- Approximately 3 Gigawatts of Series
6 Production Expected in 2019
- Series 4 Production to be Phased
Out; Series 5 Product Cancelled
- 2016 Restructuring and Asset
Impairment Charges of $500 to $700 million, Primarily
Non-Cash
- 2016 GAAP EPS Guidance Revised to a
Loss of ($4.00) to ($2.00)
- 2016 Non-GAAP EPS Guidance Raised by
$0.30 to $4.60 to $4.80
- 2017 GAAP EPS Guidance of ($0.10) to
$0.45 ; Non-GAAP EPS of Breakeven to $0.50
- 2017 Operating Cash Guidance of $550
to $650 million; Ending Net Cash of $1.4 to $1.6 Billion
First Solar, Inc. (Nasdaq: FSLR) today announced an acceleration
of Series 6 production into 2018, with approximately 3 Gigawatts of
production expected in 2019. Over the course of 2017 and 2018 the
Company’s existing production facilities will be converted to
Series 6 production and the current Series 4 product will be phased
out. As a result of the change in roadmap the Company will cancel
its Series 5 product.
“The acceleration of the Series 6 roadmap is an important
development for First Solar,” said Mark Widmar, CEO of First Solar.
“Following the completion of an internal review process to evaluate
the best competitive response to address the current challenging
market conditions, we have developed plans that will enable us to
more quickly begin production of our Series 6 module. Although the
decision to accelerate our Series 6 roadmap requires a
restructuring of our current operations, we expect the transition
to Series 6 will enable us to maximize the intrinsic cost advantage
of CdTe thin-film technology versus crystalline silicon. Recent
steep module pricing declines require us to evaluate all components
of our cost structure and streamline our business model to best
position the Company for long-term success.”
The Company will reduce its workforce at its manufacturing
facilities both domestically and internationally as a result of the
transition from Series 4 to Series 6 production. Additional
reductions in administrative and other staff are also planned.
Resulting from the transition to Series 6 from Series 4 and
other competitive factors, the Company expects to incur
restructuring and asset impairment charges of $500 to $700 million,
which includes a cash impact of $70 to $100 million. The charges
are anticipated primarily in 2016 and are comprised of the
following:
- $475 to $585 million, including asset
impairments related to Series 4, Series 5 and stored manufacturing
equipment, and charges for cancellation of open purchase orders.
The cash impact is anticipated to range from $50 to $70
million.
- Up to $80 million for a non-cash
impairment of goodwill
- $10 to $15 million in cash severance
charges, expected primarily in 2016
- $15 to $20 million of other charges,
expected primarily in 2017
These pre-tax restructuring and asset impairment charges are
expected to have an offsetting tax benefit of $50 to $100
million.
In addition to the restructuring and asset impairment charges,
the Company also expects to incur $220 to $250 million of tax
expense in 2016 associated with the distribution of between $700
and $750 million of cash to the United States from a foreign
subsidiary. This distribution will provide liquidity for the
restructuring of U.S. operations and Series 6 investment. The cash
tax impact related to this transfer is expected to be between $8
and $10 million.
As a result of the restructuring and other related charges, the
Company has updated 2016 GAAP guidance in the table below. 2016
non-GAAP guidance has also been updated to reflect the sale of the
entire remaining interest in the Stateline project and excludes the
impact of the current or previously announced restructuring
actions.
2016 Guidance Prior GAAP
Current GAAP Prior Non-GAAP
Current Non-GAAP Net Sales $2.8B to
$2.9B
Unchanged
Gross Margin % 25.5% to 26.0%
Unchanged
Operating Expenses $480M to $500M
$965M to $1,160M $375M to $385M
Unchanged Operating Income (Loss)
$235M to $255M
($445M) to
($210M) $340M to $370M
Unchanged
Tax (Benefit) Expense1
($15M) to ($10M)
$145M to $175M
$30M to $40M
Unchanged
Earnings per Share2 $3.75 to $3.90
($4.00) to ($2.00) $4.30 to
$4.50
$4.60 to $4.80 Net Cash
Balance3 $1.4B to $1.5B
Unchanged
Operating Cash Flow4 ($100M) to $0M
Unchanged
Capital Expenditures $225M to $275M
Unchanged
Shipments 2.8GW to 2.9GW
Unchanged 1.
Includes $220 to $250 million of tax expense associated with
distribution of cash to the U.S. from a foreign jurisdiction 2.
