FSLR Mar13 10q Draft


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark one)
[x]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the quarterly period ended March 31, 2013
or
[ ]
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)

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 [x] No [ ]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [x]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [ ]
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [ ]   No [x]

As of May 3, 2013, 87,792,199 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding.
 



FIRST SOLAR, INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013

TABLE OF CONTENTS
 
 
Page
Part I.
Financial Information (Unaudited)
 
Item 1.
Condensed Consolidated Financial Statements:
 
 
Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and March 31, 2012
 
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2013 and March 31, 2012
 
Condensed Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012
 
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and March 31, 2012
 
Notes to Condensed Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
Part II.
Other Information
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signature
 




PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

 
 
Three Months Ended
 
 
 
March 31,
2013
 
March 31,
2012
Net sales
 
$
755,205

 
$
497,055

Cost of sales
 
585,879

 
420,310

Gross profit
 
169,326

 
76,745

Operating expenses:
 
 
 
 
Research and development
 
29,931

 
36,084

Selling, general and administrative
 
74,465

 
91,820

Production start-up
 
1,376

 
4,058

Restructuring
 
2,347

 
401,065

Total operating expenses
 
108,119

 
533,027

Operating income (loss)
 
61,207

 
(456,282
)
Foreign currency gain (loss)
 
1,618

 
(984
)
Interest income
 
4,947

 
2,911

Interest expense, net
 
(750
)
 
(920
)
Other expense, net
 
(833
)
 
(1,211
)
Income (loss) before income taxes
 
66,189

 
(456,486
)
Income tax expense (benefit)
 
7,047

 
(7,070
)
Net income (loss)
 
$
59,142

 
$
(449,416
)
Net income (loss) per share:
 
 
 
 
Basic
 
$
0.68

 
$
(5.20
)
Diluted
 
$
0.66

 
$
(5.20
)
Weighted-average number of shares used in per share calculations:
 
 
 
 
Basic
 
87,206

 
86,507

Diluted
 
89,377

 
86,507


See accompanying notes to these condensed consolidated financial statements.

3


FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended
 
 
 
March 31,
2013
 
March 31,
2012
Net income (loss)
 
$
59,142

 
$
(449,416
)
Other comprehensive income (loss), net of tax:
 
 
 
 
Foreign currency translation adjustments
 
(3,077
)
 
13,509

Unrealized loss on marketable securities and restricted investments
 
(10,341
)
 
(4,064
)
Unrealized loss on derivative instruments
 
(5,846
)
 
(15,300
)
Other comprehensive loss, net of tax
 
(19,264
)
 
(5,855
)
Comprehensive income (loss)
 
$
39,878

 
$
(455,271
)

See accompanying notes to these condensed consolidated financial statements.

4


FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
 
 
March 31,
2013
 
December 31,
2012
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
842,753

 
$
901,294

Marketable securities
 
168,993

 
102,578

Accounts receivable trade, net
 
279,131

 
553,567

Accounts receivable, unbilled and retainage
 
480,131

 
400,987

Inventories
 
388,509

 
434,921

Balance of systems parts
 
135,374

 
98,903

Deferred project costs
 
617,540

 
21,390

Deferred tax assets, net 
 
41,456

 
44,070

Assets held for sale
 
49,521

 
49,521

Note receivable affiliate
 
—

 
17,725

Prepaid expenses and other current assets
 
106,518

 
207,368

Total current assets
 
3,109,926

 
2,832,324

Property, plant and equipment, net
 
1,553,205

 
1,525,382

Project assets and deferred project costs 
 
573,901

 
845,478

Deferred tax assets, net 
 
321,420

 
317,473

Restricted cash and investments 
 
286,325

 
301,400

Goodwill
 
68,833

 
65,444

Inventories 
 
133,264

 
134,375

Retainage
 
188,681

 
270,364

Other assets 
 
58,870

 
56,452

Total assets
 
$
6,294,425

 
$
6,348,692

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 

 
 

Accounts payable
 
$
209,019

 
$
350,230

Income taxes payable
 
2,068

 
5,474

Accrued expenses
 
430,503

 
554,433

Current portion of long-term debt
 
61,106

 
62,349

Deferred revenue
 
2,614

 
2,056

Payments and billings for deferred project costs
 
778,651

 
94,535

Other current liabilities
 
49,480

 
32,297

Total current liabilities
 
1,533,441

 
1,101,374

Accrued solar module collection and recycling liability
 
228,779

 
212,835

Long-term debt
 
501,111

 
500,223

Payments and billings for deferred project costs
 
25,746

 
636,518

Other liabilities
 
331,366

 
292,216

Total liabilities
 
2,620,443

 
2,743,166

Commitments and contingencies
 


 


Stockholders’ equity:
 
 
 
 
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 87,624,484 and 87,145,323 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
 
88

 
87

Additional paid-in capital
 
2,094,104

 
2,065,527

Accumulated earnings
 
1,588,875

 
1,529,733

Accumulated other comprehensive (loss) income
 
(9,085
)
 
10,179

Total stockholders’ equity
 
3,673,982

 
3,605,526

Total liabilities and stockholders’ equity
 
$
6,294,425

 
$
6,348,692

See accompanying notes to these condensed consolidated financial statements.

5


FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Three Months Ended
 
 
 
March 31,
2013
 
March 31,
2012
Cash flows from operating activities:
 
 
 
 
Cash received from customers
 
$
1,125,886

 
$
648,954

Cash paid to suppliers and associates
 
(1,028,544
)
 
(646,949
)
Interest received
 
3,435

 
1,222

Interest paid
 
(3,723
)
 
(6,767
)
Income tax payments, net
 
(5,661
)
 
(2,537
)
Excess tax benefit from share-based compensation arrangements
 
(24,933
)
 
(9,489
)
Other operating activities
 
(5
)
 
(570
)
Net cash provided by (used in) operating activities
 
66,455

 
(16,136
)
Cash flows from investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
(71,667
)
 
(124,490
)
Purchases of marketable securities
 
(75,591
)
 
(14,446
)
Proceeds from maturities and sales of marketable securities
 
8,775

 
57,867

Investment in note receivable, affiliate
 
—

 
(20,278
)
Payments received on note receivable, affiliate
 
17,075

 
—

Purchase of restricted investments
 
—

 
(80,668
)
Change in restricted cash
 
5,136

 
—

Acquisitions, net of cash acquired
 
(7,934
)
 
(2,437
)
Purchase of equity and cost method investments
 
(14,894
)
 
—

Other investing activities
 
(2,500
)
 
2,132

Net cash used in investing activities
 
(141,600
)
 
(182,320
)
Cash flows from financing activities:
 
 
 
 
Repayments of long-term debt
 
(330,176
)
 
(13,148
)
Proceeds from borrowings under long-term debt, net of discount and issuance costs
 
335,000

 
200,000

Excess tax benefit from share-based compensation arrangements
 
24,933

 
9,489

Repayment of economic development funding
 
(8,315
)
 
—

Other financing activities
 
(87
)
 
(563
)
Net cash provided by financing activities
 
21,355

 
195,778

Effect of exchange rate changes on cash and cash equivalents
 
(4,751
)
 
7,539

Net (decrease) increase in cash and cash equivalents
 
(58,541
)
 
4,861

Cash and cash equivalents, beginning of the period
 
901,294

 
605,619

Cash and cash equivalents, end of the period
 
$
842,753

 
$
610,480

Supplemental disclosure of noncash investing and financing activities:
 
 

 
 

Property, plant and equipment acquisitions funded by liabilities
 
$
75,236

 
$
118,414

Acquisitions funded by liabilities
 
$
14,962

 
$
—


 See accompanying notes to these condensed consolidated financial statements.

6


FIRST SOLAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Solar, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted 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 management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement have been included. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or for any other period. The condensed consolidated balance sheet at December 31, 2012 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 financial statements and notes should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2012 included in our Annual Report on Form 10-K filed with the SEC.

