Edgar Filing: FIRST SOLAR, INC.

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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, 2011
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 April 29, 2011, 86,160,700 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, 2011

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, 2011 and March 27, 2010	3
	Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and March 27, 2010	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
Part II.	Other Information	44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	45
Item 5.	Other Information	45
Item 6.	Exhibits	45
Signature		47

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, 2011			March 27, 2010
Net sales	$	567,293		$	567,961
Cost of sales	307,628			285,925
Gross profit	259,665			282,036
Operating expenses:
Research and development	31,351			22,888
Selling, general and administrative	87,000			66,864
Production start-up	11,931			1,143
Total operating expenses	130,282			90,895
Operating income	129,383			191,141
Foreign currency gain (loss)	950			(696		)
Interest income	3,023			5,648
Interest expense, net	—			—
Other expense, net	(349		)	(734		)
Income before income taxes	133,007			195,359
Income tax expense	17,039			23,014
Net income	$	115,968		$	172,345
Net income per share:
Basic	$	1.36		$	2.04
Diluted	$	1.33		$	2.00
Weighted-average number of shares used in per share calculations:
Basic	85,324			84,505
Diluted	87,053			86,092

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)



	March 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	355,725		$	765,689
Marketable securities and investments	199,785			167,889
Accounts receivable trade, net	362,695			305,537
Accounts receivable, unbilled	10,582			1,482
Inventories	271,215			195,863
Balance of systems parts	16,021			4,579
Deferred tax assets, net	401			388
Prepaid expenses and other current assets	177,831			143,033
Total current assets	1,394,255			1,584,460
Property, plant and equipment, net	1,549,529			1,430,789
Project assets	384,376			320,140
Deferred tax assets, net	265,591			259,236
Marketable securities	157,442			180,271
Restricted cash and investments	147,707			86,003
Goodwill	458,808			433,288
Inventories	30,607			42,728
Other assets	45,666			43,488
Total assets	$	4,433,981		$	4,380,403
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	99,398		$	82,312
Income taxes payable	28,148			16,831
Accrued expenses	228,956			244,271
Current portion of long-term debt	28,169			26,587
Other current liabilities	85,218			99,676
Total current liabilities	469,889			469,677
Accrued solar module collection and recycling liability	155,570			132,951
Long-term debt	103,531			210,804
Other liabilities	139,142			112,026
Total liabilities	868,132			925,458
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 86,066,220 and 85,843,511 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively	86			86
Additional paid-in capital	1,834,514			1,815,420
Contingent consideration	1,118			1,118
Accumulated earnings	1,781,532			1,665,564
Accumulated other comprehensive loss	(51,401		)	(27,243		)
Total stockholders’ equity	3,565,849			3,454,945
Total liabilities and stockholders’ equity	$	4,433,981		$	4,380,403

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended
	March 31, 2011			March 27, 2010
Cash flows from operating activities:
Cash received from customers	$	471,600		$	484,261
Cash paid to suppliers and associates	(495,427		)	(441,079		)
Interest received	1,984			9,359
Interest paid	(3,034		)	(74		)
Income taxes paid, net of refunds	(18,535		)	(18,892		)
Excess tax benefit from share-based compensation arrangements	—			(1,568		)
Other operating activities	(401		)	(734		)
Net cash (used in) provided by operating activities	(43,813		)	31,273
Cash flows from investing activities:
Purchases of property, plant and equipment	(168,990		)	(105,976		)
Purchases of marketable securities and investments	(157,151		)	(383,757		)
Proceeds from maturities of marketable securities	67,448			33,756
Proceeds from sales of marketable securities and investments	79,114			200,220
Payments received on notes receivable	—			35,817
Increase in restricted investments	(62,748		)	(43,443		)
Acquisitions, net of cash acquired	(21,105		)	—
Other investing activities	16			1,019
Net cash used in investing activities	(263,416		)	(262,364		)
Cash flows from financing activities:
Proceeds from stock option exercises	2,741			1,107
Repayment of long-term debt	(113,900		)	(714		)
Excess tax benefit from share-based compensation arrangements	—			1,568
Other financing activities	(114		)	—
Net cash (used in) provided by financing activities	(111,273		)	1,961
Effect of exchange rate changes on cash and cash equivalents	8,538			(14,483		)
Net decrease in cash and cash equivalents	(409,964		)	(243,613		)
Cash and cash equivalents, beginning of the period	765,689			664,499
Cash and cash equivalents, end of the period	$	355,725		$	420,886
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities	$	91,186		$	56,329

See accompanying notes to these condensed consolidated financial statements.

