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 June 30, 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 July 21, 2023, 106,831,394 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 JUNE 30, 2023

TABLE OF CONTENTS

		Page
Part I.	Financial Information	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	1
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022	2
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	54
Item 4.	Controls and Procedures	54
Part II.	Other Information	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
Signature		56

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.” The unit of electricity is typically stated in megawatts (“MW”) and gigawatts (“GW”).

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net sales	$	810,673	$	620,955	$	1,358,959	$	987,995
Cost of sales	500,253		644,155		936,488		999,732
Gross profit (loss)	310,420		(23,200)		422,471		(11,737)
Operating expenses:
Selling, general and administrative	46,328		38,894		90,356		75,622
Research and development	36,745		25,229		67,255		52,337
Production start-up	23,377		13,231		42,871		20,569
Litigation loss	35,590		—		35,590		—
Total operating expenses	142,040		77,354		236,072		148,528
Gain on sales of businesses, net	135		245,381		118		247,288
Operating income	168,515		144,827		186,517		87,023
Foreign currency loss, net	(4,652)		(2,984)		(10,599)		(7,182)
Interest income	25,026		2,880		50,848		5,205
Interest expense, net	(1,415)		(3,236)		(2,163)		(6,101)
Other income (expense), net	997		(1,883)		(459)		(2,095)
Income before taxes	188,471		139,604		224,144		76,850
Income tax expense	(17,892)		(83,799)		(11,004)		(64,300)
Net income	$	170,579	$	55,805	$	213,140	$	12,550
Net income per share:
Basic	$	1.60	$	0.52	$	2.00	$	0.12
Diluted	$	1.59	$	0.52	$	1.99	$	0.12
Weighted-average number of shares used in per share calculations:
Basic	106,827		106,586		106,791		106,500
Diluted	107,278		107,056		107,256		106,965

See accompanying notes to these condensed consolidated financial statements.

1

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	170,579	$	55,805	$	213,140	$	12,550
Other comprehensive (loss) income:
Foreign currency translation adjustments	(5,348)		(18,170)		(2,693)		(28,295)
Unrealized (loss) gain on marketable securities and restricted marketable securities, net of tax of $85, $681, $(317) and $1,927	(1,315)		(16,967)		5,651		(39,488)
Unrealized gain (loss) on derivative instruments, net of tax of $(165), $1,541, $(873) and $1,635	594		(5,643)		2,808		(6,085)
Other comprehensive (loss) income	(6,069)		(40,780)		5,766		(73,868)
Comprehensive income (loss)	$	164,510	$	15,025	$	218,906	$	(61,318)

See accompanying notes to these condensed consolidated financial statements.

2

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	829,913	$	1,481,269
Marketable securities	1,054,044		1,096,712
Accounts receivable trade, net	631,335		324,337
Accounts receivable unbilled	37,084		30,654
Inventories	756,173		621,376
Other current assets	352,181		237,073
Total current assets	3,660,730		3,791,421
Property, plant and equipment, net	4,020,178		3,536,902
Deferred tax assets, net	126,234		78,680
Restricted marketable securities	194,650		182,070
Government grants receivable	225,121		—
Goodwill	28,646		14,462
Intangible assets, net	70,435		31,106
Inventories	257,169		260,395
Other assets	414,003		356,192
Total assets	$	8,997,166	$	8,251,228
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	245,834	$	341,409
Income taxes payable	29,067		29,397
Accrued expenses	303,322		382,782
Deferred revenue	390,231		263,215
Other current liabilities	122,160		21,245
Total current liabilities	1,090,614		1,038,048
Accrued solar module collection and recycling liability	132,061		128,114
Long-term debt	437,410		184,349
Deferred revenue	1,157,190		944,725
Other liabilities	140,253		119,937
Total liabilities	2,957,528		2,415,173
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,830,548 and 106,609,094 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	107		107
Additional paid-in capital	2,872,153		2,887,476
Accumulated earnings	3,353,429		3,140,289
Accumulated other comprehensive loss	(186,051)		(191,817)
Total stockholders’ equity	6,039,638		5,836,055
Total liabilities and stockholders’ equity	$	8,997,166	$	8,251,228

See accompanying notes to these condensed consolidated financial statements.