Certain prior year balances have been reclassified to conform to the current year’s presentation. Such reclassifications did not affect total cash flows, total net sales, operating income, net income, total assets, total liabilities or stockholders’ equity.

Unless expressly stated or the context otherwise requires, the terms “the Company,” “we,” “our,” “us,” and “First Solar” refer to First Solar, Inc. and its subsidiaries.


Note 2. Summary of Significant Accounting Policies
  
Use of Estimates. 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 our condensed consolidated financial statements and the accompanying notes. Significant estimates in these condensed consolidated financial statements include percentage-of-completion revenue recognition, estimates of future cash flows from and the economic useful lives of long-lived assets, certain accrued liabilities, income taxes and tax valuation allowances, reportable segment allocations, product warranties and manufacturing excursions, accrued collection and recycling expense, and goodwill. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from these estimates and assumptions.

Revenue Recognition — Systems Business. We recognize revenue for arrangements entered into by our systems business generally using two revenue recognition models, following the guidance in ASC 605, Accounting for Long-term Construction Contracts or, for arrangements which include land or land rights, ASC 360, Accounting for Sales of Real Estate.

For systems business sales arrangements that do not include land or land rights and thus are accounted for under ASC 605, we use the percentage-of-completion method, as described further below, using actual costs incurred over total estimated costs to develop and construct a project (including module costs) as our standard accounting policy, unless we cannot make reasonably dependable estimates of the costs to complete the contract, in which case we would use the completed contract method.

For systems business sales arrangements that are accounted for under ASC 360, where we convey control of land or land rights, we record the sale as revenue using one of the following revenue recognition methods, based upon evaluation of the substance and form of the terms and conditions of such sales arrangements:

(i) We apply the percentage-of-completion method, as further described below, to certain sales arrangements covered under ASC 360, when a sale has been consummated, we have transferred the usual risks and rewards of ownership to the buyer, the initial and continuing investment criteria have been met, we have the ability to estimate our costs and progress toward completion, and all other revenue recognition criteria have been met. The initial and continuing investment requirements, which demonstrate a buyer’s commitment to honor their obligations for the sales arrangement, can typically be met through the receipt of cash or an irrevocable letter of credit from a highly credit worthy lending institution. When evaluating whether the usual risks and rewards of ownership have transferred to the buyer, we consider whether we have or may be contingently required to have any prohibited forms of continuing involvement with the project. Prohibited forms of continuing involvement in a real estate sales arrangement are when we retain risks or rewards associated with the project that are not customary with the range of risks or rewards that an EPC contractor may assume.


7


(ii) Depending on whether the initial and continuing investment requirements have been met, and whether collectability from the buyer is reasonably assured, we may align our revenue recognition and release of project assets or deferred project costs to cost of sales with the receipt of payment from the buyer if the sale has been consummated and we have transferred the usual risks and rewards of ownership to the buyer.

(iii) We may also record revenue for certain sales arrangements after construction of discrete portions of a project or after the entire project is substantially complete, we have transferred the usual risks and rewards of ownership to the buyer, and we have received substantially all payments due from the buyer or the initial and continuing investment criteria have been met.

For any systems business sales arrangements containing multiple deliverables (including our solar modules) not covered under ASC 360 (real estate) or ASC 605 (long-term construction contracts), we analyze each activity within the sales arrangement to ensure that we adhere to the separation guidelines of ASC 605 for multiple-element arrangements. We allocate revenue for any transactions involving multiple elements to each unit of accounting based on its relative selling price, and recognize revenue for each unit of accounting when all revenue recognition criteria for a unit of accounting have been met.

Revenue Recognition - Percentage-of-Completion. In applying the percentage-of-completion method, we use the actual costs incurred relative to estimated costs to complete (including module costs) in order to estimate the progress towards completion to determine the amount of revenue and profit to recognize. Incurred costs include all installed direct materials, installed solar modules, labor, subcontractor costs, and those indirect costs related to contract performance, such as indirect labor, supplies, and tools. We recognize direct material and solar module costs as incurred costs when the direct materials and solar modules have been installed in the project. When contracts specify that title to direct materials and solar modules transfers to the customer before installation has been performed, we will not recognize revenue or associated costs until those materials are installed and have met all other revenue recognition requirements. We consider direct materials and solar modules to be installed when they are permanently placed or fitted to a solar power system as required by engineering designs. Solar modules manufactured by us that will be used in our solar power systems, which we still hold title to, remain within inventory until such modules are installed in a solar power system.

The percentage-of-completion method of revenue recognition requires us to prepare estimates of costs to complete our projects. In making such estimates, management judgments are required to evaluate significant assumptions including the cost of materials and labor, expected labor productivity, the impact of potential variances in schedule completion, the amount of net contract revenues and the impact of any penalties, claims, change orders, or performance incentives.

If estimated total costs on any contract are greater than the contract revenues, we recognize the entire estimated loss in the period the loss becomes known. The cumulative effect of the revisions to estimates related to contract revenues and costs to complete contracts, including penalties, incentive awards, claims, change orders, anticipated losses and others are recorded in the period in which the revisions to estimates are identified and can be reasonably estimated. Such revisions could occur in any reporting period and the effects may be material depending on the size of the contracts or changes in estimate.

Revenue Recognition - Components Business. Our components business sells solar modules directly to third party solar power system integrators and operators. We recognize revenue for module sales when persuasive evidence of an arrangement exists, delivery of the module has occurred and title and risk of loss have passed to the customer, the sales price is fixed or determinable, and the collectability of the resulting receivable is reasonably assured. Under this policy, we record a trade receivable for the selling price of our module and reduce inventory for the cost of goods sold when delivery occurs in accordance with the terms of the sales contracts. Our customers typically do not have extended payment terms or rights of return for our products. We account for rebates or other customer incentives as a reduction to the selling price of our solar modules at the time of sale; and therefore, as a reduction to revenue.

Ventures and Variable Interest Entities. In the normal course of business, we have and may in the future form joint venture type arrangements (“ventures”), including partnerships and partially owned limited liability companies, with one or more third parties primarily to develop and build specific or a pipeline of solar power projects. These types of ventures are core to our business and long-term strategy related to providing solar PV generation solutions using our modules to sustainable geographic markets. In accordance with ASC 810, Consolidations, we analyze all of our ventures and classify them into two groups: (1) ventures that must be consolidated because they are either not variable interest entities (“VIEs”) and we hold the majority voting interest, or because they are VIEs and we are the primary beneficiary; and (2) ventures that do not need to be consolidated and are accounted for under either the equity or cost methods of accounting because they are either not VIEs and we hold a minority voting interest, or because they are VIEs and we are not the primary beneficiary.
Ventures are considered VIEs if (1) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (2) as a group, the holders of the equity investment at risk lack the ability to make certain

8


decisions, the obligation to absorb expected losses or the right to receive expected residual returns; or (3) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor. Our venture agreements typically require some form of project development capital or project equity ranging from amounts necessary to obtain a PPA (or similar power off-take agreement) to a pro-rata portion of the total equity required for a project, depending upon the opportunity and the market our ventures are in. Our limited number of ventures as of March 31, 2013 and future ventures of a similar nature are typically VIEs because the total equity investment at risk is not sufficient to permit the ventures to finance their activities without additional financial support.
We are considered the primary beneficiary of and are required to consolidate a VIE if we have the power to direct the activities that most significantly impact that VIE’s economic performance, and the obligation to absorb losses or the right to receive benefits of that VIE that could potentially be significant to the VIE. If we determine that we do not have the power to direct the activities that most significantly impact the venture, then we are not primary beneficiary of the VIE.
We account for our unconsolidated ventures using either the equity or cost methods of accounting depending upon whether we have the ability to exercise significant influence over a venture. We consider the participating and protective rights we have as well as the legal form of the venture when evaluating whether we have the ability to exercise significant influence, which requires us to apply the equity method of accounting.
Refer to Note 2. “Summary of Significant Accounting Policies,” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 for a complete discussion of our significant accounting policies.

