UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33156

First Solar, Inc.

(Exact name of registrant as specified in its charter)


Delaware			20-4623678
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

350 West Washington Street, Suite 600

Tempe, Arizona 85281

(Address of principal executive offices, including zip code)

(602) 414-9300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	FSLR	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 29, 2021, 106,326,700~~April 22, 2022, 106,584,190 shares of the registrant’s common stock, $0.001 par value per share, were outstanding.

FIRST SOLAR, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2021~~MARCH 31, 2022

TABLE OF CONTENTS


		Page
Part I.	Financial Information	1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	1
	Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	2
	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September30,~~March 31, 2022 and 2021 ~~and 2020~~	65
	Notes to Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3833
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5748
Item 4.	Controls and Procedures	5749
Part II.	Other Information	5850
Item 1.	Legal Proceedings	5850
Item 1A.	Risk Factors	5850
Item 6.	Exhibits	6050
Signature		6051

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net sales	Net sales	$	583,504	$	927,565	$	2,016,058	$	2,102,100	Net sales	$	367,040	$	803,374
Cost of sales	Cost of sales	458,924		634,550		1,532,593		1,581,287		Cost of sales	355,577		618,607
Gross profit	Gross profit	124,580		293,015		483,465		520,813		Gross profit	11,463		184,767
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	43,476		49,861		131,909		160,218		Selling, general and administrative	36,728		52,087
Research and development	Research and development	25,426		22,972		69,234		71,068		Research and development	27,108		19,873
Production start-up	Production start-up	2,945		13,019		16,014		23,812		Production start-up	7,338		11,354
Litigation loss		—		—		—		6,000
Total operating expenses	Total operating expenses	71,847		85,852		217,157		261,098		Total operating expenses	71,174		83,314
Gain on sales of businesses, net	Gain on sales of businesses, net	(1,866)		—		147,284		—		Gain on sales of businesses, net	1,907		150,895
Operating income		50,867		207,163		413,592		259,715
Operating (loss) income										Operating (loss) income	(57,804)		252,348
Foreign currency loss, net	Foreign currency loss, net	(1,018)		(1,852)		(4,613)		(3,549)		Foreign currency loss, net	(4,198)		(2,595)
Interest income	Interest income	1,752		2,109		3,996		15,113		Interest income	2,325		956
Interest expense, net	Interest expense, net	(2,958)		(10,975)		(10,577)		(21,018)		Interest expense, net	(2,865)		(2,996)
Other (expense) income, net	Other (expense) income, net	(2,603)		(3,236)		2,598		(8,653)		Other (expense) income, net	(212)		8,448
Income before taxes and equity in earnings		46,040		193,209		404,996		241,608
Income tax (expense) benefit		(837)		(38,107)		(67,673)		40,894
Equity in earnings, net of tax		—		(65)		—		150
Net income		$	45,203	$	155,037	$	337,323	$	282,652
(Loss) income before taxes										(Loss) income before taxes	(62,754)		256,161
Income tax benefit (expense)										Income tax benefit (expense)	19,499		(46,490)
Net (loss) income										Net (loss) income	$	(43,255)	$	209,671

Net income per share:
Net (loss) income per share:										Net (loss) income per share:
Basic	Basic	$	0.43	$	1.46	$	3.18	$	2.67	Basic	$	(0.41)	$	1.98
Diluted	Diluted	$	0.42	$	1.45	$	3.16	$	2.65	Diluted	$	(0.41)	$	1.96
Weighted-average number of shares used in per share calculations:	Weighted-average number of shares used in per share calculations:									Weighted-average number of shares used in per share calculations:
Basic	Basic	106,320		105,967		106,241		105,830		Basic	106,412		106,088
Diluted	Diluted	106,899		106,751		106,879		106,537		Diluted	106,412		106,890

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)
Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net income $ 45,203 $ 155,037 $ 337,323 $ 282,652
Other comprehensive (loss) income:
Foreign currency translation adjustments (1,915) 3,242 (11,341) 552
Unrealized (loss) gain on marketable securities and restricted marketable securities, net of tax of $47, $(236), $1,134 and $(822) (3,486) 6,148 (19,961) 20,826
Unrealized gain (loss) on derivative instruments, net of tax of $153, $55, $(545) and $(31) 118 (1,827) 4,284 (1,741)
Other comprehensive (loss) income (5,283) 7,563 (27,018) 19,637
Comprehensive income $ 39,920 $ 162,600 $ 310,305 $ 302,289


	Three Months Ended March 31,
	2022		2021
Net (loss) income	$	(43,255)	$	209,671
Other comprehensive loss:
Foreign currency translation adjustments	(10,125)		(9,716)
Unrealized loss on marketable securities and restricted marketable securities, net of tax of $1,246 and $1,121	(22,521)		(16,590)
Unrealized (loss) gain on derivative instruments, net of tax of $94 and $(637)	(442)		3,382
Other comprehensive loss	(33,088)		(22,924)
Comprehensive (loss) income	$	(76,343)	$	186,747

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents		$	1,367,464	$	1,227,002
Marketable securities (amortized cost of $554,897 and $519,844 and allowance for credit losses of $133 and $121 at September 30, 2021 and December 31, 2020, respectively)		554,601		520,066
Accounts receivable trade		249,771		269,095
Less: allowance for credit losses		(1,430)		(3,009)
Cash						Cash	$	1,326,363	$	1,450,654
Marketable securities						Marketable securities	223,091		375,389
Accounts receivable trade, net	Accounts receivable trade, net	248,341		266,086		Accounts receivable trade, net	293,357		429,436
Accounts receivable, unbilled		25,053		26,673
Less: allowance for credit losses		(51)		(303)
Accounts receivable, unbilled, net		25,002		26,370
Accounts receivable unbilled, net						Accounts receivable unbilled, net	28,764		25,273
Inventories	Inventories	647,439		567,587		Inventories	840,750		666,299
Assets held for sale		—		155,685
Prepaid expenses and other current assets		203,478		251,739
Other current assets						Other current assets	282,668		244,192
Total current assets	Total current assets	3,046,325		3,014,535		Total current assets	2,994,993		3,191,243
Property, plant and equipment, net	Property, plant and equipment, net	2,505,921		2,402,285		Property, plant and equipment, net	2,785,824		2,649,587
PV solar power systems, net	PV solar power systems, net	230,423		243,396		PV solar power systems, net	214,386		217,293
Project assets	Project assets	335,259		373,377		Project assets	391,774		315,488
Deferred tax assets, net	Deferred tax assets, net	108,387		104,099		Deferred tax assets, net	61,794		59,162
Restricted marketable securities (amortized cost of $254,659 and $247,628 and allowance for credit losses of $53 and $13 at September 30, 2021 and December 31, 2020, respectively)		251,379		265,280
Restricted marketable securities						Restricted marketable securities	220,167		244,726
Goodwill	Goodwill	14,462		14,462		Goodwill	14,462		14,462
Intangible assets, net	Intangible assets, net	47,935		56,138		Intangible assets, net	42,769		45,509
Inventories	Inventories	236,446		201,229		Inventories	237,854		237,512
Other assets	Other assets	492,093		434,130		Other assets	435,202		438,764
Total assets	Total assets	$	7,268,630	$	7,108,931	Total assets	$	7,399,225	$	7,413,746
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	170,041	$	183,349	Accounts payable	$	146,233	$	193,374
Income taxes payable	Income taxes payable	12,984		14,571		Income taxes payable	4,759		4,543
Accrued expenses	Accrued expenses	231,163		310,467		Accrued expenses	334,975		288,450
Current portion of long-term debt	Current portion of long-term debt	37,129		41,540		Current portion of long-term debt	4,701		3,896
Deferred revenue	Deferred revenue	238,810		188,813		Deferred revenue	218,923		201,868
Liabilities held for sale		—		25,621
Other current liabilities	Other current liabilities	25,109		83,037		Other current liabilities	25,399		34,747
Total current liabilities	Total current liabilities	715,236		847,398		Total current liabilities	734,990		726,878
Accrued solar module collection and recycling liability	Accrued solar module collection and recycling liability	140,019		130,688		Accrued solar module collection and recycling liability	137,455		139,145
Long-term debt	Long-term debt	241,483		237,691		Long-term debt	247,354		236,005
Other liabilities	Other liabilities	341,817		372,226		Other liabilities	404,251		352,167
Total liabilities	Total liabilities	1,438,555		1,588,003		Total liabilities	1,524,050		1,454,195
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,326,000 and 105,980,466 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		106		106
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,583,300 and 106,332,315 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively						Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,583,300 and 106,332,315 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	107		106
Additional paid-in capital	Additional paid-in capital	2,865,628		2,866,786		Additional paid-in capital	2,863,318		2,871,352
Accumulated earnings	Accumulated earnings	3,053,085		2,715,762		Accumulated earnings	3,141,200		3,184,455
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(88,744)		(61,726)		Accumulated other comprehensive loss	(129,450)		(96,362)
Total stockholders’ equity	Total stockholders’ equity	5,830,075		5,520,928		Total stockholders’ equity	5,875,175		5,959,551
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	7,268,630	$	7,108,931	Total liabilities and stockholders’ equity	$	7,399,225	$	7,413,746

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Three Months Ended September 30, 2021																				Three Months Ended March 31, 2022
		Common Stock			Additional Paid-In Capital				Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income					Total Stockholders' Equity						Common Stock						Additional Paid-In Capital					Accumulated Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity
		Shares	Amount											Shares						Amount
Balance at June 30, 2021		106,319	$	106			$	2,859,108					$	3,007,882				$	(83,461)			$	5,783,635
Balance at December 31, 2021																			Balance at December 31, 2021			106,332				$	106		$	2,871,352				$	3,184,455		$	(96,362)		$	5,959,551
Net loss																			Net loss			—				—		—					(43,255)			—			(43,255)
Other comprehensive loss																			Other comprehensive loss			—				—		—					—			(33,088)			(33,088)
Common stock issued for share-based compensation																			Common stock issued for share-based compensation			414				1		—					—			—			1
Tax withholding related to vesting of restricted stock																			Tax withholding related to vesting of restricted stock			(163)				—		(11,505)					—			—			(11,505)
Share-based compensation expense																			Share-based compensation expense			—				—		3,471					—			—			3,471
Balance at March 31, 2022																			Balance at March 31, 2022			106,583				$	107	$	2,863,318				$	3,141,200		$	(129,450)		$	5,875,175

																						Three Months Ended March 31, 2021
																						Common Stock						Additional Paid-In Capital					Accumulated Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity
																						Shares				Amount
Balance at December 31, 2020																			Balance at December 31, 2020			105,980				$	106				$	2,866,786				$	2,715,762		$	(61,726)		$	5,520,928

Net income	Net income	—	—		—				45,203		—					45,203			Net income			—				—		—					209,671			—			209,671
Other comprehensive loss	Other comprehensive loss	—	—		—				—		(5,283)					(5,283)			Other comprehensive loss			—				—		—					—			(22,924)			(22,924)
Common stock issued for share-based compensation	Common stock issued for share-based compensation	8	—		—				—		—					—			Common stock issued for share-based compensation			536				—		—					—			—			—
Tax withholding related to vesting of restricted stock	Tax withholding related to vesting of restricted stock	(1)	—		(67)				—		—					(67)			Tax withholding related to vesting of restricted stock			(205)				—		(15,689)					—			—			(15,689)
Share-based compensation expense	Share-based compensation expense	—	—		6,587				—		—					6,587			Share-based compensation expense			—				—		2,794					—			—			2,794
Balance at September 30, 2021		106,326	$	106	$	2,865,628			$	3,053,085	$	(88,744)				$	5,830,075

		Three Months Ended September 30, 2020
		Common Stock			Additional Paid-In Capital				Accumulated Earnings		Accumulated Other Comprehensive (Loss) Income					Total Stockholders' Equity
		Shares	Amount
Balance at June 30, 2020		105,961	$	106			$	2,848,928						$	2,445,022					$	(67,260)			$	5,226,796

Net income		—	—		—				155,037		—					155,037
Other comprehensive income		—	—		—				—		7,563					7,563
Common stock issued for share-based compensation		19	—		—				—		—					—
Tax withholding related to vesting of restricted stock		(5)	—		(289)				—		—					(289)
Share-based compensation expense		—	—		7,006				—		—					7,006
Balance at September 30, 2020		105,975	$	106	$	2,855,645			$	2,600,059	$	(59,697)				$	5,396,113
Balance at March 31, 2021																			Balance at March 31, 2021			106,311				$	106	$	2,853,891				$	2,925,433		$	(84,650)		$	5,694,780

See accompanying notes to these condensed consolidated financial statements.

~~Table of Contents~~

~~FIRST SOLAR, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)~~

~~(In thousands)~~

~~(Unaudited)~~
Nine Months Ended September 30, 2021
Common Stock Additional
Paid-In
Capital Accumulated Earnings Accumulated
Other
Comprehensive (Loss) Income Total
Stockholders' Equity
Shares Amount
Balance at December 31, 2020 105,980 $ 106 $ 2,866,786 $ 2,715,762 $ (61,726) $ 5,520,928
Net income — — — 337,323 — 337,323
Other comprehensive loss — — — — (27,018) (27,018)
Common stock issued for share-based compensation 554 — — — — —
Tax withholding related to vesting of restricted stock (208) — (15,877) — — (15,877)
Share-based compensation expense — — 14,719 — — 14,719
Balance at September 30, 2021 106,326 $ 106 $ 2,865,628 $ 3,053,085 $ (88,744) $ 5,830,075
Nine Months Ended September 30, 2020
Common Stock Additional
Paid-In
Capital Accumulated Earnings Accumulated
Other
Comprehensive (Loss) Income Total
Stockholders' Equity
Shares Amount
Balance at December 31, 2019 105,449 $ 105 $ 2,849,376 $ 2,326,620 $ (79,334) $ 5,096,767
Cumulative-effect adjustment for the adoption of ASU 2016-13 — — — (9,213) — (9,213)
Net income — — — 282,652 — 282,652
Other comprehensive income — — — — 19,637 19,637
Common stock issued for share-based compensation 808 1 1,362 — — 1,363
Tax withholding related to vesting of restricted stock (282) — (13,053) — — (13,053)
Share-based compensation expense — — 17,960 — — 17,960
Balance at September 30, 2020 105,975 $ 106 $ 2,855,645 $ 2,600,059 $ (59,697) $ 5,396,113

~~See accompanying notes to these condensed consolidated financial statements.~~

Table of Contents

FIRST SOLAR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income		$	337,323	$	282,652
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Net (loss) income						Net (loss) income	$	(43,255)	$	209,671
Adjustments to reconcile net (loss) income to cash used in operating activities:						Adjustments to reconcile net (loss) income to cash used in operating activities:
Depreciation, amortization and accretion	Depreciation, amortization and accretion	194,606		173,277		Depreciation, amortization and accretion	65,207		63,205
Impairments and net losses on disposal of long-lived assets	Impairments and net losses on disposal of long-lived assets	9,083		24,600		Impairments and net losses on disposal of long-lived assets	1,892		4,501
Share-based compensation	Share-based compensation	14,974		18,189		Share-based compensation	3,503		3,115
Deferred income taxes	Deferred income taxes	(13,450)		(77,970)		Deferred income taxes	1,083		(11,538)
Gain on sales of businesses, net	Gain on sales of businesses, net	(147,284)		—		Gain on sales of businesses, net	(1,907)		(150,895)
Gains on sales of marketable securities and restricted marketable securities	Gains on sales of marketable securities and restricted marketable securities	(11,696)		(15,346)		Gains on sales of marketable securities and restricted marketable securities	—		(11,696)
Liabilities assumed by customers for the sale of systems		—		(136,745)

Other, net	Other, net	(2,909)		16,289		Other, net	273		1,412
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, trade and unbilled	Accounts receivable, trade and unbilled	79,565		330,090		Accounts receivable, trade and unbilled	144,286		(320,461)
Prepaid expenses and other current assets		(52,275)		8,467
Other current assets						Other current assets	(15,044)		(42,750)
Inventories	Inventories	(116,017)		(142,017)		Inventories	(175,990)		12,602
Project assets and PV solar power systems	Project assets and PV solar power systems	11,945		183,163		Project assets and PV solar power systems	(98,695)		59,623
Other assets	Other assets	(39,264)		(30,804)		Other assets	(15,794)		(20,814)
Income tax receivable and payable	Income tax receivable and payable	22,615		9,160		Income tax receivable and payable	(23,502)		33,278
Accounts payable	Accounts payable	879		(58,311)		Accounts payable	(55,371)		7,853
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(95,685)		(720,756)		Accrued expenses and other liabilities	74,475		(116,584)
Accrued solar module collection and recycling liability		10,682		(13,136)
Net cash provided by (used in) operating activities		203,092		(149,198)
Net cash used in operating activities						Net cash used in operating activities	(138,839)		(279,478)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(345,399)		(327,284)		Purchases of property, plant and equipment	(154,761)		(90,155)
Purchases of marketable securities and restricted marketable securities		(1,107,704)		(642,993)
Purchases of marketable securities						Purchases of marketable securities	(750,220)		(292,308)
Proceeds from sales and maturities of marketable securities and restricted marketable securities	Proceeds from sales and maturities of marketable securities and restricted marketable securities	1,075,768		1,100,176		Proceeds from sales and maturities of marketable securities and restricted marketable securities	900,165		508,289
Proceeds from sales of businesses	Proceeds from sales of businesses	300,499		—		Proceeds from sales of businesses	1,860		145,969
Other investing activities	Other investing activities	(6,453)		(13,577)		Other investing activities	12		43
Net cash (used in) provided by investing activities	Net cash (used in) provided by investing activities	(83,289)		116,322		Net cash (used in) provided by investing activities	(2,944)		271,838
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayment of long-term debt	Repayment of long-term debt	(38,471)		(224,643)		Repayment of long-term debt	(737)		(37,378)
Proceeds from borrowings under long-term debt, net of discounts and issuance costs	Proceeds from borrowings under long-term debt, net of discounts and issuance costs	45,138		140,304		Proceeds from borrowings under long-term debt, net of discounts and issuance costs	18,006		21,616
Payments of tax withholdings for restricted shares	Payments of tax withholdings for restricted shares	(15,877)		(13,053)		Payments of tax withholdings for restricted shares	(11,505)		(15,689)
Other financing activities		—		(804)
Net cash used in financing activities		(9,210)		(98,196)

Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	5,764		(31,451)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,687		1,251		Effect of exchange rate changes on cash, cash equivalents and restricted cash	15,162		(652)
Net increase (decrease) in cash, cash equivalents and restricted cash		112,280		(129,821)
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(120,857)		(39,743)
Cash, cash equivalents and restricted cash, beginning of the period	Cash, cash equivalents and restricted cash, beginning of the period	1,273,594		1,446,510		Cash, cash equivalents and restricted cash, beginning of the period	1,455,837		1,273,594
Cash, cash equivalents and restricted cash, end of the period	Cash, cash equivalents and restricted cash, end of the period	$	1,385,874	$	1,316,689	Cash, cash equivalents and restricted cash, end of the period	$	1,334,980	$	1,233,851
Supplemental disclosure of noncash investing and financing activities:	Supplemental disclosure of noncash investing and financing activities:					Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities	Property, plant and equipment acquisitions funded by liabilities	$	50,415	$	129,384	Property, plant and equipment acquisitions funded by liabilities	$	105,643	$	76,095
Proceeds to be received from sales of businesses						Proceeds to be received from sales of businesses	$	—	$	156,965

See accompanying notes to these condensed consolidated financial statements.

Table of Contents

FIRST SOLAR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries in this Quarterly Report have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of First Solar management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Certain prior period balances have been reclassified to conform to the current period presentation.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions. Operating results for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021~~2022 or for any other period. The condensed consolidated balance sheet at December 31, ~~2020~~2021 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, ~~2020~~2021 included in our Annual Report on Form 10-K, which has been filed with the SEC.

Unless expressly stated or the context otherwise requires, the terms “the Company,” “we,” “us,” “our,” and “First Solar” refer to First Solar, Inc. and its consolidated subsidiaries, and the term “condensed consolidated financial statements” refers to the accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report.

2. Sales of Businesses

~~Sale~~Sales of North American and International O&M ~~operations~~Operations

Following an evaluation of the long-term cost structure, competitiveness, and risk-adjusted returns of our O&M services business, we received an offer to purchase certain portions of the business and determined it was in the best interest of our stockholders to pursue the transaction. Accordingly, inIn August 2020, we entered into an agreement with a subsidiary of Clairvest Group, Inc. (“Clairvest”) for the sale of our North American operations and maintenance (“O&M&M”) operations.

On In March ~~31,~~ 2021, we completed the ~~transaction. Following certain customary post-closing adjustments, we~~transaction and received ~~total~~initial consideration of ~~$149.1~~$146.0 million. As a result of this transaction, we recognized a gain of ~~$115.8~~$119.2 million, net of transaction costs, ~~and post-closing adjustments,~~ during the ~~nine~~three months ended ~~September 30,~~March 31, 2021, which was included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations. ~~The assets~~

In January 2022, we completed the sale of certain international O&M operations to a separate subsidiary of Clairvest for consideration of $1.9 million. As a result of this transaction, we recognized a gain of $1.9 million, net of transaction costs and ~~liabilities associated with this business were classified as held for sale~~post-closing adjustments, during the three months ended March 31, 2022, which was included in “Gain on sales of businesses, net” in our condensed consolidated ~~balance sheet as~~statements of ~~December 31, 2020.~~operations.