3

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Three Months Ended June 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance at March 31, 2023	106,825	$	107	$	2,865,753	$	3,182,850	$	(179,982)	$	5,868,728
Net income	—	—		—		170,579		—		170,579
Other comprehensive loss	—	—		—		—		(6,069)		(6,069)
Common stock issued for share-based compensation	7	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(1)	—		(1,933)		—		—		(1,933)
Share-based compensation expense	—	—		8,333		—		—		8,333
Balance at June 30, 2023	106,831	$	107	$	2,872,153	$	3,353,429	$	(186,051)	$	6,039,638
	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount
Balance at March 31, 2022	106,583	$	107	$	2,863,318	$	3,141,200	$	(129,450)	$	5,875,175
Net income	—	—		—		55,805		—		55,805
Other comprehensive loss	—	—		—		—		(40,780)		(40,780)
Common stock issued for share-based compensation	12	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(1)	—		(86)		—		—		(86)
Share-based compensation expense	—	—		5,713		—		—		5,713
Balance at June 30, 2022	106,594	$	107	$	2,868,945	$	3,197,005	$	(170,230)	$	5,895,827

See accompanying notes to these condensed consolidated financial statements.

4

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

	Six Months Ended June 30, 2023
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance at December 31, 2022	106,609	$	107	$	2,887,476	$	3,140,289	$	(191,817)	$	5,836,055
Net income	—	—		—		213,140		—		213,140
Other comprehensive income	—	—		—		—		5,766		5,766
Common stock issued for share-based compensation	371	—		—		—		—		—
Tax withholding related to vesting of restricted stock	(149)	—		(30,247)		—		—		(30,247)
Share-based compensation expense	—	—		14,924		—		—		14,924
Balance at June 30, 2023	106,831	$	107	$	2,872,153	$	3,353,429	$	(186,051)	$	6,039,638
	Six Months Ended June 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Earnings		Accumulated Other Comprehensive Loss		Total Equity
	Shares	Amount
Balance at December 31, 2021	106,332	$	106	$	2,871,352	$	3,184,455	$	(96,362)	$	5,959,551
Net income	—	—		—		12,550		—		12,550
Other comprehensive loss	—	—		—		—		(73,868)		(73,868)
Common stock issued for share-based compensation	426	1		—		—		—		1
Tax withholding related to vesting of restricted stock	(164)	—		(11,591)		—		—		(11,591)
Share-based compensation expense	—	—		9,184		—		—		9,184
Balance at June 30, 2022	106,594	$	107	$	2,868,945	$	3,197,005	$	(170,230)	$	5,895,827

See accompanying notes to these condensed consolidated financial statements.

5

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	213,140	$	12,550
Adjustments to reconcile net income to cash used in operating activities:
Depreciation, amortization and accretion	140,560		131,760
Impairments and net losses on disposal of long-lived assets	230		62,688
Share-based compensation	15,011		9,267
Deferred income taxes	(42,607)		(5,576)
Gain on sales of businesses, net	(118)		(247,288)
Other, net	(9,073)		(392)
Changes in operating assets and liabilities:
Accounts receivable, trade and unbilled	(177,591)		145,784
Inventories	(131,625)		(160,456)
Project assets and PV solar power systems	8,626		(160,300)
Government grants receivable	(225,121)		—
Other assets	(105,243)		(55,154)
Income tax receivable and payable	(20,090)		42,679
Accounts payable and accrued expenses	(42,994)		(77,301)
Deferred revenue	211,721		211,308
Other liabilities	40,898		39,610
Net cash used in operating activities	(124,276)		(50,821)
Cash flows from investing activities:
Purchases of property, plant and equipment	(753,656)		(353,448)
Purchases of marketable securities	(2,492,495)		(971,205)
Proceeds from sales and maturities of marketable securities	2,538,069		1,198,254
Proceeds from sales of businesses, net of cash and restricted cash sold	—		264,614
Acquisitions, net of cash acquired	(35,540)		—
Other investing activities	—		72
Net cash (used in) provided by investing activities	(743,622)		138,287
Cash flows from financing activities:
Proceeds from borrowings under long-term debt, net of issuance costs	246,825		213,086
Repayment of long-term debt	—		(75,879)
Payments of tax withholdings for restricted shares	(30,247)		(11,591)
Net cash provided by financing activities	216,578		125,616
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents	2,454		39,934
Net (decrease) increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	(648,866)		253,016
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	$	844,596	$	1,708,853
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities	$	183,482	$	178,807
Proceeds to be received from sales of businesses	$	132	$	163,966
Acquisitions funded by liabilities and contingent consideration	$	18,686	$	—