FIRST SOLAR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended March 31, 2011

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 (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, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, or for any other period. The balance sheet at December 31, 2010 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, 2010 included in our Annual Report on Form 10-K filed with the SEC.

We report our results of operations using a calendar year. Prior to December 31, 2010, our fiscal periods ended on the Saturday closest to the end of the applicable calendar quarter. Fiscal 2011 will end on December 31, 2011.

Certain prior year balances have been reclassified to conform to the current year's presentation. Such reclassifications did not affect total net sales, operating income, or net income.

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

Balance of Systems Parts. Balance of systems parts represent construction parts purchased for solar power plants under construction, which we hold title of and are not yet installed in a solar power plant. These parts include posts, tilt brackets, cartridges, inverters, and any other parts we purchase or assemble for the solar power plants we construct. Balance of systems parts do not include solar modules. We report these parts at the lower of cost or market, with market being based on either recoverability through installation in a solar power plant under construction or through a sale.

Revenue Recognition - Systems Business. Our systems business provides a complete solar power system solution, which includes project development, engineering, procurement, and construction (EPC) services, operating and maintenance (O&M) services, when applicable, and project finance, when required.

We base revenue recognition for arrangements entered into by the 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, ASC 360, Accounting for Sales of Real Estate.

For construction contracts that do not involve land or land rights and thus are accounted for under ASC 605, we use the percentage-of-completion method using actual costs incurred over total estimated costs to complete a project (including module costs) as our basic 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. We periodically revise our contract cost and profit estimates and we immediately recognize any losses that we identify on contracts. Incurred costs include all direct materials, costs for solar modules, labor, subcontractor costs, and those indirect costs related to contract performance, such as indirect labor, supplies, and tools. We recognize direct material costs as incurred costs when the direct materials have been installed. When contracts specify that title to direct materials transfers to the customer before installation has been performed, we defer revenue and associated costs and recognize them once those materials are installed and have met any other revenue recognition requirements. We consider direct materials to be installed when they are permanently attached or fitted to the solar power systems as required by engineering designs.

For arrangements recognized under ASC 360, typically when we have gained control of land or land rights, we record the sale as revenue after construction of a project is complete, we have transferred the usual risks and rewards of ownership to the buyer, and we have received payment from the buyer. We apply the percentage-of-completion method to certain contracts covered under ASC 360, when the sale has been consummated, the initial or continuing investment criteria have been met, we have the

ability to estimate our costs and progress toward completion, and other revenue recognition criteria have been met. Depending on the value of the initial and continuing payment commitment by the buyer, we generally align our revenue recognition and release of project assets to cost of sales with the receipt of payment from the buyer for contracts accounted for under ASC 360.

Please also refer to Note 2. "Summary of Significant Accounting Policies," in our Annual Report on Form 10-K for a more complete discussion of our significant accounting policies.

Note 3. Recent Accounting Pronouncements

In December 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. This ASU amends guidance for Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. ASU 2010-28 is effective for fiscal years and interim periods beginning after December 15, 2010, with early adoption not permitted. The adoption of ASU 2010-28 during the three months ended March 31, 2011 did not have a material impact on our financial position, results of operations, or cash flows.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. This ASU specifies that if a public company presents comparative financial statements, the entity should only disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. The adoption of ASU 2010-29 during the three months ended March 31, 2011 had no impact on our financial position, results of operations, or cash flows, as its requirements only pertain to financial statement footnote disclosure.

Note 4. Acquisitions

Fiscal 2011 Acquisition

Ray Tracker

On January 4, 2011, we acquired 100% of the ownership interest of Ray Tracker, Inc., a tracking technology and photovoltaic (PV) balance of systems business in an all-cash transaction. We have included the financial results of Ray Tracker in our condensed consolidated financial statements from the date of acquisition. We concluded that the impact of this acquisition was not material to our consolidated balance sheets and results of operations.

