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First Solar Disappoints But 2018 Looks Promising

Date: Friday, February 23, 2018 5:04 PM EDT

First Solar, Inc (FSLR) has caught our attention today after the stock plummeted 7%. In this column, we discuss what happened, and offer our projections for 2018 performance.

Sales were terrible in Q4

today announced financial results for the fourth quarter and year ended December 31, 2017. Net sales for the fourth quarter were $339 million, a decrease of $748 million from the prior quarter primarily due to lower systems and third-party module sales. Systems revenue decreased primarily due to the sale of the California Flats and Cuyama projects in the third quarter. Fourth quarter net sales were slightly lower than guidance as a result of certain foreign project sales that are now expected to be recognized in 2018.

Big losses

The company reported a fourth quarter GAAP loss per share of $4.14, compared to GAAP earnings per share of $1.95 in the prior quarter. We saw revenues were down, but the loss in the fourth quarter was due primarily to higher tax expense associated with U.S. tax reform enacted in December 2017 and the timing of system project sales.

Net income decreased compared to the prior quarter primarily as a result of lower net sales, the mix of lower gross profit projects, higher operating expenses and an increase in tax expense. Tax expense in the fourth quarter included a charge of $408 million resulting from U.S. tax reform. This one-time charge includes a tax on previously untaxed foreign earnings and profits and the impact of re-measuring deferred tax assets using the new U.S. statutory corporate tax rate. The cash payment associated with the impact of U.S. tax reform is expected to be approximately $101 million, as a result of utilizing tax credits, and is expected to be paid over the full eight-year period allowed.

Fourth quarter earnings, adjusted for restructuring and asset impairment charges and the impact of U.S. tax reform, was a loss of $0.25 per share.

Cash and cash flows

Cash and marketable securities at the end of the fourth quarter increased to $3.0 billion from $2.7 billion at the end of the prior quarter. The increase primarily resulted from cash received from projects sold in the prior quarter and third-party module sales. Cash flows from operations were $434 million in the fourth quarter.

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