372 | | | 119,937 | |
| Total liabilities | | 2,695,868 | | | 2,415,173 | |
| Commitments and contingencies | | | | |
| Stockholders’ equity: | | | | |
| Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,825,067 and 106,609,094 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | | 107 | | | 107 | |
| Additional paid-in capital | | 2,865,753 | | | 2,887,476 | |
| Accumulated earnings | | 3,182,850 | | | 3,140,289 | |
| Accumulated other comprehensive loss | | (179,982) | | | (191,817) | |
| Total stockholders’ equity | | 5,868,728 | | | 5,836,055 | |
| Total liabilities and stockholders’ equity | | $ | 8,564,596 | | | $ | 8,251,228 | |
See accompanying notes to these condensed consolidated financial statements.
FIRST SOLAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2023 |
| | | Common Stock | | Additional
Paid-In
Capital | | Accumulated Earnings | | Accumulated
Other
Comprehensive Loss | | Total
Stockholders' Equity |
| | | Shares | | Amount | | | | |
| Balance at December 31, 2022 | | 106,609 | | | $ | 107 | | | $ | 2,887,476 | | | $ | 3,140,289 | | | $ | (191,817) | | | $ | 5,836,055 | |
| Net income | | — | | | — | | | — | | | 42,561 | | | — | | | 42,561 | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | 11,835 | | | 11,835 | |
Common stock issued for share-based compensation | | 364 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to vesting of restricted stock | | (148) | | | — | | | (28,314) | | | — | | | — | | | (28,314) | |
Share-based compensation expense | | — | | | — | | | 6,591 | | | — | | | — | | | 6,591 | |
| Balance at March 31, 2023 | | 106,825 | | | $ | 107 | | | $ | 2,865,753 | | | $ | 3,182,850 | | | $ | (179,982) | | | $ | 5,868,728 | |
| | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 |
| | | Common Stock | | Additional
Paid-In
Capital | | Accumulated Earnings | | Accumulated
Other
Comprehensive Loss | | Total
Stockholders' Equity |
| | | Shares | | Amount | | | | |
| Balance at December 31, 2021 | | 106,332 | | | $ | 106 | | | $ | 2,871,352 | | | $ | 3,184,455 | | | $ | (96,362) | | | $ | 5,959,551 | |
| | | | | | | | | | | | |
| Net loss | | — | | | — | | | — | | | (43,255) | | | — | | | (43,255) | |
| Other comprehensive loss | | — | | | — | | | — | | | — | | | (33,088) | | | (33,088) | |
Common stock issued for share-based compensation | | 414 | | | 1 | | | — | | | — | | | — | | | 1 | |
Tax withholding related to vesting of restricted stock | | (163) | | | — | | | (11,505) | | | — | | | — | | | (11,505) | |
Share-based compensation expense | | — | | | — | | | 3,471 | | | — | | | — | | | 3,471 | |
| Balance at March 31, 2022 | | 106,583 | | | $ | 107 | | | $ | 2,863,318 | | | $ | 3,141,200 | | | $ | (129,450) | | | $ | 5,875,175 | |
See accompanying notes to these condensed consolidated financial statements.
FIRST SOLAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended
March 31, |
| | 2023 | | 2022 |
| Cash flows from operating activities: | | | | |
| Net income (loss) | | $ | 42,561 | | | $ | (43,255) | |
| Adjustments to reconcile net income (loss) to cash used in operating activities: | | | | |
| Depreciation, amortization and accretion | | 68,855 | | | 65,207 | |
| | | | |
| Share-based compensation | | 6,600 | | | 3,503 | |
| Deferred income taxes | | (55,282) | | | 1,083 | |
| Gain on sales of businesses, net | | 17 | | | (1,907) | |
| | | | |
| | | | |
| Other, net | | (698) | | | 2,165 | |
| Changes in operating assets and liabilities: | | | | |
| Accounts receivable, trade and unbilled | | 33,933 | | | 144,286 | |
| Inventories | | (122,996) | | | (175,990) | |
| Project assets and PV solar power systems | | 6,099 | | | (98,695) | |
| Government grants receivable | | (70,114) | | | — | |
| Other assets | | (66,493) | | | (30,838) | |
| Income tax receivable and payable | | 43,646 | | | (23,502) | |
| Accounts payable and accrued expenses | | (61,552) | | | (38,043) | |
| Deferred revenue | | 139,713 | | | 77,042 | |
| Other liabilities | | 1,113 | | | (19,895) | |
| Net cash used in operating activities | | (34,598) | | | (138,839) | |
| Cash flows from investing activities: | | | | |
| Purchases of property, plant and equipment | | (370,961) | | | (154,761) | |
| Purchases of marketable securities and restricted marketable securities | | (1,470,600) | | | (750,220) | |
