FIRST SOLAR, INC. (NASDAQ: FSLR)By Kitty MakFI 305Summer 2011

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AGENDA Background Key Competitor Operating Performance Balance Sheet Analysis

Asset Ultilization Liquidity Ratio Debt Management Return on Equity

Cash Flow Analysis Company Value Analysts’ Comments Recommendation

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FIRST SOLAR, INC. - BACKGROUND Manufactures photovoltaic (PV) solar panels Uses thin semiconductor technology Products/services includes:

PV solar system Project development Engineering, procurement, and construction Operating and maintenance Project finance

Has low production cost through continuous flow manufacturing and operation efficiency

Operates in US, Europe, and Asia. Headquarter in Arizona

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FIRST SOLAR, INC. – 2010 ACHIEVEMENTS Revenue of $2.6 billion, an increase of 24%

from FY 2009 Operating profit of $749 million, an increase

of 10% from FY 2009 Manufacturing cost per watt reduced by 11%

to $0.75 per watt Operates 24 product lines globally and

manufactures over 2.4GW of power

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KEY COMPETITOR

SunPower Corp

Manufactures solar system for residential, commercial, and power plant.

Products include solar panels, inverters, photovoltaic rooftop products, and ground-mounted solar power systems.

In the same semiconductor industry as FSLR.

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OPERATING PERFORMANCE

2006 2007 2008 2009 201005

1015202530354045

Operating Profit Margin

First SolarSunPower

2006 2007 2008 2009 201005

101520253035

Net Profit Margin

First SolarSunPower

Analysis: In both companies, sales increased by over $2 bil during the 5 year

period. First Solar was effective in reducing cost which drove up profit

margin.

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First Solar, Inc.

Annual Income Statement

[As Reported in USD Millions]

31-Dec-2010 26-Dec-2009 27-Dec-2008 29-Dec-2007 30-Dec-2006

Net sales 2563.5 2066.2 1246.3 504 135

Total Revenue 2563.5 2066.2 1246.3 504 135

Cost of Sales 1378.7 1021.6 566.6 252.6 80.7

Impairment of Intangibles - 0 1.3 0 -

Research and Development 94.8 78.2 33.5 15.1 6.4

Selling, General, and Administrative 321.7 250.3 174 82.2 33.3

One time Charge reld. to management - 15.7 - - -

One time Charge - 6.9 - - -

Production Start-up 19.4 13.9 32.5 16.9 11.7

Total Operating Expense 1814.6 1386.6 808 366.8 132.2

Foreign currency gain -3.5 5.2 5.7 1.9 5.5

Interest Income 14.4 9.7 21.2 20.4 -

Interest Cost Incurred -10.1 -11.9 -7.4 -6.1 -4.4

Interest Capitalized 10.1 6.6 6.9 3.8 3.3

Other Income/Expense, Net 2.3 -3 -0.9 -1.2 1.8

Net Income Before Taxes 762.1 686.3 463.8 156 9.2

Provision for Income Taxes 97.9 46.2 115.4 -2.4 5.2

Net Income After Taxes 664.2 640.1 348.3 158.4 4

Net Income Before Extra. Items 664.2 640.1 348.3 158.4 4

Cumulative effect of change in accountin - - - 0 0

Net Income 664.2 640.1 348.3 158.4 4

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First Solar, Inc.

Annual Balance Sheet

[As Reported in USD Millions]