Includes a gain of approximately $145 million, net of tax, from the
expected sale of an equity method investment, 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 3.
Defined as cash and marketable securities less expected debt at the
end of 2016 4. Excludes cash from the sale of an equity method
investment treated as an investing cash flow
The Company also provided full year 2017 financial guidance.
Forecasted net sales for 2017 are $2.5 to $2.6 billion, with solar
power systems net sales expected to comprise 70% to 75% of the
total net sales and third party module sales the remainder. GAAP
earnings per share is forecasted to be between ($0.10) and $0.45,
with non-GAAP EPS of breakeven to $0.50 per share. The ending net
cash balance is projected in the range of $1.4 to $1.6 billion.
Capital expenditures of $525 to $625 million are higher than 2016
expected levels resulting from investment in Series 6 production
equipment.
The complete guidance is as follows:
2017 Guidance GAAP
Non-GAAP Net Sales $2.5B to
$2.6B Gross Margin %
12.5% to 14.5% Operating
Expenses $290M to $305M
$280M to $300M Operating Income $30M
to $75M $40M to $80M Earnings per
Share ($0.10) to $0.45
$0.00 to $0.50 Net Cash Balance1
$1.4B to $1.6B Operating Cash
Flow $550M to $650M
Capital Expenditures $525M to $625M
Shipments 2.4GW to
2.6GW 1. Cash and marketable
securities less expected debt at the end of 2017
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
16, 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 23, 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
313920. 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.
About First Solar, Inc.
First Solar is a leading global provider of comprehensive
photovoltaic (PV) solar systems which use its advanced module and
system technology. The Company's integrated power plant solutions
deliver an economically attractive alternative to fossil-fuel
electricity generation today. From raw material sourcing through
end-of-life module recycling, First Solar's renewable energy
systems protect and enhance the environment. For more information
about First Solar, please visit www.firstsolar.com.
For First Solar Investors
This release contains forward-looking statements which are made
pursuant to safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include statements, among other things, concerning: effects on our
financial statements and guidance resulting from certain module
manufacturing changes and associated restructuring activities; our
business strategy, including anticipated trends and developments in
and management plans for our business and the markets in which we
operate; future financial results, operating results, revenues,
gross margin, operating expenses, products, projected costs
(including estimated future module collection and recycling costs),
warranties, solar module efficiency and balance of systems cost
reduction roadmaps, restructuring, product reliability, investments
in unconsolidated affiliates and capital expenditures; our ability
to continue to reduce the cost per watt of our solar modules; our
ability to reduce the costs to construct PV solar power systems;
research and development programs and our ability to improve the
conversion efficiency of our solar modules; our ability to expand
manufacturing capacity worldwide; sales and marketing initiatives;
and competition. These forward-looking statements are often
characterized by the use of words such as "estimate," "expect,"
"anticipate," "project," "plan," "intend," "seek," "believe,"
"forecast," "foresee," "likely," "may," "should," "goal," "target,"
"might," "will," "could," "predict," "continue" and the negative or
plural of these words and other comparable terminology.
Forward-looking statements are only predictions based on our
current expectations and our projections about future events. You
should not place undue reliance on these forward-looking
statements. We undertake no obligation to update any of these
forward-looking statements for any reason. These forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity,
performance or achievements to differ materially from those
expressed or implied by these statements. These factors include,
but are not limited to, the matters discussed in Item 1A: "Risk
Factors," of our most recent Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, and other filings with the Securities and
Exchange Commission.
Non-GAAP Financial Measures
In the press release above, we provided non-GAAP guidance for
our operating expenses, operating income, effective tax rate and
earnings per share for the year ending December 31, 2016 as of the
date of this press release (“current non-GAAP 2016 guidance”) and
as of the date of the press release announcing our earnings for the
quarter ended September 30, 2016 (“prior non-GAAP 2016 guidance”),
as well as non-GAAP guidance for our operating expenses, operating
income and earnings per share for the year ending December 31, 2017
as of the date of this press release (“non-GAAP 2017 guidance”). We
have included these forward-looking non-GAAP financial measures to
adjust our GAAP projections of such financial measures for, as
applicable (i) restructuring, asset impairment and related charges
primarily associated with the transition from Series 4 to Series 6
production and the end of our crystalline silicon operations, (ii)
additional restructuring activities expected during the remainder
of the year, (iii) the reversal of a liability associated with an
uncertain tax position related to the income of a foreign
subsidiary and (iv) the tax expense associated with the
distribution of cash to the United States from a foreign
subsidiary. Other GAAP charges, including those related to asset
impairments, restructuring programs or litigation, that would be
excluded from non-GAAP earnings per share are possible for the
periods presented, but such amounts are dependent on numerous
factors that we currently cannot ascertain with sufficient
certainty or are presently unknown. These GAAP charges are also
dependent upon future events and valuations that have not yet
occurred or been performed. We believe these forward-looking
non-GAAP financial measures, when taken together with our
corresponding financial guidance based on GAAP, to be relevant and
useful information to our investors because they provide them with
additional information in assessing our financial operating
results. Our management also uses such non-GAAP guidance in
evaluating our operating performance. However, such measures have
limitations, including that they exclude the effect of certain
changes to our assets and liabilities, certain amounts that we may
ultimately have to pay in cash and certain tax impacts.