See accompanying notes to these condensed consolidated financial statements.

6

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 and six months ended June 30, 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. Business Acquisitions

In May 2023, we acquired 100% of the shares of Evolar AB (“Evolar”), a developer of perovskite technology, for cash payments of $35.5 million, net of cash acquired of $0.5 million, and a promise to pay additional consideration of up to $42.5 million contingent on the achievement of certain technical milestones. The fair value of such contingent consideration was determined to be $18.5 million at the acquisition date. In connection with applying the acquisition method of accounting, $47.0 million of the purchase price consideration was assigned to an in-process research and development (“IPR&D”) intangible asset to be amortized over its useful life upon successful completion of the underlying project, $15.0 million was assigned to goodwill, $9.2 million was assigned to a deferred tax liability, and $2.0 million was assigned to property, plant and equipment.

The acquired IPR&D includes technical information, know-how, and other proprietary information associated with certain production capabilities for perovskite technology. The acquisition is expected to accelerate the development of high efficiency tandem devices by integrating Evolar’s know-how with First Solar’s existing research and development (“R&D”) capabilities, intellectual property portfolio, and expertise in developing and commercially scaling thin film photovoltaic (“PV”) products. The goodwill is attributable to the acquired technical workforce of Evolar and the synergies the Company expects through integrating the acquired technology to accelerate the development of next-generation PV technology. The goodwill resulting from this transaction is not expected to be deductible for income tax purposes.

7

3. Sales of Businesses

Sale of Japan Project Development Business

In May 2022, we entered into various agreements with certain subsidiaries of PAG Real Assets (“PAG”), a private investment firm, for the sale of our Japan project development business. The transaction included our approximately 293 MW utility-scale solar project development platform, which comprised the business of developing, contracting for the construction of, and selling utility-scale PV solar power systems.

In June 2022, we completed the sale of our Japan project development business for an aggregate purchase price of ¥66.4 billion ($488.4 million), subject to certain customary post-closing adjustments. On the closing date, we received proceeds of ¥44.1 billion ($324.5 million) and transferred cash and restricted cash of ¥8.4 billion ($61.9 million) to PAG. As a result of this transaction, we recognized a gain of $245.4 million, net of transaction costs, during the three months ended June 30, 2022, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations.

During the three months ended June 30, 2023, we recognized certain post-closing adjustments associated with the prior sale of our Japan project development business, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations.

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 $1.6 million, net of transaction costs and post-closing adjustments, during the six months ended June 30, 2022, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations.

During the six months ended June 30, 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.

4. Cash, Cash Equivalents, and Marketable Securities

Cash, cash equivalents, and marketable securities consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Cash and cash equivalents:
Cash	$	826,635	$	1,476,945
Money market funds	3,278		4,324
Total cash and cash equivalents	829,913		1,481,269
Marketable securities:
Foreign debt	34,615		59,777
U.S. debt	43,770		56,463
U.S. Treasury securities	846,102		—
Time deposits	129,557		980,472
Total marketable securities	1,054,044		1,096,712
Total cash, cash equivalents, and marketable securities	$	1,883,957	$	2,577,981