31-Dec-2010 26-Dec-2009 27-Dec-2008 29-Dec-2007 30-Dec-2006

Cash and Cash Equivalents 742.2 269.1 716.2 404.3 308.1

Commercial paper 1.2 0 - - -

Money market mutual funds 22.3 395.4 - - -

Marketable Securities 167.9 120.2 76 232.7 0.3

Funding Receivable - - - 35.9 27.5

Inventories 243.1 174.5 - - -

Accounts Receivable, Gross 305.5 227.8 61.7 18.2 28

Allowance for Doubtful Accounts 0 -1 0 0 0

Accounts receivable, unbilled 1.5 0.1 - - -

Raw Materials - - 103.7 22.9 8.2

Work in Process - - 4 2.3 1.1

Finished Goods - - 13.8 15 7.2

Project assets 0 1.1 0 - -

Deferred tax asset 0.4 21.7 9.9 3.9 -

Prepaid Expenses 46 33.1 32.2 9.1 -

Prepaid Income Tax - - - 13 -

Deferred project costs 14.4 36.7 0.7 2.6 0

Sale of Marketing Securities - - - 28.6 -

Notes receivable 0 50.5 0 - -

Derivative Instruments 21 7.9 34.9 0.1 -

Other receivable from financial inst. - - - 0 -

Other Current Assets 61.6 35.9 24.2 13.9 -

Prepaid Expenses and Other Current Asset - - - - 8.1

Total Current Assets 1584.5 1351.3 1077.4 802.5 388.5

Buildings and Improvements 286.6 239.1 137.1 44.7 21.8

Machinery and Equipment 997.5 813.3 559.6 170.1 79.8

Office Equipment and Furniture 70.6 38.8 22.8 7.4 4.4

Leasehold Improvements 25.4 15.9 11.5 4 3.1

Land 10.4 5 5.8 3 2.8

Construction in Progress 403.7 102.5 206.8 244 85.8

Accumulated Depreciation & Amortization -363.3 -225.8 -100.9 -43.1 -18.9

Project assets 320.1 131.4 0 - -

Deferred tax asset 259.2 130.5 61.3 51.8 0

Marketable Securities 180.3 329.6 29.6 32.7 0

Restricted Investment 86 36.5 30.1 14.7 8.2

Investment in related party 0 25 25 0 -

Goodwill 433.3 286.5 33.8 33.4 0

Other assets 43.1 48 14.4 5.7 2.6

Intangible Assets, Gross 1.6 1.5 1.5 1.5 1.4

Accumulated Amortization -1.3 -1.2 -1.2 -1.2 -1.1

Total Assets 4380.4 3349.5 2114.5 1371.3 578.5

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ASSET UTILIZATION RATIOS

FSLR SPWR Industry2006 4.78 6.13 8.92007 9.23 6.31 10.12008 19.64 5.97 10.32009 11.82 4.74 12.92010 8.65 4.75 12.1

FSLR SPWR Industry2006 6.89 10.36 7.12007 8.91 7.68 10.92008 7.02 5.47 82009 7.45 5.47 72010 7.81 6.63 8.7

Account Receivable Turnover

Inventory Turnover

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ASSET ULTILIZATION ANALYSIS AR turnover measures how effective a firm

uses its assets and how efficient it is at collecting sales.

FSLR has high turnover compared to its competitor due to low AR.

Inventory turnover indicates the number of times inventory is sold.

FSLR has high turnover compare to competitor and comparable to industry, which indicates strong sales.

Semiconductor industry includes companies such as Intel and Texas Instrument. Comparison to direct competitor offers more insight.

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ASSET UTILIZATION RATIOS CONT.

2006 2007 2008 2009 20100

0.2

0.4

0.6

0.8

1

1.2

Total Asset Turnover

First SolarSunPowerIndustry

2006 2007 2008 2009 20100

5

10

15

20

25

Return on Asset (ROA)

First SolarSunPower

Analysis: Asset turnover measures how well a company uses it assets to

generate sale. FSLR has lower turnover because it has more assets on the book.

ROA measures the amount of profit generate by each $1 of asset. FSLR is more profitable then its competitor.

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LIQUIDITY RATIOS

FSLR SPWR Industry2006 7.46 4.78 2.92007 4.3 1.13 4.12008 2.82 1.88 3.52009 3.42 2.4 4.42010 3.37 2.28 3.8

FSLR SPWR Industry2006 6.99 3.87 1.92007 3.71 0.83 2.82008 2.27 1.12 2.22009 2.69 1.8 2.92010 2.64 1.57 2.2

Current Ratios

Quick Ratios

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LIQUIDITY RATIOS

Current ratio measures whether the company has enough current asset to cover short term liabilities.

Quick ratio measures whether the company has enough liquid asset to meet short term liability.

FSLR is in a better position than its competitors and the industry at meeting short term obligations.