Table of Contents

Sale of U.S. ~~project development business~~Project Development Business

Following a separate evaluation of the long-term cost structure, competitiveness, and risk-adjusted returns of our U.S. project development business, we determined it was also in the best interest of our stockholders to pursue the sale of this business. In January 2021, we entered into an agreement with Leeward Renewable Energy Development, LLC (“Leeward”), a subsidiary of the Ontario Municipal Employees Retirement System, for the sale of our U.S. project development business, which included developing, contracting for the construction of, and selling utility-scale photovoltaic (“PV”) solar power systems in the United States. The transaction included our approximately 10 GWAC utility-scale solar project pipeline, including the advanced-stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail projects, which are expected to commence construction in the next two years; the 30MWAC ~~Barilla Solar project, which is operational; and certain other equipment.~~business. In ~~addition, Leeward agreed to certain module purchase commitments.~~

On March ~~31,~~ 2021, we completed the transaction ~~for an aggregate purchase price~~and received consideration of ~~$284.0 million. Such purchase price included~~ $151.4 million for the sale of ~~the U.S. project development business and $132.6 million for the sale~~such business. As a result of ~~392 MW~~DC ~~of solar modules, which is presented in “Net sales” on our condensed consolidated statements of operations for the nine months ended September 30, 2021.~~

~~During the nine months ended September 30, 2021,~~this transaction, we recognized a gain of ~~$31.5~~$31.8 million, net of transaction costs, ~~and post-closing adjustments, from~~during the ~~sale of our U.S. project development business,~~three months ended March 31, 2021, which iswas included in “Gain on sales of businesses, net” in our condensed consolidated statements of operations. ~~The assets and liabilities associated with this business were classified as held for sale in our condensed consolidated balance sheet as of December 31, 2020.~~

3. Cash ~~Cash Equivalents,~~ and Marketable Securities

Cash ~~cash equivalents,~~ and marketable securities consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Cash and cash equivalents:
Cash	Cash	$	1,367,462	$	1,227,000	Cash	$	1,326,363	$	1,450,654
Money market funds		2		2
Total cash and cash equivalents		1,367,464		1,227,002
Marketable securities:	Marketable securities:					Marketable securities:
Foreign debt	Foreign debt	147,445		214,254		Foreign debt	85,010		103,317
U.S. debt	U.S. debt	18,710		14,543		U.S. debt	18,030		18,627
Time deposits	Time deposits	388,446		291,269		Time deposits	120,051		253,445
Total marketable securities	Total marketable securities	554,601		520,066		Total marketable securities	223,091		375,389
Total cash, cash equivalents, and marketable securities		$	1,922,065	$	1,747,068
Total cash and marketable securities						Total cash and marketable securities	$	1,549,454	$	1,826,043

~~Table of Contents~~

The following table provides a reconciliation of cash ~~cash equivalents,~~ and restricted cash reported within our condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 to the total of such amounts as presented in the condensed consolidated statements of cash flows (in thousands):


		Balance Sheet Line Item	September 30, 2021		December 31, 2020			Balance Sheet Line Item	March 31, 2022		December 31, 2021
Cash and cash equivalents		Cash and cash equivalents	$	1,367,464	$	1,227,002
Cash							Cash	Cash	$	1,326,363	$	1,450,654
Restricted cash – current	Restricted cash – current	Prepaid expenses and other current assets	1,181		1,745		Restricted cash – current	Other current assets	2,353		1,532
Restricted cash – noncurrent	Restricted cash – noncurrent	Other assets	17,229		44,847		Restricted cash – noncurrent	Other assets	6,264		3,651
Total cash, cash equivalents, and restricted cash			$	1,385,874	$	1,273,594
Total cash and restricted cash							Total cash and restricted cash		$	1,334,980	$	1,455,837

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we sold marketable securities for proceeds of $5.5 million and realized gains of less than $0.1 million on such sales. During the three and nine months ended September 30, 2020, we sold marketable securities for proceeds of $27.6 million and $188.1 million, respectively, and realized gains of less than $0.1 million and $0.2 million, respectively, on such sales. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our marketable securities.

Table of Contents

The following tables summarize the unrealized gains and losses related to our available-for-sale marketable securities, by major security type, as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		As of September 30, 2021											As of March 31, 2022
		Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign debt	Foreign debt	$	147,312	$	133	$	—	$	—	$	147,445	Foreign debt	$	85,228	$	26	$	220	$	24	$	85,010
U.S. debt	U.S. debt	19,009		13		309		3		18,710		U.S. debt	19,000		—		968		2		18,030
Time deposits	Time deposits	388,576		—		—		130		388,446		Time deposits	120,085		—		—		34		120,051
Total	Total	$	554,897	$	146	$	309	$	133	$	554,601	Total	$	224,313	$	26	$	1,188	$	60	$	223,091


		As of December 31, 2020											As of December 31, 2021
		Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign debt	Foreign debt	$	213,949	$	367	$	46	$	16	$	214,254	Foreign debt	$	103,263	$	81	$	18	$	9	$	103,317
U.S. debt	U.S. debt	14,521		22		—		—		14,543		U.S. debt	19,003		10		384		2		18,627
Time deposits	Time deposits	291,374		—		—		105		291,269		Time deposits	253,531		—		—		86		253,445
Total	Total	$	519,844	$	389	$	46	$	121	$	520,066	Total	$	375,797	$	91	$	402	$	97	$	375,389

The following table presents the change in the allowance for credit losses related to our available-for-sale marketable securities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Allowance for credit losses, beginning of period	Allowance for credit losses, beginning of period	$	121	$	—	Allowance for credit losses, beginning of period	$	97	$	121
Cumulative-effect adjustment for the adoption of ASU 2016-13		—		207
Provision for credit losses, net	Provision for credit losses, net	329		215		Provision for credit losses, net	49		122
Sales and maturities of marketable securities	Sales and maturities of marketable securities	(317)		(374)		Sales and maturities of marketable securities	(86)		(105)
Allowance for credit losses, end of period	Allowance for credit losses, end of period	$	133	$	48	Allowance for credit losses, end of period	$	60	$	138

~~Table of Contents~~

The contractual maturities of our marketable securities as of ~~September 30, 2021~~March 31, 2022 were as follows (in thousands):


	Fair Value
One year or less	$	~~538,879~~214,062
One year to two years	~~6,034~~—
Two years to three years	—
Three years to four years	—4,635
Four years to five years	~~4,813~~—
More than five years	~~4,875~~4,394
Total	$	~~554,601~~223,091

Table of Contents

4. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Foreign government obligations	Foreign government obligations	$	71,603	$	149,700	Foreign government obligations	$	57,867	$	64,855
Supranational debt	Supranational debt	10,944		—		Supranational debt	10,085		10,997
U.S. debt	U.S. debt	145,151		—		U.S. debt	131,862		145,326
U.S. government obligations	U.S. government obligations	23,681		115,580		U.S. government obligations	20,353		23,548
Total restricted marketable securities	Total restricted marketable securities	$	251,379	$	265,280	Total restricted marketable securities	$	220,167	$	244,726

Our restricted marketable securities represent long-term investments to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. We have established a trust under which estimated funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, such custodial accounts also included noncurrent restricted cash balances of ~~$0.6~~$3.5 million and ~~$0.7~~$0.9 million, respectively, which were reported within “Other assets.” Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we sold all our restricted marketable securities for proceeds of $258.9 million and realized gains of $11.7 million on such sales, and repurchased $255.6 million of restricted marketable securities as part of our ongoing management of the custodial accounts. During the nine months ended September 30, 2020, we sold certain restricted marketable securities for proceeds of $115.2 million, realized gains of $15.1 million on such sales, and repurchased $114.5 million of restricted marketable securities as part of our ongoing management of the custodial accounts.sales. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the fair value of our restricted marketable securities.

~~Table of Contents~~

The following ~~table summarizes~~tables summarize the unrealized gains and losses related to our restricted marketable securities, by major security type, as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		As of September 30, 2021											As of March 31, 2022
		Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign government obligations	Foreign government obligations	$	68,081	$	5,280	$	1,747	$	11	$	71,603	Foreign government obligations	$	65,733	$	—	$	7,854	$	12	$	57,867
Supranational debt	Supranational debt	11,416		—		472		—		10,944		Supranational debt	11,310		—		1,225		—		10,085
U.S. debt	U.S. debt	150,500		—		5,312		37		145,151		U.S. debt	149,623		—		17,728		33		131,862
U.S. government obligations	U.S. government obligations	24,662		—		976		5		23,681		U.S. government obligations	24,618		—		4,260		5		20,353
Total	Total	$	254,659	$	5,280	$	8,507	$	53	$	251,379	Total	$	251,284	$	—	$	31,067	$	50	$	220,167

As of December 31, 2020
Amortized
Cost Unrealized
Gains Unrealized
Losses Allowance for Credit Losses Fair
Value
Foreign government obligations $ 131,980 $ 17,720 $ — $ — $ 149,700
U.S. government obligations 115,648 133 188 13 115,580
Total $ 247,628 $ 17,853 $ 188 $ 13 $ 265,280

Table of Contents


	As of December 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
Foreign government obligations	$	66,867	$	—	$	2,002	$	10	$	64,855
Supranational debt	11,362		—		365		—		10,997
U.S. debt	150,060		—		4,697		37		145,326
U.S. government obligations	24,640		—		1,086		6		23,548
Total	$	252,929	$	—	$	8,150	$	53	$	244,726

The following table presents the change in the allowance for credit losses related to our restricted marketable securities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Allowance for credit losses, beginning of period	Allowance for credit losses, beginning of period	$	13	$	—	Allowance for credit losses, beginning of period	$	53	$	13
Cumulative-effect adjustment for the adoption of ASU 2016-13		—		54
Provision for credit losses, net	Provision for credit losses, net	69		(29)		Provision for credit losses, net	(3)		16
Sales of restricted marketable securities	Sales of restricted marketable securities	(29)		(25)		Sales of restricted marketable securities	—		(29)
Allowance for credit losses, end of period	Allowance for credit losses, end of period	$	53	$	—	Allowance for credit losses, end of period	$	50	$	—

As of ~~September 30, 2021,~~March 31, 2022, the contractual maturities of our restricted marketable securities were between 9 years and 1817 years.

5. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade, net consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accounts receivable trade, gross	Accounts receivable trade, gross	$	249,771	$	269,095	Accounts receivable trade, gross	$	293,836	$	430,100
Allowance for credit losses	Allowance for credit losses	(1,430)		(3,009)		Allowance for credit losses	(479)		(664)
Accounts receivable trade, net	Accounts receivable trade, net	$	248,341	$	266,086	Accounts receivable trade, net	$	293,357	$	429,436

At September 30, 2021 and December 31, 2020, $60.7 million and $24.4 million, respectively, of our trade accounts receivable were secured by letters of credit and surety bonds issued by creditworthy financial institutions.

~~Table of Contents~~

Accounts receivable unbilled, net

Accounts receivable unbilled, net consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):

September 30,
2021 December 31,
2020
Accounts receivable, unbilled $ 25,053 $ 26,673
Allowance for credit losses (51) (303)
Accounts receivable, unbilled, net $ 25,002 $ 26,370


	March 31, 2022		December 31, 2021
Accounts receivable unbilled, gross	$	28,764	$	25,336
Allowance for credit losses	—		(63)
Accounts receivable unbilled, net	$	28,764	$	25,273

Table of Contents

Allowance for credit losses

The following tables present the change in the allowances for credit losses related to our accounts receivable for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
Accounts receivable, trade		2021		2020
Accounts receivable trade						Accounts receivable trade	2022		2021
Allowance for credit losses, beginning of period	Allowance for credit losses, beginning of period	$	3,009	$	1,386	Allowance for credit losses, beginning of period	$	664	$	3,009
Cumulative-effect adjustment for the adoption of ASU 2016-13		—		171
Provision for credit losses, net	Provision for credit losses, net	(1,458)		1,421		Provision for credit losses, net	(185)		2,915
Writeoffs	Writeoffs	(121)		(565)		Writeoffs	—		(97)
Allowance for credit losses, end of period	Allowance for credit losses, end of period	$	1,430	$	2,413	Allowance for credit losses, end of period	$	479	$	5,827


		Nine Months Ended September 30,					Three Months Ended March 31,
Accounts receivable, unbilled		2021		2020
Accounts receivable unbilled						Accounts receivable unbilled	2022		2021
Allowance for credit losses, beginning of period	Allowance for credit losses, beginning of period	$	303	$	—	Allowance for credit losses, beginning of period	$	63	$	303
Cumulative-effect adjustment for the adoption of ASU 2016-13		—		459
Provision for credit losses, net	Provision for credit losses, net	(252)		635		Provision for credit losses, net	(63)		(27)
Writeoffs		—		(175)

Allowance for credit losses, end of period	Allowance for credit losses, end of period	$	51	$	919	Allowance for credit losses, end of period	$	—	$	276

Inventories

Inventories consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	356,109	$	292,334	Raw materials	$	399,138	$	404,727
Work in process	Work in process	61,195		64,709		Work in process	57,854		65,573
Finished goods	Finished goods	466,581		411,773		Finished goods	621,612		433,511
Inventories	Inventories	$	883,885	$	768,816	Inventories	$	1,078,604	$	903,811
Inventories – current	Inventories – current	$	647,439	$	567,587	Inventories – current	$	840,750	$	666,299
Inventories – noncurrent	Inventories – noncurrent	$	236,446	$	201,229	Inventories – noncurrent	$	237,854	$	237,512

~~Table of Contents~~

~~Prepaid expenses and other~~Other current assets

~~Prepaid expenses and other~~Other current assets consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Spare maintenance materials and parts						Spare maintenance materials and parts	$	111,651	$	112,070
Prepaid income taxes						Prepaid income taxes	64,705		41,379
Operating supplies						Operating supplies	40,896		41,034
Prepaid expenses	Prepaid expenses	$	172,112	$	160,534	Prepaid expenses	30,186		28,232
Derivative instruments (1)	Derivative instruments (1)	6,682		3,315		Derivative instruments (1)	14,854		5,816
Prepaid income taxes		6,206		71,051
Restricted cash	Restricted cash	1,181		1,745		Restricted cash	2,353		1,532
Other						Other	18,023		14,129
Other current assets	Other current assets	17,297		15,094		Other current assets	$	282,668	$	244,192
Prepaid expenses and other current assets		$	203,478	$	251,739

——————————

(1)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

Table of Contents

Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Land	Land	$	17,856	$	14,498	Land	$	18,041	$	18,359
Buildings and improvements	Buildings and improvements	693,833		693,762		Buildings and improvements	693,740		693,289
Machinery and equipment	Machinery and equipment	2,507,719		2,184,236		Machinery and equipment	2,566,495		2,527,627
Office equipment and furniture	Office equipment and furniture	139,034		143,685		Office equipment and furniture	140,292		139,611
Leasehold improvements	Leasehold improvements	40,206		41,459		Leasehold improvements	40,594		40,517
Construction in progress	Construction in progress	281,715		419,766		Construction in progress	614,845		461,708
Property, plant and equipment, gross	Property, plant and equipment, gross	3,680,363		3,497,406		Property, plant and equipment, gross	4,074,007		3,881,111
Accumulated depreciation	Accumulated depreciation	(1,174,442)		(1,095,121)		Accumulated depreciation	(1,288,183)		(1,231,524)
Property, plant and equipment, net	Property, plant and equipment, net	$	2,505,921	$	2,402,285	Property, plant and equipment, net	$	2,785,824	$	2,649,587

Depreciation of property, plant and equipment was ~~$59.1~~$58.6 million and ~~$174.7~~$56.8 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively, and $49.7 million and $145.5 million for the three and nine months ended September 30, 2020,~~ respectively.

PV solar power systems, net

PV solar power systems, net consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
PV solar power systems, gross	PV solar power systems, gross	$	291,898	$	298,067	PV solar power systems, gross	$	281,498	$	281,660
Accumulated depreciation	Accumulated depreciation	(61,475)		(54,671)		Accumulated depreciation	(67,112)		(64,367)
PV solar power systems, net	PV solar power systems, net	$	230,423	$	243,396	PV solar power systems, net	$	214,386	$	217,293

Depreciation of PV solar power systems was ~~$3.0~~$2.8 million and ~~$8.9~~$3.0 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively, and $4.8 million and $16.4 million for the three and nine months ended September 30, 2020,~~ respectively.

~~Table of Contents~~

We evaluate our PV solar power systems for impairment under a held and used impairment model whenever events or changes in circumstances arise that may indicate that the carrying amount of a particular system may not be recoverable. Such events or changes may include a significant decrease in the market price of the asset, current-period operating or cash flow losses combined with a history of such losses or a projection of future losses associated with the use of the asset, and changes in expectations regarding our intent to hold the asset on a long-term basis or the timing of a potential asset disposition.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the recoverability of our Luz del Norte PV solar power plant was based, in part, on the likelihood of our continued ownership and operation of the system. However, it is reasonably possible that our intent to hold the asset may change in the near term due to our evaluation of strategic sale opportunities for the system. The pursuit of such opportunities, which require coordination with the system’s lenders, may result in a determination that the carrying value of the system is not recoverable based on the probability-weighted undiscounted future cash flows, which in turn could result in a possible impairment of the system in future periods. Accordingly, any changes in our expected use of the asset or its disposition may result in impairment charges that could be material to our condensed consolidated financial statements and have a significant adverse impact on our results of operations.

Table of Contents

Project assets

Project assets consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Project assets – development costs, including project acquisition and land costs	Project assets – development costs, including project acquisition and land costs	$	129,844	$	176,346	Project assets – development costs, including project acquisition and land costs	$	107,609	$	117,407
Project assets – construction costs	Project assets – construction costs	205,415		197,031		Project assets – construction costs	284,165		198,081
Project assets	Project assets	$	335,259	$	373,377	Project assets	$	391,774	$	315,488

Goodwill

Goodwill for the relevant reporting unit consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):


	December 31, 2021		Acquisitions (Impairments)		March 31, 2022
Modules	$	407,827	$	—	$	407,827
Accumulated impairment losses	(393,365)		—		(393,365)
Goodwill	$	14,462	$	—	$	14,462

Intangible assets, net

Intangible assets, net consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):


	March 31, 2022
	Gross Amount		Accumulated Amortization		Net Amount
Developed technology	$	99,964	$	(64,451)	$	35,513
Power purchase agreements	6,486		(1,703)		4,783
Patents	8,480		(6,007)		2,473
Intangible assets, net	$	114,930	$	(72,161)	$	42,769


	December 31, 2021
	Gross Amount		Accumulated Amortization		Net Amount
Developed technology	$	99,964	$	(61,985)	$	37,979
Power purchase agreements	6,486		(1,621)		4,865
Patents	8,480		(5,815)		2,665
Intangible assets, net	$	114,930	$	(69,421)	$	45,509

Amortization of intangible assets was $2.7 million for the three months ended March 31, 2022 and 2021.

Table of Contents

Other assets

Other assets consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Operating lease assets (1)	Operating lease assets (1)	$	238,508	$	226,664	Operating lease assets (1)	$	197,058	$	207,544
Advanced payments for raw materials	Advanced payments for raw materials	89,252		97,883		Advanced payments for raw materials	91,854		86,962
Income tax receivables	Income tax receivables	39,888		36		Income tax receivables	39,862		39,862
Indirect tax receivables	Indirect tax receivables	24,785		14,849		Indirect tax receivables	28,980		21,873
Accounts receivable, unbilled, net		24,018		22,722
Accounts receivable unbilled, net						Accounts receivable unbilled, net	19,387		20,840
Accounts receivable trade, net	Accounts receivable trade, net	23,094		—		Accounts receivable trade, net	9,376		21,293
Restricted cash	Restricted cash	17,229		44,847		Restricted cash	6,264		3,651
Other	Other	35,319		27,129		Other	42,421		36,739
Other assets	Other assets	$	492,093	$	434,130	Other assets	$	435,202	$	438,764

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

~~Table of Contents~~

~~Goodwill~~

~~Goodwill for the relevant reporting unit consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):~~

December 31,
2020 Acquisitions (Impairments) September 30,
2021
Modules $ 407,827 $ — $ 407,827
Accumulated impairment losses (393,365) — (393,365)
Goodwill $ 14,462 $ — $ 14,462

~~Intangible assets, net~~

~~The following tables summarize our intangible assets at September 30, 2021 and December 31, 2020 (in thousands):~~

September 30, 2021
Gross Amount Accumulated Amortization Net Amount
Developed technology $ 99,964 $ (59,518) $ 40,446
Power purchase agreements 6,486 (1,539) 4,947
Patents 8,173 (5,631) 2,542
Intangible assets, net $ 114,623 $ (66,688) $ 47,935

December 31, 2020
Gross Amount Accumulated Amortization Net Amount
Developed technology $ 99,964 $ (52,115) $ 47,849
Power purchase agreements 6,486 (1,296) 5,190
Patents 8,173 (5,074) 3,099
Intangible assets, net $ 114,623 $ (58,485) $ 56,138

Amortization of intangible assets was $2.7 million and $8.2 million for the three and nine months ended September 30, 2021, respectively, and $2.7 million and $8.1 million for the three and nine months ended September 30, 2020, respectively.

Accrued expenses

Accrued expenses consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accrued property, plant and equipment						Accrued property, plant and equipment	$	77,101	$	42,031
Accrued freight						Accrued freight	76,855		61,429
Accrued project costs	Accrued project costs	$	43,721	$	81,380	Accrued project costs	63,333		48,836
Accrued freight		42,091		26,580
Accrued inventory	Accrued inventory	39,514		25,704		Accrued inventory	49,543		42,170
Accrued compensation and benefits	Accrued compensation and benefits	29,030		51,685		Accrued compensation and benefits	21,295		34,606
Accrued property, plant and equipment		20,637		66,543
Product warranty liability (1)	Product warranty liability (1)	16,752		22,278		Product warranty liability (1)	11,809		13,598
Accrued other taxes						Accrued other taxes	11,597		23,103
Other	Other	39,418		36,297		Other	23,442		22,677
Accrued expenses	Accrued expenses	$	231,163	$	310,467	Accrued expenses	$	334,975	$	288,450

——————————

(1)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”

Table of Contents

Other current liabilities

Other current liabilities consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Operating lease liabilities (1)	Operating lease liabilities (1)	$	13,566	$	14,006	Operating lease liabilities (1)	$	12,834	$	12,781
Derivative instruments (2)	Derivative instruments (2)	1,720		5,280		Derivative instruments (2)	3,790		3,550
Other taxes payable	Other taxes payable	1,221		30,041		Other taxes payable	1,875		8,123
Other	Other	8,602		33,710		Other	6,900		10,293
Other current liabilities	Other current liabilities	$	25,109	$	83,037	Other current liabilities	$	25,399	$	34,747

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for discussion of our derivative instruments.

Other liabilities

Other liabilities consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Deferred revenue						Deferred revenue	$	154,885	$	95,943
Operating lease liabilities (1)	Operating lease liabilities (1)	$	173,627	$	189,034	Operating lease liabilities (1)	136,526		145,912
Deferred revenue		68,663		44,919
Product warranty liability (2)	Product warranty liability (2)	41,789		72,818		Product warranty liability (2)	35,207		38,955
Deferred tax liabilities, net	Deferred tax liabilities, net	14,305		23,671		Deferred tax liabilities, net	30,117		27,699
Other	Other	43,433		41,784		Other	47,516		43,658
Other liabilities	Other liabilities	$	341,817	$	372,226	Other liabilities	$	404,251	$	352,167

——————————

(1)See Note 7. “Leases” to our condensed consolidated financial statements for discussion of our lease arrangements.

(2)See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our “Product Warranties.”

1615

Table of Contents

6. Derivative Financial Instruments

As a global company, we are exposed in the normal course of business to interest rate, foreign currency, and commodity price risks that could affect our financial position, results of operations, and cash flows. We use derivative instruments to hedge against these risks and only hold such instruments for hedging purposes, not for speculative or trading purposes.

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 8. “Fair Value Measurements” to our condensed consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments.