Fiscal 2010 Acquisition

NextLight Renewable Power

On July 12, 2010, we completed the acquisition of NextLight Renewable Power, LLC (NextLight), a leading developer of utility-scale solar power projects in the southwestern United States. NextLight was formed by a private equity firm focused on investing in North America's energy infrastructure. This transaction expanded our pipeline of solar power projects in the southwestern United States and supports our expansion in the U.S. utility-scale power market. We have integrated NextLight into our systems business, which provides a complete PV solar power solution, including project development, EPC services, O&M services, when applicable, and project finance, when required.

The total consideration for this acquisition was $296.7 million in an all-cash transaction. In allocating the purchase price based on estimated fair values, we recorded approximately $146.8 million of goodwill, $2.5 million of net tangible assets, and $147.4 million of project assets. We have included the financial results of NextLight in our condensed consolidated financial statements beginning on the acquisition date. For the period from January 1, 2010 to March 27, 2010, NextLight did not recognize any revenue and did not incur a material net loss. Therefore, had the acquisition of NextLight occurred on December 27, 2009 (the first day of our fiscal year 2010), our reported net sales would not have changed and our reported net income would not have materially changed from the amounts previously reported.

Note 5. Goodwill

The changes in the carrying amount of goodwill, which is generally deductible for tax purposes, for our components segment

and systems segment for the three months ended March 31, 2011 were as follows:



	Components		Systems		Consolidated
Ending balance, December 31, 2010	$	393,365	$	39,923	$	433,288
Goodwill from acquisition	—		25,520		25,520
Ending balance, March 31, 2011	$	393,365	$	65,443	$	458,808

ASC 350, Intangibles - Goodwill and Other, requires us to test goodwill for impairment at least annually, or sooner, if facts or circumstances between scheduled annual tests indicate that it is more likely than not that the fair value of a reporting unit that has goodwill might be less than its carrying value. Currently our operating segments and reporting units are identical. We estimate the fair value of our reporting units by referring to the price that would be received to sell the unit as whole in an orderly transaction between market participants at the measurement date. For the goodwill assessment of our systems business, we believe that a typical market participant for the sale of our systems reporting unit would be a solar module manufacturer seeking to acquire a systems business with a large pipeline of utility-scale solar power plant projects, with the intent that these projects would provide a captive outlet for additional future solar module production. Therefore, we model the systems reporting unit's future performance for purposes of applying the income method of fair value measurement to include some of the profitability associated with the solar module element of the solar power plants that it builds and sells.

We performed our goodwill impairment test in the fourth fiscal quarter of the year ended December 31, 2010 and determined that the fair value of our goodwill substantially exceeded the carrying value for each individual reporting unit. Therefore, we concluded that our goodwill was not impaired. We have also concluded that there have been no changes in facts and circumstances since the date of that test that would trigger an interim goodwill impairment test.

Note 6. Cash, Cash Equivalents, Marketable Securities, and Investments

Cash, cash equivalents, marketable securities, and investments consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Cash and cash equivalents:
Cash	$	317,395	$	742,200
Cash equivalents:
Commercial paper	4,998		1,200
Corporate debt securities	52		—
Money market mutual funds	33,280		22,289
Total cash and cash equivalents	355,725		765,689
Marketable securities and investments:
Certificates of deposit	2,001		—
Commercial paper	5,698		13,343
Corporate debt securities	155,436		98,602
Federal agency debt	48,363		45,875
Foreign agency debt	92,251		133,165
Foreign government obligations	9,096		9,143
Supranational debt	44,181		48,032
U.S. government obligations	201		—
Total marketable securities and investments	357,227		348,160
Total cash, cash equivalents, marketable securities, and investments	$	712,952	$	1,113,849

We have classified our marketable securities and 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. We report realized gains and losses on the sale of our marketable securities and investments in earnings, computed using the specific identification method. During the three months ended March 31, 2011 and March 27, 2010, we realized $0.1 million and $0.3 million, respectively, in gains and an immaterial amount and $0.1 million, respectively, in losses on our marketable securities and investments. See Note 10. "Fair Value Measurements," to our condensed consolidated financial statements for information about the fair value of our

marketable securities and investments.

