This is a summary of the first quarter fiscal 2008 earnings call conducted by First Solar, Inc. (FSLR) on April 30, 2008
Management:
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President: Bruce Sohn
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VP – IR: Larry Polizzotto
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CEO: Mike Ahearn
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CFO: Jens Meyerhoff
Key Investors Issues:
- Net sales for were $196.9 million, an increase of $130 million compared to the same period of 2007.
- Net income was $46.6 million or 57 cents a share, compared $5.0 million or 7 cents a share in 2007.
Second Quarter Highlights:
Net sales were $196.9 million, an increase of $130 million compared to the same period of 2007, though down sequentially driven by the annual contractual price decline of 6.5% underlying the long-term contracts and by customer mix impacting net sales.
- This decline was largely offset by an increase on watt sold totaling $8.4 million and a further strengthening euro which contributed $4.1 million to net sales during the first quarter.
- Gross margin was 53%, up from 44.9% in the same period of 2007 and was impacted by 4.1 percentage points due to the quarter-over-quarter price decline partially offset by foreign exchange benefits.
- The increase was also driven by higher overhead absorption due to incremental product shipments at a variable margin in excess of 70%.
Net income was $46.6 million or 57 cents a share compared to $5.0 million or 7 cents a share in the prior year due to revenue growth.
- Operating income was $58.132 million, compared to $4.820 million during the same period of 2007.
- Interest income was $6.685 million reflecting an average pre-tax yield of 4%, compared to $4.127 million in 2007.
- Total operating expenses was $46,192 million, compared to $25,222 million of the prior year same period.
- Research and development totalled $4.760 million compared to $3,058 million the first quarter fiscal 2007.
- Selling, general and administrative were $28,671million compared to $13,690 million of the prior year first quarter.
- Production start up expenses were $12.761 million compared to $8.474 million of last year same quarter.
Cash and cash equivalents were $590.534 million compared to the $404.264 million of the prior period 2007.
- Marketable securities were $90.130 million compared to $232.686 million of first quarter 2007.
- Net accounts receivable were $18.027 million as for $18.165 million 2007 same quarter.
- Inventories were $58.559 million, an increase from $40.204 million in the prior year.
- Accounts payable and accrued expenses were $167,063 million compared to $132,366 million prior year.
Outlook Fiscal 2008:
- The company expects to sell 420 megawatts to 460 megawatts based on its demonstrated first quarter run-rate.
- The company expects revenues of $975 million to $1.50 billion subject to customer mix and foreign exchange fluctuations.
- Revenues in the second quarter of 2008 are expected to grow modestly over the first quarter 59% to 60% of the annual net sales are expected to occur in the second half of 2008.
First Solar expects plant start-up cost to increase to $36 million to $39 million due to a possible pull-in of $8 million in plant start-up cost for plants III and IV of Malaysia planned for in 2009.
- Operating margin is expected between 25% and 30% and is subject to the timing of plant starting up and ramping on time.
- Tax rate for 2008 is expected to be approximately 28% to 30% and would not yet benefit from tax holidays taking effect in 2009.
- Year-end 2008 fully diluted share count remains unchanged at an estimated 83 million to 84 million shares.
- CapEx for the year remains unchanged at approximately $500 million and is based on the currently announced capacity expansions through plant IV of our Malaysian manufacturing center and infrastructure related investment.
Key questions and answers for the first quarter fiscal 2008 earnings call, conducted by First Solar, Inc. (FSLR) on April 30, 2008
Mark Heller:
Discuss raw material supply of glass and tellurium, do you see any constraints in that market and are you seeing any martial price changes?
Bruce Sohn: On the tellurium front, we got sources and we locked out long term contracts for raw materials and that helped us maintain the supply as well as the price. On the glass front we have good relationships with suppliers for glass.
Mark Heller:
Elaborate on fab expansion beyond Malaysia?
Bruce Sohn: We look at expansion periodically and we are thinking about supply match to demand. So there are few variables, the level of demand and level of production. We are trying to bring four factories in Malaysia up on time and on budget.