The following tables present the fair values of derivative instruments included in our condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		September 30, 2021									March 31, 2022
		Prepaid Expenses and Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities			Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:									Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	628	$	18	$	36	$	—	Foreign exchange forward contracts	$	1,026	$	—
Commodity swap contracts	Commodity swap contracts	633		—		—		—		Commodity swap contracts	—		402
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	1,261	$	18	$	36	$	—	Total derivatives designated as hedging instruments	$	1,026	$	402

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	5,421	$	—	$	1,684	$	—	Foreign exchange forward contracts	$	13,828	$	3,388
Interest rate swap contracts		—		—		—		595

Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	5,421	$	—	$	1,684	$	595	Total derivatives not designated as hedging instruments	$	13,828	$	3,388
Total derivative instruments	Total derivative instruments	$	6,682	$	18	$	1,720	$	595	Total derivative instruments	$	14,854	$	3,790


		December 31, 2020							December 31, 2021
		Prepaid Expenses and Other Current Assets		Other Current Liabilities		Other Liabilities			Other Current Assets		Other Current Liabilities
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:							Derivatives designated as hedging instruments:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	—	$	2,504	$	341	Foreign exchange forward contracts	$	1,336	$	139
Commodity swap contracts		1,478		—		—
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	1,478	$	2,504	$	341	Total derivatives designated as hedging instruments	$	1,336	$	139

Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:							Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Foreign exchange forward contracts	$	1,837	$	2,776	$	—	Foreign exchange forward contracts	$	4,480	$	3,411
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	1,837	$	2,776	$	—	Total derivatives not designated as hedging instruments	$	4,480	$	3,411
Total derivative instruments	Total derivative instruments	$	3,315	$	5,280	$	341	Total derivative instruments	$	5,816	$	3,550

1716

Table of Contents

The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Foreign Exchange Forward Contracts		Commodity Swap Contracts		Total			Foreign Exchange Forward Contracts		Commodity Swap Contracts		Total
Balance as of December 31, 2020		$	(3,644)	$	1,472	$	(2,172)
Balance as of December 31, 2021								Balance as of December 31, 2021	$	1,126	$	—	$	1,126
Amounts recognized in other comprehensive income (loss)	Amounts recognized in other comprehensive income (loss)	2,268		1,531		3,799		Amounts recognized in other comprehensive income (loss)	426		(402)		24

Amounts reclassified to earnings impacting:	Amounts reclassified to earnings impacting:							Amounts reclassified to earnings impacting:

Cost of sales	Cost of sales	1,913		(883)		1,030		Cost of sales	(560)		—		(560)

Balance as of September 30, 2021		$	537	$	2,120	$	2,657
Balance as of March 31, 2022								Balance as of March 31, 2022	$	992	$	(402)	$	590

Balance as of December 31, 2019		$	(962)	$	—	$	(962)
Balance as of December 31, 2020								Balance as of December 31, 2020	$	(3,644)	$	1,472	$	(2,172)
Amounts recognized in other comprehensive income (loss)	Amounts recognized in other comprehensive income (loss)	(2,129)		(228)		(2,357)		Amounts recognized in other comprehensive income (loss)	1,859		1,024		2,883
Amounts reclassified to earnings impacting:	Amounts reclassified to earnings impacting:							Amounts reclassified to earnings impacting:

Cost of sales	Cost of sales	647		—		647		Cost of sales	1,129		7		1,136

Balance as of September 30, 2020		$	(2,444)	$	(228)	$	(2,672)
Balance as of March 31, 2021								Balance as of March 31, 2021	$	(656)	$	2,503	$	1,847

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, we recognized ~~unrealized gains of less than $0.1 million and~~ unrealized losses of less than $0.1 million ~~respectively, within “Cost of sales” for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges. During the three~~ and ~~nine months ended September 30, 2020, we recognized unrealized gains of~~ $0.1 ~~million and $1.2~~ million, respectively, within “Cost of sales” for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges.

The following table presents gains and losses related to derivative instruments not designated as hedges affecting our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):

Amount of Gain (Loss) Recognized in Income
Three Months Ended
September 30, Nine Months Ended
September 30,
Income Statement Line Item 2021 2020 2021 2020
Foreign exchange forward contracts Cost of sales $ 103 $ (195) $ (174) $ (73)
Foreign exchange forward contracts Foreign currency loss, net 1,802 (2,598) 10,821 (2,405)
Interest rate swap contracts Interest expense, net 96 (5,878) (595) (7,259)

~~Table of Contents~~

~~Interest Rate Risk~~

We use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments. We do not use such swap contracts for speculative or trading purposes. During the nine months ended September 30, 2021 and 2020, all of our interest rate swap contracts related to project specific debt facilities. Such swap contracts did not qualify for accounting as cash flow hedges in accordance with Accounting Standards Codification (“ASC”) 815 due to our expectation to sell the associated projects before the maturity of their project specific debt financings and corresponding swap contracts. Accordingly, changes in the fair values of these swap contracts were recorded directly to “Interest expense, net.”

In June 2021, FS Japan Project B4 GK, our indirect wholly-owned subsidiary and project company, entered into an interest rate swap contract to hedge a portion of the floating rate term loan facility under the project’s Ikeda Credit Facility (as defined in Note 9. “Debt” to our condensed consolidated financial statements). Such swap had an initial notional value of ¥0.7 billion and entitled the project to receive a six-month floating Tokyo Interbank Offered Rate (“TIBOR”) plus 0.70% interest rate while requiring the project to pay a fixed rate of 1.12%. The notional amount of the interest rate swap contract proportionately adjusts with scheduled draws and principal payments on the underlying hedged debt. As of September 30, 2021, the notional value of the interest rate swap contract was ¥1.0 billion ($8.6 million).


		Amount of Gain (Loss) Recognized in Income
		Three Months Ended March 31,
	Income Statement Line Item	2022		2021
Foreign exchange forward contracts	Cost of sales	$	78	$	169
Foreign exchange forward contracts	Foreign currency loss, net	18,981		10,296

Foreign Currency Risk

Cash Flow Exposure

We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, these foreign exchange forward contracts hedged our forecasted cash flows for periods up to 148 months and 2011 months, respectively. These foreign exchange forward contracts qualify for accounting as cash flow hedges in accordance with ~~ASC~~Accounting Standards Codification (“ASC”) 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Table of Contents

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the notional values associated with our foreign exchange forward contracts qualifying as cash flow hedges were as follows (notional amounts and U.S. dollar equivalents in millions):

September 30, 2021

March 31, 2022

Currency

Notional Amount

USD Equivalent

Currency

Notional Amount

USD Equivalent

U.S. dollar (1)

$39.8

U.S. dollar (1)

$17.4

British pound

GBP 10.6

$14.3

December 31, 2020

December 31, 2021

Currency

Notional Amount

USD Equivalent

Currency

Notional Amount

USD Equivalent

U.S. dollar (1)

$43.4

U.S. dollar (1)

$38.4

British pound

GBP 10.6

$14.4

——————————

(1)These derivative instruments represent hedges of outstanding payables denominated in U.S. dollars at certain of our foreign subsidiaries whose functional currencies are other than the U.S. dollar.

~~Table of Contents~~

In the following 12 months, we expect to reclassify to earnings ~~$0.5~~$1.0 million of net unrealized gains related to foreign exchange forward contracts that are included in “Accumulated other comprehensive loss” at ~~September 30, 2021~~March 31, 2022 as we realize the earnings effects of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual exchange rates when we realize the related forecasted transactions.

Transaction Exposure and Economic Hedging

Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, operating lease liabilities, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported condensed consolidated statements of operations and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities.

We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in “Foreign currency loss, net” on our condensed consolidated statements of operations.

Table of Contents

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were as follows (notional amounts and U.S. dollar equivalents in millions):

~~September 30, 2021~~March 31, 2022

Transaction

Currency

Notional Amount

USD Equivalent

Purchase

Australian dollar

AUD 3.2

$~~2.3~~

~~Purchase~~

~~Brazilian real~~

~~BRL 2.6~~

~~$0.5~~2.4

Purchase

~~Chilean peso~~British pound

~~CLP 985.0~~GBP 11.5

$~~1.2~~15.1

Sell

British pound

GBP 14.0

$18.3

Sell

Chilean peso

CLP ~~4,240.6~~3,206.6

$~~5.3~~4.1

Purchase

Euro

€~~86.4~~85.4

$~~100.6~~94.4

Sell

Euro

€~~32.6~~68.8

$~~37.9~~76.0

~~Purchase~~

~~British pound~~

~~GBP 2.5~~

~~$3.4~~

Sell

Indian rupee

INR ~~1,830.0~~11,172.9

$~~24.7~~147.7

~~Purchase~~

~~Japanese yen~~

~~¥151.8~~

~~$1.4~~

Sell

Japanese yen

¥~~27,325.6~~35,758.9

$~~244.9~~290.3

Purchase

Malaysian ringgit

MYR ~~30.5~~42.0

$~~7.3~~10.0

Sell

Malaysian ringgit

MYR ~~26.8~~39.9

$~~6.4~~9.5

Sell

Mexican peso

MXN 34.6

$1.7

Purchase

Singapore dollar

SGD ~~5.5~~1.5

$~~4.0~~1.1

~~Table of Contents~~

December 31, ~~2020~~2021

Transaction

Currency

Notional Amount

USD Equivalent

Purchase

Australian dollar

AUD 3.2

$~~2.5~~2.3

Purchase

Brazilian real

BRL 2.6

$0.5

Sell

~~Canadian dollar~~Brazilian real

~~CAD 8.9~~BRL 2.6

$~~7.0~~0.5

Purchase

~~Chilean peso~~British pound

~~CLP 2,006.0~~GBP 2.5

$~~2.8~~3.4

Sell

Chilean peso

CLP ~~4,476.7~~4,058.6

$~~6.3~~4.8

Purchase

Euro

€~~140.0~~77.6

$~~172.1~~88.0

Sell

Euro

€~~63.6~~38.6

$~~78.2~~43.8

Sell

Indian rupee

INR ~~619.2~~10,943.0

$~~8.4~~147.1

Purchase

Japanese yen

¥~~1,593.7~~667.5

$~~15.5~~5.8

Sell

Japanese yen

¥~~20,656.6~~31,524.6

$~~200.5~~273.9

Purchase

Malaysian ringgit

MYR ~~69.3~~17.0

$~~17.2~~4.1

Sell

Malaysian ringgit

MYR ~~24.9~~24.5

$~~6.2~~5.9

Sell

Mexican peso

MXN 34.6

$1.7

Purchase

Singapore dollar

SGD ~~2.9~~5.5

$~~2.2~~4.1

Commodity Price Risk

We use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. In ~~August 2020,~~March 2022, we entered into a commodity swap contract to hedge a portion of our forecasted cash flows for purchases of aluminum frames for a ~~one-year~~six-month period. Such swap had an initial notional value based on metric tons of forecasted aluminum purchases, equivalent to ~~$24.9~~$9.8 million, and entitles us to receive a three-month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contract proportionately ~~adjusted~~adjusts with forecasted purchases of aluminum frames.

Table of Contents

This commodity swap contract qualifies for accounting as a cash flow hedge in accordance with ASC 815, and we designated it as such. We report unrealized gains or losses on such contract in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that this derivative financial instrument was highly effective as a cash flow hedge as of ~~September 30, 2021 and December~~March 31, ~~2020.~~2022. In the following 12 months, we expect to reclassify into earnings ~~$2.1~~$0.4 million of net unrealized ~~gains~~losses related to this commodity swap contract that are included in “Accumulated other comprehensive loss” at ~~September 30, 2021~~March 31, 2022 as we realize the earnings effects of the related forecasted transactions.

~~Table of Contents~~

7. Leases

Our lease arrangements include land associated with our PV solar power systems ~~projects,~~and project assets, our corporate and administrative offices, land for our international manufacturing facilities, and certain of our manufacturing equipment. Such leases primarily relate to assets located in the United States, Japan, Malaysia, India, and Vietnam.

The following table presents certain quantitative information related to our lease arrangements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Operating lease cost	Operating lease cost	$	4,622	$	4,798	$	13,171	$	13,694	Operating lease cost		$	4,377	$	4,033
Variable lease cost	Variable lease cost	575		628		1,575		1,919		Variable lease cost		599		538
Short-term lease cost	Short-term lease cost	104		1,112		711		2,817		Short-term lease cost		31		371
Total lease cost	Total lease cost	$	5,301	$	6,538	$	15,457	$	18,430	Total lease cost		$	5,007	$	4,942

Payments of amounts included in the measurement of operating lease liabilities	Payments of amounts included in the measurement of operating lease liabilities					$	16,813	$	15,756	Payments of amounts included in the measurement of operating lease liabilities		$	4,136	$	4,113
Lease assets obtained in exchange for operating lease liabilities	Lease assets obtained in exchange for operating lease liabilities					$	19,769	$	93,992	Lease assets obtained in exchange for operating lease liabilities		$	534	$	13,598

						September 30, 2021		December 31, 2020				March 31, 2022		December 31, 2021
Operating lease assets	Operating lease assets					$	238,508	$	226,664	Operating lease assets		$	197,058	$	207,544
Operating lease liabilities – current	Operating lease liabilities – current					13,566		14,006		Operating lease liabilities – current		12,834		12,781
Operating lease liabilities – noncurrent	Operating lease liabilities – noncurrent					173,627		189,034		Operating lease liabilities – noncurrent		136,526		145,912


Weighted-average remaining lease term	Weighted-average remaining lease term	20 years		20 years		Weighted-average remaining lease term	19 years		19 years
Weighted-average discount rate	Weighted-average discount rate	2.6	%	2.9	%	Weighted-average discount rate	2.8	%	2.8	%

As of ~~September 30, 2021,~~March 31, 2022, the future payments associated with our lease liabilities were as follows (in thousands):


		Total Lease Liabilities			Total Lease Liabilities
Remainder of 2021		$	3,292
2022		17,051
Remainder of 2022				Remainder of 2022	$	11,618
2023	2023	17,100		2023	15,579
2024	2024	16,608		2024	15,111
2025	2025	15,979		2025	14,295
2026	2026	14,489		2026	12,814
2027				2027	10,149
Thereafter	Thereafter	140,192		Thereafter	98,584
Total future payments	Total future payments	224,711		Total future payments	178,150
Less: interest	Less: interest	(37,518)		Less: interest	(28,790)
Total lease liabilities	Total lease liabilities	$	187,193	Total lease liabilities	$	149,360

2220

Table of Contents

8. Fair Value Measurements

The following is a description of the valuation techniques that we use to measure the fair value of assets and liabilities that we measure and report at fair value on a recurring basis:

•~~Cash Equivalents.~~ At September 30, 2021 and December 31, 2020, our cash equivalents consisted of money market funds. We value our cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1.

•Marketable Securities and Restricted Marketable Securities. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our marketable securities consisted of foreign debt, U.S. debt, and time deposits, and our restricted marketable securities consisted of foreign and U.S. government obligations, supranational debt, and U.S. debt. We value our marketable securities and restricted marketable securities using observable inputs that reflect quoted prices for securities with identical characteristics or quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals). Accordingly, we classify the valuation techniques that use these inputs as either Level 1 or Level 2 depending on the inputs used. We also consider the effect of our counterparties’ credit standing in these fair value measurements.

•Derivative Assets and Liabilities. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our derivative assets and liabilities consisted of foreign exchange forward contracts involving major ~~currencies, interest rate swap contracts involving major interest rates, and~~currencies. At March 31, 2022, our derivative liabilities also included commodity swap contracts involving major commodity prices. Since our derivative assets and liabilities are not traded on an exchange, we value them using standard industry valuation models. As applicable, these models project future cash flows and discount the amounts to a present value using market-based observable inputs, including ~~interest rate curves,~~ credit risk, foreign exchange rates, forward and spot prices for currencies, and forward prices for commodities. These inputs are observable in active markets over the contract term of the derivative instruments we hold, and accordingly, we classify the valuation techniques as Level 2. In evaluating credit risk, we consider the effect of our counterparties’ and our own credit standing in the fair value measurements of our derivative assets and liabilities, respectively.

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value measurements of our assets and liabilities measured on a recurring basis were as follows (in thousands):


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
		September 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			March 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash equivalents:
Money market funds		$	2	$	2	$	—	$	—

Marketable securities:	Marketable securities:									Marketable securities:
Foreign debt	Foreign debt	147,445		—		147,445		—		Foreign debt	$	85,010	$	—	$	85,010	$	—
U.S. debt	U.S. debt	18,710		—		18,710		—		U.S. debt	18,030		—		18,030		—
Time deposits	Time deposits	388,446		388,446		—		—		Time deposits	120,051		120,051		—		—
Restricted marketable securities	Restricted marketable securities	251,379		—		251,379		—		Restricted marketable securities	220,167		—		220,167		—
Derivative assets	Derivative assets	6,700		—		6,700		—		Derivative assets	14,854		—		14,854		—
Total assets	Total assets	$	812,682	$	388,448	$	424,234	$	—	Total assets	$	458,112	$	120,051	$	338,061	$	—
Liabilities:	Liabilities:									Liabilities:
Derivative liabilities	Derivative liabilities	$	2,315	$	—	$	2,315	$	—	Derivative liabilities	$	3,790	$	—	$	3,790	$	—

2321

Table of Contents


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
		December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:	Assets:									Assets:
Cash equivalents:
Money market funds		$	2	$	2	$	—	$	—

Marketable securities:	Marketable securities:									Marketable securities:
Foreign debt	Foreign debt	214,254		—		214,254		—		Foreign debt	$	103,317	$	—	$	103,317	$	—

U.S. debt	U.S. debt	14,543		—		14,543		—		U.S. debt	18,627		—		18,627		—
Time deposits	Time deposits	291,269		291,269		—		—		Time deposits	253,445		253,445		—		—
Restricted marketable securities	Restricted marketable securities	265,280		—		265,280		—		Restricted marketable securities	244,726		—		244,726		—
Derivative assets	Derivative assets	3,315		—		3,315		—		Derivative assets	5,816		—		5,816		—
Total assets	Total assets	$	788,663	$	291,271	$	497,392	$	—	Total assets	$	625,931	$	253,445	$	372,486	$	—
Liabilities:	Liabilities:									Liabilities:
Derivative liabilities	Derivative liabilities	$	5,621	$	—	$	5,621	$	—	Derivative liabilities	$	3,550	$	—	$	3,550	$	—

Fair Value of Financial Instruments

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the carrying values and fair values of our financial instruments not measured at fair value were as follows (in thousands):


		September 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:	Assets:									Assets:
Accounts receivable, unbilled, net - noncurrent		$	24,018	$	21,498	$	22,722	$	22,096
Accounts receivable unbilled, net - noncurrent										Accounts receivable unbilled, net - noncurrent	$	19,387	$	17,590	$	20,840	$	18,846
Accounts receivable trade, net - noncurrent	Accounts receivable trade, net - noncurrent	23,094		20,111		—		—		Accounts receivable trade, net - noncurrent	9,376		7,462		21,293		18,605
Liabilities:	Liabilities:									Liabilities:
Long-term debt, including current maturities (1)	Long-term debt, including current maturities (1)	$	287,185	$	290,457	$	287,149	$	297,076	Long-term debt, including current maturities (1)	$	258,672	$	242,551	$	246,737	$	243,865

——————————

(1)Excludes unamortized discounts and issuance costs.

The carrying values in our condensed consolidated balance sheets of our current trade accounts receivable, current unbilled accounts receivable, restricted cash, accounts payable, and accrued expenses approximated their fair values due to their nature and relatively short maturities; therefore, we excluded them from the foregoing table. The fair value measurements for our noncurrent unbilled accounts receivable, noncurrent trade accounts receivable, and long-term debt are considered Level 2 measurements under the fair value hierarchy.

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, ~~cash equivalents,~~ marketable securities, accounts receivable, restricted cash, restricted marketable securities, foreign exchange forward ~~contracts, interest rate swap~~ contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place these instruments with various high-quality financial institutions and limit the amount of credit risk from any one counterparty. We continuously evaluate the credit standing of our counterparty financial institutions. Our net sales are primarily concentrated among a limited number of customers. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. Depending upon the sales arrangement,

~~Table of Contents~~

we may require some form of payment security from our customers, including, but not limited to, advance payments, parent guarantees, letters of credit, bank guarantees, or surety bonds. We also have power purchase agreements (“PPAs”) that subject us to credit risk in the event our off-take counterparties are unable to fulfill their contractual obligations, which may adversely affect our project assets and certain receivables. Accordingly, we closely monitor the credit standing

Table of ~~existing and potential off-take counterparties to limit such risks.~~

Contents

9. Debt

Our long-term debt consisted of the following at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


			Balance (USD)						Balance (USD)
Loan Agreement	Loan Agreement	Currency	September 30, 2021		December 31, 2020		Loan Agreement	Currency	March 31, 2022		December 31, 2021
Revolving Credit Facility		USD	$	—	$	—
Luz del Norte Credit Facilities	Luz del Norte Credit Facilities	USD	184,546		186,230		Luz del Norte Credit Facilities	USD	$	183,092	$	183,829
Japan Credit Facility		JPY	33,870		13,813
Tochigi Credit Facility		JPY	—		39,400
Kyoto Credit Facility	Kyoto Credit Facility	JPY	44,053		47,706		Kyoto Credit Facility	JPY	75,580		62,908
Ikeda Credit Facility		JPY	24,716		—

Long-term debt principal	Long-term debt principal		287,185		287,149		Long-term debt principal		258,672		246,737
Less: unamortized discounts and issuance costs	Less: unamortized discounts and issuance costs		(8,573)		(7,918)		Less: unamortized discounts and issuance costs		(6,617)		(6,836)
Total long-term debt	Total long-term debt		278,612		279,231		Total long-term debt		252,055		239,901
Less: current portion	Less: current portion		(37,129)		(41,540)		Less: current portion		(4,701)		(3,896)
Noncurrent portion	Noncurrent portion		$	241,483	$	237,691	Noncurrent portion		$	247,354	$	236,005

~~Revolving Credit Facility~~

On June 30, 2021, we terminated our Second Amended and Restated Credit Agreement (the “Revolving Credit Facility”) with several financial institutions as lenders and JPMorgan Chase Bank, N.A. as administrative agent, which was set to mature in July 2022. The Revolving Credit Facility provided us with an aggregate borrowing capacity of $500.0 million. Subject to certain conditions, we had the right to increase the aggregate commitments under the Revolving Credit Facility to $750.0 million. Borrowings under the Revolving Credit Facility bore interest at (i) London Interbank Offered Rate (“LIBOR”), adjusted for Eurocurrency reserve requirements, plus a margin of 2.00% or (ii) a base rate as defined in the credit agreement plus a margin of 1.00% depending on the type of borrowing requested.

In addition to paying interest on outstanding principal under the Revolving Credit Facility, we paid a commitment fee at a rate of 0.30% per annum, based on the average daily unused commitments under the facility. We also paid a letter of credit fee based on the applicable margin for Eurocurrency revolving loans on the face amount of each letter of credit and a fronting fee of 0.125%.

Prior to the termination, we had no borrowings under the Revolving Credit Facility and had $3.3 million in issued and outstanding letters of credits, which were moved to a bilateral facility upon such termination. As of December 31, 2020, we had no borrowings under the Revolving Credit Facility and had issued $4.3 million of letters of credit using availability under the facility.