Accordingly, these forward-looking non-GAAP financial measures that
exclude the aforementioned items should be considered in addition
to, and not as substitutes for or superior to, financial guidance
based on GAAP. The following are the reconciliations of our current
non-GAAP 2016 guidance, our prior non-GAAP 2016 guidance and our
non-GAAP 2017 guidance to the corresponding GAAP guidance as of the
applicable date (in millions, except per share amounts):
Reconciliation of Current Non-GAAP 2016
Guidance to Current GAAP 2016 Guidance
GAAPGuidance
RestructuringCharges1
Foreign
TaxBenefit2
Cash Distribution3
Non-GAAPGuidance
Operating Expenses $1,160 to $965 ($785) to ($580) - - $375 to $385
Operating Income (Loss) ($445) to ($210) $785 to $580 - - $340 to
$370 Tax Expense4 $145 to $175 $100 to $50 $35 ($250) to ($220) $30
to $40 Earnings per Share ($4.00) to ($2.00) $6.50 to $5.00 ($0.30)
$2.40 to $2.10 $4.60 to $4.80 1. Current and previously
announced restructuring actions including: $475 to $585 million of
asset impairment charges and charges for cancellation of open
purchase orders, up to $80 million for a non-cash impairment of
goodwill, $20 to $25 million in cash severance charges, $5 to $10
million of other charges related to restructuring of manufacturing
operations, $85 to $90 million of restructuring, asset impairment
and related charges associated with the end of our crystalline
silicon module production. 2. Tax benefit in Q3 2016 from the
reversal of a liability associated with an uncertain tax position
related to the income of a foreign subsidiary 3. Tax expense
associated with the distribution of cash to the United States from
a foreign subsidiary 4. Effective tax rate reconciliation provides
the estimated tax benefit associated with restructuring and asset
impairment charges and the reversal of an uncertain tax position
liability
Reconciliation of Prior Non-GAAP 2016
Guidance to Prior GAAP 2016 Guidance
GAAPGuidance
RestructuringCharges1
Foreign
TaxBenefit2
Non-GAAPGuidance
Operating Expenses $480 to $500 ($105 to $115) - $375 to $385
Operating Income $235 to $255 $105 to $115 - $340 to $370 Effective
Tax Rate3 (5%) to (3%) $15 to $20 $35 8% to 10% Earnings per Share
$3.75 to $3.90 $0.85 to $0.90 ($0.30) $4.30 to $4.50 1. $90
to $95 million of restructuring, asset impairment and related
charges primarily associated with the end of our crystalline
silicon module production and $15 to $20 million associated with
other actions 2. Tax benefit in Q3 2016 from the reversal of a
liability associated with an uncertain tax position related to the
income of a foreign subsidiary 3. Effective tax rate reconciliation
provides the estimated tax benefit associated with restructuring
and asset impairment charges and the reversal of an uncertain tax
position liability
Reconciliation of Non-GAAP 2017
Guidance to GAAP 2017 Guidance
GAAPGuidance
RestructuringCharges1
Non-GAAPGuidance
Operating Expenses $290 to $305 ($10) to ($5) $280 to $300
Operating Income $30 to $75 $10 to $5 $40 to $80 Earnings per Share
($0.10) to $0.45 $0.10 to $0.05 $0.00 to $0.50 1. $5 to $10
million of other charges related to restructuring of manufacturing
operations
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161116006537/en/
First Solar InvestorsSteve Haymore+1
602-414-9315stephen.haymore@firstsolar.comorFirst Solar
MediaSteve Krum+1 602-427-3359steve.krum@firstsolar.com
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