Note 3. Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities, updated by ASU 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which requires companies to disclose information about financial instruments that have been offset and related arrangements to enable users of their financial statements to understand the effect of those arrangements on their financial position. Companies will be required to provide both net (offset amounts) and gross information in the notes to the financial statements for relevant assets and liabilities that are offset. ASU 2011-11, as amended by ASU 2013-01, is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. The adoption of ASU 2011-11, as amended by ASU 2013-01, in the first quarter of 2013, did not have an impact on our financial position, results of operations, or cash flows.

In July 2012, the FASB issued ASU 2012-02, Intangibles - Goodwill and Other (Topic 350), Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 gives companies an option to first assess qualitative factors to determine whether the existence of events and circumstances indicate it is more-likely-than-not that an indefinite-lived intangible asset (excluding goodwill) is impaired. If based on its qualitative assessment, a company concludes that it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, quantitative impairment testing is required. However, if a company concludes otherwise, quantitative impairment testing is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of ASU 2012-02, in the first quarter of 2013, did not have an impact on our financial position, results of operations, or cash flows.

In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. ASU 2013-02 supersedes and replaces the presentation requirements for reclassifications out of accumulated other comprehensive income in ASUs 2011-05 and 2011-12 for all public and private organizations. The amendment requires that an entity must report the effect of significant reclassifications out of accumulated other comprehensive income by the respective line items in net income if the amount being reclassified is required under U.S. GAAP. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. The adoption of ASU 2013-02, in the first quarter of 2013, did not have an impact on our financial position, results of operations or cash flows.

Note 4. Restructuring

The activity related to our restructuring charges for material restructuring initiatives that were not completed as of December 31, 2012 are as follows:
 
February 2012 Manufacturing Restructuring

9



In February 2012, executive management completed an evaluation of and approved a set of manufacturing capacity and other initiatives primarily intended to adjust our previously planned manufacturing capacity expansions and global manufacturing footprint. The primary goal of these initiatives was to better align production capacity and geographic location of such capacity with expected geographic market requirements and demand. The remaining $5.1 million of asset impairment related charges from the February 2012 manufacturing restructuring as of December 31, 2012 is included within other liabilities and such amount is not expected to be paid within the next year.

April 2012 European Restructuring

In April 2012, executive management approved a set of restructuring initiatives intended to align the organization with our Long Term Strategic Plan including expected sustainable market opportunities and to reduce costs. As part of these initiatives, we substantially reduced our European operations including the closure of our manufacturing operations in Frankfurt (Oder), Germany at the end of 2012. Due to the lack of policy support for utility-scale solar projects in Europe, we did not believe there was a business case for continuing manufacturing operations in Germany or to proceed with the previously announced 2-line plant in France. Additionally, we substantially reduced the size of our operations in Mainz, Germany and elsewhere in Europe. After the closure of our Frankfurt (Oder) manufacturing operations at the end of 2012, First Solar’s manufacturing operations consist of 24 production lines in Kulim, Malaysia and four production lines in Perrysburg, Ohio.

In connection with these restructuring initiatives, we incurred total charges to operating expense during 2012 of $342.0 million and $2.3 million in the first three months of 2013. These charges consisted of (i) $251.8 million in asset impairments and asset impairment related charges, primarily related to the closure of the Frankfurt (Oder) plants; (ii) $62.0 million in severance and termination related costs; and (iii) $30.5 million for the required repayment of German government grants related to the second Frankfurt (Oder) plant.

The following table summarizes the April 2012 European restructuring amounts remaining as of December 31, 2012, amounts recorded to restructuring expense during the three months ended March 31, 2013, and the remaining balance at March 31, 2013 (in thousands):
April 2012 European Restructuring
 
Asset Impairments
 
Asset Impairment Related Costs
 
Severance and Termination Related Costs
 
Grant Repayments
 
Total
Ending Balance at December 31, 2012
 
$
—

 
$
16,625

 
$
25,717

 
$
8,400

 
$
50,742

Charges to Income
 
—

 
—

 
2,347

 
—

 
2,347

Change in Estimates
 
—

 
—

 
—

 
—

 
—

Cash Payments
 
—

 
(7,193
)
 
(6,720
)
 
(8,315
)
 
(22,228
)
Non-Cash Amounts
 
—

 
(304
)
 
(718
)
 
(85
)
 
(1,107
)
Ending Balance at March 31, 2013
 
$
—

 
$
9,128

 
$
20,626

 
$
—

 
$
29,754


Expenses recognized for restructuring activities are presented in “Restructuring” on the condensed consolidated statements of operations. Substantially all expenses related to the April 2012 European restructuring were related to our components segment. We expect to incur up to $5 million in additional restructuring expense through the end of 2013 primarily related to remaining severance and termination related costs and asset impairment related costs associated with such restructuring initiatives.

Note 5. Acquisitions

Solar Chile

In January 2013, we acquired 100% of the ownership interest of Solar Chile S.A. (“Solar Chile”), a Chilean-based solar project development company with substantially all of its assets being a portfolio of early to mid-stage utility-scale photovoltaic (“PV”) power projects in northern Chile, in an all-cash transaction which was not material to our historical condensed consolidated balance sheets, results of operations or cash flows. We have included the financial results of Solar Chile in our condensed consolidated financial statements from the date of acquisition.

TetraSun

In April 2013, we acquired 100% of the stock not previously owned by us of TetraSun, Inc., a start up company that is in advanced stages of developing high efficiency crystalline silicon technology that is expected to provide improvements in performance rel

10


ative to conventional crystalline silicon solar modules. The all-cash acquisition was not material to our historical condensed consolidated balance sheets, results of operations or cash flows.

Note 6. Cash, Cash Equivalents, and Marketable Securities

Cash, cash equivalents, and marketable securities consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
 
March 31,
2013
 
December 31,
2012
Cash:
 
 
 
 
Cash
 
$
832,868

 
$
889,065

Cash equivalents:
 
 
 
 
Commercial paper
 
1,499

 
1,500

Money market mutual funds
 
8,386

 
10,729

Total cash and cash equivalents
 
842,753

 
901,294

Marketable securities:
 
  
 
 
Commercial paper
 
5,096

 
1,698

Corporate debt securities
 
23,315

 
23,384

Federal agency debt
 
35,392

 
29,936

Foreign agency debt
 
38,115

 
7,233

Foreign government obligations
 
4,103

 
4,142

Supranational debt
 
62,972

 
34,181

U.S. government obligations
 
—

 
2,004

Total marketable securities
 
168,993

 
102,578

Total cash, cash equivalents, and marketable securities
 
$
1,011,746

 
$
1,003,872


We have classified our marketable securities as “available-for-sale.” Accordingly, we record them at fair value and account for net unrealized gains and losses as a part of other comprehensive income (loss). We report realized gains and losses on the sale or maturity of our marketable securities in earnings, computed using the specific identification method. We may sell these securities prior to their stated maturities after consideration of our liquidity requirements. We view securities with maturities beyond 12 months as available to support current operations, and accordingly we classify all such securities as current assets under the caption marketable securities in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2013 and March 31, 2012, we realized an immaterial amount of gains and losses on our marketable securities, respectively. See Note 11. “Fair Value Measurements,” to our condensed consolidated financial statements for information about the fair value of our marketable securities.
 
All of our available-for-sale marketable securities are subject to a periodic impairment review. We consider a marketable security to be impaired when its fair value is less than its cost, in which case we would further review the marketable security to determine whether it is other-than-temporarily impaired. When we evaluate a marketable security for other-than-temporary impairment, we review factors such as the length of time and extent to which its fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, our intent to sell, and whether it is more-likely-than-not that we will be required to sell the marketable security before we have recovered its cost basis. If a marketable security were other-than-temporarily impaired, we would write it down through earnings to its impaired value and establish that as a new cost basis. We did not identify any of our marketable securities as other-than-temporarily impaired at March 31, 2013 and December 31, 2012.