~~Table of Contents~~

Luz del Norte Credit Facilities

In August 2014, Parque Solar Fotovoltaico Luz del Norte SpA (“Luz del Norte”), our indirect wholly-owned subsidiary and project company, entered into credit facilities (the “Luz del Norte Credit Facilities”) with the U.S. International Development Finance Corporation (“DFC”) and the International Finance Corporation (“IFC”) to provide limited-recourse senior secured debt financing for the design, development, financing, construction, testing, commissioning, operation, and maintenance of a 141 MWAC PV solar power plant located near Copiapó, Chile.

In March 2017, we amended the terms of the DFC and IFC credit facilities. Such amendments (i) allowed for the capitalization of accrued and unpaid interest through March 15, 2017, along with the capitalization of certain future interest payments as variable rate loans under the credit facilities, (ii) allowed for the conversion of certain fixed rate loans to variable rate loans upon scheduled repayment, (iii) extended the maturity of the DFC and IFC loans until June 2037, and (iv) canceled the remaining borrowing capacity under the DFC and IFC credit facilities with the exception of the capitalization of certain future interest payments. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the balance outstanding on the DFC loans was ~~$138.2~~$137.1 million and ~~$139.4~~$137.7 million, respectively. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the balance outstanding on the IFC loans was ~~$46.3~~$46.0 million and ~~$46.8~~$46.1 million, respectively. The DFC and IFC loans mature in June 2037 and are secured by liens over all of Luz del Norte’s assets, ~~and by~~ a pledge of all of the equity interests in the ~~entity. In October 2021, we received a waiver for technical noncompliance related to the credit facilities as~~entity, and certain letters of ~~September 30, 2021.~~

credit.

~~Japan Credit Facility~~

In September 2015, First Solar Japan GK, our wholly-owned subsidiary, entered into a construction loan facility with Mizuho Bank, Ltd. for borrowings up to ¥4.0 billion ($33.4 million) for the development and construction of utility-scale PV solar power plants in Japan (the “Japan Credit Facility”). Borrowings under the facility generally mature within 12 months following the completion of construction activities for each financed project. The facility is guaranteed by First Solar, Inc. and secured by pledges of certain projects’ cash accounts and other rights in the projects.

~~Tochigi Credit Facility~~

In June 2017, First Solar Japan GK, our wholly-owned subsidiary, entered into a term loan facility with Mizuho Bank, Ltd. for borrowings up to ¥7.0 billion ($62.2 million) for the development of utility-scale PV solar power plants in Japan (the “Tochigi Credit Facility”). In March 2021, the credit facility matured and we repaid the remaining $36.8 million principal balance.

Kyoto Credit Facility

In July 2020, First Solar Japan GK, our wholly-owned subsidiary, entered into a construction loan facility with Mizuho Bank, Ltd. for borrowings up to ¥15.0 billion ($142.8 million), which are intended to be used for the construction of a 38 MWAC PV solar power plant located in Kyoto, Japan (the “Kyoto Credit Facility”). Borrowings under the facility generally mature within 12 months following the completion of construction activities at the project. The facility is guaranteed by First Solar, Inc. and First Solar Japan GK ~~our wholly-owned subsidiary,~~ and secured by pledges of the project’s cash accounts and certain other assets.

~~Table of Contents~~

~~Ikeda Credit Facility~~

In March 2021, FS Japan Project B4 GK (“Ikeda”), our indirect wholly-owned subsidiary and project company, entered into a credit agreement (the “Ikeda Credit Facility”) with MUFG Bank, Ltd.; Japan Post Insurance Co., Ltd.; The Shizuoka Bank, Ltd.; The Hyakugo Bank, Ltd.; The Iyo Bank, Ltd.; and The Yamagata Bank, Ltd. for aggregate borrowings up to ¥9.8 billion ($88.6 million) for the development and construction of a 21 MWAC PV solar power plant located in Tochigi, Japan. The credit facility consists of a ¥4.7 billion ($43.1 million) fixed rate term loan facility, a ¥3.8 billion ($34.1 million) variable rate term loan facility, a ¥0.9 billion ($8.2 million) consumption tax facility, and a ¥0.4 billion ($3.2 million) debt service reserve facility. The fixed rate and variable rate term loan facilities mature in April 2040, the consumption tax facility matures in May 2024, and the debt service reserve facility is expected to mature in October 2039. The credit facility is secured by pledges of certain of Ikeda’s assets, accounts, material project documents, and by the equity interests in the entity.

Variable Interest Rate Risk

Certain of our long-term debt agreements bear interest at LIBOR, TIBOR, or equivalent variable rates. An increase in these variable rates would increase the cost of borrowing under certain project specific debt financings. Our long-term debt borrowing rates as of ~~September 30, 2021~~March 31, 2022 were as follows:


Loan Agreement		~~September 30, 2021~~March 31, 2022
Luz del Norte Credit Facilities (1)		Fixed rate loans at bank rate plus 3.50%
		Variable rate loans at 91-Day U.S. Treasury Bill Yield or LIBOR plus 3.50%
~~Japan Credit Facility~~		~~1-month TIBOR plus 0.55%~~
Kyoto Credit Facility		1-month TIBOR plus 0.60%
~~Ikeda Credit Facility (2)~~		~~Fixed rate term loan facility at 1.20%~~
	~~Variable rate term loan facility at 6-month TIBOR plus 0.70% (3)~~
	~~Consumption tax facility at 3-month TIBOR plus 0.50%~~
	~~Debt service reserve facility at 6-month TIBOR plus 1.20%~~

——————————

(1)Outstanding balance comprised of ~~$135.9~~$129.3 million of fixed rate loans and ~~$48.6~~$53.8 million of variable rate loans as of ~~September 30, 2021.~~March 31, 2022.

~~(2)Outstanding balance comprised~~Table of ~~$12.2 million of fixed rate loans and $12.5 million of variable rate loans as of September 30, 2021.~~Contents

~~(3)~~We have entered into an interest rate swap contract to hedge a portion of this variable rate. See Note 6. “Derivative Financial Instruments” to our condensed consolidated financial statements for additional information.

Future Principal Payments

At ~~September 30, 2021,~~March 31, 2022, the future principal payments on our long-term debt were due as follows (in thousands):


		Total Debt			Total Debt
Remainder of 2021		$	717
2022		37,905
Remainder of 2022				Remainder of 2022	$	3,298
2023	2023	6,687		2023	6,085
2024	2024	55,137		2024	82,600
2025	2025	8,636		2025	7,560
2026	2026	9,114		2026	7,965
2027				2027	9,199
Thereafter	Thereafter	168,989		Thereafter	141,965
Total long-term debt future principal payments	Total long-term debt future principal payments	$	287,185	Total long-term debt future principal payments	$	258,672

~~Table of Contents~~

10. Commitments and Contingencies

Commercial Commitments

During the normal course of business, we enter into commercial commitments in the form of letters of credit and surety bonds to provide financial and performance assurance to third parties. As of ~~September 30, 2021,~~March 31, 2022, the majority of these commercial commitments supported our ~~systems projects.~~module business. As of ~~September 30, 2021,~~March 31, 2022, the issued and outstanding amounts and available capacities under these commitments were as follows (in millions):


		Issued and Outstanding		Available Capacity			Issued and Outstanding		Available Capacity
Bilateral facilities (1)	Bilateral facilities (1)	$	27.4	$	287.6	Bilateral facilities (1)	$	43.4	$	171.6
Surety bonds	Surety bonds	12.6		703.8		Surety bonds	12.9		229.9

——————————

(1)Of the total letters of credit issued under the bilateral facilities, $2.6 million was secured with cash.

Product Warranties

When we recognize revenue for ~~module~~sales of modules or ~~system sales,~~projects, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations for both modules and the balance of the systems. We estimate our limited product warranty liability for power output and defects in materials and workmanship under normal use and service conditions based on return rates for each series of module technology. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and projections of warranty claims, and our estimated per-module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. From time to time, we have taken remediation actions with respect to affected modules beyond our limited warranties and may elect to do so in the future, in which case we would incur additional expenses. Such potential voluntary future remediation actions beyond our limited warranty obligations may be material to our condensed consolidated statements of operations if we commit to any such remediation actions.

Table of Contents

Product warranty activities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Product warranty liability, beginning of period $ 91,058 $ 123,194 $ 95,096 $ 129,797
Accruals for new warranties issued 1,680 3,435 8,397 7,903
Settlements (1,091) (9,289) (6,730) (18,772)
Changes in estimate of product warranty liability (33,106) (19,987) (38,222) (21,575)
Product warranty liability, end of period $ 58,541 $ 97,353 $ 58,541 $ 97,353
Current portion of warranty liability $ 16,752 $ 22,325 $ 16,752 $ 22,325
Noncurrent portion of warranty liability $ 41,789 $ 75,028 $ 41,789 $ 75,028

We estimate our limited product warranty liability for power output and defects in materials and workmanship under normal use and service conditions based on return rates for each series of module technology. During the three months ended September 30, 2021, we revised this estimate based on updated information regarding our warranty claims, which reduced our product warranty liability by $33.1 million. This updated information reflected lower-than-expected warranty claims for our older series of module technology as well as the evolving claims profile of our newest series of module technology, resulting in reductions to our projected module return rates. During the three months ended September 30, 2020, we revised this estimate based on updated information regarding our warranty claims, which reduced our product warranty liability by $19.7 million. This updated information reflected lower-than-expected settlements for our older series of module technology and revisions to projected settlements, resulting in a lower projected return rate.

~~Table of Contents~~

In general, we expect the return rates for our Series 6 modules to be lower than our older series, and we estimate that the return rate for such newer series of module technology will be less than 1%. As of September 30, 2021, a 1% increase in the return rate across all series of module technology would increase our product warranty liability by $112.2 million, and a 1% increase in the return rate for balance of systems (“BoS”) parts would not have a material impact on the associated warranty liability.

~~Performance Guarantees~~

As part of our systems business, we conduct performance testing of a system prior to substantial completion to confirm the system meets its operational and capacity expectations noted in the engineering, procurement, and construction (“EPC”) agreement. In addition, we may provide an energy performance test during the first or second year of a system’s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain adjustments. If there is an underperformance event with regard to these tests, we may incur liquidated damages as specified in the applicable EPC agreement. In certain instances, a bonus payment may be received at the end of the applicable test period if the system performs above a specified level. As of December 31, 2020, we accrued $10.2 million for our estimated obligations under such arrangements, which were classified as “Other current liabilities” in our condensed consolidated balance sheet.


	Three Months Ended March 31,
	2022		2021
Product warranty liability, beginning of period	$	52,553	$	95,096
Accruals for new warranties issued	848		2,277
Settlements	(6,002)		(3,226)
Changes in estimate of product warranty liability	(383)		(74)
Product warranty liability, end of period	$	47,016	$	94,073
Current portion of warranty liability	$	11,809	$	22,275
Noncurrent portion of warranty liability	$	35,207	$	71,798

Indemnifications

In certain limited circumstances, we have provided indemnifications to customers or other parties, including project tax equity investors, under which we are contractually obligated to compensate such parties for losses they suffer resulting from a breach of a representation, warranty, or covenant; a reduction in tax benefits received, including investment tax credits; the resolution of specific matters associated with a project’s development or construction; or guarantees of a third party’s payment or performance obligations. Project related tax benefits are, in part, based on guidance provided by the Internal Revenue Service and U.S. Treasury Department, which includes assumptions regarding the fair value of qualifying PV solar power systems. For contracts that have such indemnification provisions, we initially recognize a liability under ASC 460 for the estimated premium that would be required by a guarantor to issue the same indemnity in a standalone arm’s-length transaction with an unrelated party. We may base these estimates on the cost of insurance or other instruments that cover the underlying risks being indemnified and may purchase such instruments to mitigate our exposure to potential indemnification payments. We subsequently measure such liabilities at the greater of the initially estimated premium or the contingent liability required to be recognized under ASC 450. We recognize any indemnification liabilities as a reduction of earnings associated with the related transaction.

After an indemnification liability is recorded, we derecognize such amount pursuant to ASC 460 depending on the nature of the indemnity, which derecognition typically occurs upon expiration or settlement of the arrangement, and any contingent aspects of the indemnity are accounted for in accordance with ASC 450. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we accrued $3.8 million ~~and $3.2 million~~ of current indemnification ~~liabilities, respectively.~~liabilities. As of ~~September 30, 2021,~~March 31, 2022, the maximum potential amount of future payments under our indemnifications was ~~$101.8~~$98.8 million, and we held insurance and other instruments allowing us to recover up to $28.2 million of potential amounts paid under the indemnifications.

In September 2017, we made an indemnification payment in connection with the sale of one of our projects following the underpayment of anticipated cash grants by the United States government. In February 2018, the associated project entity commenced legal action against the United States government seeking full payment of the cash grants. In May 2021, the parties reached an agreement, pursuant to which the United States government made a settlement payment to the project entity. Under the terms of the indemnification arrangement, we received $65.1 million for our portion of the settlement payment, which we recorded as revenue during the nine months ended September 30, 2021.

~~Table of Contents~~

Solar Module Collection and Recycling Liability

We previously established a module collection and recycling program, which has since been discontinued, to collect and recycle modules sold and covered under such program once the modules reach the end of their service lives. For legacy customer sales contracts that were covered under this program, we agreed to pay the costs for the collection and recycling of qualifying solar modules, and the end-users agreed to notify us, disassemble their solar power systems, package the solar modules for shipment, and revert ownership rights over the modules back to us at the end of the modules’ service lives. Accordingly, we recorded any collection and recycling obligations within “Cost of sales” at the time of sale based on the estimated cost to collect and recycle the covered solar modules.

Table of Contents

We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials; the cost of freight from the solar module installation sites to a recycling center; material, labor, and capital costs; and by-product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and certain assumptions regarding costs at the time the solar modules will be collected and recycled. In the periods between the time of sale and the related settlement of the collection and recycling obligation, we accrete the carrying amount of the associated liability and classify the corresponding expense within “Selling, general and administrative” expense on our condensed consolidated statements of operations.

We periodically review our estimates of expected future recycling costs and may adjust our liability accordingly. During the three months ended September 30, 2021, we completed our annual cost study of obligations under our module collection and recycling program and increased the associated liability by $10.8 million primarily due to lower estimated by-product credits for certain semiconductor materials recovered during the recycling process and updates to certain valuation assumptions. During the three months ended September 30, 2020, we completed our annual cost study of obligations under our module collection and recycling program and reduced the associated liability by $18.9 million primarily due to changes to the estimated timing of cash flows associated with capital, labor, and maintenance costs and updates to certain valuation assumptions.

Our module collection and recycling liability was ~~$140.0~~$137.5 million and ~~$130.7~~$139.1 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. ~~As of September 30, 2021, a 10% increase in the expected future recycling costs would increase the liability by $14.0 million.~~ See Note 4. “Restricted Marketable Securities” to our condensed consolidated financial statements for more information about our arrangements for funding this liability.

Legal Proceedings

~~Opt-Out~~Class Action

~~First Solar was party to~~On January 7, 2022, a ~~suit~~putative class action lawsuit titled ~~Maverick Fund, L.D.C.~~City of Pontiac General Employees’ Retirement System v. First Solar, Inc., et al., Case No. 2:~~15-cv-01156-ROS,~~22-cv-00036-MTL, was filed in 2015 in the United States District Court for the District of Arizona (hereafter “Arizona District Court”) by putative stockholders that opted out of a separate class action lawsuit (the “Opt-Out Action”).

In July 2020, the parties executed a definitive settlement agreement pursuant to which First Solar agreed to pay a total of $19 million in exchange for mutual releases and a dismissal with prejudice of the Opt-Out Action. The agreement contains no admission of liability, wrongdoing, or responsibility by any of the defendants. On July 30, 2020, First Solar funded the settlement, and on July 31, 2020, the parties filed a joint stipulation of dismissal. On September 10, 2020, the Arizona District Court ~~entered an order dismissing~~against the ~~case with prejudice. As~~Company and certain of ~~December 31,~~our current officers. The complaint was filed on behalf of a purported class consisting of all purchasers of First Solar common stock between February 22, 2019 ~~we accrued $13 million~~and February 20, 2020, inclusive. The complaint asserts violations of ~~estimated losses for this action. As a result~~Sections 10(b) and 20(a) of the ~~settlement,~~Securities Exchange Act of 1934 and Rule 10b-5 based on allegedly false and misleading statements related to the Company’s Series 6 solar modules and its project development business. It seeks unspecified damages and an award of costs and expenses. The Company and its officers intend to vigorously defend this action in all respects. Given the early stage of the litigation, at this time we ~~accrued an incremental $6 million litigation~~are not in a position to assess the likelihood of any potential loss ~~during~~or adverse effect on our financial condition or to estimate the ~~nine months ended September 30, 2020.~~amount or range of potential loss, if any, from this action.

~~Table of Contents~~

Other Matters and Claims

We are party to legal matters and claims in the normal course of our ~~operations, which are described in Note 13 within our Annual Report on Form 10-K for the year ended December 31, 2020.~~operations. While we believe the ultimate outcome of these matters and claims will not have a material adverse effect on our financial position, results of operations, or cash flows, the outcome of such matters and claims is not determinable with certainty, and negative outcomes may adversely affect us. There have been no material changes to these matters since our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 was filed with the SEC on ~~February 26, 2021.~~March 1, 2022.

Table of Contents

11. Revenue from Contracts with Customers

The following table presents the disaggregation of revenue from contracts with customers for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ along with the reportable segment for each category (in thousands):


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
Category	Category	Segment	2021		2020		2021		2020		Category	Segment	2022		2021
Solar modules	Solar modules	Modules	$	562,810	$	422,480	$	1,640,436	$	1,187,679	Solar modules	Modules	$	354,881	$	534,670
Energy generation											Energy generation	Other	6,293		14,579
O&M services											O&M services	Other	3,897		27,235
Solar power systems	Solar power systems	Systems	10,132		471,174		311,076		776,724		Solar power systems	Other	1,969		226,967
O&M services		Systems	5,262		28,061		37,210		89,237
Energy generation (1)		Systems	7,339		14,335		29,375		54,884
EPC services ~~(2)~~(1)	EPC services ~~(2)~~(1)	Systems	(2,039)		(8,485)		(2,039)		(6,424)		EPC services ~~(2)~~(1)	Other	—		(77)
Net sales	Net sales		$	583,504	$	927,565	$	2,016,058	$	2,102,100	Net sales		$	367,040	$	803,374

——————————

(1)~~During the three and ninemonths ended September 30, 2020, the majority of energy generated and sold by our PV solar power systems was accounted for under ASC 840 consistent with the classification of the associated PPAs.~~

~~(2)~~For certain of our ~~EPC~~engineering, procurement, and construction (“EPC”) agreements, we provide an energy performance test during the first or second year of a system’s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain adjustments. If there is an underperformance event with regard to these tests, we may incur liquidated damages as specified in the applicable EPC agreement. During the three months ended ~~September 30, 2020,~~March 31, 2021, we accrued liquidated damages for certain of these agreements, which we recognized as a reduction to revenue. ~~See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our performance guarantee arrangements.~~

We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Such contracts may contain provisions that require us to make liquidated damage payments to the customer if we fail to ship or deliver modules by scheduled dates. We recognize these liquidated damages as a reduction of revenue in the period we transfer control of the modules to the customer.

We recognize revenue for sales of development projects or completed systems when we enter into the associated sales contract. For ~~EPC services, or~~certain prior project sales, including sales of solar power systems with EPC services, ~~we recognize~~such revenue ~~over time using cost based input methods, in which~~included estimated amounts of variable consideration. These estimates may require significant judgment ~~is required~~ to ~~evaluate assumptions including~~determine the most likely amount of net contract revenues and the total estimated costs to determine our progress toward contract completion. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known.revenues. The cumulative effect of revisions to estimates ~~related to net contract revenues or costs to complete contracts are~~is recorded in the period in which the revisions ~~to estimates~~ are identified and the amounts can be reasonably estimated.

~~Changes in estimates for sales of systems and EPC services occur for a variety of reasons, including but not limited~~ During the three months ended March 31, 2021, revenue increased $1.6 million due to (i) changes in estimates of variable consideration, (ii) construction plan accelerations or delays, (iii) module cost forecast changes, (iv) cost related change orders, or (v) changes in other information used to estimate costs. Changes in estimates may have a material effect on our condensed consolidated statements of operations.

~~Table of Contents~~

~~The following table outlines the impact on revenue of~~ net changes in ~~estimated~~ transaction prices ~~and input costs~~ for ~~systems related sales contracts (both increases and decreases) for the three and nine months ended September 30, 2021 and 2020 as well as the number of~~4 projects, that comprise such changes. For purposes of the table, we only include projects with changes in estimates that have a net impact on revenue of at least $1.0 million during the periods presented. Also included in the table is the net change in estimate as a percentagewhich represented 0.1% of the aggregate revenue for such projects.

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Number of projects 4 6 9 12
Increase (decrease) in revenue from net changes in transaction prices (in thousands) (1) $ 7,818 $ (16,319) $ 72,950 $ (25,470)
Increase (decrease) in revenue from net changes in input cost estimates (in thousands) — 24 — (2,483)
Net increase (decrease) in revenue from net changes in estimates (in thousands) $ 7,818 $ (16,295) $ 72,950 $ (27,953)
Net change in estimate as a percentage of aggregate revenue 0.9 % (1.3) % 2.3 % (1.3) %

~~——————————~~

~~(1)During the nine~~months ended September 30, 2021, we recorded revenue of $65.1 million associated with the settlement of an outstanding indemnification arrangement associated with the sale of one of our projects. See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our indemnification arrangements.

The following table reflects the changes in our contract assets, which we classify as “Accounts receivable unbilled,” net” and our contract liabilities, which we classify as “Deferred revenue,” for the ~~nine~~three months ended ~~September 30, 2021. As of December~~March 31, ~~2020, these balances excluded any assets or liabilities classified as held for sale~~2022 (in thousands):

September 30,
2021 December 31,
2020 Nine Month Change
Accounts receivable, unbilled (1) $ 49,204 $ 49,395
Allowance for credit losses (184) (303)
Accounts receivable, unbilled, net $ 49,020 $ 49,092 $ (72) — %
Deferred revenue (2) $ 307,473 $ 233,732 $ 73,741 32 %


	March 31, 2022		December 31, 2021		Three Month Change
Accounts receivable unbilled, net (1)	$	48,151	$	46,113	$	2,038	4	%
Deferred revenue (2)	$	373,808	$	297,811	$	75,997	26	%

——————————

(1)Includes ~~$24.2~~$19.4 million and ~~$22.7~~$20.8 million of noncurrent accounts receivable unbilled, net classified as “Other assets” on our condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2)Includes ~~$68.7~~$154.9 million and ~~$44.9~~$95.9 million of noncurrent deferred revenue classified as “Other liabilities” on our condensed consolidated balance sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Table of Contents

During the ~~nine~~three months ended September 30, 2021, our contract assets decreased by $0.1 million primarily due to final billings for certain project sales, offset by unbilled receivables associated with the sale of the Sun Streams 4 and Sun Streams 5 projects in the current period. During the nine months ended September 30, 2021,March 31, 2022, our contract liabilities increased by ~~$73.7~~$76.0 million primarily due to advance payments received for sales of solar modules in the current period, partially offset by the recognition of revenue for sales of solar modules for which payment was received in ~~2020.~~2021. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized revenue of ~~$169.5~~$43.7 million and ~~$296.7~~$72.0 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

~~Table of Contents~~

As of ~~September 30, 2021,~~March 31, 2022, we had entered into contracts with customers for the future sale of ~~16.4~~25.4 GWDC of solar modules for an aggregate transaction price of ~~$4.6 billion. We~~$6.9 billion, which we expect to recognize ~~such amounts~~ as revenue through ~~2024~~2025 as we transfer control of the modules to the customers. Such aggregate transaction price excludes estimates of variable consideration for certain contracts with customers that are associated with future module technology improvements, including new product designs and enhancements to certain energy related attributes. Certain other price adjustments associated with the proposed extension of the U.S. investment tax credit, sales freight, and potential changes to certain commodity prices have also been excluded. While our contracts with customers typically represent firm purchase commitments, these contracts may be subject to amendments made by us or requested by our customers. These amendments may increase or decrease the volume of modules to be sold under the contract, change delivery schedules, or otherwise adjust the expected revenue under these contracts.

