First Solar, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide standalone fourth-quarter results in the supplied text. First Solar manufactures and sells cadmium telluride thin-film solar modules. Its modules business is its sole reportable segment; residual operations include project development, O&M services, and owned solar systems.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $2.923 billion | $2.711 billion |
| Gross profit / margin | $730.0 million / 25.0% | $680.7 million / 25.1% |
| Operating income | $586.8 million | $317.5 million |
| Net income / diluted EPS | $468.7 million / $4.38 | $398.4 million / $3.73 |
| Cash from operating activities | $237.6 million | $37.1 million |
| Capital expenditures | $540.3 million | $416.6 million |
- Module sales rose 34% to $2.331 billion: watt volume increased 48%, partly offset by a 10% decline in average selling price per watt. Other-segment sales fell 39% to $592.0 million, mainly reflecting fewer project sales than in 2020.
- Gross margin edged down 0.1 percentage point. Lower module pricing and higher logistics costs were partly offset by manufacturing cost reductions.
- Year-end cash, cash equivalents, and marketable securities totaled $1.826 billion, up from $1.747 billion. Current assets were $3.191 billion and current liabilities $726.9 million.
- Long-term debt had a $239.9 million carrying value ($246.7 million principal); the company had no revolver borrowings and terminated its $500 million revolving credit facility in June 2021. Management said available liquidity, operating cash flows, and customer contracts should cover needs for at least 12 months.
- Operating cash flow improved year over year, partly because 2020 included a $350 million class-action settlement payment. Capital spending exceeded operating cash flow in 2021.
Material changes and unusual items
- Operating income included $147.3 million of gains from selling North American O&M operations and the U.S. project-development business, completed in March 2021. The U.S. development sale included a roughly 10 GW AC project pipeline and module purchase commitments.
- The company recorded $65.1 million of revenue from a settlement related to an indemnification arrangement on a previously sold project.
- Income tax expense was $103.5 million in 2021, compared with a $107.3 million tax benefit in 2020. The prior-year benefit included CARES Act-related tax effects and other discrete items.
- The product warranty liability fell to $52.6 million from $95.1 million, including a $33.1 million reduction from revised estimates of projected claims. The recycling liability was $139.1 million, after an $10.8 million increase in the estimate during 2021.
- A $10.2 million impairment was recorded for a 4 MW AC Samoa solar plant after its off-taker indicated it intended to terminate the power purchase agreement.
Outlook, management commentary, and risks
- Management expected 2022 module production of 8.2–8.8 GW DC and capital expenditures of $0.9–$1.1 billion.
- The company plans approximately $1.4 billion of investment to add 6.6 GW DC of manufacturing capacity: a third U.S. plant and its first India plant, both expected to begin operations in 2023. Series 7 modules are planned for these facilities.
- At year-end, contracted future module sales totaled 21.9 GW DC for $5.9 billion, expected to be recognized through 2025 as modules are delivered. Certain contracts include potential technology-related price adjustments; the company estimated these could add up to $0.2 billion if realized.
- First Solar expected to pursue a sale of its Japan project-development and O&M businesses, targeting completion in the first half of 2022, subject to negotiations and closing conditions.
- The CuRe module program was delayed by performance and manufacturing-tooling challenges, with COVID-related travel restrictions also affecting implementation. Management described possible contract amendments, price concessions, or module substitutions.
- Key risks include industry overcapacity and pricing pressure, competition from crystalline-silicon and bifacial modules, customer and policy dependence, elevated freight and input costs, supply concentration, interest rates and customer financing, warranty and recycling estimates, and execution of capacity expansion. The filing also disclosed a securities class action filed in January 2022; the company could not estimate potential loss at that early stage.
Important facts for investors to verify
- How much reported operating income and profit growth depended on the $147.3 million divestiture gains and $65.1 million indemnification-related revenue.
- Whether 2022 production and capital-spending plans, and the U.S. and India factory schedules and budgets, are achieved.
- Whether the CuRe program reaches high-volume performance targets and whether delays lead to customer concessions or contract changes.
- How module pricing, logistics costs, and manufacturing cost reductions affect margins, given the 10% year-over-year decline in module average selling price.
- Whether warranty, recycling, impairment, litigation, and customer-concentration exposures develop differently from management’s estimates.