All of our available-for-sale marketable securities and investments are subject to a periodic impairment review. We consider a marketable debt security to be impaired when its fair value is less than its carrying cost, in which case we would further review the investment to determine whether it is other-than-temporarily impaired. When we evaluate an investment 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 investment before we have recovered its cost basis. If an investment were other-than-temporarily impaired, we would write it down through earnings to its impaired value and establish that as a new cost basis for the investment. We did not identify any of our marketable securities and investments as other-than-temporarily impaired at March 31, 2011 and December 31, 2010.

The following tables summarize the unrealized gains and losses related to our available-for-sale marketable securities and investments, by major security type, as of March 31, 2011 and December 31, 2010 (in thousands):



	As of March 31, 2011
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Certificates of deposit	$	2,001	$	—	$	—	$	2,001
Commercial paper	5,697		1		—		5,698
Corporate debt securities	155,077		472		113		155,436
Federal agency debt	48,331		35		3		48,363
Foreign agency debt	91,949		316		14		92,251
Foreign government obligations	9,090		6		—		9,096
Supranational debt	44,131		50		—		44,181
U.S. government obligations	201		—		—		201
Total	$	356,477	$	880	$	130	$	357,227



	As of December 31, 2010
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Commercial paper	$	13,340	$	3	$	—	$	13,343
Corporate debt securities	98,148		592		138		98,602
Federal agency debt	45,858		21		4		45,875
Foreign agency debt	132,860		425		120		133,165
Foreign government obligations	9,137		8		2		9,143
Supranational debt	47,917		115		—		48,032
Total	$	347,260	$	1,164	$	264	$	348,160

Contractual maturities of our available-for-sale marketable securities and investments as of March 31, 2011 and December 31, 2010 were as follows (in thousands):



	As of March 31, 2011
Maturity	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
One year or less	$	199,292	$	498	$	5	$	199,785
One year to two years	156,171		382		125		156,428
Two years to three years	1,014		—		—		1,014
Total	$	356,477	$	880	$	130	$	357,227



	As of December 31, 2010
Maturity	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
One year or less	$	167,499	$	398	$	8	$	167,889
One year to two years	177,268		759		256		177,771
Two years to three years	2,493		7		—		2,500
Total	$	347,260	$	1,164	$	264	$	348,160

The net unrealized gain of $0.8 million and $0.9 million as of March 31, 2011 and December 31, 2010, respectively, on our available-for-sale marketable securities and investments was primarily the result of changes in interest rates. We typically invest in highly-rated securities with low probabilities of default. Our investment policy requires investments to be rated single A or higher and limits the security types, issuer concentration, and duration of our investments.

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, 2011 and December 31, 2010, aggregated by major security type and the length of time that individual securities have been in a continuous loss position (in thousands):



	As of March 31, 2011
	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	$	55,868	$	113	$	—	$	—	$	55,868	$	113
Federal agency debt	2,612		3		—		—		2,612		3
Foreign agency debt	22,385		14		—		—		22,385		14
Total	$	80,865	$	130	$	—	$	—	$	80,865	$	130



	As of December 31, 2010
	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	$	33,018	$	138	$	—	$	—	$	33,018	$	138
Federal agency debt	11,721		4		—		—		11,721		4
Foreign agency debt	46,134		120		—		—		46,134		120
Foreign government obligations	4,515		2		—		—		4,515		2
Total	$	95,388	$	264	$	—	$	—	$	95,388	$	264

Note 7. Restricted Cash and Investments

Restricted cash and investments consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Restricted cash	$	236	$	19
Restricted investments	147,471		85,984
Total restricted cash and investments — noncurrent	$	147,707	$	86,003

At March 31, 2011 and December 31, 2010, our restricted investments consisted of long-term marketable securities that we hold through a custodial account to fund future costs of our solar module collection and recycling program.