12. Share-Based Compensation

The following table presents share-based compensation expense recognized in our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Cost of sales (1)	Cost of sales (1)	$	154	$	1,099	$	235	$	2,554	Cost of sales (1)	$	498	$	(92)
Selling, general and administrative (1)	Selling, general and administrative (1)	5,746		5,562		14,998		13,323		Selling, general and administrative (1)	2,574		4,515
Research and development (2)	Research and development (2)	529		548		(259)		2,312		Research and development (2)	431		(1,308)
Total share-based compensation expense	Total share-based compensation expense	$	6,429	$	7,209	$	14,974	$	18,189	Total share-based compensation expense	$	3,503	$	3,115

——————————

(1)On March 31, 2021, we completed the sales of our North American O&M operations and U.S. project development business, which resulted in the forfeiture of unvested shares for associates (our term for ~~full~~full- and part-time employees) departing the Company as part of the transactions. See Note 2. “Sales of Businesses” to our condensed consolidated financial statements for further information related to these transactions.

(2)Effective March 15, 2021, our former Chief Technology Officer retired from the Company, which resulted in the forfeiture of his unvested shares during the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

Share-based compensation expense capitalized in inventory, project assets, and PV solar power systems was ~~$0.8~~$0.7 million as of ~~September 30, 2021~~March 31, 2022 and ~~$1.1 million as of~~ December 31, ~~2020.~~2021. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$29.3~~$32.6 million of unrecognized share-based compensation expense related to unvested restricted and performance units, which we expect to recognize over a weighted-average period of approximately ~~1.4~~1.7 years.

In ~~April 2018,~~July 2019, the compensation committee of our board of directors ~~(“the Board”)~~ approved ~~a long-term incentive program~~grants of performance units for key executive officers and associates. The program was intended to incentivize retention of our key executive talent and align the interest of executive management and stockholders. The program consisted of performance units to be earned over ~~an approximately three-year~~a multi-year performance period, which ended in December ~~2020.~~2021. Vesting of the ~~2018~~2019 grants of performance units was contingent upon the relative attainment of target cost per watt, module wattage, gross ~~margin,~~profit, and operating ~~expense, and contracted revenue~~income metrics. In ~~February 2021,~~March 2022, the compensation committee certified the achievement of the vesting conditions applicable to the grants, which approximated the ~~target~~maximum level of performance. Accordingly, each participant received one share of common stock for each vested performance unit granted, net of any tax withholdings.

~~In July 2019, the compensation committee approved additional grants~~

Table of performance units for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2021. Vesting of the 2019 grants of performance units is contingent upon the relative attainment of target cost per watt, module wattage, gross profit, and operating income metrics.Contents

In March 2020, the compensation committee approved additional grants of performance units for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2022. Vesting of the 2020 grants of performance units is contingent upon the relative attainment of target contracted revenue, module wattage, and return on capital metrics.

~~Table of Contents~~

In May 2021, the compensation committee approved additional grants of performance units for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2023. Vesting of the 2021 grants of performance units is contingent upon the relative attainment of target contracted revenue, cost per watt, incremental average selling price, and operating income metrics.

In March 2022, the compensation committee approved additional grants of performance units for key executive officers. Such grants are expected to be earned over a multi-year performance period ending in December 2024. Vesting of the 2022 grants of performance units is contingent upon the relative attainment of target contracted revenue, cost per watt, and return on capital metrics.

Vesting of performance units is also contingent upon the employment of program participants through the applicable vesting dates, with limited exceptions in case of death, disability, a qualifying retirement, or a change-in-control of First Solar. Outstanding performance units are included in the computation of diluted net income per share based on the number of shares that would be issuable if the end of the reporting period were the end of the contingency period.

In February 2022, First Solar adopted a Clawback Policy (“the Policy”) that applies to the Company’s current and former Section 16 officers. The Policy applies to all incentive compensation, including any performance-based annual incentive awards and performance-based equity compensation. The Policy was adopted to ensure that incentive compensation is paid or awarded based on accurate financial results and the correct calculation of performance against incentive targets.

13. Income Taxes

In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “CARES Act”) was signed into law. The CARES Act includes a number of federal corporate tax relief provisions that are intended to support the ongoing liquidity of U.S. corporations. Among other provisions, the CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years. Because changes in tax law are accounted for in the period of enactment, the retroactive effects of such changes were accounted for as a discrete item in the prior period.

As a result of the CARES Act, we expect to carry back our 2019 and 2020 net operating losses to our 2016 U.S. corporate income tax return, which will restore certain foreign tax credits we expect to utilize by amending our 2017 and 2018 U.S. corporate income tax returns. Such amended returns will restore other general business credits we expect to utilize in future tax years before the credits expire and eliminate the transition tax liability for accumulated earnings of foreign subsidiaries resulting from the Tax Cuts and Jobs Act.

Our effective tax rate was ~~16.7%~~31.1% and ~~(16.9)%~~18.1% for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. The increase in our effective tax rate was primarily driven by ~~a discrete~~the effect of tax ~~benefit in the prior year~~law changes associated with the ~~net operating loss carryback provisions~~foreign tax credit (“FTC”) regulations described below and lower relative amounts of ~~the CARES Act described above.~~income earned in foreign jurisdictions with lower tax rates. Our provision for income taxes differed from the amount computed by applying the U.S. statutory federal income tax rate of 21% primarily due to the ~~beneficial impact~~effect of the FTC regulations described below and changes in our deferred income taxes related to our Malaysian tax holiday, partially offset by lower relative amounts of income earned in foreign jurisdictions with lower tax rates.

In December 2021, the U.S. Treasury released final FTC regulations addressing various aspects of the U.S. FTC regime. Among other items, these regulations revised the definition of a creditable foreign income tax and ~~Vietnamese~~the time at which foreign taxes accrued can be claimed as a credit. These regulations are applicable for tax ~~incentive.~~years beginning on or after December 28, 2021. As a result of these regulations, foreign taxes, which were previously creditable, are now treated as foreign tax deductions at the U.S. statutory federal income tax rate of 21%.

Our Malaysian subsidiary has been granted a long-term tax holiday that expires in 2027. The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with certain employment and investment thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday in 2027. In addition, our Vietnamese subsidiary has been granted a tax incentive that provides a two-year tax exemption, which began in 2020, and reduced annual tax rates through the end of 2025.

Table of Contents

We account for uncertain tax positions pursuant to the recognition and measurement criteria under ASC 740. It is reasonably possible that ~~$0.4~~$0.3 million of uncertain tax positions will be recognized within the next 12 months due to the expiration of the statute of limitations associated with such positions.

We are subject to audit by federal, state, local, and foreign tax authorities. We are currently under examination in India, Malaysia, and the state of California. We believe that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed by our tax examinations are not resolved in a manner consistent with our expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs.

~~Table of Contents~~

14. Net (Loss) Income per Share

The calculation of basic and diluted net (loss) income per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was as follows (in thousands, except per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Basic net income per share
Basic net (loss) income per share										Basic net (loss) income per share
Numerator:	Numerator:									Numerator:
Net income		$	45,203	$	155,037	$	337,323	$	282,652
Net (loss) income										Net (loss) income	$	(43,255)	$	209,671
Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding	Weighted-average common shares outstanding	106,320		105,967		106,241		105,830		Weighted-average common shares outstanding	106,412		106,088

Diluted net income per share
Diluted net (loss) income per share										Diluted net (loss) income per share
Denominator:	Denominator:									Denominator:
Weighted-average common shares outstanding	Weighted-average common shares outstanding	106,320		105,967		106,241		105,830		Weighted-average common shares outstanding	106,412		106,088
Effect of restricted and performance units and stock purchase plan shares		579		784		638		707
Weighted-average shares used in computing diluted net income per share		106,899		106,751		106,879		106,537
Effect of restricted stock and performance units										Effect of restricted stock and performance units	—		802
Weighted-average shares used in computing diluted net (loss) income per share										Weighted-average shares used in computing diluted net (loss) income per share	106,412		106,890

Net income per share:
Net (loss) income per share:										Net (loss) income per share:
Basic	Basic	$	0.43	$	1.46	$	3.18	$	2.67	Basic	$	(0.41)	$	1.98
Diluted	Diluted	$	0.42	$	1.45	$	3.16	$	2.65	Diluted	$	(0.41)	$	1.96

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net (loss) income per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ as such shares would have had an anti-dilutive effect (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Anti-dilutive shares 8 1 3 —


	Three Months Ended March 31,
	2022	2021
Anti-dilutive shares	504	—

3530

Table of Contents

15. Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss, net of tax, for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 (in thousands):


		Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Marketable Securities and Restricted Marketable Securities		Unrealized Gain (Loss) on Derivative Instruments		Total			Foreign Currency Translation Adjustment		Unrealized Gain (Loss) on Marketable Securities and Restricted Marketable Securities		Unrealized Gain (Loss) on Derivative Instruments		Total
Balance as of December 31, 2020		$	(76,239)	$	16,630	$	(2,117)	$	(61,726)
Balance as of December 31, 2021										Balance as of December 31, 2021	$	(89,452)	$	(8,036)	$	1,126	$	(96,362)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	(12,544)		(9,399)		3,799		(18,144)		Other comprehensive (loss) income before reclassifications	(10,130)		(23,767)		24		(33,873)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	1,203		(11,696)		1,030		(9,463)		Amounts reclassified from accumulated other comprehensive loss	5		—		(560)		(555)
Net tax effect	Net tax effect	—		1,134		(545)		589		Net tax effect	—		1,246		94		1,340
Net other comprehensive (loss) income		(11,341)		(19,961)		4,284		(27,018)
Balance as of September 30, 2021		$	(87,580)	$	(3,331)	$	2,167	$	(88,744)
Net other comprehensive loss										Net other comprehensive loss	(10,125)		(22,521)		(442)		(33,088)
Balance as of March 31, 2022										Balance as of March 31, 2022	$	(99,577)	$	(30,557)	$	684	$	(129,450)

The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands):


Comprehensive Income Components	Comprehensive Income Components	Income Statement Line Item		Three Months Ended September 30,						Nine Months Ended September 30,					Comprehensive Income Components		Income Statement Line Item	Three Months Ended March 31,
			2021			2020			2021			2020				2022		2021
Foreign currency translation adjustment:

Foreign currency translation adjustment	Foreign currency translation adjustment	Cost of sales		$	—		$	370		$	—		$	370	Foreign currency translation adjustment		Other (expense) income, net	$	(5)	$	(475)
Foreign currency translation adjustment		Other (expense) income, net		(728)			—			(1,203)			—
Total foreign currency translation adjustment				(728)			370			(1,203)			370

Unrealized gain on marketable securities and restricted marketable securities	Unrealized gain on marketable securities and restricted marketable securities	Other (expense) income, net		—			9			11,696			15,346		Unrealized gain on marketable securities and restricted marketable securities		Other (expense) income, net	—		11,696
Unrealized gain (loss) on derivative contracts:	Unrealized gain (loss) on derivative contracts:														Unrealized gain (loss) on derivative contracts:
Foreign exchange forward contracts	Foreign exchange forward contracts	Cost of sales		15			(334)			(1,913)			(647)		Foreign exchange forward contracts		Cost of sales	560		(1,129)
Commodity swap contracts	Commodity swap contracts	Cost of sales		670			—			883			—		Commodity swap contracts		Cost of sales	—		(7)
Total unrealized gain (loss) on derivative contracts	Total unrealized gain (loss) on derivative contracts			685			(334)			(1,030)			(647)		Total unrealized gain (loss) on derivative contracts			560		(1,136)
Total (loss) gain reclassified				$	(43)		$	45		$	9,463		$	15,069
Total gain reclassified															Total gain reclassified			$	555	$	10,085

3631

Table of Contents

16. Segment Reporting

~~We operate~~Our primary segment is our modules business, ~~in 2 segments. Our modules segment~~which involves the design, manufacture, and sale of cadmium telluride (“CdTe”) solar modules, which convert sunlight into electricity. Third-party customers of our modules segment include ~~integrators~~developers and operators of PV solar power systems. Our ~~second segment is our~~residual business operations include certain project development activities and O&M services, which are primarily concentrated in Japan, as well as the results of operations from PV solar power systems ~~segment, through which~~ we ~~provide power plant solutions~~own and operate in certain ~~markets,~~international regions.

For the year ended December 31, 2021, we changed our reportable segments to align with revisions to our internal reporting structure and long-term strategic plans. Following this change, our modules business represents our only reportable segment. We previously operated our business in two segments, which ~~include~~included our modules and systems businesses. Systems business activities primarily involved (i) project development, (ii) EPC services, and (iii) O&M ~~services. We may provide any combination of individual products~~services, which now comprise our residual business operations and ~~services within such capabilities (including, with respect~~are categorized as “Other” in the tables below. All prior year balances were revised to ~~EPC services, by contracting with third parties) depending upon~~conform to the customer and market opportunity. Our systems segment customers include utilities, independent power producers, commercial and industrial companies, and other system owners. From time to time, we may temporarily own and operate, or retain interests in, certain of our systems for a period of time based on strategic opportunities or market factors. current year presentation.

See Note 20. “Segment and Geographical Information” in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for additional discussion of our segment reporting.

The following tables ~~present~~provide a reconciliation of certain financial information for our reportable ~~segments~~segment to information presented in our condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ and as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 (in thousands):


		Three Months Ended September 30, 2021						Three Months Ended September 30, 2020							Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
		Modules		Systems		Total		Modules		Systems		Total			Modules		Other		Total		Modules		Other		Total
Net sales	Net sales	$	562,810	$	20,694	$	583,504	$	422,480	$	505,085	$	927,565	Net sales	$	354,881	$	12,159	$	367,040	$	534,670	$	268,704	$	803,374
Gross profit	Gross profit	118,260		6,320		124,580		124,822		168,193		293,015		Gross profit	11,189		274		11,463		100,440		84,327		184,767
Depreciation and amortization expense	Depreciation and amortization expense	56,335		3,045		59,380		43,137		4,982		48,119		Depreciation and amortization expense	56,199		2,846		59,045		50,724		3,097		53,821

		Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
		Modules		Systems		Total		Modules		Systems		Total
Net sales		$	1,640,436	$	375,622	$	2,016,058	$	1,187,679	$	914,421	$	2,102,100
Gross profit		328,047		155,418		483,465		280,115		240,698		520,813
Depreciation and amortization expense		163,747		9,193		172,940		132,529		17,477		150,006

		September 30, 2021						December 31, 2020							March 31, 2022						December 31, 2021
		Modules		Systems		Total		Modules		Systems		Total			Modules		Other		Total		Modules		Other		Total
Goodwill	Goodwill	$	14,462	$	—	$	14,462	$	14,462	$	—	$	14,462	Goodwill	$	14,462	$	—	$	14,462	$	14,462	$	—	$	14,462

3732

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), which are subject to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, ~~concerning,~~ among other ~~things:~~things, concerning: the length and severity of the ongoing COVID-19 (novel coronavirus) outbreak, including its impacts across our businesses on demand, manufacturing, project development, ~~construction,~~ O&M, construction, financing, and our global supply chains, actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impacts, and the ability of our customers, suppliers, equipment vendors, and other counterparties to fulfill their contractual obligations to us; effects resulting from certain module manufacturing changes; our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, revenues, gross margin, operating expenses, products, projected costs (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, currently anticipated delays in the implementation of our ~~CuRe~~Copper Replacement (“CuRe”) program and related estimated impacts, restructuring, product reliability, investments, and capital expenditures; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies, such as tariffs or other trade remedies imposed on solar cells and modules; the potential impact of proposed legislation intended to encourage renewable energy investments through tax credits; effects resulting from pending litigation; our ability to expand manufacturing capacity worldwide; our ability to reduce the costs to develop and construct PV solar power systems; the impact of supply chain disruptions, further exacerbated by the COVID-19 pandemic, that may affect the procurement of raw materials used in our manufacturing process and the distribution of our modules; research and development (“R&D”) programs and our ability to improve the wattage of our solar modules; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue,” “contingent,” and the negative or plural of these words, and other comparable terminology.

Forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q and therefore speak only as of the filing date. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason, whether as a result of new information, future developments, or otherwise. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, the severity and duration of the COVID-19 pandemic, including its potential impact on the Company’s business, financial condition, and results of operations; structural imbalances in global supply and demand for PVphotovoltaic (“PV”) solar modules; the market for renewable energy, including solar energy; our competitive position and other key competitive factors; reduction, elimination, or expiration of government subsidies, policies, and support programs for solar energy projects; the impact of public policies, such as tariffs or other trade remedies imposed on solar cells and modules; the passage of proposed legislation intended to encourage renewable energy investments through tax credits; our ability to execute on our long-term strategic plans; our ability to execute on our solar module technology and cost reduction roadmaps; our ability to improve the wattage of our solar modules; interest rate fluctuations and ~~both our and~~ our customers’ ability to secure financing; ~~the creditworthiness of our off-take counterparties and the ability of our off-take counterparties to fulfill their contractual obligations to us;~~ the loss of any of our large customers, or the ability of our customers and counterparties to perform under their contracts with us; the satisfaction of conditions precedent in our sales agreements; our ability to attract new customers and to develop and maintain existing customer and supplier

~~Table of Contents~~

relationships; ~~our ability to successfully develop and complete our systems business projects;~~ our ability to convert existing or construct production facilities to support new product lines; general

Table of Contents

economic and business conditions, including those influenced by U.S., international, and geopolitical events; environmental responsibility, including with respect to CdTe and other semiconductor materials; claims under our limited warranty obligations; changes in, or the failure to comply with, government regulations and environmental, health, and safety requirements; effects resulting from pending litigation; future collection and recycling costs for solar modules covered by our module collection and recycling program; supply chain disruption, including the availability of shipping containers, port congestion, cancelled shipments by logistic providers, and the cost of fuel, all of which may be exacerbated by the COVID-19 pandemic; our ability to protect our intellectual property; our ability to prevent and/or minimize the impact of cyber-attacks or other breaches of our information systems; our continued investment in research and ~~development;~~development (“R&D”); the supply and price of components and raw materials, including CdTe; our ability to attract and retain key executive officers and associates; and the matters discussed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, elsewhere in this Quarterly Report on Form 10-Q, and our other reports filed with the SEC. You should carefully consider the risks and uncertainties described in these reports.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q. When referring to our manufacturing capacity, total sales, and solar module sales, the unit of electricity in watts for megawatts (“MW”) and gigawatts (“GW”) is direct current (“DC” or “DC”) unless otherwise noted. When referring to our projects or systems, the unit of electricity in watts for MW and GW is alternating current (“AC” or “AC”) unless otherwise noted.

Executive Overview

We are a leading American solar technology company and global provider of PV solar energy solutions. Developed at our R&D labs in California and Ohio, we manufacture and sell PV solar modules with an advanced thin film semiconductor technology that provide a high-performance, lower-carbon alternative to conventional crystalline silicon PV solar modules. From raw material sourcing through end-of-life module recycling, we are committed to reducing the environmental impacts and enhancing the social and economic benefits of our products across their life cycle. ~~In certain markets, we also develop and sell PV solar power systems that use the modules we manufacture and provide O&M services to system owners.~~ We are the world’s largest thin film PV solar module manufacturer and the largest PV solar module manufacturer in the Western Hemisphere.

Certain of our financial results and other key operational developments for the three months ended ~~September 30, 2021~~March 31, 2022 include the following:

•Net sales for the three months ended ~~September 30, 2021~~March 31, 2022 decreased by ~~37%~~54% to ~~$583.5~~$367.0 million compared to ~~$927.6~~$803.4 million for the same period in ~~2020.~~2021. The decrease was primarily driven by ~~the~~ sales of certain projects in the ~~Ishikawa, Miyagi, Anamizu, Tungabhadra, and Anantapur projects~~United States in the prior period, ~~partially offset by an increase~~a decrease in the volume of modules sold to third ~~parties.~~parties, and a lower average selling price per watt.

•Gross profit for the three months ended ~~September 30, 2021~~March 31, 2022 decreased ~~10.2~~19.9 percentage points to ~~21.4%~~3.1% from ~~31.6%~~23.0% for the same period in ~~2020.~~2021. The decrease in gross profit was primarily due to the volume of higher gross profit projects sold during the prior period, a decrease in the average selling price per watt of our modules, and an increase in ~~logistics costs, and an increase to our module collection and recycling liability due to lower estimated by-product credits for certain semiconductor materials recovered during the recycling process,~~sales freight, partially offset by continued module cost reductions and ~~a higher benefit from reductions to our product warranty liability~~manufacturing related charges associated with the COVID-19 pandemic in the ~~current period due to lower-than-expected claims for our older series of module technology and the evolving claims profile of our newest series of module technology.~~prior period.

~~Table of Contents~~

•As of ~~September 30, 2021,~~March 31, 2022, we had 7.9 GWDC of total installed Series 6 nameplate production capacity across all our facilities. We produced ~~2.0~~2.1 GWDC of solar modules during the three months ended ~~September 30, 2021,~~March 31, 2022, which represented a ~~33%~~19% increase in Series 6 module production from the same period in ~~2020.~~2021. The increase in ~~Series 6~~ production was primarily driven by ~~the incremental Series 6 production capacity added in Malaysia in early 2021 and~~ higher throughput at our manufacturing facilities. We expect to produce between ~~7.6~~8.2 GWDC and ~~7.8~~8.8 GWDC of Series 6 and Series 6 Plus modules during ~~2021.~~2022.