8

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 June 30, 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	June 30, 2023		December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	829,913	$	1,481,269
Restricted cash – current	Other current assets	8,262		3,175
Restricted cash – noncurrent	Other assets	3,227		2,734
Restricted cash equivalents – noncurrent	Other assets	3,194		6,284
Total cash, cash equivalents, restricted cash, and restricted cash equivalents		$	844,596	$	1,493,462

During the three months ended June 30, 2023, we sold marketable securities for proceeds of $34.9 million and realized a loss of less than $0.1 million on such sales. See Note 10. “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 June 30, 2023 and December 31, 2022 (in thousands):

	As of June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign debt	$	35,000	$	—	$	371	$	14	$	34,615
U.S. debt	45,500		9		1,726		13		43,770
U.S. Treasury securities	845,980		122		—		—		846,102
Time deposits	129,592		—		—		35		129,557
Total	$	1,056,072	$	131	$	2,097	$	62	$	1,054,044

	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 contractual maturities of our marketable securities as of June 30, 2023 were as follows (in thousands):

	Fair Value
One year or less	$	978,855
One year to two years	66,830
Two years to three years	4,454
Three years to four years	—
Four years to five years	—
More than five years	3,905
Total	$	1,054,044

9

5. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Foreign government obligations	$	48,895	$	46,886
Supranational debt	15,582		8,661
U.S. debt	112,169		109,328
U.S. government obligations	18,004		17,195
Total restricted marketable securities	$	194,650	$	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 June 30, 2023 and December 31, 2022, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $3.2 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 10. “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 June 30, 2023 and December 31, 2022 (in thousands):

	As of June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign government obligations	$	64,909	$	—	$	16,004	$	10	$	48,895
Supranational debt	17,797		126		2,341		—		15,582
U.S. debt	147,391		—		35,194		28		112,169
U.S. government obligations	24,506		—		6,497		5		18,004
Total	$	254,603	$	126	$	60,036	$	43	$	194,650

	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

As of June 30, 2023, the contractual maturities of these securities were between 8 years and 16 years.

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6. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade, net consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Accounts receivable trade, gross	$	632,620	$	325,379
Allowance for credit losses	(1,285)		(1,042)
Accounts receivable trade, net	$	631,335	$	324,337

Inventories

Inventories consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Raw materials	$	413,279	$	397,912
Work in process	83,156		66,641
Finished goods	516,907		417,218
Inventories	$	1,013,342	$	881,771
Inventories – current	$	756,173	$	621,376
Inventories – noncurrent	$	257,169	$	260,395

Other current assets

Other current assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Spare maintenance materials and parts	$	131,035	$	114,428
Operating supplies	62,581		47,492
Prepaid expenses	53,300		43,262
Insurance receivable for accrued litigation (1)	51,300		—
Prepaid income taxes	13,574		8,314
Restricted cash	8,262		3,175
Derivative instruments (2)	1,146		2,018
Other	30,983		18,384
Other current assets	$	352,181	$	237,073

——————————

(1)See Note 12. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(2)See Note 8. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

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Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Land	$	35,335	$	35,259
Buildings and improvements	1,020,969		893,049
Machinery and equipment	3,255,297		2,762,801
Office equipment and furniture	158,164		146,467
Leasehold improvements	40,080		40,160
Construction in progress	1,115,767		1,121,938
Property, plant and equipment, gross	5,625,612		4,999,674
Accumulated depreciation	(1,605,434)		(1,462,772)
Property, plant and equipment, net	$	4,020,178	$	3,536,902

Depreciation of property, plant and equipment was $76.9 million and $142.8 million for the three and six months ended June 30, 2023, respectively, and $60.0 million and $118.6 million for the three and six months ended June 30, 2022, respectively.