The following tables summarize the unrealized gains and losses related to our marketable securities, by major security type, as of March 31, 2013 and December 31, 2012 (in thousands):

11


 
 
As of March 31, 2013
 
 
Security Type
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Commercial paper
 
$
5,096

 
$
—

 
$
—

 
$
5,096

Corporate debt securities
 
23,327

 
15

 
27

 
23,315

Federal agency debt
 
35,355

 
38

 
1

 
35,392

Foreign agency debt
 
38,168

 
1

 
54

 
38,115

Foreign government obligations
 
4,101

 
2

 
—

 
4,103

Supranational debt
 
62,933

 
74

 
35

 
62,972

Total
 
$
168,980

 
$
130

 
$
117

 
$
168,993


 
 
As of December 31, 2012
 
 
Security Type
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Commercial paper
 
$
1,697

 
$
1

 
$
—

 
$
1,698

Corporate debt securities
 
23,358

 
26

 
—

 
23,384

Federal agency debt
 
29,888

 
49

 
1

 
29,936

Foreign agency debt
 
7,266

 
—

 
33

 
7,233

Foreign government obligations
 
4,138

 
4

 
—

 
4,142

Supranational debt
 
34,110

 
71

 
—

 
34,181

U.S. government obligations
 
2,000

 
4

 
—

 
2,004

Total
 
$
102,457

 
$
155

 
$
34

 
$
102,578


Contractual maturities of our marketable securities as of March 31, 2013 and December 31, 2012 were as follows (in thousands):
 
 
As of March 31, 2013
 
 
Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
One year or less
 
$
77,941

 
$
47

 
$
4

 
$
77,984

One year to two years
 
88,534

 
81

 
113

 
88,502

Two years to three years
 
2,505

 
2

 
—

 
2,507

Total
 
$
168,980

 
$
130

 
$
117

 
$
168,993


 
 
As of December 31, 2012
 
 
Maturity
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
One year or less
 
$
71,225

 
$
67

 
$
32

 
$
71,260

One year to two years
 
30,707

 
88

 
1

 
30,794

Two years to three years
 
525

 
—

 
1

 
524

Total
 
$
102,457

 
$
155

 
$
34

 
$
102,578


The net unrealized gain of zero and $0.1 million as of March 31, 2013 and December 31, 2012, respectively, on our marketable securities were primarily the result of changes in interest rates. Our investment policy requires marketable securities to be highly rated and limits the security types, issuer concentration, and duration to maturity of our marketable securities portfolio.

The following table shows gross unrealized losses and estimated fair values for those marketable securities that were in an unrealized loss position as of March 31, 2013 and December 31, 2012, aggregated by major security type and the length of time the marketable securities have been in a continuous loss position (in thousands):

12


 
 
As of March 31, 2013
 
 
In Loss Position for
Less Than 12 Months
 
In Loss Position for
12 Months or Greater
 
Total
 
 
Security Type
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Corporate debt securities
 
$
5,081

 
$
27

 
$
—

 
$
—

 
$
5,081

 
$
27

Federal agency debt
 
4,524

 
1

 
—

 
—

 
4,524

 
1

Foreign agency debt
 
30,853

 
53

 
5,999

 
1

 
36,852

 
54

Supranational debt
 
28,923

 
35

 
—

 
—

 
28,923

 
35

Total
 
$
69,381

 
$
116

 
$
5,999

 
$
1

 
$
75,380

 
$
117


 
 
As of December 31, 2012
 
 
In Loss Position for
Less Than 12 Months
 
In Loss Position for
12 Months or Greater
 
Total
 
 
Security Type
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
Federal agency debt
 
524

 
1

 
—

 
—

 
524

 
1

Foreign agency debt
 
—

 
—

 
5,970

 
33

 
5,970

 
33

Total
 
$
524

 
$
1

 
$
5,970

 
$
33

 
$
6,494

 
$
34


Note 7. Restricted Cash and Investments

Restricted cash and investments consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
 
March 31,
2013
 
December 31,
2012
Restricted cash (1)
 
$
180

 
$
184

Restricted investments
 
286,145

 
301,216

Restricted cash and investments
 
$
286,325

 
$
301,400


(1)
There was $5.1 million of restricted cash included within prepaid expenses and other current assets at December 31, 2012 primarily related to required cash collateral for certain letters of credit provided for projects under development in foreign jurisdictions.

At March 31, 2013 and December 31, 2012, our restricted investments consisted of long-term marketable securities that we hold through a custodial account to fund the estimated future costs of modules covered under our solar module collection and recycling program and related obligations. We have classified our restricted investments as “available-for-sale.” Accordingly, we record them at fair value and account for net unrealized gains and losses as a part of accumulated other comprehensive income (loss). We report realized gains and losses on the maturity or sale of our restricted investments in earnings, computed using the specific identification method. Restricted investments are classified as noncurrent as the underlying accrued solar module collection and recycling liability is also noncurrent in nature.

We fund the estimated collection and recycling cost incremental to amounts already pre-funded in prior years for the cumulative module sales covered by our solar module collection and recycling program within 90 days of the end of each year, assuming for this purpose a service life of 25 years for our solar modules. To ensure that our collection and recycling program for covered modules is available at all times and the pre-funded amounts are accessible regardless of our financial status in the future (even in the case of our own insolvency), we have established a trust structure under which funds are put into custodial accounts with a large bank as the investment advisor in the name of a trust, for which First Solar, Inc. (“FSI”), First Solar Malaysia Sdn. Bhd. (“FS Malaysia”), and First Solar Manufacturing GmbH (“FSM GmbH”) are grantors. Only the trustee can distribute funds from the custodial accounts and these funds cannot be accessed for any purpose other than to cover qualified costs of module collection and recycling, either by us or a third party executing the collection and recycling services. Investments in this custodial account must meet the criteria of the highest quality investments, such as highly rated government or agency bonds. We closely monitor our exposure to European markets and maintain holdings of German and French sovereign debt securities which are not currently at risk of default. Under the trust agreements, each year we determine the annual pre-funding requirement based upon the difference between the current estimated future costs of collecting and recycling all solar modules covered under our program combined

13


with the rate of return restricted investments will earn prior to being utilized to cover qualified collection and recycling costs and amounts already pre-funded in prior years. Based primarily upon reductions in the estimated future costs of collecting and recycling solar modules covered under our program combined with the cumulative amounts pre-funded since the inception of our program, we have determined that no incremental funding in the first quarter of 2013 was required for covered module sales during the fiscal year ending December 31, 2012.

The following table summarizes unrealized gains and losses related to our restricted investments by major security type as of March 31, 2013 and December 31, 2012 (in thousands):
 
 
As of March 31, 2013
 
 
Security Type
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Foreign government obligations
 
$
184,517

 
$
39,880

 
$
—

 
$
224,397

U.S. government obligations
 
53,992

 
7,756

 
—

 
61,748

Total
 
$
238,509

 
$
47,636

 
$
—

 
$
286,145


 
 
As of December 31, 2012
 
 
Security Type
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Foreign government obligations
 
$
188,350

 
$
47,921

 
$
—

 
$
236,271

U.S. government obligations
 
53,368

 
11,577

 
—

 
64,945

Total
 
$
241,718

 
$
59,498

 
$
—

 
$
301,216


As of March 31, 2013 and December 31, 2012, the contractual maturities of these restricted investments were between 15 years and 24 years.

Note 8. Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share is computed giving effect to all potential dilutive common stock, including employee stock options, restricted and performance stock units, stock purchase plan shares, and contingently issuable shares, unless there is a net loss for the period.