Table of Contents

Market Overview

~~The solar industry continues~~Solar energy is one of the fastest growing forms of renewable energy with numerous economic and environmental benefits that make it an attractive complement to ~~be characterized by intense pricing competition, both at the module and system levels. Although module average selling prices in many global markets have declined over several~~and/or substitute for traditional forms of energy generation. In recent years, ~~recent module spot pricing has increased due to elevated commodity and freight costs. For example,~~ the price of ~~polysilicon~~PV solar power systems, and accordingly the cost of producing electricity from such systems, has ~~significantly increased~~decreased to levels that are competitive with or below the wholesale price of electricity in ~~recent months due~~many markets. This price decline has opened new possibilities to develop systems in many locations with limited or no financial incentives, thereby promoting the widespread adoption of solar energy. As a ~~coal shortage in China, which resulted in higher energy prices and Chinese government mandated power restrictions that led to curtailments~~result of ~~silicon metal production. Given the majority of global polysilicon capacity is located in China,~~ such ~~higher energy prices and reduced operating capacities have further exacerbated the supply and demand imbalance~~market opportunities, we are in the ~~polysilicon market, contributing~~process of expanding our manufacturing capacity by 6.6 GWDC by constructing our third manufacturing facility in the U.S. and our first manufacturing facility in India. These new facilities, which we expect to ~~the increase in polysilicon pricing. While the duration of this elevated period of spot pricing is uncertain, module average selling prices in global markets~~produce our next generation Series 7 modules, are currently under construction and are expected to ~~continue to decline~~commence operations in the ~~long-term.~~first half of 2023 and the second half of 2023, respectively. In the aggregate, we believe manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar industry may experience periods of structural imbalance between supply and demand (i.e., where production capacity exceeds global demand), and that ~~such periods~~excess capacity will also put pressure on pricing. Additionally, intense competition at the system level may result in an environment in which pricing falls rapidly, thereby potentially increasing demand for solar energy solutions but constraining the ability for project developers and diversified module manufacturers to sustain meaningful and consistent profitability. In light of such market realities, we continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process, our ~~diversified~~R&D capabilities, ~~our financial viability, and~~ the sustainability advantage of our modules, and ~~systems.~~our financial stability.

~~Global~~The solar ~~markets continue~~industry continues to ~~expand and develop, in part aided~~be characterized by ~~demand elasticity resulting from declining average selling prices,~~intense pricing competition, both at the module and system ~~levels,~~levels. This competition may result in an environment in which pricing falls rapidly, thereby potentially increasing demand for solar energy solutions but constraining the ability for project developers and module manufacturers to sustain meaningful and consistent profitability. Although module average selling prices in many global markets have declined for several years, recent module spot pricing has ~~promoted~~increased, in part, due to elevated commodity and freight costs. For example, the ~~widespread adoption~~price of ~~solar energy. As a result~~polysilicon has significantly increased in recent months, reaching its highest level in the last 10 years due to higher energy prices and reduced operating capacities of ~~such market opportunities, we recently announced plans to expand our manufacturing capacity by 6.6 GW~~DC ~~by constructing our third U.S. manufacturing facility~~silicon metal production in ~~Lake Township, Ohio~~China and ~~our first manufacturing facility~~rising global demand for polysilicon. Several other commodities, including aluminum, steel, and natural gas, have experienced similar price increases in ~~India. These new facilities~~recent months. While the duration of this elevated period of pricing is uncertain, module average selling prices in global markets are expected to ~~commence operations~~continue to decline in the first half of 2023 and the second half of 2023, respectively. Additionally, we are developing solar projects in Japan as we execute on our utility-scale project pipeline. See the table under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Systems Project Pipeline” for additional information about the projects we are developing. Although we expect a portion of our future consolidated net sales, operating income, and cash flows to be derived from such projects, we expect third-party module sales to continue to have a more significant impact on our operating results as we expand our manufacturing capacity and leverage the benefits of our module technology.long-term.

Competitive pricing for modules and systems, relative to the cost of traditional forms of energy generation, is expected to contribute to diversification in global electricity generation and further demand for solar energy. Over time, however, declining average selling prices may adversely affect our results of ~~operations to the extent we have not already entered into contracts for future module or system sales.~~operations. Our results of operations could also be adversely affected if competitors reduce pricing to levels below their costs, bid aggressively low prices for module sale agreements, ~~or PPAs,~~ or are able to operate at minimal or negative operating margins for sustained periods of time. For certain of our competitors, including many in China, these practices may be enabled by their direct or indirect access to sovereign capital or other forms of state-owned support. InAdditionally, in certain markets ~~in California and elsewhere,~~ an oversupply imbalance at the grid level may reduce short-to-medium term demand for new solar installations relative to prior years, lower ~~PPA~~ pricing for power purchase agreements (“PPAs”), and lower margins on module and system sales to such

~~Table of Contents~~

markets. However, we believe the effects of such imbalance can be mitigated by modern solar power plants and energy storage solutions that offer a flexible operating profile, thereby promoting greater grid stability and enabling a higher penetration of solar energy. We continue to address these uncertainties, in part, by executing on our module technology improvements ~~partnering with grid operators and utility companies,~~ and implementing certain other cost reduction initiatives.

Table of Contents

We face intense competition from manufacturers of crystalline silicon solar ~~modules and developers of solar power projects.~~modules. Solar module manufacturers compete with one another on sales price ~~and on~~per watt, which may be influenced by several module value attributes, including wattage (through a larger form factor or an improved conversion efficiency), energy yield, degradation, sustainability, and ~~reliability,~~reliability. Sales price per watt may also be influenced by warranty terms and developers of systems compete on various factors such as net present value, return on equity, and levelized cost of electricity (“LCOE”), meaning the net present value of a system’s total life cycle costs divided by the quantity of energy that is expected to be produced over the system’s operational life. Most crystalline silicon cell and wafer manufacturers have transitioned from lower efficiency Back Surface Field multi-crystalline cells (the legacy technology against which we have generally competed) to higher efficiency Passivated Emitter Rear Contact (“PERC”) mono-crystalline cells at competitive cost structures. Additionally, whilecustomer payment terms. While conventional solar modules, including the solar modules we currently produce, are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, ~~several~~most module manufacturers ~~of mono-crystalline PERC modules~~ offer bifacial modules that also capture diffuse irradiance on the back side of a module. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which ~~after considering the incremental BoS and other costs,~~ could potentially lower the overall ~~LCOE~~levelized cost of electricity (“LCOE”) of a system when compared to systems using conventional solar modules, including the modules we currently produce. Additionally, certain module manufacturers recently introduced n-type mono-crystalline modules, such as tunnel oxide passivated contact modules, which are expected to provide certain improvements to module efficiency, temperature coefficient, and bifacial performance, and claim to provide certain degradation advantages compared to other mono-crystalline modules.

We believe we are among the lowest cost module manufacturers in the solar industry on a module cost per watt basis, based on publicly available information. This cost competitiveness allows us to compete favorably in markets where pricing for modules and systems is highly competitive. Our cost competitiveness is based in large part on our advanced thin-film semiconductor technology, module wattage (or conversion efficiency), proprietary manufacturing process (which enables us to produce a CdTe module in a matter of hours using a continuous and highly automated industrial manufacturing process, as opposed to a batch process), and our focus on operational excellence. In addition, our CdTe modules use approximately ~~1-2%~~2% of the amount of semiconductor material that is used to manufacture conventional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules, and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels. In recent years, polysilicon consumption per cell has been reduced through various initiatives, such as the adoption of diamond wire saw technology, which have contributed to declines in our relative manufacturing cost competitiveness over conventional crystalline silicon module manufacturers.

In terms of performance, in many climates our ~~CdTe~~ solar modules provide certain energy production advantages relative to competing crystalline silicon solar modules. For example, our CdTe solar technology provides:

•a superior temperature coefficient, which results in stronger system performance in typical high insolation climates as the majority of a system’s generation, on average, occurs when module temperatures are well above 25°C (standard test conditions);

•a superior spectral response in humid environments where atmospheric moisture alters the solar spectrum relative to standard test conditions;

•a better partial shading response than competing crystalline silicon technologies, which may experience significantly lower energy generation than CdTe solar modules when partial shading occurs; and

•an immunity to cell cracking and its resulting power output loss, a common failure often observed in crystalline silicon modules caused by poor manufacturing, handling, weather, or other conditions.

~~Table of Contents~~

In addition to these technological advantages, we also warrant that our PV solar modules will produce at least 98% of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor of between 0.3% and 0.5%, depending on the module series, every year thereafter throughout the limited power output warranty period of up to 30 years. Based on the implementation of our Copper Replacement (“CuRe”) program, which replaces copper with certain other elements that are expected to enhance module performance, we expect the warranted degradation of our CdTe solar modules to decline to 0.2% per year in the near term. As a result of these and other factors, our PV solar modules can produce more annual energy in real world operating conditions than conventional crystalline silicon modules with the same nameplate capacity.

Table of Contents

While our modules ~~and systems~~ are generally competitive in cost, reliability, and performance attributes, there can be no guarantee such competitiveness will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in further declines in the average selling prices of our modules and ~~systems and~~ additional margin compression. We continue to focus on enhancing the competitiveness of our solar modules ~~and systems~~ by accelerating progress along our module technology and cost reduction roadmaps.

Certain Trends and Uncertainties

We believe that our business, financial condition, and results of operations may be favorably or unfavorably impacted by the following trends and uncertainties. See Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 for discussions of other risks (the “Risk Factors”) that may affect us.

Our ~~long-term strategic plans~~business is evolving worldwide and is shaped by the varying ways in which our offerings can be compelling and economically viable solutions to energy needs in various markets. In addressing electricity demands, we are focused on ~~our goal to create long-term stockholder value through a balance of growth, profitability, and liquidity. In executing such plans, we are focusing on~~ providing utility-scale ~~PV solar energy solutions~~module offerings in key geographic markets that we believe have a compelling need for mass-scale PV solar electricity, including markets throughout the United States, ~~Japan,~~India, Europe, ~~India,~~ and ~~certain other strategic markets. Additionally, we continue~~Japan. We closely evaluate and monitor the appropriate level of resources required to ~~focus on opportunities~~support such markets and their associated sales opportunities. When deployed in ~~which~~utility-scale applications, our ~~PV solar~~modules provide energy ~~solutions compete directly with~~at a lower LCOE compared to traditional forms of energy generation, onmaking them an ~~LCOE~~attractive alternative to or ~~similar basis, or complement such generation offerings. These opportunities include the retirement and~~ replacement offor aging fossil fuel-based generation ~~resources with utility-scale PV solar energy solutions. For example, based~~resources. Based on publicly available information, retirements of coal generation plants in the United States alone are expected to approximate 50 GWDC over the next ten years, representing a significant increase in the potential market for solar energy.

This focus on ~~our core~~utility-scale module ~~and utility-scale~~ offerings exists within a current market environment that includes rooftop and distributed generation solar, particularly in the United States. While it is unclear how rooftop and distributed generation solar might impact our core offerings over the next several years, we believe that utility-scale solar will continue to be a compelling offering for companies with technology and cost leadership and will continue to represent an increasing portion of the overall electricity generation mix. However, our module offerings in certain ~~international~~ markets may be driven, in part, by future demand for rooftop and distributed generation solar solutions.

Demand for our solar energy solutions depends, in part, on market factors outside our control, such as the availability of debt and/or equity financing (including, in the United States, tax equity financing), interest rate fluctuations, domestic or international trade policies, government regulations, and government support programs. ~~Adverse changes in these factors could increase the cost of utility-scale systems, which could reduce demand for our solar energy solutions.~~

Our ability to provide solar energy solutions on economically attractive terms is also affected by the availability and cost of logistics services associated with the procurement of raw materials used in our manufacturing process and the distribution of our modules. For example, the cost of ocean freight throughout many parts of the world has continued to increase due to the limited availability of shipping containers, increased port congestion resulting from labor shortages, an increase in cancellations of shipments by logistics providers, and elevated fuel costs. Such factors may disrupt our supply chain and adversely impact our manufacturing operations as several of our key raw materials and components are either single-sourced or sourced from a limited number of suppliers. In response to these disruptions, we have accommodated certain requests for delayed shipments in an effort to manage our shipping

~~Table of Contents~~

routes and mitigate our exposure to uncontracted freight rates. Additionally, due to ongoing schedule reliability issues with many operating ships, we are adjusting our shipping plans to include additional lead time for module deliveries and utilizing our U.S. distribution network to better meet our customer commitments. While it is currently unclear how long these issues will persist, they may be further exacerbated by the disruption of major shipping routes or other economic disruptions caused by the COVID-19 pandemic.

In certain markets, demand for our utility-scale offerings may be affected by specific regulations or policies of governmental bodies or utility regulators. For example, in June 2020, the Japanese legislature enacted an amendment to the Electricity Business Law Enforcement Order for the Ministry of Economy, Trade and Industry of Japan which, among other things, is expected to invalidate the feed-in-tariff certificates for projects that fail to achieve construction plan acceptance, submit an interconnection application, and/or achieve commercial operation within a set period of time following dates specified in their respective certificates. The amendment, which becomes effective in April 2022, applies to all projects regardless of generation type and is intended to release grid capacity reserved for delayed projects to enable other newly developed projects to utilize such capacity at a lower cost of electricity to consumers. The deadline by which a project must achieve construction plan acceptance, submit an interconnection application, and/or achieve commercial operation varies by project, but is no earlier than March 2023. Any deadlines that precede the expected construction plan acceptance and/or commercial operation dates of our various projects in Japan could adversely affect the value of such projects and our ability to secure any related project financing.

Many governments have ~~also~~ proposed policies or support programs intended to encourage renewable energy investments. Such support programs may include additional incentives over several years for renewable energy projects ~~including PV solar power systems,~~ or manufacturers of renewable energy products. For example, during 2021 legislation was ~~recently~~ introduced in the U.S. Congress ~~that is intended~~ to ~~increase~~incentivize domestic solar manufacturing and accelerate the transition to clean energy by providing tax credits for U.S. solar manufacturers and project developers. Among other things, such proposed legislation ~~extends~~is expected to (i) extend the investment tax credit up to 40% for 10 years for solar projects that satisfy certain domestic content, labor, and wage requirements; ~~introduces~~(ii) introduce certain refundable tax credits for solar module components manufactured in the U.S.; ~~revives~~(iii) revive certain tax credits for capital investments in the manufacturing of solar module components; and ~~expands~~(iv) expand the scope of production tax credits for energy storage projects. At this time, it is unclear whether and to what extent such measures will be enacted into law. If such legislation is successfully signed into law, or other similar policies or support programs are enacted, it could positively impact our business, financial condition, and results of operations. While we compete in many markets that do not require solar-specific government subsidies or support programs, our net sales and profits remain subject to variability based on the availability and size of government subsidies and economic incentives. Adverse changes in these factors could increase the cost of utility-scale systems, which could reduce demand for our solar modules.

We intend to focus our resources in those markets and energy applications in which solar power can be a least-cost, best-fit energy solution, particularly in regions with significant current or projected electricity demand, relatively high existing electricity prices, strong demand for renewable energy generation, and high solar resources, such as the United States, Japan, Europe, and India. As a result, we closely evaluate and monitor the appropriate level of resources required to support such markets and their associated sales opportunities. We have dedicated, and intend to continue to dedicate, significant capital and human resources to reduce the total installed cost of PV solar energy and to ensure that our solutions integrate well into the overall electricity ecosystem of each specific market.

Creating or maintaining a market position in certain strategically targeted markets and energy applications also requires us to adapt to new and changing market conditions, including changes in the market set of potential buyers of our modules and solar projects. Market environments with few potential project buyers and a higher cost of capital would generally exert downward pressure on the potential revenue from such offerings, whereas, conversely, market environments with many potential project buyers and a lower cost of capital would likely have a favorable impact on the potential revenue from such offerings. For example, the emergence of utility-owned generation has increased the number of potential project buyers as such utility customers benefit from a potentially low cost of capital available through rate-based utility investments. Given their long-term ownership profile, utility-owned generation customers typically seek to partner with diversified and stable companies that can provide a broad spectrum of utility-scale generation solutions, including reliable PV solar technology, thereby mitigating their long-term ownership risks.

4337

Table of Contents

Our ability to provide solar modules on economically attractive terms is also affected by the availability and cost of logistics services associated with the procurement of raw materials or equipment used in our manufacturing process and the shipping, handling, storage, and distribution of our modules. For example, the cost of ocean freight throughout many parts of the world has continued to increase due to the limited availability of shipping containers, increased port congestion, an increase in cancellations of shipments by logistics providers, and elevated fuel costs. Such factors may disrupt our supply chain and adversely impact our manufacturing operations as several of our key raw materials and components are either single-sourced or sourced from a limited number of international suppliers. In response to these disruptions, we have accommodated certain requests for delayed shipments to customers in an effort to manage our shipping routes and mitigate our exposure to uncontracted freight rates. Additionally, due to ongoing schedule reliability issues with many ships, we are adjusting our shipping plans to include additional lead time (in many cases, longer than 30 days) for module deliveries and utilizing our U.S. distribution network to better meet our customer commitments. For certain contracts with customers, we have also started employing module contract structures that provide additional consideration to us if the cost of logistics services exceeds a defined threshold. Additionally, our manufacturing capacity expansions in the U.S. and India are expected to bring manufacturing activities closer to customer demand, further mitigating our exposure to the cost of ocean freight. While it is currently unclear how long these issues will persist, they may be further exacerbated by the disruption of major shipping routes or other economic disruptions caused by the COVID-19 pandemic.

We generally price and sell our solar modules on a per watt basis. As of March 31, 2022, we had entered into contracts with customers for the future sale of 25.4 GWDC of solar modules for an aggregate transaction price of $6.9 billion, which we expect to recognize as revenue through 2025 as we transfer control of the modules to the customers. Such volume includes contracts for the sale of 9.8 GWDC of solar modules that include transaction price adjustments associated with future module technology improvements, including new product designs and enhancements to certain energy related attributes. Based on these potential technology improvements, the contracted module volumes as of March 31, 2022, and the expected timing of module deliveries, such adjustments, if realized, could result in additional revenue of up to $0.3 billion, the majority of which would be recognized in 2023 and 2024. In addition to these price adjustments, certain of our contracts with customers may also include favorable price adjustments for the proposed extension of the U.S. investment tax credit and sales freight described above. Such contracts may also include price adjustments related to potential changes to certain commodity prices.

We continue to invest significant financial resources in R&D initiatives, including in efforts to enhance module performance such as our CuRe ~~program.~~program, which replaces copper with certain other elements that are expected to enhance module performance. However, the implementation of our CuRe program has ~~encountered~~been delayed as a result of certain challenges, including in achieving ~~its~~ full module performance entitlement in high volume manufacturing conditions ~~which, together with~~and COVID-19 related travel restrictions, quarantine requirements, and government orders impacting our ability to upgrade tooling to support our CuRe program at our manufacturing facilities in Malaysia and ~~Vietnam, has resulted~~Vietnam. In addition to these factors, we have elected to prioritize other aspects of our technology roadmap in ~~delays in implementing~~the near term, which will further delay our CuRe ~~program. As a result, we are revising~~program beyond 2022. The revised implementation timeline will be based on our ~~expected integration schedule from~~ability to improve upon our manufacturing process capabilities in respect of the ~~end~~CuRe program and the outcome of ~~2021 to early 2022 for~~additional production tests, which will inform our lead line ~~implementation.~~implementation timing and subsequent fleet-wide replication schedule. In connection with ~~these~~the aforementioned challenges, we have amended or will endeavor to amend certain customer contracts for modules utilizing CuRe technology, including by potentially making certain price concessions and substituting our other modules for the modules with CuRe technology that were expected to be delivered under the terms of the original customer contracts. In connection with these customer contract amendments, we may make certain price concessions. Based on the information available to us at this time, including our present assessment of the challenges with our CuRe program and the relative performance characteristics of the substitute modules we can provide to customers, we currently estimate that the price concessions that we potentially will make across the impacted customer contracts described above will not exceed approximately $100 million of 2022 revenue. See Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q for more information related to the delays to our CuRe program.

Table of Contents

On occasion, we ~~may~~have elected to temporarily own and operate certain PV solar power systems with the intention to sell them at a later date. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the recoverability of our Luz del Norte PV solar power plant was based, in part, on the likelihood of our continued ownership and operation of the system. However, it is reasonably possible that our intent to hold the asset may change in the near term due to our evaluation of strategic sale opportunities for the system. The pursuit of such opportunities, which require coordination with the system’s lenders, may result in a determination that the carrying value of the system is not recoverable based on the probability-weighted undiscounted future cash flows, which in turn could result in a possible impairment of the system in future periods. Accordingly, any changes in our expected use of the asset or its disposition may result in impairment charges that could be material to our condensed consolidated financial statements and have a significant adverse impact on our results of operations.

We continually evaluate forecasted global demand, competition, and our addressable market and seek to effectively balance manufacturing capacity with market demand and the nature and extent of our competition. We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage (or conversion efficiency), and improving manufacturing yield losses. Additionally, we ~~recently announced plans to expand~~are in the process of expanding our manufacturing capacity by 6.6 GWDC by constructing our third ~~U.S.~~ manufacturing facility in ~~Lake Township, Ohio~~the U.S. and our first manufacturing facility in India. Such additional capacity, and any other potential investments to add or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be subject to certain risks and uncertainties described in the Risk Factors.

In response to the COVID-19 pandemic, governmental authorities have recommended or ordered the limitation or cessation of certain business or commercial activities in jurisdictions in which we do business or have operations. While some of these orders permit the continuation of essential business operations, or permit the performance of minimum business activities, these orders are subject to continuous revision or may be revoked or superseded, or our understanding of the applicability of these orders and exemptions may change at any time. In addition, due to contraction of the virus, or concerns about becoming ill from the virus, we may experience reductions in the availability of our operational workforce, such as our manufacturing personnel. As a result, we may at any time be ordered by governmental authorities, or we may determine, based on our understanding of the recommendations or orders of governmental authorities or the availability of our personnel, that we have to curtail or cease business operations or activities altogether, including manufacturing, fulfillment, ~~project development, construction, operating or maintenance operations, research and development~~R&D activities, or the implementation of our technology roadmap (such as certain Series 6 Plus manufacturing upgrades), or construction activities associated with our ~~CuRe program).~~expanding manufacturing capacity. At this time, such limitations have had a minimal effect on our manufacturing facilities, with the exception of the aforementioned ~~delay in the implementation of our CuRe program,~~technology roadmap delays, and we have implemented a wide range of safety measures intended to enable the continuity of our operations and inhibit the spread of COVID-19 at our manufacturing, administrative, and other sites and ~~facilities, including those in the~~

~~Table of Contents~~

~~United States, Malaysia, and Vietnam.~~facilities. While we continue to work with relevant government agencies in Malaysia and Vietnam to allow the essential travel of personnel that support the implementation of our technology roadmap, such implementation may be delayed ~~and in the case of our CuRe program has been delayed,~~ due to travel restrictions, quarantine requirements, other government orders, or increases in COVID-19 infection rates.