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First Solar, Inc.

Annual Balance Sheet

[As Reported in USD Millions]

Accounts payable 82.3 75.7 46.3 26.4 14

Income tax payable 16.8 8.7 99.9 24.5 5.2

Short Term Debt - - - 24.5 16.3

Current Portion of Long-term Debt 26.6 28.6 35 14.8 3.3

Deferred Revenue 14.7 31.1 0 - -

Derivative instruments 23 30.8 50.7 3.6 -

Deferred tax liabilities 34.6 0 - - -

Other Current Liabilities 27.4 26.7 9 11.2 0.3

Accrued compensation and benefits 69.4 53.9 32.1 21.9 2.6

Accrued property, plant and equipment 53.7 35.8 - - -

Product warranty liability 11.2 8.2 4 2.1 2.8

Note Payable to a Related Party - - - - 0

Accrued expenses 110 95.4 104.7 52.3 7.5

Total Current Liabilities 469.7 394.9 381.8 181.3 52.1

Long-term debt 210.8 146.4 163.5 68.9 61

Note Payable to a Related Party - - - - 0

Total Long Term Debt 210.8 146.4 163.5 68.9 61

Accrued Recycling 133 92.8 35.2 13.1 3.7

Other liabilities noncurrent 112 62.6 20.9 10.8 0

Total Liabilities 925.5 696.7 601.5 274 116.8

Employee Stock Options - - - 0 50.2

Common Stock 0.1 0.1 0.1 0.1 0.1

Contingent consideration 1.1 2.8 0 - -

Additional Paid-in Capital 1815.4 1658.1 1176.2 1079.8 555.7

Accumulated Deficit 1665.6 1001.4 361.2 12.9 -145.4

Accumulated Other Comprehensive Income -27.2 -9.6 -24.4 4.5 1

Total Equity 3454.9 2652.8 1513 1097.3 461.7

Total Liabilities & Shareholders' Equity 4380.4 3349.5 2114.5 1371.3 578.5

Total Common Shares Outstanding 85.8 85.2 81.6 78.6 72.3

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DEBT MANAGEMENT

Analysis: Low debt to equity ratio indicates that assets are financed by

equity rather than debt.

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

Debt to Equity

First SolarSunPower

2006 2007 2008 2009 20100

0.050.1

0.150.2

0.250.3

0.350.4

0.450.5

LT Debt to Equity

First SolarSunPower

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RETURN ON EQUITY

Analysis: ROE measures how efficient the company is at generating profit

from each dollar of equity. FSLR generates higher return for its shareholders than its

competitor. Over the 5 yr period, it also has higher average return than the industry.

2006 2007 2008 2009 20100

5

10

15

20

25

30

35

First SolarSunPower

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OTHER MARKET MEASUREFSLR SPWRA

BV/sh 40.25 16.89EPS 7.01 1.36PE 18.98 15.42

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First SolarAs Reported Annual Cash Flow

In Thousands

12/31/2010 12/26/2009 12/27/2008 12/29/2007 12/30/2006

Cash received from customers 2,458,088 1,957,604 1,203,822 515,994 110,196

Cash paid to suppliers & employees (1,614,763) (1,123,746) (723,123) (276,525) (111,945)

Interest received 20,531 6,147 19,138 19,965 -

Interest paid (7,610) (10,550) (4,629) (2,294) (712)

Income tax paid, net of refunds (80,064) (147,843) (1,975) (19,002) -

Excess tax benefit from share-based compensation arrangements (69,367) (4,892) (28,661) (30,196) -

Other cash flows from operating activities (1,323) (1,527) (1,505) (1,991) 1,885

Net cash flows from operating activities 705,492 675,193 463,067 205,951 (576)

Purchases of property, plant & equipment (588,914) (279,941) (459,271) (242,371) (153,150)

Purchase of marketable securities (462,070) (607,356) (334,818) (1,081,154) -

Proceeds from maturities of marketable securities 62,648 149,076 107,450 787,783 -