The calculation of basic and diluted net income (loss) per share for the three months ended March 31, 2013 and March 31, 2012 was as follows (in thousands, except per share amounts):
 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
Basic net income (loss) per share
 
 
 
 
Numerator:
 
 
 
 
Net income (loss)
 
$
59,142

 
$
(449,416
)
Denominator:
 
 
 
 
Weighted-average common stock outstanding
 
87,206

 
86,507

Diluted net income (loss) per share
 
 
 
 
Denominator:
 
 
 
 
Weighted-average common stock outstanding
 
87,206

 
86,507

Effect of stock options, restricted and performance stock units, and stock purchase plan shares
 
2,171

 
—

Weighted-average shares used in computing diluted net income (loss) per share
 
89,377

 
86,507



14


 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
Per share information — basic:
 
 
 
 
Net income (loss) per share
 
$
0.68

 
$
(5.20
)
 
 
 
 
 
Per share information — diluted:
 
 
 
 
Net income (loss) per share
 
$
0.66

 
$
(5.20
)

The following number of outstanding employee stock options, restricted and performance stock units and stock purchase plan shares were excluded from the computation of diluted net income (loss) per share for the three months ended March 31, 2013 and March 31, 2012 as they would have had an anti-dilutive effect (in thousands):
 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
Anti-dilutive shares
 
123

 
967


Note 9. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade, net consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):

 
 
March 31,
2013
 
December 31,
2012
Accounts receivable trade, gross
 
$
291,433

 
$
568,070

Allowance for doubtful accounts
 
(12,302
)
 
(14,503
)
Accounts receivable trade, net
 
$
279,131

 
$
553,567


At March 31, 2013 and December 31, 2012, $75.7 million and $104.5 million, respectively, of our Accounts receivable trade, net were secured by letters of credit, bank guarantees or other forms of financial security issued by credit worthy financial institutions.

Accounts receivable, unbilled and retainage
 
 
 
March 31,
2013
 
December 31,
2012
Accounts receivable, unbilled
 
$
257,624

 
$
342,587

Retainage
 
222,507

 
58,400

Accounts receivable, unbilled and retainage
 
$
480,131

 
$
400,987


Accounts receivable, unbilled represents revenue that has been recognized in advance of billing the customer. This is common for construction contracts. For example, we recognize revenue from contracts for the construction and sale of solar power systems which include the sale of project assets over the construction period using applicable accounting methods. One applicable accounting method is the percentage-of-completion method under which sales and gross profit are recognized as construction work is performed based on the relationship between actual costs incurred compared to the total estimated costs for constructing the project. Under this accounting method, revenue can be recognized in advance of billing the customer, resulting in an amount recorded to Accounts receivable, unbilled. Once we meet the billing criteria under a construction contract, we bill our customer accordingly and reclassify the Accounts receivable, unbilled to Accounts receivable trade, net. Billing requirements vary by contract, but are generally structured around completion of certain construction milestones.
 
Also included within Accounts receivable, unbilled and retainage is the current portion of retainage. Retainage refers to the portion of the contract price earned by us for work performed, but held for payment by our customer as a form of security until

15


we reach certain construction milestones. Retainage included within Accounts receivable, unbilled and retainage is expected to be billed and collected within the next 12 months. Retainage that is noncurrent in nature is expected to be collected in 2014 through 2015, after certain construction milestones have been met.

Inventories

Inventories consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Raw materials
 
$
176,088

 
$
184,006

Work in process
 
18,612

 
14,868

Finished goods (solar modules)
 
327,073

 
370,422

Inventories
 
$
521,773

 
$
569,296

Inventories — current
 
$
388,509

 
$
434,921

Inventories — noncurrent (1)
 
$
133,264

 
$
134,375


(1) We purchase a critical raw material that is used in our core production process in quantities that exceed anticipated consumption within our operating cycle (which is 12 months). We classify the raw materials that we do not expect to be consumed within our operating cycle as noncurrent.

We regularly review the cost of inventories, including noncurrent inventories, against their estimated market value and record a lower of cost or market write-down if any inventories have a cost in excess of their estimated market value as defined by ASC 330, Inventories. We also regularly evaluate the quantities and values of our inventories, including noncurrent inventories, in light of current market conditions and market trends and record write-downs for any quantities in excess of demand and for any new obsolescence.

Balance of systems parts

Balance of systems parts represent mounting, electrical and other construction parts purchased for solar power plants to be constructed or currently under construction, which we hold title to and are not yet installed in a solar power plant. These parts include posts, tilt brackets, tables, harnesses, combiner boxes, inverters, cables and other parts we purchase or assemble for the solar power plants we construct. Balance of systems parts does not include any solar modules that we manufacture. We carry these parts at the lower of cost or market, with market being based primarily on recoverability through installation in a solar power plant. 

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Prepaid expenses
 
$
42,853

 
$
39,582

Derivative instruments 
 
3,450

 
7,230

Deferred costs of goods sold
 
2,102

 
96,337

Other assets — current
 
58,113

 
64,219

Prepaid expenses and other current assets
 
$
106,518

 
$
207,368


Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):

16


 
 
March 31,
2013
 
December 31,
2012
Buildings and improvements
 
$
446,737

 
$
446,133

Machinery and equipment
 
1,415,659

 
1,415,632

Office equipment and furniture
 
121,539

 
117,228

Leasehold improvements
 
49,474

 
49,367

Depreciable property, plant and equipment, gross
 
2,033,409

 
2,028,360

Accumulated depreciation
 
(846,933
)
 
(803,501
)
Depreciable property, plant and equipment, net
 
1,186,476

 
1,224,859

Land
 
22,157

 
22,256

Construction in progress
 
119,195

 
51,133

Stored assets (1)
 
225,377

 
227,134

Property, plant and equipment, net
 
$
1,553,205

 
$
1,525,382


(1)
Consists of machinery and equipment (“stored assets”) that were originally purchased for installation in our previously planned manufacturing capacity expansions. We intend to install and place the stored assets into service in yet to be determined locations once market demand supports such additional manufacturing capacity. As the stored assets are neither in the condition or location to produce modules as intended, we will not begin depreciation until the assets are placed into service. The stored assets are evaluated for impairment whenever events or changes in business circumstances arise, including obsolescence considerations, that may indicate that the carrying amount of the long-lived assets may not be recoverable. We ceased the capitalization of interest on such stored assets once they were physically received from the related machinery and equipment suppliers.

Depreciation of property, plant and equipment was $58.2 million and $72.7 million for the three months ended March 31, 2013 and March 31, 2012.

From time to time, we have received grants for the construction or expansion of our manufacturing facilities. We account for any such grants as a reduction to the carrying value of the property, plant and equipment they fund. During the three months ended March 31, 2013, we repaid the remaining €6.3 million of grants received in 2011, including outstanding interest, as a result of the closure of our Frankfurt (Oder) manufacturing facility.

See Note 4. “Restructuring,” for more information on the long-lived asset impairments and grant repayments related to our April 2012 European restructuring.

Capitalized interest

We capitalized interest costs incurred into property, plant and equipment or project assets as follows during the three months ended March 31, 2013 and March 31, 2012 (in thousands):
 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
Interest cost incurred
 
$
(3,275
)
 
$
(6,732
)
Interest cost capitalized —– property, plant and equipment
 
310

 
2,054

Interest cost capitalized —– project assets
 
2,215

 
3,758

Interest expense, net
 
$
(750
)
 
$
(920
)

Project assets and deferred project costs 

Project assets consist primarily of costs relating to solar power projects in various stages of development and construction that we capitalize prior to entering into a definitive sales agreement for the solar power project including projects that have begun commercial operation under the project PPAs. These costs include costs for land and costs for developing and constructing a PV solar power plant. Development costs can include legal, consulting, permitting, interconnection, and other similar costs. Once we enter into a definitive sales agreement, we reclassify project assets to deferred project costs on our condensed consolidated balance sheet until the sale is completed and we have met all of the criteria to recognize the sale as revenue, which is typically subject to

17


real estate revenue recognition criteria. We expense project assets to cost of sales after each respective project asset is sold to a customer and all revenue recognition criteria have been met (matching the expensing of costs to the underlying revenue recognition method). We classify project assets generally as noncurrent due to the nature of solar power projects and the time required to complete all activities to develop, construct, and sell projects, which is typically longer than 12 months.