We pre-fund our estimated solar module collection and recycling costs at the time of module sale through a custodial account with a large bank as the investment advisor in the name of a trust, for which First Solar Inc., First Solar Malaysia Sdn. Bhd., and First Solar Manufacturing GmbH are grantors. We fund this custodial account within 60 days after the beginning of a fiscal year

for the prior year's module sales, assuming for this purpose a minimum service life of 25 years for our solar modules. To ensure that our collection and recycling program 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), a trust structure has been established; funds are put into custodial accounts in the name of a trustee. Only the trustee can distribute funds from the custodial accounts and these funds cannot be accessed for any purpose other than for administering module collection and recycling, either by us or a third party executing the collection and recycling services. To provide further assurance that sufficient funds will be available, our module collection and recycling program, including the financing arrangement, is audited periodically by an independent third party auditor. Cash invested in this custodial account must meet the criteria of the highest quality investments, such as AAA rated government or agency bonds.

The following table summarizes unrealized gains and losses related to our restricted investments in marketable securities designated as available-for-sale by major security type as of March 31, 2011 and December 31, 2010 (in thousands):



	As of March 31, 2011
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Foreign government obligations	$	134,442	$	2,122	$	3,880	$	132,684
U.S. government obligations	14,701		255		169		14,787
Total	$	149,143	$	2,377	$	4,049	$	147,471



	As of December 31, 2010
Security Type	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Foreign government obligations	$	73,729	$	6,529	$	72	$	80,186
U.S. government obligations	5,659		139		—		5,798
Total	$	79,388	$	6,668	$	72	$	85,984

As of March 31, 2011 and December 31, 2010, the contractual maturities of these available-for-sale marketable securities were between 17 years and 25 years.

Note 8. Consolidated Balance Sheet Details

Accounts receivable trade, net

Accounts receivable trade consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Accounts receivable trade, gross	$	362,695	$	305,537
Allowance for doubtful accounts	—		—
Accounts receivable trade, net	$	362,695	$	305,537

During the third quarter of 2009, we amended our Supply Contracts with certain of our customers to implement a program which provided a price rebate to these customers for solar modules purchased from us. The intent of this program was to enable our customers to successfully compete in our core German market and to adjust, for eligible customers, the sales price (which was documented in framework agreements entered into several years ago) in light of market conditions.

The rebate program is offered for a defined period, during which customers may apply and claim such rebate. The most recent rebate offering, for solar modules sold on or after December 1, 2010, includes certain European geographic areas in addition to Germany.

As was the case in 2009, the rebate amounts are established so as to enable the sell-through of our products at competitive prices. The amount of rebate earned during a fiscal quarter is based on (i) the volume of solar modules shipped to a customer (measured in watts), (ii) the volume of solar modules registered for eligible projects (measured in watts), provided that those solar modules were invoiced by the buyer to an end-user, and (iii) the rebate rate. The rebate program applies a specified rebate rate to

solar modules sold for solar power projects in certain geographic areas. Customers need to meet certain requirements in order to be eligible for and benefit from this program. During the three months ended March 31, 2011, we experienced approximately 92% participation in this program by eligible customers.

We account for these rebates as a reduction to the selling price of our solar modules and, therefore, as a reduction in revenue at the time of sale and recognize a contra-asset within accounts receivable trade, net. No rebates granted under this program can be claimed for cash; instead, rebates may only be applied to reduce outstanding accounts receivable balances. During the three months ended March 31, 2011, we extended rebates to customers in the amount of €10.7 million ($14.8 million at an average exchange rate of $1.38/€1.00). At March 31, 2011, we had €17.7 million ($25.0 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) of rebate claims accrued, which reduced our accounts receivable accordingly. During the three months ended March 27, 2010, we extended rebates to customers in the amount of €20.0 million ($27.8 million at an average exchange rate of $1.39/€1.00).