Other assets

Other assets consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Advance payments for raw materials	$	141,062	$	91,260
Operating lease assets (1)	89,747		93,185
Income tax receivables	70,818		56,993
Project assets	27,870		30,108
Accounts receivable unbilled, net	4,229		11,498
Restricted cash	3,227		2,734
Restricted cash equivalents	3,194		6,284
Accounts receivable trade, net	—		1,500
Other	73,856		62,630
Other assets	$	414,003	$	356,192

——————————

(1)See Note 9. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

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Accrued expenses

Accrued expenses consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Accrued property, plant and equipment	$	104,740	$	148,777
Accrued inventory	56,144		44,679
Accrued freight	44,938		77,136
Accrued compensation and benefits	30,304		47,939
Accrued other taxes	12,546		19,765
Product warranty liability (1)	9,243		10,660
Other	45,407		33,826
Accrued expenses	$	303,322	$	382,782

——————————

(1)See Note 12. “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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Accrued litigation (1)	$	86,890	$	—
Derivative instruments (2)	12,875		6,668
Operating lease liabilities (3)	9,693		9,193
Contingent consideration (4)	7,500		—
Other	5,202		5,384
Other current liabilities	$	122,160	$	21,245

——————————

(1)See Note 12. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our legal proceedings.

(2)See Note 8. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

(3)See Note 9. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(4)See Note 12. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our contingent consideration arrangements.

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Other liabilities

Other liabilities consisted of the following at June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023		December 31, 2022
Deferred tax liabilities, net	$	43,812	$	28,929
Operating lease liabilities (1)	36,194		40,589
Product warranty liability (2)	22,726		23,127
Contingent consideration (3)	11,000		—
Other	26,521		27,292
Other liabilities	$	140,253	$	119,937

——————————

(1)See Note 9. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)See Note 12. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”

(3)See Note 12. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our contingent consideration arrangements.

7. 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 and six months ended June 30, 2023 and 2022 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
Income Statement Line Item	2023		2022		2023		2022
Cost of sales	$	155,007	$	—	$	225,121	$	—

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 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.”

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8. 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 10. “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 June 30, 2023 and December 31, 2022 (in thousands):

	June 30, 2023
	Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts	$	—	$	2,649
Total derivatives designated as hedging instruments	$	—	$	2,649
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	$	1,146	$	10,226
Total derivatives not designated as hedging instruments	$	1,146	$	10,226
Total derivative instruments	$	1,146	$	12,875

	December 31, 2022
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts	$	—	$	17	$	4,447	$	144
Total derivatives designated as hedging instruments	$	—	$	17	$	4,447	$	144
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	$	2,018	$	—	$	2,221	$	—
Total derivatives not designated as hedging instruments	$	2,018	$	—	$	2,221	$	—
Total derivative instruments	$	2,018	$	17	$	6,668	$	144

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The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022 (in thousands):

	Foreign Exchange Forward Contracts		Commodity Swap Contracts		Total
Balance as of December 31, 2022	$	—	$	(7,242)	$	(7,242)
Amounts recognized in other comprehensive income (loss)	—		(984)		(984)
Amounts reclassified to earnings impacting:
Cost of sales	—		4,665		4,665
Balance as of June 30, 2023	$	—	$	(3,561)	$	(3,561)
Balance as of December 31, 2021	$	1,126	$	—	$	1,126
Amounts recognized in other comprehensive income (loss)	545		(6,812)		(6,267)
Amounts reclassified to earnings impacting:
Cost of sales	(1,453)		—		(1,453)
Balance as of June 30, 2022	$	218	$	(6,812)	$	(6,594)

During the three and six months ended June 30, 2022, we recognized unrealized gains of less than $0.1 million and unrealized losses of less than $0.1 million, respectively, within “Cost of sales” for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges.

The following table presents gains and losses related to derivative instruments not designated as hedges affecting our condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 (in thousands):

		Amount of Gain (Loss) Recognized in Income
		Three Months Ended June 30,				Six Months Ended June 30,
	Income Statement Line Item	2023		2022		2023		2022
Foreign exchange forward contracts	Cost of sales	$	—	$	444	$	—	$	522
Foreign exchange forward contracts	Foreign currency loss, net	(9,418)		44,534		(14,101)		63,515

Foreign Currency Risk

Cash Flow Exposure

We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, from time to time we may enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. These foreign exchange forward contracts qualify for accounting as cash flow hedges in accordance with Accounting Standards Codification (“ASC”) 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings.