Proceeds from sales of marketable securities 494,256 115,805 418,762 - -

Investment in notes receivable - (99,637) - - -

Payments received on notes receivable 61,658 25,447 - - -

Increase in restricted investments (43,064) (4,150) (15,564) (6,008) (6,804)

Sales of (purchase of) investment in related party 28,596 - (25,000) - -

Acquisitions, net of cash acquired (296,496) 318 - (5,500) -

Other investing activities 1,301 (1,252) - - (40)

Net cash flows from investing activities (742,085) (701,690) (308,441) (547,250) (159,994)

Proceeds from stock options exercises 9,379 5,961 16,036 10,173 100

Proceeds from issuance of common stock - - - 365,969 302,650

Repayment of notes payable to a related party - - - - (28,700)

Repayment of long-term debt (27,879) (78,224) (41,691) (34,757) (135)

Equity contributions - - - - 30,000

Proceeds from issuance of debt, net of issuance costs 100,000 44,739 138,887 49,368 132,330

Debt issuance costs - - - - (1,497)

Excess tax benefit from share-based compensation arrangements 69,367 4,892 28,661 30,196 45

Proceeds from economic development funding - 615 35,661 9,475 16,766

Other financing activities (416) (4) (5) (3) (9)

Net cash flows from financing activities 150,451 (22,021) 177,549 430,421 451,550

Effect of exchange rate changes on cash & cash equivalents (12,668) (3,201) (20,221) 7,050 391

Net increase (decrease) in cash & cash equivalents 101,190 (51,719) 311,954 96,172 291,371

Cash & cash equivalents, beginning of year 664,499 716,218 404,264 308,092 16,721

Cash & cash equivalents, end of year 765,689 664,499 716,218 404,264 308,092

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CASH FLOW ANALYSIS Major sources of cash are through

operations, the issuance of common stocks, and loans.

Major uses of cash are operating expenses, PPE purchases, and investment in marketable securities.

Year over year, there are an increase in CF due to increase in sales. Credit sales are small.

The company was started with equity contributions.

According to the Annual Report, only 15% of acquired PPE was funded by liability.

Very little debt is used. Cash primarily from operations and equity.

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COMPANY VALUE – ECONOMIC PROFIT VAL

Year NOPLAT Invested cap (beg) ROIC WACC Eco Profit PV of Eco Profit

2011 788.33 3,939.90 17.36% 11% 250.64 225.81

2012 861.97 5,141.30 15.58% 11% 235.37 191.03

2013 969.62 5,925.22 15.67% 11% 276.97 202.52

2014 1,062.29 6,446.79 15.78% 11% 308.13 202.98

2015 1,148.22 7,017.30 15.67% 11% 327.42 194.31

2016 1,224.81 7,641.48 15.34% 11% 331.85 177.42

2017 1,298.30 8,324.52 12.48% 11% 122.94 59.22

2018 1,363.22 12,486.78 10.76% 11% -30.48 (13.22)

2019 1,431.38 12,861.39 10.96% 11% -4.53 (1.77)

2020 1,488.63 13,247.23 11.07% 11% 9.44 3.32

Continuing value 14722.46 5,185.02

  PV of economic profit 6,426.63

  Invested Cap 2010 3,939.90

  PV of economic profit + invested cap 10,366.53

  mid year adjustment 1.04

  Enterprise Value of operations 10,791.56

   

  Value of debt 2010 (210.80)

   

  Equity value 10,580.76

   

  outstanding shares on 7/18/11 86,160,700

   

  Value per share         $122.80

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COMPANY VALUE

Market price per share: $99.70Economic Profit base Valuation: $122

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ANALYSTS COMMENTS UBS analyst offered a buy rating following

news that FSLR received conditional loan guarantee from US Dept of Energy in three projects, which is estimated to increase EPS by 45% in the next 3 years.

Goldman Sach offered a buy rating indicating that the company has upside potential due to cost reduction, project pipeline, strong balance sheet, and global demand.

FSLR entered into a collaborative agreement with China Power International Holding to explore investment opportunities and PV projects.

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RECOMMENDATION

BUYFSLR out performs competitors in all financial comparisons and the industry in most areas.

The company is clearly a leader in the industry.