| Proceeds from maturities of marketable securities | | 1,196,334 | | | 900,165 | |
| Proceeds from sales of businesses | | — | | | 1,860 | |
| Other investing activities | | — | | | 12 | |
| Net cash used in investing activities | | (645,227) | | | (2,944) | |
| Cash flows from financing activities: | | | | |
| Repayment of long-term debt | | — | | | (737) | |
| Proceeds from borrowings under long-term debt, net of issuance costs | | 136,000 | | | 18,006 | |
| Payments of tax withholdings for restricted shares | | (28,314) | | | (11,505) | |
| | | | |
| Net cash provided by financing activities | | 107,686 | | | 5,764 | |
| Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents | | 1,495 | | | 15,162 | |
| Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents | | (570,644) | | | (120,857) | |
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of the period | | 1,493,462 | | | 1,455,837 | |
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of the period | | $ | 922,818 | | | $ | 1,334,980 | |
| Supplemental disclosure of noncash investing and financing activities: | | | | |
| Property, plant and equipment acquisitions funded by liabilities | | $ | 330,830 | | | $ | 105,643 | |
| | | | |
See accompanying notes to these condensed consolidated financial statements.
FIRST SOLAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries in this Quarterly Report have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of First Solar management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Certain prior period balances have been reclassified to conform to the current period presentation.
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K, which has been filed with the SEC.
Unless expressly stated or the context otherwise requires, the terms “the Company,” “we,” “us,” “our,” and “First Solar” refer to First Solar, Inc. and its consolidated subsidiaries, and the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report.
2. Sales of Businesses
Sales of International O&M Operations
In January 2022, we completed the sale of our Chilean operations and maintenance (“O&M”) operations to a subsidiary of Clairvest Group, Inc. (“Clairvest”) and received total consideration of $1.9 million. As a result of this transaction, we recognized a gain of $1.9 million, net of transaction costs and post-closing adjustments, during the three months ended March 31, 2022, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations.
During the three months ended March 31, 2023, we recognized certain post-closing adjustments associated with the prior sale of our O&M operations in a foreign jurisdiction, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations.
3. Cash, Cash Equivalents, and Marketable Securities
Cash, cash equivalents, and marketable securities consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | March 31,
2023 | | December 31,
2022 |
| Cash and cash equivalents: | | | | |
| Cash | | $ | 899,537 | | | $ | 1,476,945 | |
| Money market funds | | 7,097 | | | 4,324 | |
| Total cash and cash equivalents | | 906,634 | | | 1,481,269 | |
| Marketable securities: | | | | |
| Foreign debt | | 56,499 | | | 59,777 | |
| U.S. debt | | 56,731 | | | 56,463 | |
| U.S. Treasury securities | | 520,516 | | | — | |
| Time deposits | | 730,861 | | | 980,472 | |
| Total marketable securities | | 1,364,607 | | | 1,096,712 | |
| Total cash, cash equivalents, and marketable securities | | $ | 2,271,241 | | | $ | 2,577,981 | |
The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported within our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 to the total of such amounts as presented in the condensed consolidated statements of cash flows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Line Item | | March 31,
2023 | | December 31,
2022 |
| Cash and cash equivalents | | Cash and cash equivalents | | $ | 906,634 | | | $ | 1,481,269 | |
Restricted cash – current | | Other current assets | | 12,256 | | | 3,175 | |
Restricted cash – noncurrent | | Other assets | | 1,349 | | | 2,734 | |
| Restricted cash equivalents - noncurrent | | Other assets | | 2,579 | | | 6,284 | |
| Total cash, cash equivalents, restricted cash, and restricted cash equivalents | | | | $ | 922,818 | | | $ | 1,493,462 | |
See Note 9. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our marketable securities.