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Transaction Exposure and Economic Hedging

Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, operating lease liabilities, long-term debt, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported condensed consolidated statements of operations and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities.

We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in “Foreign currency loss, net” on our condensed consolidated statements of operations.

As of June 30, 2023 and December 31, 2022, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were as follows (notional amounts and U.S. dollar equivalents in millions):

	June 30, 2023
Transaction	Currency	Notional Amount	USD Equivalent
Sell	Canadian dollar	CAD 4.2	$3.2
Sell	Chilean peso	CLP 6,035.6	$7.6
Purchase	Euro	€69.4	$75.9
Sell	Euro	€27.5	$30.1
Sell	Indian rupee	INR 48,782.1	$594.7
Purchase	Japanese yen	¥695.6	$4.8
Sell	Japanese yen	¥563.6	$3.9
Purchase	Malaysian ringgit	MYR 176.0	$37.7
Sell	Malaysian ringgit	MYR 30.8	$6.6
Sell	Mexican peso	MXN 34.6	$2.0
Purchase	Singapore dollar	SGD 2.4	$1.8
Sell	Singapore dollar	SGD 14.7	$10.9

	December 31, 2022
Transaction	Currency	Notional Amount	USD Equivalent
Sell	Canadian dollar	CAD 4.2	$3.1
Sell	Chilean peso	CLP 5,996.5	$7.0
Purchase	Euro	€160.2	$170.5
Sell	Euro	€38.4	$40.9
Sell	Indian rupee	INR 27,119.5	$327.4
Purchase	Japanese yen	¥2,982.7	$22.4
Sell	Japanese yen	¥8,950.3	$67.1
Purchase	Malaysian ringgit	MYR 99.8	$22.6
Sell	Malaysian ringgit	MYR 13.7	$3.1
Sell	Mexican peso	MXN 34.6	$1.8
Purchase	Singapore dollar	SGD 1.4	$1.0

17

Commodity Price Risk

We use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. During the year ended December 31, 2022, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of aluminum frames between July 2022 and December 2023. Such swaps had an aggregate initial notional value based on metric tons of forecasted aluminum purchases, equivalent to $70.5 million, and entitle us to receive a three-month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusts with forecasted purchases of aluminum frames. As of June 30, 2023, the notional value associated with these contracts was $6.6 million.

These commodity swap contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transactions occur and impact earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of June 30, 2023 and December 31, 2022. In the following 12 months, we expect to reclassify into earnings $3.6 million of net unrealized losses related to these commodity swap contracts that are included in “Accumulated other comprehensive loss” at June 30, 2023 as we realize the earnings effects of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual commodity pricing when we realize the related forecasted transactions.

9. Leases

Our lease arrangements include land associated with our corporate and administrative offices, land for our international manufacturing facilities, and certain of our manufacturing equipment. Such leases primarily relate to assets located in the United States, Malaysia, India, and Vietnam.

The following table presents certain quantitative information related to our lease arrangements for the three and six months ended June 30, 2023 and 2022, and as of June 30, 2023 and December 31, 2022 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023			2022
Operating lease cost	$	3,014	$	4,232	$	5,951		$	8,609
Variable lease cost	1,121		604		2,016			1,203
Short-term lease cost	98		221		168			252
Total lease cost	$	4,233	$	5,057	$	8,135		$	10,064
Payments of amounts included in the measurement of operating lease liabilities					$	5,721		$	9,259
Lease assets obtained in exchange for operating lease liabilities					$	1,080		$	3,754
					June 30, 2023			December 31, 2022
Operating lease assets					$	89,747		$	93,185
Operating lease liabilities – current					9,693			9,193
Operating lease liabilities – noncurrent					36,194			40,589
Weighted-average remaining lease term					5 years			6 years
Weighted-average discount rate					5.1		%	5.1		%

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As of June 30, 2023, the future payments associated with our lease liabilities were as follows (in thousands):

	Total Lease Liabilities
Remainder of 2023	$	5,814
2024