~~Systems Project Pipeline~~

~~The following table summarizes, as of November 4, 2021, our approximately 386 MW~~AC ~~advanced-stage project pipeline. The actual volume of modules installed in our projects will be greater than the project size in MW~~AC ~~as module volumes required for a project are based upon MW~~DC~~, which will be greater than the MW~~AC size pursuant to a DC-AC ratio typically ranging from 1.1 to 1.6. Such ratio varies across different projects due to many factors, including PPA pricing and the location, design, and costs of the system. Projects are typically removed from our advanced-stage project pipeline tables below once we substantially complete construction of the project and after substantially all of the associated project revenue is recognized. A project, or a portion of a project, may also be removed from the tables below in the event the project is not able to be sold due Refer to the ~~changing economics~~Risk Factors for more information related to impacts of ~~the project or other factors, or we decide to temporarily own and operate the project based~~COVID-19 on ~~strategic opportunities or market factors.~~

~~The following table includes projects with confirmed offtake agreements or projects under contracts with customers subject to certain closing conditions:~~

Project/Location
Project Size in MWAC
Project under Sales Agreement Primary Permits Obtained PPA Contracted Partner Expected or Actual Substantial Completion Year % Complete
as of
September 30, 2021
Luz del Norte, Chile 141 No Yes (1) 2016 100%
Momura, Japan 53 No Yes (2) 2023 20%
Kyoto, Japan 38 No Yes Chubu Electric Power Company 2022 36%
Yatsubo, Japan 26 No Yes (2) 2023 49%
Ikeda, Japan 21 No Yes (2) 2023 41%
Japan (multiple locations) 107 No Yes (3) 2021/2023 38%
Total 386

~~——————————~~

~~(1)Approximately 70 MW~~AC ~~of the plant’s capacity is contracted under various PPAs; remaining capacity to be sold on an open contract basis.~~

~~(2)Project has secured feed-in-tariff rights, and the related PPA will be executed at a later date.~~

~~(3)11 MW~~AC ~~has been contracted with Tokyo Electric Power Company. The remaining 96 MW~~AC ~~has secured feed-in-tariff rights, and the related PPAs for such projects will be executed at a later date.~~our business.

4539

Table of Contents

Results of Operations

The following table sets forth our condensed consolidated statements of operations as a percentage of net sales for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Cost of sales	Cost of sales	78.6	%	68.4	%	76.0	%	75.2	%	Cost of sales	96.9	%	77.0	%
Gross profit	Gross profit	21.4	%	31.6	%	24.0	%	24.8	%	Gross profit	3.1	%	23.0	%
Selling, general and administrative	Selling, general and administrative	7.5	%	5.4	%	6.5	%	7.6	%	Selling, general and administrative	10.0	%	6.5	%
Research and development	Research and development	4.4	%	2.5	%	3.4	%	3.4	%	Research and development	7.4	%	2.5	%
Production start-up	Production start-up	0.5	%	1.4	%	0.8	%	1.1	%	Production start-up	2.0	%	1.4	%
Litigation loss		—	%	—	%	—	%	0.3	%
Gain on sales of businesses, net	Gain on sales of businesses, net	(0.3)	%	—	%	7.3	%	—	%	Gain on sales of businesses, net	0.5	%	18.8	%
Operating income		8.7	%	22.3	%	20.5	%	12.4	%
Operating (loss) income										Operating (loss) income	(15.7)	%	31.4	%
Foreign currency loss, net	Foreign currency loss, net	(0.2)	%	(0.2)	%	(0.2)	%	(0.2)	%	Foreign currency loss, net	(1.1)	%	(0.3)	%
Interest income	Interest income	0.3	%	0.2	%	0.2	%	0.7	%	Interest income	0.6	%	0.1	%
Interest expense, net	Interest expense, net	(0.5)	%	(1.2)	%	(0.5)	%	(1.0)	%	Interest expense, net	(0.8)	%	(0.4)	%
Other (expense) income, net	Other (expense) income, net	(0.4)	%	(0.3)	%	0.1	%	(0.4)	%	Other (expense) income, net	(0.1)	%	1.1	%
Income tax (expense) benefit		(0.1)	%	(4.1)	%	(3.4)	%	1.9	%
Income tax benefit (expense)										Income tax benefit (expense)	5.3	%	(5.8)	%

Net income		7.7	%	16.7	%	16.7	%	13.4	%
Net (loss) income										Net (loss) income	(11.8)	%	26.1	%

Segment Overview

~~We operate~~Our primary segment is our modules business, ~~in two segments. Our modules segment~~which involves the design, manufacture, and sale of CdTe solar modules, ~~to third parties,~~which convert sunlight into electricity. Third-party customers of our modules segment include developers and ~~our systems segment includes the development, construction contracting and management, operation, maintenance, and sale~~operators of PV solar power systems. Our residual business operations include certain project development activities and O&M services, which are primarily concentrated in Japan, as well as the results of operations from PV solar power systems ~~including any~~we own and operate in certain international regions.

Net sales

~~Modules Business~~

We generally price and sell our solar modules on a per watt basis. During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we sold the majority of our solar modules to ~~integrators~~developers and operators of systems in the United States and India, and substantially all of our modules business net sales were denominated in U.S. dollars. We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Net sales from our residual business operations primarily consists of revenue recognized for sales of development projects or completed systems, including any modules installed in such systems and any revenue from energy generated by such systems. In certain prior periods, our residual business operations also included EPC services we provided to third parties.

~~Systems Business~~

During the three and nine months ended September 30, 2021, the majority of our systems business net sales were in the United States and Chile and were denominated in U.S. dollars. We recognize revenue for the sale of a development project, which excludes EPC services, or for the sale of a completed system when we enter into the associated sales contract with the customer. For other sales of solar power systems and/or EPC services, we generally recognize revenue over time as our performance creates or enhances an energy generation asset controlled by the customer. Furthermore, the sale of a solar power system combined with EPC services represents a single performance obligation for the development and construction of a single generation asset. For such arrangements, we recognize revenue as work is performed using cost based input methods, which result in revenue being

4640

Table of Contents

~~recognized as work is performed based on the relationship between actual costs incurred compared to the total estimated costs for a given contract.~~

The following table shows net sales by reportable segment for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Three Month Change				2021		2020		Nine Month Change				(Dollars in thousands)	2022		2021		Three Month Change
Modules	Modules	$	562,810	$	422,480	$	140,330	33	%	$	1,640,436	$	1,187,679	$	452,757	38	%	Modules	$	354,881	$	534,670	$	(179,789)	(34)	%
Systems		20,694		505,085		(484,391)		(96)	%	375,622		914,421		(538,799)		(59)	%
Other																		Other	12,159		268,704		(256,545)		(95)	%
Net sales	Net sales	$	583,504	$	927,565	$	(344,061)	(37)	%	$	2,016,058	$	2,102,100	$	(86,042)	(4)	%	Net sales	$	367,040	$	803,374	$	(436,334)	(54)	%

Net sales from our modules segment ~~increased $140.3~~decreased $179.8 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to a ~~51% increase~~22% decrease in the volume of watts sold ~~partially offset by~~and a ~~12%~~15% decrease in the average selling price per watt. Net sales from our ~~systems segment~~residual business operations decreased ~~$484.4~~$256.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to ~~the~~ sales of certain projects in the ~~Ishikawa, Miyagi, Anamizu, Tungabhadra, and Anantapur projects~~United States in the prior period.

Net sales from our modules segment increased $452.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to a 54% increase in the volume of watts sold, partially offset by a 10% decrease in the average selling price per watt. Net sales from our systems segment decreased $538.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the sales of the Ishikawa, American Kings, Miyagi, Anamizu, Tungabhadra, and Anantapur projects in the prior period and the completion of substantially all construction activities at the GA Solar 4 project in 2020, partially offset by the sales of the Sun Streams 2, Sun Streams 4, and Sun Streams 5 projects in the current period and the settlement of an outstanding indemnification arrangement associated with the sale of one of our projects. Under the terms of the indemnification arrangement, we received $65.1 million for our portion of the settlement payment, which we recorded as revenue during the nine months ended September 30, 2021. See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for discussion of our indemnification arrangements.

Cost of sales

~~Modules Business~~

Our modules business cost of sales includes the cost of raw materials and components for manufacturing solar modules, such as glass, transparent conductive coatings, CdTe and other thin film semiconductors, laminate materials, connector assemblies, edge seal materials, and frames. In addition, our cost of sales includes direct labor for the manufacturing of solar modules and manufacturing overhead, such as engineering, equipment maintenance, quality and production control, and information technology. Our cost of sales also includes depreciation of manufacturing plant and equipment, facility-related expenses, environmental health and safety costs, and costs associated with shipping, warranties, and solar module collection and recycling (excluding accretion).

~~Systems Business~~

~~Our systems business cost~~ Cost of sales ~~includes~~for our residual business operations primarily consists of project-related costs, such as development costs (legal, consulting, transmission upgrade, interconnection, permitting, and other similar costs), EPC costs (consisting primarily of solar modules, inverters, electrical and mounting hardware, project management and engineering, and construction labor), and site specific costs.

~~Table of Contents~~

The following table shows cost of sales by reportable segment for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Modules	Modules	$	444,550		$	297,658		$	146,892	49	%	$	1,312,389		$	907,564		$	404,825	45	%	Modules	$	343,692		$	434,230		$	(90,538)	(21)	%
Systems		14,374			336,892			(322,518)		(96)	%	220,204			673,723			(453,519)		(67)	%
Other																						Other	11,885			184,377			(172,492)		(94)	%
Total cost of sales	Total cost of sales	$	458,924		$	634,550		$	(175,626)	(28)	%	$	1,532,593		$	1,581,287		$	(48,694)	(3)	%	Total cost of sales	$	355,577		$	618,607		$	(263,030)	(43)	%
% of net sales	% of net sales	78.6		%	68.4		%					76.0		%	75.2		%					% of net sales	96.9		%	77.0		%

~~Our cost~~Cost of sales decreased ~~$175.6~~$263.0 million, or ~~28%~~43%, and increased ~~10.2~~19.9 percentage points as a percent of net sales for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The decrease in cost of sales was driven by a ~~$322.5~~$172.5 million decrease in our ~~systems segment~~residual business operations cost of sales primarily due to the ~~lower~~higher volume of projects sold during the prior period. ~~Such~~The decrease in ~~our systems segment~~ cost of sales was ~~partially offset~~also driven by a ~~$146.9~~$90.5 million ~~increase~~decrease in our modules segment cost of sales primarily ~~as a result of the following:~~

•~~higher~~due to lower costs of ~~$155.9~~$90.2 million from ~~an increase~~a decrease in the volume of modules sold;

•~~higher logistics costs of $30.3 million;~~

•a reduction to our product warranty liability of $19.7 million in 2020 due to lower-than-expected settlements for our older series of module technology and revisions to projected settlements, resulting in a lower projected return rate;

•a reduction to our module collection and recycling liability of $18.9 million in 2020 due to changes to the estimated timing of cash flows associated with capital, labor, and maintenance costs and updates to certain valuation assumptions; and

•an increase to our module collection and recycling liability of $10.8 million in 2021 due to lower estimated by-product credits for certain semiconductor materials recovered during the recycling process and updates to certain valuation assumptions; partially offset by

•continued module cost reductions, which decreased cost of sales by ~~$46.0~~$14.7 million;

•~~a reduction to our product warranty liability~~ and manufacturing related charges of ~~$33.1~~$5.3 million in ~~2021 due to lower-than-expected claims for our older series of module technology as well as~~ the ~~evolving claims profile of our newest series of module technology, resulting in reductions to our projected module return rates; and~~

•~~an impairment loss of $17.4 million in 2020 for certain module manufacturing equipment, including framing and assembly tools, which were no longer compatible~~prior period associated with ~~our long-term module technology roadmap.~~

~~Our cost of sales decreased $48.7 million, or 3%, and increased 0.8 percentage points as a percent of net sales for~~ the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease in cost of sales was driven by a $453.5 million decrease in our systems segment cost of sales primarily due to the lower volume of projects sold and under construction during the period. Such decrease in our systems segment cost of sales wasongoing COVID-19 pandemic; partially offset by ~~a $404.8 million increase in our modules segment cost~~higher sales freight of ~~sales primarily as a result of the following:~~$19.1 million.

•~~higher costs of $466.5 million from an increase in the volume of modules sold;~~

•~~higher logistics costs of $47.6 million;~~

•~~the reduction to our product warranty liability of $19.7 million in 2020 described above;~~

•~~the reduction to our module collection and recycling liability of $18.9 million in 2020 described above; and~~

•~~the increase to our module collection and recycling liability of $10.8 million in 2021 described above; partially offset by~~

•~~continued module cost reductions, which decreased cost of sales by $123.5 million;~~

•~~the reduction to our product warranty liability of $33.1 million in 2021 described above; and~~

•~~the impairment loss of $17.4 million in 2020 described above.~~

~~Table of Contents~~

Gross profit

Gross profit may be affected by numerous factors, including the selling prices of our modules and ~~systems,~~the selling prices of projects and services included in our residual business operations, our manufacturing costs, project development costs, ~~BoS costs,~~ the capacity utilization ~~and downtime~~ of our manufacturing facilities, and foreign exchange rates. Gross profit may also be affected by the mix of net sales from our modules business and ~~systems businesses.~~residual business operations.

Table of Contents

The following table shows gross profit for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Gross profit	Gross profit	$	124,580		$	293,015		$	(168,435)	(57)	%	$	483,465		$	520,813		$	(37,348)	(7)	%	Gross profit	$	11,463		$	184,767		$	(173,304)	(94)	%
% of net sales	% of net sales	21.4		%	31.6		%					24.0		%	24.8		%					% of net sales	3.1		%	23.0		%

Gross profit decreased ~~10.2~~19.9 percentage points to ~~21.4%~~3.1% during the three months ended ~~September 30, 2021~~March 31, 2022 from ~~31.6%~~23.0% during the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to the volume of higher gross profit projects sold during the prior period, a decrease in the average selling price per watt of our modules, an increase in logistics costs, and the increase to our module collection and recycling liability in the current period compared to a reduction in the prior period described above, partially offset by the higher benefit from reductions to our product warranty liability described above and continued module cost reductions.

Gross profit decreased 0.8 percentage points to 24.0% during the nine months ended September 30, 2021 from 24.8% during the nine months ended September 30, 2020 primarily due to a decrease in the average selling price per watt of our modules, the volume of higher gross profit projects sold during the prior period, and an increase in ~~logistics costs,~~sales freight, partially offset by continued module cost reductions and manufacturing related charges associated with the ~~indemnification matter described above.~~COVID-19 pandemic in the prior period.

Selling, general and administrative

Selling, general and administrative expense consists primarily of salaries and other personnel-related costs, professional fees, insurance costs, and other business development and selling expenses.

The following table shows selling, general and administrative expense for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Selling, general and administrative	Selling, general and administrative	$	43,476		$	49,861		$	(6,385)	(13)	%	$	131,909		$	160,218		$	(28,309)	(18)	%	Selling, general and administrative	$	36,728		$	52,087		$	(15,359)	(29)	%
% of net sales	% of net sales	7.5		%	5.4		%					6.5		%	7.6		%					% of net sales	10.0		%	6.5		%

Selling, general and administrative expense for the three months ended ~~September 30, 2021~~March 31, 2022 decreased compared to the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to a decrease in employee compensation expense driven by reductions in headcount from the sales of our North American O&M operations and U.S. project development business in the prior period, lower ~~professional fees, partially offset by~~expected credit losses for our accounts receivable, higher charges for impairments of certain project ~~assets.~~assets in the prior period, and lower professional fees.

Selling, general and administrative expense for the nine months ended September 30, 2021 decreased compared to the nine months ended September 30, 2020 primarily due to a decrease in employee compensation expense driven by reductions in headcount, lower professional fees, and lower expected credit losses for our accounts receivable.

~~Table of Contents~~

Research and development

Research and development expense consists primarily of salaries and other personnel-related costs; the cost of products, materials, and outside services used in our R&D activities; and depreciation and amortization expense associated with R&D specific facilities and equipment. We maintain a number of programs and activities to improve our technology and processes in order to enhance the performance and reduce the costs of our solar modules.

The following table shows research and development expense for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Research and development	Research and development	$	25,426		$	22,972		$	2,454	11	%	$	69,234		$	71,068		$	(1,834)	(3)	%	Research and development	$	27,108		$	19,873		$	7,235	36	%
% of net sales	% of net sales	4.4		%	2.5		%					3.4		%	3.4		%					% of net sales	7.4		%	2.5		%

Research and development expense for the three months ended ~~September 30, 2021~~March 31, 2022 increased compared to the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to increased material and module testing costs ~~partially offset by lower employee compensation expense resulting from reductions in R&D headcount.~~

~~Research~~ and development expense for the nine months ended September 30, 2021 decreased compared to the nine months ended September 30, 2020 primarily due to lower employee compensation expense resulting from reductions in R&D headcount, lower share-based compensation expense in the prior period driven by the forfeiture of unvested shares by our former Chief Technology Officer, who retired ~~effective~~in March ~~15, 2021, and lower impairment charges for certain equipment, partially offset by increased material and module testing costs.~~2021.

Table of Contents

Production start-up

Production start-up expense consists of costs associated with operating a production line before it is qualified for commercial production, including the cost of raw materials for solar modules run through the production line during the qualification phase, employee compensation for individuals supporting production start-up activities, and applicable facility related costs. Production start-up expense also includes costs related to the selection of a new site and implementation costs for manufacturing process improvements to the extent we cannot capitalize these expenditures.

The following table shows production start-up expense for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Production start-up	Production start-up	$	2,945		$	13,019		$	(10,074)	(77)	%	$	16,014		$	23,812		$	(7,798)	(33)	%	Production start-up	$	7,338		$	11,354		$	(4,016)	(35)	%
% of net sales	% of net sales	0.5		%	1.4		%					0.8		%	1.1		%					% of net sales	2.0		%	1.4		%

During the three months ended ~~September 30, 2021,~~March 31, 2022, we incurred production start-up expense primarily for our third manufacturing facility in the U.S. and for certain manufacturing upgrades at our ~~facilities in Kulim, Malaysia.~~Malaysian facilities. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we incurred production start-up expense primarily for the transition to Series 6 module manufacturing at our second facility in Kulim, Malaysia, which commenced commercial production in early 2021. During the three and nine months ended September 30, 2020, we incurred production start-up expense for the transition to Series 6 module manufacturing at our second facility in Kulim, Malaysia and the capacity expansion of our manufacturing facility in Perrysburg, Ohio.

~~Table of Contents~~

~~Litigation loss~~

~~The following table shows litigation loss for the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
(Dollars in thousands) 2021 2020 Three Month Change 2021 2020 Nine Month Change
Litigation loss $ — $ — $ — — % $ — $ 6,000 $ (6,000) (100) %
% of net sales — % — % — % 0.3 %

In July 2020, we executed a definitive agreement to settle the claims in the Opt-Out Action filed in 2015 in the Arizona District Court by putative stockholders that opted out of a separate class action lawsuit. Pursuant to the settlement, we agreed to pay a total of $19 million in exchange for mutual releases and a dismissal with prejudice of the Opt-Out Action. The agreement contains no admission of liability, wrongdoing, or responsibility by any of the defendants. On July 30, 2020, First Solar funded the settlement, and on July 31, 2020, the parties filed a joint stipulation of dismissal. On September 10, 2020, the Arizona District Court entered an order dismissing the case with prejudice. As of December 31, 2019, we accrued $13 million of estimated losses for this action. As a result of the settlement, we accrued an incremental $6 million litigation loss during the nine months ended September 30, 2020.

Gain on sales of businesses, net

The following table shows gain on sales of businesses, net for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Gain on sales of businesses, net	Gain on sales of businesses, net	$	(1,866)		$	—		$	(1,866)	(100)	%	$	147,284		$	—		$	147,284	100	%	Gain on sales of businesses, net	$	1,907		$	150,895		$	(148,988)	(99)	%
% of net sales	% of net sales	(0.3)		%	—		%					7.3		%	—		%					% of net sales	0.5		%	18.8		%

In January 2022, we completed the sale of certain international O&M operations to a subsidiary of Clairvest for consideration of $1.9 million. As a result of this transaction, we recognized a gain of $1.9 million, net of transaction costs and post-closing adjustments, during the three months ended March 31, 2022.

In August 2020, we entered into an agreement with a separate subsidiary of Clairvest for the sale of our North American O&M operations. OnIn March ~~31,~~ 2021, we completed the ~~transaction. Following certain customary post-closing adjustments, we~~transaction and received ~~total~~initial consideration of ~~$149.1~~$146.0 million. As a result of this transaction, we recognized a gain of ~~$115.8~~$119.2 million, net of transaction costs, ~~and post-closing adjustments,~~ during the ~~nine~~three months ended ~~September 30, 2021.~~

InMarch 31, 2021.In January 2021, we entered into an agreement with Leeward for the sale of our U.S. project development business. OnIn March ~~31,~~ 2021, we completed the transaction ~~for an aggregate purchase price~~and received consideration of ~~$284.0 million. Such purchase price included~~ $151.4 million for the sale of ~~the U.S. project development business and $132.6 million for the sale of 392 MW~~DC ~~of solar modules, which is presented in “Net sales” on our condensed consolidated statements of operations for the nine months ended September 30, 2021.~~such business. As a result of this transaction, we recognized a gain of ~~$31.5~~$31.8 million, net of transaction costs, ~~and post-closing adjustments,~~ during the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

See Note 2. “Sales of Businesses” to our condensed consolidated financial statements for further information related to these transactions.

5143

Table of Contents

Foreign currency loss, net

Foreign currency loss, net consists of the net effect of gains and losses resulting from holding assets and liabilities and conducting transactions denominated in currencies other than our subsidiaries’ functional currencies.

The following table shows foreign currency loss, net for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Three Month Change				2021		2020		Nine Month Change				(Dollars in thousands)	2022		2021		Three Month Change
Foreign currency loss, net	Foreign currency loss, net	$	(1,018)	$	(1,852)	$	834	(45)	%	$	(4,613)	$	(3,549)	$	(1,064)	30	%	Foreign currency loss, net	$	(4,198)	$	(2,595)	$	(1,603)	62	%

Foreign currency loss, net for the three ~~and nine~~ months ended ~~September 30, 2021 was consistent with~~March 31, 2022 increased compared to the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021 primarily due to higher costs associated with hedging activities related to our subsidiaries in India.

Interest income

Interest income is earned on our cash, ~~cash equivalents,~~ marketable securities, restricted cash, and restricted marketable securities. Interest income also includes interest earned from ~~notes receivable and~~ late customer payments.

The following table shows interest income for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Three Month Change				2021		2020		Nine Month Change				(Dollars in thousands)	2022		2021		Three Month Change
Interest income	Interest income	$	1,752	$	2,109	$	(357)	(17)	%	$	3,996	$	15,113	$	(11,117)	(74)	%	Interest income	$	2,325	$	956	$	1,369	143	%

Interest income for the three months ended ~~September 30, 2021 was consistent with~~March 31, 2022 increased compared to the three months ended ~~September 30, 2020. Interest income for the nine months ended September 30,~~March 31, 2021 ~~decreased compared to the nine months ended September 30, 2020~~ primarily due to ~~lower~~higher interest rates on restricted marketable securities and ~~cash and cash equivalents and~~time deposits, partially offset by lower average balances associated with marketable securities.

Interest expense, net

Interest expense, net is primarily comprised of interest incurred on long-term debt, settlements of interest rate swap contracts, and changes in the fair value of interest rate swap contracts that do not qualify for hedge accounting in accordance with ASC 815. We may capitalize interest expense to our project assets or property, plant and equipment when such costs qualify for interest capitalization, which reduces the amount of net interest expense reported in any given period.