The following tables summarize the unrealized gains and losses related to our available-for-sale marketable securities, by major security type, as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of March 31, 2023 |
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value |
| Foreign debt | | $ | 56,952 | | | $ | — | | | $ | 430 | | | $ | 23 | | | $ | 56,499 | |
| U.S. debt | | 58,376 | | | — | | | 1,623 | | | 22 | | | 56,731 | |
| U.S. Treasury securities | | 520,705 | | | — | | | 189 | | | — | | | 520,516 | |
| Time deposits | | 731,114 | | | — | | | — | | | 253 | | | 730,861 | |
| Total | | $ | 1,367,147 | | | $ | — | | | $ | 2,242 | | | $ | 298 | | | $ | 1,364,607 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2022 |
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value |
| Foreign debt | | $ | 59,940 | | | $ | — | | | $ | 140 | | | $ | 23 | | | $ | 59,777 | |
| U.S. debt | | 58,308 | | | — | | | 1,823 | | | 22 | | | 56,463 | |
| Time deposits | | 980,810 | | | — | | | — | | | 338 | | | 980,472 | |
| Total | | $ | 1,099,058 | | | $ | — | | | $ | 1,963 | | | $ | 383 | | | $ | 1,096,712 | |
The following table presents the change in the allowance for credit losses related to our available-for-sale marketable securities for the three months ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | |
| | Three Months Ended
March 31, |
| | 2023 | | 2022 |
| Allowance for credit losses, beginning of period | | $ | 383 | | | $ | 97 | |
| Provision for credit losses, net | | 253 | | | 49 | |
| Sales and maturities of marketable securities | | (338) | | | (86) | |
| Allowance for credit losses, end of period | | $ | 298 | | | $ | 60 | |
The contractual maturities of our marketable securities as of March 31, 2023 were as follows (in thousands):
| | | | | | | | |
| | Fair
Value |
| One year or less | | $ | 1,259,325 | |
| One year to two years | | 69,886 | |
| Two years to three years | | 31,399 | |
| Three years to four years | | — | |
| Four years to five years | | — | |
| More than five years | | 3,997 | |
| Total | | $ | 1,364,607 | |
4. Restricted Marketable Securities
Restricted marketable securities consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | March 31,
2023 | | December 31,
2022 |
| Foreign government obligations | | $ | 48,539 | | | $ | 46,886 | |
| Supranational debt | | 15,614 | | | 8,661 | |
| U.S. debt | | 114,283 | | | 109,328 | |
| U.S. government obligations | | 18,155 | | | 17,195 | |
| Total restricted marketable securities | | $ | 196,591 | | | $ | 182,070 | |
Our restricted marketable securities represent long-term investments to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. We have established a trust under which estimated funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. As of March 31, 2023 and December 31, 2022, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $2.6 million and $6.7 million, respectively, which were reported within “Other assets.” Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years.
See Note 9. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our restricted marketable securities.
The following tables summarize the unrealized gains and losses related to our restricted marketable securities, by major security type, as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of March 31, 2023 |
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value |
| Foreign government obligations | | $ | 64,647 | | | $ | — | | | $ | 16,098 | | | $ | 10 | | | $ | 48,539 | |
| Supranational debt | | 17,851 | | | — | | | 2,237 | | | — | | | 15,614 | |
| U.S. debt | | 147,842 | | | — | | | 33,531 | | | 28 | | | 114,283 | |
| U.S. government obligations | | 24,529 | | | — | | | 6,369 | | | 5 | | | 18,155 | |
| Total | | $ | 254,869 | | | $ | — | | | $ | 58,235 | | | $ | 43 | | | $ | 196,591 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2022 |
| | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Allowance for Credit Losses | | Fair
Value |
| Foreign government obligations | | $ | 64,008 | | | $ | — | | | $ | 17,112 | | | $ | 10 | | | $ | 46,886 | |
| Supranational debt | | 11,146 | | | — | | | 2,485 | | | — | | | 8,661 | |
| U.S. debt | | 148,288 | | | — | | | 38,932 | | | 28 | | | 109,328 | |
| U.S. government obligations | | 24,551 | | | — | | | 7,352 | | | 4 | | | 17,195 | |
| Total | | $ | 247,993 | | | $ | — | | | $ | 65,881 | | | $ | 42 | | | $ | 182,070 | |
The following table presents the change in the allowance for credit losses related to our restricted marketable securities for the three months ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | |
| | Three Months Ended
March 31, |
| | 2023 | | 2022 |
| Allowance for credit losses, beginning of period | | $ | 42 | | | $ | 53 | |
| Provision for credit losses, net | | 1 | | | (3) | |
| | | | |
| Allowance for credit losses, end of period | | $ | 43 | | | $ | 50 | |
As of March 31, 2023, the contractual maturities of our restricted marketable securities were between 8 years and 16 years.