Deferred project costs represent (i) costs that we capitalize as project assets for arrangements that we account for as real estate transactions after we have entered into a definitive sales arrangement, but before the sale is completed and we have met all criteria to recognize the sale as revenue, (ii) recoverable pre-contract costs that we capitalize for arrangements accounted for as long-term construction contracts prior to entering into a definitive sales agreement, or (iii) costs that we capitalize for arrangements accounted for as long-term construction contracts after we have signed a definitive sales agreement, but before all revenue recognition criteria have been met. We classify deferred project costs as current if completion of the sale and the meeting of all revenue recognition criteria is expected within the next 12 months.

Project assets and deferred project costs  consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Project assets — land
 
$
1,209

 
$
9,164

Project assets — development costs including project acquisition costs
 
231,138

 
157,489

Project assets — construction costs
 
101,884

 
192,171

Project assets — projects in commercial operation under project PPAs
 
$
214,622

 
—

Project assets 
 
$
548,853

 
$
358,824

Deferred project costs — current
 
$
617,540

 
$
21,390

Deferred project costs — non-current
 
25,048

 
486,654

Deferred project costs
 
$
642,588

 
$
508,044

Total project assets and deferred project costs
 
$
1,191,441

 
$
866,868


Note Receivable

On April 8, 2009, we entered into a credit facility agreement with a solar project entity of one of our customers for an available amount of €17.5 million to provide financing for a PV power generation facility. The credit facility replaced a bridge loan that we had made to this entity. The credit facility bears interest at 8% per annum and is due on December 31, 2026. As of March 31, 2013 and December 31, 2012, the balance on this credit facility was €7.0 million. The outstanding amount of this credit facility is included within “Other assets” on our condensed consolidated balance sheets.

Note Receivable, Affiliate

In January 2012, we contributed an immaterial amount for a 50% ownership interest in a newly formed limited liability company (“property company”), which was formed for the sole purpose of holding land for use in the development of a certain solar power project. One of our customers also contributed an immaterial amount for the remaining 50% ownership interest in the property company. The activities for the property company are governed by a shareholders agreement. The intent of the shareholders agreement is to outline the parameters of the arrangement with our customer, whereby we would supply solar modules to our customer for the solar power project and our customer would develop, construct, and sell the project. The shareholders agreement also requires each party to consent to all decisions made for the most significant activities of the property company. There are no requirements for us to make further contributions to the property company and the proceeds from the sale of the project are to be divided equally between us and our customer after the repayment of all project development related costs including the repayment of the loan discussed further below.

We also entered into a loan agreement with the property company, which is considered an affiliate, which required that the proceeds be used to purchase the project land and to pay for certain land development costs. The loan bears interest at 6% per annum and must be repaid only after the underlying solar power project has been sold and sufficient proceeds from the sale are received. Construction of the project was substantially completed during September 2012. During the first quarter of 2013, the then outstanding principal balance on this loan of €13.4 million was repaid in full. Additionally, €1.1 million of interest income was realized under the terms of the loan, representing the cumulative interest due from the property company since the inception of the loan.


18


The property company is considered a variable interest entity and our ownership interest in and the loan to the property company are considered variable interests. We accounted for our investment in the property company under the equity method of accounting as we concluded we are not the primary beneficiary as we do not have the power to make decisions for the most significant activities of the property Company. The basis in our investment in the property company was immaterial as of March 31, 2013.

Accrued expenses

Accrued expenses consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Accrued compensation, benefits and severance
 
$
61,417

 
$
105,677

Accrued property, plant and equipment
 
27,300

 
20,564

Accrued inventory and balance of systems parts
 
58,511

 
52,408

Accrued project assets and deferred project costs
 
78,016

 
76,133

Product warranty liability (Note 13)
 
64,611

 
90,581

Accrued expenses in excess of normal product warranty liability and related expenses (1)
 
68,392

 
75,020

Other accrued expenses
 
72,256

 
134,050

Accrued expenses
 
$
430,503

 
$
554,433


(1) Accrued expenses in excess of normal product warranty liability and related expenses consists primarily of commitments to certain customers, each related to the manufacturing excursion occurring during the period between June 2008 to June 2009 (“2008-2009 manufacturing excursion”), whereby certain modules manufactured during that time period may experience premature power loss once installed in the field. Additionally, included in such accrued expenses are commitments to certain customers related to a workmanship issue potentially affecting a limited number of solar modules manufactured between October 2008 to June 2009, as a limited number of the modules manufactured during that time utilized a new material and process to attach the cord plate (junction box) to the module which may not adhere securely over time.

Our best estimate for such remediation programs is based on evaluation and consideration of currently available information, including the estimated number of potentially affected modules in the field, historical experience related to our remediation efforts, customer-provided data related to potentially affected systems, the estimated costs of performing the removal, replacement and logistical services and the post-sale expenses covered under our remediation program. If any of our estimates prove incorrect, we could be required to accrue additional expenses.

Deferred Revenue

We recognize deferred revenue as net sales only after all revenue recognition criteria are met. We expect to recognize these amounts as revenue within the next 12 months.

Payments and billings for deferred project costs

Payments and billings for deferred project costs represent customer payments received or customer billings made under the terms of solar power project related sales contracts for which all revenue recognition criteria for real estate transactions have not yet been met. The associated solar power project related costs are included as deferred project costs.  We classify such amounts as current or noncurrent depending upon when all revenue recognition criteria are expected to be met, consistent with the classification of the associated deferred project costs.
Other current liabilities

Other current liabilities consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):

19


 
 
March 31,
2013
 
December 31,
2012
Derivative instruments 
 
$
4,900

 
$
5,825

Deferred tax liabilities
 
—

 
2,226

Billings in excess of costs and estimated earnings (1)
 
3,832

 
2,422

Other liabilities — current
 
40,748

 
21,824

Other current liabilities
 
$
49,480

 
$
32,297


(1) Billings in excess of costs and estimated earnings represents billings made or payments received in excess of revenue recognized on contracts accounted for under the percentage-of-completion method. Typically, billings are made based on the completion of certain milestones as provided for in the sales arrangement and the timing of revenue recognition may be different from when we can bill or collect from the customer.

Other liabilities

Other liabilities consisted of the following at March 31, 2013 and December 31, 2012 (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Product warranty liability
 
$
121,019

 
$
101,015

Other taxes payable
 
105,300

 
102,599

Billings in excess of costs and estimated earnings (1)
 
45,512

 
47,623

Other liabilities — noncurrent
 
59,535

 
40,979

Other liabilities
 
$
331,366

 
$
292,216


(1) Billings in excess of costs and estimated earnings represents billings made or payments received in excess of revenue recognized on contracts accounted for under the percentage-of-completion method. Typically, billings are made based on the completion of certain milestones as provided for in the sales arrangement and the timing of revenue recognition may be different from when we can bill or collect from the customer.

