First Solar (FSLR)

Q4 2010 Earnings Call

February 24, 2011 4:30 pm ET

Executives

Tk Kallenbach - Executive Vice President of Marketing and Product Management

James Zhu - Chief Accounting Officer and Vice President

Jens Meyerhoff - Chief Financial Officer and President of the Utility Systems Business Group

Robert Gillette - Chief Executive Officer and Director

Larry Polizzotto - Vice President of Investor Relations

Analysts

Jonathan Dorsheimer - Canaccord Genuity

Mark Wienkes - Goldman Sachs Group Inc.

Smittipon Srethapramote - Morgan Stanley

Stuart Bush - RBC Capital Markets, LLC

Colin Rusch - ThinkEquity LLC

Stephen Chin - UBS Investment Bank

Sanjay Shrestha - Lazard Capital Markets LLC

Ramesh Misra - C.E. Unterberg, Towbin

Vishal Shah - Barclays Capital

Timothy Arcuri - Citigroup Inc

Steven Milunovich - BofA Merrill Lynch

Satya Kumar - Crédit Suisse AG

Daniel Ries - Collins Stewart LLC

Robert Stone - Cowen and Company, LLC

Presentation

Operator

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Good day, everyone, and welcome to the First Solar Fourth Quarter and Year-End 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Larry Polizzotto, Vice President of Investor Relations for First Solar, Inc. Mr. Polizzotto, you may begin.

Larry Polizzotto

Good afternoon, everyone, and thank you for joining us for First Solar's Fourth Quarter 2010 Conference Call. Today after the market closed, the company issued a press release announcing our fourth quarter and full year financial results for 2010 and our guidance update for 2011. If you did not receive a copy of the press release, you can obtain one from the Investors section of First Solar's website at www.firstsolar.com. In addition, First Solar has posted the presentation for this call, as well as key quarterly statistics and historical data on financial and operating performance on our IR website. We will be discussing the presentation during this call and webcast.

An audio replay of this call will also be available approximately two hours after the conclusion of the call. The replay will remain available until Tuesday, March 1, 2011, at 7:30 p.m. Eastern time and can be accessed by dialing (888) 203-1112 if you're calling within the United States, or (719) 457-0820 if you're calling from outside the United States and entering replay pass code 8382775.

A replay of the webcast will be available on the Investors section of First Solar's website approximately two hours after the conclusion of this call and remain available for approximately 90 calendar days. If you're a subscriber of FactSet or Thomson One, you could obtain a written transcript from them.

With me today are Rob Gillette, Chief Executive Officer; Tk Kallenbach, Executive Vice President of Marketing and Product Management; Jens Meyerhoff, President of the Utility Systems Business Group; and James Zhu, Chief Accounting Officer and Interim Chief Financial Officer.

Rob will present an overview of the company's fourth quarter and 2010 results and give you an update on the market and business. James will review the fourth quarter financial results and update guidance for 2011. We will then open up the call for questions.

During the Q&A period, as a courtesy to those individuals seeking to ask questions, we ask that participants limit themself to one question. First Solar has allocated approximately one hour for today's call. I'll remind everyone that all financial numbers are reported and discussed on today's call are U.S. Generally Accepted Accounting Principles, except for free cash flow, is a non-GAAP measure, which is reconciled in the operating cash flow in the back of our presentation.

Now I'd like to make a brief statement regarding forward-looking remarks you may hear on today's call. During the course of this call, the company will make projections and other comments that are forward-looking statements within the meaning of the Federal Securities laws. The forward-looking statements in this call are based on current information and expectations and are subject to uncertainties and changes in circumstances and do not constitute guarantees of future performance. Those statements involve a number of factors that could cause actual results to differ materially from those statements, including the risks as described in the company's most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission. First Solar assumes no obligation to update any forward-looking information contained in this call or respect to announcements described herein.

During the first quarter of 2011, First Solar will be attending the following conferences: Morgan Stanley Technology Conference in San Francisco on March 1; Canaccord Genuity Sustainability Forum in Deer Valley, Utah on March 3 and 4; UBS Alternative Energy Conference in New York City, March 8.

It's now my pleasure to introduce Rob Gillette, Chief Executive Officer of First Solar. Rob?

Robert Gillette

Great. Thanks, Larry, and welcome to our Q4 earnings call. Thanks for joining us today. Let me start by saying that 2010 was a good year, and we exceeded the 2010 EPS guidance we set a year ago despite the many market uncertainties we faced. The strong results demonstrate the capability of our low-cost technology and PV systems solutions, the diversification of our markets and the strength of our systems pipeline, as well as some really good execution in the operations.

For 2010, our net sales of $2.6 billion were up 24% year-over-year. Fourth quarter net sales is $610 million, increased 24% over the third quarter of 2010 primarily because the prior quarter included completed contract revenue recognition for the 60-megawatt Sarnia project and Q4 was impacted by our decision to divert some volumes to extradite the Module replacement program.

Our fourth quarter net income was $156 million or 25.6% of net sales, resulting in diluted EPS of $1.80. Diluted EPS for 2010 was $7.68 which exceeded our guidance. Return on net assets was 19.5% on a four-quarter-rolling basis, representing an EVA of over 7% or 200 basis points above our target. Our cash and marketable securities balance of $1.1 billion increased $117 million sequentially.

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