5. Consolidated Balance Sheet Details
Accounts receivable trade, net
Accounts receivable trade, net consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Accounts receivable trade, gross | | $ | 299,628 | | | $ | 325,379 | |
| Allowance for credit losses | | (1,008) | | | (1,042) | |
| Accounts receivable trade, net | | $ | 298,620 | | | $ | 324,337 | |
Allowance for credit losses
The following table presents the change in the allowance for credit losses related to our trade accounts receivable for the three months ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | |
| | Three Months Ended
March 31, |
| | 2023 | | 2022 |
| Allowance for credit losses, beginning of period | | $ | 1,042 | | | $ | 664 | |
| Provision for credit losses, net | | (34) | | | (185) | |
| Allowance for credit losses, end of period | | $ | 1,008 | | | $ | 479 | |
Inventories
Inventories consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Raw materials | | $ | 403,225 | | | $ | 397,912 | |
| Work in process | | 75,731 | | | 66,641 | |
| Finished goods | | 525,804 | | | 417,218 | |
| Inventories | | $ | 1,004,760 | | | $ | 881,771 | |
| Inventories – current | | $ | 751,407 | | | $ | 621,376 | |
| Inventories – noncurrent | | $ | 253,353 | | | $ | 260,395 | |
Other current assets
Other current assets consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Spare maintenance materials and parts | | $ | 120,542 | | | $ | 114,428 | |
| Operating supplies | | 59,697 | | | 47,492 | |
| Prepaid expenses | | 45,470 | | | 43,262 | |
| Prepaid income taxes | | 12,325 | | | 8,314 | |
| Restricted cash | | 12,256 | | | 3,175 | |
| Derivative instruments (1) | | 2,690 | | | 2,018 | |
| Other | | 19,722 | | | 18,384 | |
| Other current assets | | $ | 272,702 | | | $ | 237,073 | |
——————————
(1)See Note 7. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.
Property, plant and equipment, net
Property, plant and equipment, net consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Land | | $ | 35,305 | | | $ | 35,259 | |
| Buildings and improvements | | 1,009,652 | | | 893,049 | |
| Machinery and equipment | | 2,803,499 | | | 2,762,801 | |
| Office equipment and furniture | | 155,321 | | | 146,467 | |
| Leasehold improvements | | 40,077 | | | 40,160 | |
| Construction in progress | | 1,343,541 | | | 1,121,938 | |
| Property, plant and equipment, gross | | 5,387,395 | | | 4,999,674 | |
| Accumulated depreciation | | (1,528,791) | | | (1,462,772) | |
| Property, plant and equipment, net | | $ | 3,858,604 | | | $ | 3,536,902 | |
Depreciation of property, plant and equipment was $65.9 million and $58.6 million for the three months ended March 31, 2023 and 2022, respectively.
Goodwill
Goodwill for the relevant reporting unit consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | December 31,
2022 | | Acquisitions (Impairments) | | March 31,
2023 |
| Modules | | $ | 407,827 | | | $ | — | | | $ | 407,827 | |
| Accumulated impairment losses | | (393,365) | | | — | | | (393,365) | |
| Goodwill | | $ | 14,462 | | | $ | — | | | $ | 14,462 | |
Intangible assets, net
Intangible assets, net consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| | | Gross Amount | | Accumulated Amortization | | | | Net Amount |
| Developed technology | | $ | 97,347 | | | $ | (71,150) | | | | | $ | 26,197 | |
| Patents | | 8,970 | | | (6,690) | | | | | 2,280 | |
| Intangible assets, net | | $ | 106,317 | | | $ | (77,840) | | | | | $ | 28,477 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | | Gross Amount | | Accumulated Amortization | | | | Net Amount |
| Developed technology | | $ | 97,347 | | | $ | (68,650) | | | | | $ | 28,697 | |
| Patents | | 8,970 | | | (6,561) | | | | | 2,409 | |
| Intangible assets, net | | $ | 106,317 | | | $ | (75,211) | | | | | $ | 31,106 | |
Amortization of intangible assets was $2.6 million and $2.7 million for the three months ended March 31, 2023 and 2022.
Other assets
Other assets consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Advance payments for raw materials | | $ | 137,860 | | | $ | 91,260 | |
| Operating lease assets (1) | | 91,282 | | | 93,185 | |
| Income tax receivables | | 56,993 | | | 56,993 | |
| Project assets | | 30,397 | | | 30,108 | |
| Accounts receivable unbilled, net | | 10,111 | | | 11,498 | |
| Restricted cash equivalents | | 2,579 | | | 6,284 | |
| Restricted cash | | 1,349 | | | 2,734 | |
| Accounts receivable trade, net | | — | | | 1,500 | |
| Other | | 56,149 | | | 62,630 | |
| Other assets | | $ | 386,720 | | | $ | 356,192 | |
——————————
(1)See Note 8. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.