Note 10. Derivative Financial Instruments

As a global company, we are exposed in the normal course of business to interest rate and foreign currency risks that could affect our consolidated net assets, financial position, results of operations, and cash flows. We use derivative instruments to hedge against certain risks such as these, and we only hold derivative 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. As required by ASC 815, Derivatives and Hedging, we report all of our derivative instruments that are within the scope of that accounting standard at fair value. We account for changes in the fair value of derivative instruments within accumulated other comprehensive income (loss) if the derivative instruments qualify for hedge accounting under ASC 815. For those derivative instruments that do not qualify for hedge accounting (“economic hedges”), we record the changes in fair value directly to earnings. See Note 11. “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 value of derivative instruments included in our condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012 (in thousands):

20


 
 
March 31, 2013
 
 
Prepaid Expenses and Other Current Assets
 
Other Current Liabilities
 
Other Liabilities
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
Cross-currency swap contract
 
—

 
621

 
2,796

Interest rate swap contracts
 
—

 
445

 
713

Total derivatives designated as hedging instruments
 
$
—

 
$
1,066

 
$
3,509

 
 
 
 
 
 
 
Derivatives not designated as hedging instruments under ASC 815:
 
 

 
 

Foreign exchange forward contracts
 
$
3,450

 
$
3,834

 
$
—

Total derivatives not designated as hedging instruments
 
$
3,450

 
$
3,834

 
$
—

Total derivative instruments
 
$
3,450

 
$
4,900

 
$
3,509


 
 
December 31, 2012
 
 
Prepaid Expenses and Other Current Assets
 
Other Current Liabilities
 
Other Liabilities
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
Foreign exchange forward contracts
 
$
2,121

 
$
—

 
$
—

Cross-currency swap contract
 
—

 
316

 
1,582

Interest rate swap contracts
 
—

 
473

 
994

Total derivatives designated as hedging instruments
 
$
2,121

 
$
789

 
$
2,576

 
 
 
 
 
 
 
Derivatives not designated as hedging instruments under ASC 815:
 
 

 
 

Foreign exchange forward contracts
 
$
5,109

 
$
5,036

 
$
—

Total derivatives not designated as hedging instruments
 
$
5,109

 
$
5,036

 
$
—

Total derivative instruments
 
$
7,230

 
$
5,825

 
$
2,576


The impact of offsetting derivative instruments designated as hedging instruments under ASC 815 is shown below (in thousands):

 
 
March 31, 2013
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in Consolidated Balance Sheet
 
 
 
 
Gross Asset (Liability)
 
Gross Offset in Consolidated Balance Sheet
 
Net Amount Recognized in Financial Statements
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
Cross-currency swap contracts
 
$
(3,417
)
 
—

 
(3,417
)
 
—

 
—

 
$
(3,417
)
Interest rate swap contracts
 
$
(1,158
)
 
—

 
(1,158
)
 
—

 
—

 
$
(1,158
)


21


 
 
December 31, 2012
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in Consolidated Balance Sheet
 
 
 
 
Gross Asset (Liability)
 
Gross Offset in Consolidated Balance Sheet
 
Net Amount Recognized in Financial Statements
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
Foreign exchange forward contracts
 
$
2,121

 
—

 
2,121

 
—

 
—

 
$
2,121

Cross-currency swap contracts
 
$
(1,898
)
 
—

 
(1,898
)
 
—

 
—

 
$
(1,898
)
Interest rate swap contracts
 
$
(1,467
)
 
—

 
(1,467
)
 
—

 
—

 
$
(1,467
)

The following tables present the amounts related to derivative instruments designated as cash flow hedges under ASC 815 affecting accumulated other comprehensive income (loss) and our condensed consolidated statements of operations for the three months ended March 31, 2013 and March 31, 2012 (in thousands):
 
 
Foreign Exchange Forward Contracts
 
Interest Rate Swap Contract
 
Cross Currency Swap Contract
 
Total
Balance in other comprehensive income (loss) at December 31, 2012
 
$
8,980

 
$
(1,467
)
 
$
(8,031
)
 
$
(518
)
Amounts recognized in other comprehensive income (loss)
 
4,135

 
100

 
(1,604
)
 
2,631

Amounts reclassified to net sales as a result of forecasted transactions being probable of not occurring
 
(13,115
)
 
—

 
—

 
(13,115
)
Amounts reclassified to earnings impacting:
 
 
 
 
 
 
 
 
Foreign currency gain
 
—

 
—

 
1,974

 
1,974

Interest expense
 
—

 
209

 
85

 
294

Balance in other comprehensive income (loss) at March 31, 2013
 
—

 
(1,158
)
 
(7,576
)
 
(8,734
)

 
 
Foreign Exchange Forward Contracts
 
Interest Rate Swap Contracts
 
Cross Currency Swap Contract
 
Total
Balance in other comprehensive income (loss) at December 31, 2011
 
$
33,751

 
$
(2,571
)
 
$
(5,899
)
 
$
25,281

Amounts recognized in other comprehensive (loss) income
 
(11,341
)
 
(914
)
 
4,347

 
(7,908
)
Amounts reclassified to earnings impacting:
 
 
 
 
 
 
 
 
Net sales
 
(6,710
)
 
—

 
—

 
(6,710
)
Foreign currency loss
 
—

 
—

 
(5,003
)
 
(5,003
)
Interest expense
 
—

 
244

 
71

 
315

Balance in other comprehensive income (loss) at March 31, 2012
 
15,700

 
(3,241
)
 
(6,484
)
 
5,975


We recorded immaterial amounts related to ineffective portions of our derivative instruments designated as cash flow hedges during the three months ended March 31, 2013 and March 31, 2012 directly to other income (expense), net. In addition, we recognized unrealized losses of $0.4 million and $0.3 million related to amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges within other income (expense), net during the three months ended March 31, 2013 and March 31, 2012, respectively. During the three months ended March 31, 2013, we reclassified amounts from other comprehensive income to net sales as a result of forecasted sales transactions subject to a cash flow hedge, being probable of not occurring within two months beyond the timeframe originally expected.

The following table presents the amounts related to derivative instruments not designated as cash flow hedges under ASC 815 affecting our condensed consolidated statements of operations for the three months ended March 31, 2013 and March 31, 2012 (in thousands):


22


 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
 
 
 
Three Months Ended
 
Three Months Ended
Derivatives not designated as hedging instruments under ASC 815:
Location of Gain (Loss) Recognized in Income on Derivatives
 
March 31,
2013
 
March 31,
2012
Foreign exchange forward contracts
Foreign currency gain (loss)
 
$
1,117

 
$
7,354

Foreign exchange forward contracts
Cost of sales
 
$
(88
)
 
$
808


Interest Rate Risk

We use cross-currency swap and 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.

On September 30, 2011, we entered into a cross-currency swap contract to hedge the floating rate foreign currency denominated loan under our Malaysian Ringgit Facility Agreement. This swap had an initial notional value of MYR 465.0 million and entitles us to receive a three-month floating Kuala Lumpur Interbank Offered Rate (“KLIBOR”) interest rate, and requires us to pay a fixed U.S. dollar rate of 3.495%. Additionally, this swap hedges the foreign currency risk of the Malaysian Ringgit denominated principal and interest payments as we make swap payments in U.S. dollars and receive swap payments in Malaysian Ringgits at a fixed exchange rate 3.19 MYR to USD. The notional amount of the swap is scheduled to decline in correspondence to our scheduled principal payments on the underlying hedged debt. As of March 31, 2013 and December 31, 2012, the notional value of this cross-currency swap agreement was MYR 426.3 million and MYR 465.0 million, respectively. This swap is a derivative instrument that qualifies for accounting as a cash flow hedge in accordance with ASC 815 and we designated it as such. We determined that this swap was highly effective as a cash flow hedge at March 31, 2013 and December 31, 2012. For the three months ended March 31, 2012 and March 31, 2013, there were immaterial amounts of ineffectiveness from this cash flow hedge.

On May 29, 2009, we entered into an interest rate swap contract to hedge a portion of the floating rate loans under our Malaysian Credit Facility, which became effective on September 30, 2009 with an initial notional value of €57.3 million and pursuant to which we are entitled to receive a six-month floating Euro Interbank Offered Rate (“EURIBOR”) interest rate, and are required to pay a fixed rate of 2.80%. The notional amount of the interest rate swap contract is scheduled to decline in correspondence to our scheduled principal payments on the underlying hedged debt. As of March 31, 2013 and December 31, 2012, the notional value of this interest rate swap contract was €24.4 million and €29.1 million, respectively. This derivative instrument qualifies for accounting as a cash flow hedge in accordance with ASC 815, and we designated it as such. We determined that our interest rate swap contract was highly effective as a cash flow hedge at March 31, 2013 and December 31, 2012. For the three months ended March 31, 2012 and March 31, 2013, there were immaterial amounts of ineffectiveness from this cash flow hedge.