The following table shows interest expense, net for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Three Month Change				2021		2020		Nine Month Change				(Dollars in thousands)	2022		2021		Three Month Change
Interest expense, net	Interest expense, net	$	(2,958)	$	(10,975)	$	8,017	(73)	%	$	(10,577)	$	(21,018)	$	10,441	(50)	%	Interest expense, net	$	(2,865)	$	(2,996)	$	131	(4)	%

Interest expense, net for the three ~~and nine~~ months ended ~~September 30, 2021 decreased compared to~~March 31, 2022 was consistent with the three ~~and nine~~ months ended September 30, 2020 primarily due to unfavorable changes in the fair value of interest rate swap contracts in the prior period, which did not qualify for hedge accounting, lower amortization of debt discounts and issuance costs in the current period primarily driven by the repayment of the Ishikawa credit agreement in the prior period, and lower interest expense associated with project debt.March 31, 2021.

5244

Table of Contents

Other (expense) income, net

Other (expense) income, net is primarily comprised of miscellaneous items and realized gains and losses on the sale of marketable securities and restricted marketable securities.

The following table shows other (expense) income, net for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Three Month Change				2021		2020		Nine Month Change				(Dollars in thousands)	2022		2021		Three Month Change
Other (expense) income, net	Other (expense) income, net	$	(2,603)	$	(3,236)	$	633	20	%	$	2,598	$	(8,653)	$	11,251	130	%	Other (expense) income, net	$	(212)	$	8,448	$	(8,660)	(103)	%

Other ~~expense,~~income, net for the three months ended ~~September 30, 2021 was consistent with~~March 31, 2022 decreased compared to the three months ended ~~September 30, 2020. Other income, net for the nine months ended September 30,~~March 31, 2021 ~~increased compared to the nine months ended September 30, 2020,~~ primarily due to ~~expected credit losses associated with certain notes receivable in the prior period, partially offset by lower~~higher realized gains from sales of restricted marketable securities in the ~~current period when compared to the~~ prior period.

Income tax benefit (expense) ~~benefit~~

Income tax ~~expense~~benefit or ~~benefit,~~expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect our best estimate of current and future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions in which we operate, principally Japan, Malaysia, and Vietnam. Significant judgments and estimates are required to determine our consolidated income tax expense. The statutory federal corporate income tax rate in the United States is 21%, and the tax rates in Japan, Malaysia, and Vietnam are 30.6%, 24%, and 20%, respectively. In Malaysia, we have been granted a long-term tax holiday, scheduled to expire in 2027, pursuant to which substantially all of our income earned in Malaysia is exempt from income tax, conditional upon our continued compliance with certain employment and investment thresholds. In Vietnam, we have been granted a tax incentive, scheduled to expire at the end of 2025, pursuant to which income earned in Vietnam is subject to reduced annual tax rates.

The following table shows income tax benefit (expense) ~~benefit~~ for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Three Months Ended September 30,										Nine Months Ended September 30,											Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			Three Month Change				2021			2020			Nine Month Change				(Dollars in thousands)	2022			2021			Three Month Change
Income tax (expense) benefit		$	(837)		$	(38,107)		$	37,270	(98)	%	$	(67,673)		$	40,894		$	(108,567)	265	%
Income tax benefit (expense)																						Income tax benefit (expense)	$	19,499		$	(46,490)		$	65,989	(142)	%
Effective tax rate	Effective tax rate	1.8		%	19.7		%					16.7		%	(16.9)		%					Effective tax rate	31.1		%	18.1		%

Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. The rate is also affected by discrete items that may occur in any given period, but are not consistent from period to period. Income tax ~~expense decreased~~benefit increased by ~~$37.3~~$66.0 million during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020~~March 31, 2021 primarily due to ~~lower~~our pretax income in the current period. Income tax expense increased by $108.6 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to a discrete tax benefit in the prior year from the effect of tax law changes associated with the CARES Act and higher pretax incomeloss in the current period.

5345

Table of Contents

Critical Accounting Policies and Estimates

In preparing our condensed consolidated financial statements in conformity with U.S. GAAP, we make estimates and assumptions that affect the amounts of reported assets, liabilities, revenues, and expenses, as well as the disclosure of contingent liabilities. Some of our accounting policies require the application of significant judgment in the selection of the appropriate assumptions for making these estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We base our judgments and estimates on our historical experience, our forecasts, and other available information as appropriate. We believe the judgments and estimates involved in ~~over time revenue recognition,~~ accrued solar module collection and recycling, product warranties, accounting for income taxes, and long-lived asset impairments have the greatest potential impact on our condensed consolidated financial statements. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. For a description of the accounting policies that require the most significant judgment and estimates in the preparation of our condensed consolidated financial statements, refer to our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes to our accounting policies during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Recent Accounting Pronouncements

None.

Liquidity and Capital Resources

As of ~~September 30, 2021,~~March 31, 2022, we believe that our cash, ~~cash equivalents,~~ marketable securities, cash flows from operating activities, and contracts with customers for the future sale of solar modules ~~and advanced-stage project pipeline~~ will be sufficient to meet our working capital, capital expenditure, and ~~systems~~ project asset investment needs for at least the next 12 months. As ~~needed,~~necessary, we also believe we will have adequate access to the capital markets. We monitor our working capital to ensure we have adequate liquidity, both domestically and internationally.

We intend to maintain appropriate debt levels based upon cash flow expectations, our overall cost of capital, and expected cash requirements for operations, such as construction activities and purchases of manufacturing equipment for our recently announced manufacturing facility in India and ~~systems project~~ongoing development activities for certain projects in ~~certain international regions.~~Japan. However, our ability to raise capital on terms commercially acceptable to us could be constrained if there is insufficient lender or investor interest due to company-specific, industry-wide, or broader market concerns. Any incremental debt financings could result in increased debt service expenses and/or restrictive covenants, which could limit our ability to pursue our strategic plans. Additionally, given the duration of these and other capital investments and the currency risk relative to the U.S. dollar in certain international markets in which we operate, we continue to explore local financing alternatives. Should these financing alternatives be unavailable or too cost prohibitive, we could be exposed to significant currency risk and our liquidity could be adversely impacted.

As of ~~September 30, 2021,~~March 31, 2022, we had ~~$1.9~~$1.5 billion in cash ~~cash equivalents,~~ and marketable securities compared to ~~$1.7~~$1.8 billion as of December 31, ~~2020.~~2021. The ~~increase~~decrease in cash ~~cash equivalents,~~ and marketable securities was primarily driven by cash receipts from module sales to customers; cash proceeds from the sale of our North American O&M operations and U.S. project development business; and cash proceeds from the sale and construction of systems projects; partially offset by purchases of property, plant and equipment; expenditures for the construction of certain projects in Japan; and other operating ~~expenditures.~~expenditures; partially offset by net proceeds from the sales and maturities of marketable securities; and cash receipts from module sales. As of ~~September 30, 2021,~~March 31, 2022, $0.7 billion of our cash ~~cash equivalents,~~ and marketable securities was held by our foreign subsidiaries and was primarily based in U.S. dollar, Japanese yen, and Indian rupee denominated holdings.

Table of Contents

We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. If certain international funds were needed for our operations in the United States, we may be required to accrue and pay certain U.S. and foreign taxes to repatriate such funds. We maintain the intent and ability to permanently reinvest our accumulated earnings outside the United States, with the exception of our subsidiaries in Canada and Germany. In addition, changes to foreign government banking

~~Table of Contents~~

regulations may restrict our ability to move funds among various jurisdictions under certain circumstances, which could negatively impact our access to capital, resulting in an adverse effect on our liquidity and capital resources.

We continually evaluate forecasted global demand and seek to balance our manufacturing capacity with such demand. We recently announced our plans to invest approximately ~~$1.3~~$1.4 billion to expand our solar manufacturing capacity by 6.6 GWDC by constructing our third ~~U.S.~~ manufacturing facility in ~~Lake Township, Ohio~~the U.S. and our first manufacturing facility in India. These new facilities are currently under construction and are expected to commence operations in the first half of 2023 and the second half of 2023, respectively. In addition, we continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage (or conversion efficiency), and improving manufacturing yield losses. During ~~2021,~~2022, we expect to spend ~~$675 million~~$0.9 billion to ~~$725 million~~$1.1 billion for capital expenditures, including the new facilities mentioned above and upgrades to machinery and equipment that we believe will further increase our module wattage and expand capacity and throughput at our manufacturing facilities.

We also expect to commit significant working capital to purchase various raw materials used in our module manufacturing process. Our failure to obtain raw materials and components that meet our quality, quantity, and cost requirements in a timely manner could interrupt or impair our ability to manufacture our solar modules or increase our manufacturing costs. Accordingly, we may enter into long-term supply agreements to mitigate potential risks related to the procurement of key raw materials and components, and such agreements may be noncancelable or cancelable with a significant penalty. For example, we have entered into long-term supply agreements for the purchase of certain specified minimum volumes of substrate glass and cover glass for our PV solar modules. Our remaining purchases under these supply agreements are expected to be approximately ~~$1.7~~$1.6 billion of substrate glass and approximately ~~$380~~$359 million of cover glass. We have the right to terminate these agreements upon payment of specified termination penalties (which, in aggregate, are up to ~~$338~~$307 million as of ~~September 30, 2021~~March 31, 2022 and decline over the remaining supply periods).

~~Our systems business is expected~~We have also committed certain financial resources to ~~continue~~fulfill our solar module collection and recycling obligations, and have established a trust under which these funds are put into custodial accounts with an established and reputable bank. As of March 31, 2022, such funds were comprised of restricted marketable securities of $220.2 million and restricted cash balances of $3.5 million. As of March 31, 2022, our module collection and recycling liability was $137.5 million. Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to ~~have significant liquidity requirements~~customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the ~~future. From time~~trust must meet certain investment quality criteria comparable to ~~time,~~highly rated government or agency bonds. As necessary, we ~~enter into commercial commitments~~adjust the funded amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in ~~the form of letters of credit, bank guarantees,~~prior years.

Our residual business operations include certain project development activities and ~~surety bonds to provide financial and performance assurance to third parties, the majority of~~O&M services, which ~~support our systems projects. The net amount of our project assets and related portions of deferred revenue and long-term debt, which approximates our net capital investment~~are primarily concentrated in ~~the development and construction of systems projects, was $221.7 million as of September 30, 2021.~~Japan. Solar power project development cycles, which span the time between the identification of a site location and the commercial operation of a system, vary substantially and can take many years to mature. As a result of these long project cycles and strategic decisions to finance the development of certain projects using our working capital, we may need to make significant ~~up-front~~ investments of resources in advance of the receipt of any cash from the sale of such projects. ~~Delays~~In late 2021, we received an offer to purchase our project development and O&M services businesses in ~~construction or~~Japan and determined it was in ~~completing~~the best interest of our stockholders to pursue this transaction. As a result, we expect to complete the sale of these businesses in the first half of 2022. To the extent the sale is not completed in the near term, our ~~systems projects that we are self-financing~~residual business operations may ~~also impact our liquidity. In certain circumstances, we may need~~continue to ~~finance~~have

Table of Contents

significant liquidity requirements in the future for project development and construction costs, ~~exclusively using working~~commitments under land lease arrangements associated with project sites, and commitments under certain project debt arrangements. The net amount of our project assets and related portions of long-term debt and deferred revenue, which approximates our net capital ~~if project financing becomes unavailable due to market-wide, regional, or other concerns.~~

~~From~~investment in the development and construction of solar power projects, was $306.1 million as of March 31, 2022. Additionally, from time to time we may develop projects in certain markets around the world where we may hold all or a significant portion of the equity in a project for several years. Given the duration of these investments and the currency risk relative to the U.S. dollar in some of these markets, we continue to explore local financing alternatives. Should these financing alternatives be unavailable or too cost prohibitive, we could be exposed to significant currency risk and our liquidity could be adversely impacted.

~~Additionally, we may elect~~have elected to retain an ownership interest in certain PV solar power systems ~~projects~~ after they become operational if we determine it would be of economic and strategic benefit to do so. If, for example, we cannot sell a system at economics that are attractive to us or potential customers are unwilling to assume the risks and rewards typical of system ownership, we may instead elect to temporarily own and operate such system until we can sell it on more economically attractive terms.became operational. The decision to retain ownership of a system impacts our liquidity depending upon the size and cost of the project. AsThe net amount of ~~September 30, 2021, we had $230.4 million of net~~our PV solar power systems

~~Table~~ and related portions of ~~Contents~~

~~placed in service in international markets. We have elected, and may in the future elect, to enter into temporary or~~ long-term ~~project financing to reduce the impact on~~debt, which approximates our ~~liquidity and working~~net capital ~~with regard to such systems.~~

~~Cash Flows~~

~~The following table summarizes key cash flow activity for the nine months ended September 30, 2021 and 2020 (in thousands):~~

Nine Months Ended
September 30,
2021 2020
Net cash provided by (used in) operating activities $ 203,092 $ (149,198)
Net cash (used in) provided by investing activities (83,289) 116,322
Net cash used in financing activities (9,210) (98,196)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,687 1,251
Net increase (decrease) in cash, cash equivalents and restricted cash $ 112,280 $ (129,821)

~~Operating Activities~~

The increase in net cash provided by operating activities was primarily driven by higher cash receipts from module sales and the $350 million settlement payment in 2020 associated with our prior class action lawsuit, partially offset by lower cash proceeds from sales of systems projects in the current period.

~~Investing Activities~~

The increase in net cash used in investing activities was primarily due to higher purchases of restricted marketable securities and lower proceeds from sales and maturities of marketable securities, partially offset by proceeds from the sale of our North American O&M operations and U.S. project development business.

~~Financing Activities~~

The decrease in net cash used in financing activities was primarily due to the repayment of the Ishikawa credit agreement in the prior period, partially offset by higher proceeds from borrowings under project specific debt financings in the prior period for the construction of certain projects in Japan.

~~Contractual Obligations~~

Our contractual obligations have not materially changed since December 31, 2020 with the exception of borrowings under project specific debt financings and other changes in the ordinary course of business. See Note 9. “Debt” to our condensed consolidated financial statements for more information related to the changesinvestment in our ~~long-term debt. See also our Annual Report on Form 10-K for the year ended December~~operating power plants, was $31.3 million as of March 31, ~~2020 for additional information regarding our contractual obligations.~~

~~Off-Balance Sheet Arrangements~~2022.

As of ~~September 30, 2021,~~March 31, 2022, we had no off-balance sheet debt or similar obligations, other than financial assurance related instruments, which are not classified as debt. We do not guarantee any third-party debt. See Note 10. “Commitments and Contingencies” to our condensed consolidated financial statements for further information about our financial assurance related instruments.

Cash Flows

56The following table summarizes key cash flow activity for the three months ended March 31, 2022 and 2021 (in thousands):


	Three Months Ended March 31,
	2022		2021
Net cash used in operating activities	$	(138,839)	$	(279,478)
Net cash (used in) provided by investing activities	(2,944)		271,838
Net cash provided by (used in) financing activities	5,764		(31,451)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	15,162		(652)
Net decrease in cash, cash equivalents and restricted cash	$	(120,857)	$	(39,743)

Operating Activities

The decrease in net cash used in operating activities was primarily driven by higher cash receipts from module sales and higher operating expenditures in the prior period, partially offset by certain advance payments for raw materials in the current period.

Investing Activities

The increase in net cash used in investing activities was primarily due to proceeds from the sale of our North American O&M operations and U.S. project development business in the prior period, lower net sales and maturities of marketable securities and restricted marketable securities, and higher purchases of property, plant and equipment.

Financing Activities

The increase in net cash provided by financing activities was primarily due to the repayment of the Tochigi credit agreement in the prior period.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the information previously provided under Item 7A. of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Table of Contents

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “disclosure controls and procedures” as defined in Exchange Act Rule 13a-15(e) and 15d-15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~September 30, 2021~~March 31, 2022 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

We also carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our “internal control over financial reporting” as defined in Exchange Act Rule 13a-15(f) and 15d-15(f) to determine whether any changes in our internal control over financial reporting occurred during the three months ended ~~September 30, 2021~~March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there were no such changes in our internal control over financial reporting that occurred during the three months ended ~~September 30, 2021~~March 31, 2022 despite the fact that many of our associates continue to work remotely due to the COVID-19 pandemic. We continue to monitor and assess the COVID-19 situation on our internal controls to minimize potential impacts on their design and operating effectiveness.

CEO and CFO Certifications

We have attached as exhibits to this Quarterly Report on Form 10-Q the certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with the Exchange Act. We recommend that this Item 4. be read in conjunction with those certifications for a more complete understanding of the subject matter presented.

Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems’ objectives are being met. Further, the design of any system of controls must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 10. “Commitments and Contingencies” under the heading “Legal Proceedings” of our condensed consolidated financial statements for legal proceedings and related matters.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect our business, financial condition, results of operations, or cash flows. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently consider immaterial may also materially adversely affect our business, financial condition, results of operations, or cash flows. ~~Except for the risk factors set forth below, there~~There have been no material changes in the risk factors contained in our Annual Report on Form 10-K.

Our failure to further refine our technology, reduce module manufacturing and BoS costs, and develop and introduce improved PV products, including as a result of delays in implementing planned advancements, could render our solar modules or systems uncompetitive and reduce our net sales, profitability, and/or market share.

We need to continue to invest significant financial resources in R&D to continue to improve our module conversion efficiencies, lower the LCOE of our PV solar power systems, and otherwise keep pace with technological advances in the solar industry. However, R&D activities are inherently uncertain, and we could encounter practical difficulties in commercializing our research results. We seek to continuously improve our products and processes, including, for example, certain planned improvements to our Series 6 module technology and manufacturing capabilities, such as the implementation of our copper replacement (or “CuRe”) program or the increase to our module form factor (which we refer to as “Series 6 Plus”), and the resulting changes carry potential risks in the form of delays, performance, additional costs, or other unintended contingencies. For example, implementation of our CuRe program has been delayed as a result of certain challenges, including in achieving its full performance entitlement in high volume manufacturing conditions and certain impediments to our ability to upgrade tooling to support our CuRe program. As a result, we have amended or will endeavor to amend certain related customer contracts, including by potentially making certain price concessions and substituting other modules. While we believe our CuRe program remains promising and that we will be able to resolve the challenges described above, we may encounter unanticipated technological, logistical, or other challenges that could result in further delays to our CuRe program. Any such additional challenges or other circumstances beyond our knowledge or control could cause actual pricing concessions in potential amended customer contracts to exceed, potentially materially, our currently anticipated estimate of approximately $100 million of 2022 revenue. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Certain Trends and Uncertainties” of this Quarterly Report on Form 10-Q for additional information on our CuRe program.

Our significant expenditures for R&D may not produce corresponding benefits. Other companies are developing a variety of competing PV technologies, including advanced multi-crystalline silicon cells, PERC or advanced p-type crystalline silicon cells, high-efficiency n-type crystalline silicon cells, bifacial solar modules, copper indium gallium diselenide thin films, amorphous silicon thin films, and new emerging technologies such as hybrid perovskites, which could produce solar modules or systems that prove more cost-effective or have better performance than our solar modules or systems.

In addition, other companies could potentially develop a highly reliable renewable energy system that mitigates the intermittent power generation drawback of many renewable energy systems, or offer other value-added improvements from the perspective of utilities and other system owners, in which case such companies could compete with us even if the LCOE associated with such new systems is higher than that of our systems. As a result, our solar modules or systems may be negatively differentiated or rendered obsolete by the technological advances of

~~Table of Contents~~

our competitors, which would reduce our net sales, profitability, and/or market share. In addition, we often forward price our products and services in anticipation of future cost reductions and technology improvements, and thus, an inability to further refine our technology and execute our module technology and cost reduction roadmaps could adversely affect our operating results.

Our Amended and Restated Bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and the federal district courts of the United States as the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act of 1933, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, employees, agents or stockholders.

Our Amended and Restated Bylaws (“Bylaws”) provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, other employees, agents or stockholders to us or our stockholders, (iii) any action or proceeding against us or any of our directors, officers, other employees, agents or stockholders arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”), our Amended and Restated Certificate of Incorporation or our Bylaws, (iv) any action or proceeding against us or any of our directors, officers or other employees asserting a claim that is governed by the internal affairs doctrine, or (v) any action or proceeding asserting an “internal corporate claim,” as defined in the DGCL. Our Bylaws also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act. Nothing in our Bylaws precludes stockholders that assert claims under the Exchange Act from bringing such claims in any court, subject to applicable law.

Any person or entity holding, owning or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, other employees, agents or stockholders, which may discourage lawsuits against us and our directors, officers, other employees, agents or stockholders. The enforceability of similar choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. For example, in December 2018, the Court of Chancery of the State of Delaware determined that a provision stating that federal district courts of the United States are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. Although this decision was reversed by the Delaware Supreme Court in March 2020, courts in other states may still find these provisions to be inapplicable or unenforceable. If a court were to find the exclusive forum provisions in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could adversely affect our results of operations.

~~Table of Contents~~

Item 6. Exhibits

The following exhibits are filed with this Quarterly Report on Form 10-Q:


Exhibit Number						Exhibit Description
3.1						Amended and Restated Certificate of Incorporation of First Solar, Inc. (incorporated by reference to Exhibit 3.1 to First Solar, Inc.’s Registration Statement on Form S-1 filed on October 25, 2006)
3.2						Amended and Restated Bylaws of First Solar, Inc. (incorporated by reference to Exhibit 3.1 to First Solar, Inc.’s Form 8-K filed on July 23, 2021)
10.1*						Form of Performance Unit Award Agreement - Form Perf Unit-014
10.2*						Form of RSU Award Agreement
10.3*						Form of Option Award Agreement
10.4*						Form of Share Award Agreement
10.5*						Form of Cash Incentive Award Agreement
10.6*						Form of Grant Notice for 2022-2024 Executive Performance Equity Plan
10.7*						Form of Grant Notice for Restricted Stock Unit Award
31.1*						Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1†						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover page formatted as Inline XBRL and contained in Exhibit 101

Table of Contents

——————————

* Filed herewith.

† Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FIRST SOLAR, INC.

Date: ~~November 4, 2021~~April 28, 2022	By:	/s/ BYRON JEFFERS
	Name:	Byron Jeffers
	Title:	Chief Accounting Officer

6051


Project/Location	Project Size in MWAC	Project under Sales Agreement	Primary Permits Obtained	PPA Contracted Partner	Expected or Actual Substantial Completion Year	% Complete as of September 30, 2021
Luz del Norte, Chile	141	No	Yes	(1)	2016	100%
Momura, Japan	53	No	Yes	(2)	2023	20%
Kyoto, Japan	38	No	Yes	Chubu Electric Power Company	2022	36%
Yatsubo, Japan	26	No	Yes	(2)	2023	49%
Ikeda, Japan	21	No	Yes	(2)	2023	41%
Japan (multiple locations)	107	No	Yes	(3)	2021/2023	38%
Total	386