Accrued expenses
Accrued expenses consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Accrued property, plant and equipment | | $ | 193,399 | | | $ | 148,777 | |
| Accrued freight | | 69,090 | | | 77,136 | |
| Accrued inventory | | 54,463 | | | 44,679 | |
| Accrued compensation and benefits | | 17,339 | | | 47,939 | |
| Accrued other taxes | | 12,862 | | | 19,765 | |
| Product warranty liability (1) | | 10,236 | | | 10,660 | |
| Other | | 34,523 | | | 33,826 | |
| Accrued expenses | | $ | 391,912 | | | $ | 382,782 | |
——————————
(1)See Note 11. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”
Other current liabilities
Other current liabilities consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Operating lease liabilities (1) | | $ | 9,363 | | | $ | 9,193 | |
| Derivative instruments (2) | | 6,797 | | | 6,668 | |
| Other taxes payable | | 1,180 | | | 1,185 | |
| Other | | 3,291 | | | 4,199 | |
| Other current liabilities | | $ | 20,631 | | | $ | 21,245 | |
——————————
(1)See Note 8. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.
(2)See Note 7. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.
Other liabilities
Other liabilities consisted of the following at March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | |
| | | March 31,
2023 | | December 31,
2022 |
| Operating lease liabilities (1) | | $ | 38,473 | | | $ | 40,589 | |
| Deferred tax liabilities, net | | 32,500 | | | 28,929 | |
| Product warranty liability (2) | | 23,079 | | | 23,127 | |
| Other | | 27,320 | | | 27,292 | |
| Other liabilities | | $ | 121,372 | | | $ | 119,937 | |
——————————
(1)See Note 8. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.
(2)See Note 11. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”
6. Government Grants
Government grants represent benefits provided by federal, state, or local governments that are not subject to the scope of ASC 740. We recognize a grant when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received. Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost-basis, which reduces future depreciation. Other government grants not related to long-lived assets are considered income-based grants, which are recognized as a reduction to the related cost of activities that generated the benefit.
The following table presents the benefits recognized from income-based government grants in our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended
March 31, |
| Income Statement Line Item | | | | | | 2023 | | 2022 |
| Cost of sales | | | | | | $ | 70,114 | | | $ | — | |
In August 2022, the U.S. President signed into law the Inflation Reduction Act of 2022 (“IRA”). Among other things, the IRA offers a tax credit, pursuant to Section 45X of the Internal Revenue Code (“IRC”), for solar modules and solar module components manufactured in the United States and sold to third parties. Such credit may be refundable or transferable to a third party and is available from 2023 to 2032, subject to phase down beginning in 2030. For eligible components, the credit is equal to (i) $12 per square meter for a photovoltaic (“PV”) wafer, (ii) 4 cents multiplied by the capacity of a PV cell, and (iii) 7 cents multiplied by the capacity of a PV module. Based on the current form factor of our modules, we expect to qualify for a credit of approximately 17 cents per watt for each module produced in the United States and sold to a third party. We recognize such credit as a reduction to “Cost of sales” in the period the modules are sold to customers. Such credit is also reflected on our condensed consolidated balance sheets within “Government grants receivable.”
7. Derivative Financial Instruments
As a global company, we are exposed in the normal course of business to interest rate, foreign currency, and commodity price risks that could affect our financial position, results of operations, and cash flows. We use derivative instruments to hedge against these risks and only hold such instruments for hedging purposes, not for speculative or trading purposes.
Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 9. “Fair Value Measurements” to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.
The following tables present the fair values of derivative instruments included in our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | | March 31, 2023 |
| | Other Current Assets | | | | Other Current Liabilities | | |
| Derivatives designated as hedging instruments: | | | | | | | | |
| Commodity swap contracts | | $ | — | | | | | $ | 2,323 | | | |
| Total derivatives designated as hedging instruments | | $ | — | | | | | $ | 2,323 | | | |
| | | | | | | | |
| Derivatives not designated as hedging instruments: | | | | | | | | |
| Foreign exchange forward contracts | | $ | 2,690 | | | | | $ | 4,474 | | | |
| | | | | | | | |
| Total derivatives not designated as hedging instruments | | $ | 2,690 | | | | | $ | 4,474 | | | |
| Total derivative instruments | | $ | 2,690 | | | | | $ | 6,797 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2022 |
| | Other Current Assets | | Other Assets | | Other Current Liabilities | | Other Liabilities |
| Derivatives designated as hedging instruments: | | | | | | | | |
| Commodity swap contracts | | $ | — | | | $ | |