In the following 12 months, we expect to reclassify to earnings $1.1 million of net unrealized losses related to swap contracts that are included in accumulated other comprehensive income (loss) at March 31, 2013 as we realize the earnings effect of the underlying loans. The amount we ultimately record to earnings will depend on the actual interest rates and foreign exchange rate when we realize the earnings effect of the underlying loans.

Foreign Currency Exchange Risk

Cash Flow Exposure

We expect many of the subsidiaries of our business to have material future cash flows, including revenues and expenses that will be denominated in currencies other than the subsidiaries’ functional currency. Our primary cash flow exposures are revenues and expenses. Changes in the exchange rates between our subsidiaries’ functional currencies 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 December 31, 2012, these foreign exchange forward contracts hedged our forecasted cash flows for up to 3 months. These foreign exchange forward contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We initially report the effective portion of the derivative’s unrealized gain or loss in accumulated other comprehensive income (loss) and subsequently reclassify amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that

23


these derivative financial instruments were highly effective as cash flow hedges at December 31, 2012. During the three months ended March 31, 2013, we did not discontinue any cash flow hedges because a hedging relationship was no longer highly effective. As of March 31, 2013 there were no longer any outstanding foreign exchange forward contracts qualifying as cash flow hedges.

As of December 31, 2012, 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):

December 31, 2012
 
 
 
 
 
Currency
 
Notional Amount
 
USD Equivalent
Canadian dollar
 
CAD 192.0
 
$195.1

As of December 31, 2012, the net unrealized gain on these contracts was $9.0 million.

Transaction Exposure and Economic Hedging

Many subsidiaries of our business have assets and liabilities (primarily receivables, investments, accounts payable, debt, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between our subsidiaries’ functional currencies and the other currencies in which these assets and liabilities are denominated can 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 the 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 purchase foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting under ASC 815. We recognize gains or losses from the fluctuation in foreign exchange rates and the fair value of these derivative contracts in “Cost of sales”, and “Foreign currency gain (loss)” on our condensed consolidated statements of operations, depending on where the gain or loss from the economically hedged item is classified on our condensed consolidated statements of operations. As of March 31, 2013 the total net unrealized loss on our economic hedge foreign exchange forward contracts was $0.4 million. As of December 31, 2012 the total net unrealized gain on our economic hedge foreign exchange forward contracts was $0.1 million. As these amounts do not qualify for hedge accounting, changes in fair value related to such derivative instruments are recorded directly to earnings. These contracts have maturities of less than three months.

As of March 31, 2013 and December 31, 2012, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting under ASC 815 were as follows (notional amounts and U.S. dollar equivalents in millions):
March 31, 2013
Transaction
 
Currency
 
Notional Amount
 
USD Equivalent
Purchase
 
Euro
 
€186.5
 
$239.0
Sell
 
Euro
 
€170.4
 
$218.3
Sell
 
Australian dollar
 
AUD 9.1
 
$9.5
Purchase
 
Malaysian ringgit
 
MYR 128.8
 
$41.2
Sell
 
Malaysian ringgit
 
MYR 64.8
 
$20.7
Purchase
 
Canadian dollar
 
CAD 9.2
 
$9.0
Sell
 
Canadian dollar
 
CAD 202.4
 
$199.0

The table above includes certain foreign exchange forward contracts originally designated as cash flow hedges but that were subsequently de-designated.


24


December 31, 2012
Transaction
 
Currency
 
Notional Amount
 
USD Equivalent
Purchase
 
Euro
 
€128.7
 
$170.2
Sell
 
Euro
 
€134.2
 
$177.5
Sell
 
Australian Dollar
 
AUD 8.5
 
$8.8
Purchase
 
Malaysian ringgit
 
MYR 136.4
 
$45.0
Sell
 
Malaysian ringgit
 
MYR 36.0
 
$11.9
Purchase
 
Canadian Dollar
 
CAD 22.4
 
$22.6
Sell
 
Canadian Dollar
 
CAD 15.8
 
$16.0



Note 11. 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 March 31, 2013 and December 31, 2012, our cash equivalents consisted of commercial paper and money market mutual funds. We value our commercial paper cash equivalents using 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 Level 2. We value our money market cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics, and accordingly, we classify the valuation techniques that use these inputs as Level 1.

•
Marketable securities and restricted investments. At March 31, 2013, our marketable securities consisted of commercial paper, corporate debt securities, federal and foreign agency debt, foreign government obligations and supranational debt, and our restricted investments consisted of foreign and U.S. government obligations. At December 31, 2012, our marketable securities consisted of commercial paper, corporate debt securities, federal and foreign agency debt, foreign government obligations, supranational debt, and U.S. government obligations, and our restricted investments consisted of foreign and U.S. government obligations. We value our marketable securities and restricted investments using quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals), and accordingly, we classify the valuation techniques that use these inputs as Level 2. We also consider the effect of our counterparties’ credit standings in these fair value measurements.

•
Derivative assets and liabilities. At March 31, 2013 and December 31, 2012, our derivative assets and liabilities consisted of foreign exchange forward contracts involving major currencies, interest rate swap contracts involving a benchmark of interest rates, and a cross-currency swap including both. Since our derivative assets and liabilities are not traded on an exchange, we value them using industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit risk, foreign exchange rates, and forward and spot prices for currencies. These inputs are observable in active markets over the contract term of the derivative instruments we hold, and accordingly, we classify these valuation techniques as Level 2. We consider the effect of our own credit standing and that of our counterparties in our fair value measurements of our derivative assets and liabilities.

At March 31, 2013 and December 31, 2012, the fair value measurements of our assets and liabilities that we measure on a recurring basis were as follows (in thousands):

25


 
 
As of March 31, 2013
 
 
 
 
Fair Value Measurements at Reporting
Date Using
 
 
 
 
 
 
 
Total Fair
Value and
Carrying
Value on Our
Balance Sheet
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
Commercial paper
 
$
1,499

 
$
—

 
$
1,499

 
$
—

Money market mutual funds
 
8,386

 
8,386

 
—

 
—

Marketable securities:
 
 
 
  

 
  

 
  

Commercial paper
 
5,096

 
—

 
5,096

 
—

Corporate debt securities
 
23,315

 
—

 
23,315

 
—

Federal agency debt
 
35,392

 
—

 
35,392

 
—

Foreign agency debt
 
38,115

 
—

 
38,115

 
—

Foreign government obligations
 
4,103

 
—

 
4,103

 
—

Supranational debt
 
62,972

 
—

 
62,972

 
—

Restricted investments (excluding restricted cash)
 
286,145

 
—

 
286,145

 
—

Derivative assets
 
3,450

 
—

 
3,450

 
—

Total assets
 
$
468,473

 
$
8,386

 
$
460,087

 
$
—

Liabilities:
 
 
 
 
 
 
 
 
Derivative liabilities
 
$
8,409

 
$
—

 
$
8,409

 
$
—


 
 
As of December 31, 2012
 
 
 
 
Fair Value Measurements at Reporting
Date Using
 
 
 
 
 
 
 
Total Fair
Value and
Carrying
Value on Our
Balance Sheet
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
 
Cash equivalents:
 
 

 
 
 
 
 
 
Commercial paper
 
$
1,500

 
$
—

 
$
1,500

 
$
—

Money market mutual funds
 
10,729

 
10,729

 
—

 
—

Marketable securities:
 
 
 
 
 
 
 
 
Commercial paper
 
1,698

 
—

 
1,698

 
—

Corporate debt securities
 
23,384

 
—

 
23,384

 
—

Federal agency debt
 
29,936

 
—

 
29,936

 
—

Foreign agency debt
 
7,233

 
—

 
7,233

 
—

Foreign government obligations
 
4,142