Accounts receivable, unbilled

Accounts receivable, unbilled represents revenue that has been recognized in advance of billing the customer. This is common for long-term construction contracts. For example, we recognize revenue from long-term contracts for the construction and sale of solar power systems which include the sale of project assets over the contractual period using applicable accounting methods. One applicable accounting method is the percentage-of-completion method of accounting, under which sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred to the total estimated costs for completing the entire contract. Under this accounting method, it is possible that revenue could be recognized under applicable revenue recognition criteria in advance of billing the customer, resulting in an amount recorded to "Accounts receivable, unbilled." Once we meet the billing criteria under a contract, we bill our customer accordingly and reclassify the “Accounts receivable, unbilled” to “Accounts receivable trade, net.” Billing criteria vary by contract, but are generally structured around completion of certain construction milestones.

Accounts receivable, unbilled were $10.6 million and $1.5 million at March 31, 2011 and December 31, 2010, respectively. We expect to bill and collect these amounts within the next 12 months.

Inventories

Inventories consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Raw materials	$	175,212	$	162,190
Work in process	27,466		21,528
Finished goods	99,144		54,873
Total inventories	$	301,822	$	238,591
Inventories — current	$	271,215	$	195,863
Inventories — noncurrent (1)	$	30,607	$	42,728

(1) We purchase a critical raw material that is heavily used in our core production process in quantities that anticipate confident, but long-term future demand. We classify the raw materials that we do not expect to be consumed within our operating cycle (which is 12 months) as noncurrent.

Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Prepaid expenses	$	56,308	$	46,016
Deferred project costs (1)	4,485		14,446
Derivative instruments	5,914		20,986
Other current assets	111,124		61,585
Total prepaid expenses and other current assets	$	177,831	$	143,033

(1) Deferred project costs represent (i) costs that we capitalize for arrangements that we account for as real estate transactions after we have entered into a definitive sales arrangement, but before we have met the 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 the revenue recognition criteria have been met.

Project assets – current and noncurrent

Project assets consist primarily of costs relating to solar power projects in various stages of development that we capitalize prior to the sale of the solar power project to a third party for further project development or the signing of a project construction contract. These costs include costs for land and costs for developing and constructing a solar power plant. Development costs can include legal, consulting, permitting, and other similar costs. Once we enter into a definitive sales agreement, we reclassify project assets to deferred project costs on our balance sheet until we have met the criteria to recognize the sale of the project assets as revenue.

Project assets - current and noncurrent consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Project assets acquired through OptiSolar and NextLight	$	217,417	$	217,417
Project assets — land	13,810		13,781
Project assets — other	153,149		88,942
Total project assets	$	384,376	$	320,140
Total project assets — current	$	—	$	—
Total project assets — noncurrent	$	384,376	$	320,140

In connection with the acquisition of the solar power project development businesses of OptiSolar and NextLight, we measured at fair value certain acquired project assets based on the varying development stages of each project asset on the acquisition date. Subsequent to the acquisitions of OptiSolar and NextLight, we incurred additional costs to further develop these projects. Once we enter into a definitive sales agreement, we reclassify project assets to deferred project costs on our balance sheet. We expense these project assets to cost of sales as each respective project asset or solar power system is sold to a customer, since the project is constructed for a customer (matching the underlying revenue recognition method). If a project is considered not commercially viable, we impair the respective project asset and adjust it to fair value, with the resulting impairment recorded within operations.

We review project assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider a project commercially viable if it is anticipated to be sellable for a profit once it is either fully developed or fully constructed. We consider a partially developed or partially constructed project commercially viable if the anticipated selling price is higher than the carrying value of the related project assets. We examine a number of factors to determine if the project will be profitable, the most notable of which is whether there are any changes in environmental, ecological, permitting, or regulatory conditions that impact the project. Such changes could cause the cost of the project to increase or the selling price of the project to decrease.

Property, plant and equipment, net

Property, plant and equipment, net consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011			December 31, 2010
Buildings and improvements	$	344,320		$	286,637
Machinery and equipment	1,157,319			997,510
Office equipment and furniture	78,121			70,569
Leasehold improvements	26,418			25,354
Depreciable property, plant and equipment, gross	1,606,178			1,380,070
Accumulated depreciation	(409,622		)	(363,305		)
Depreciable property, plant and equipment, net	1,196,556			1,016,765
Land	11,139			10,355
Construction in progress	341,834			403,669
Property, plant and equipment, net	$	1,549,529		$	1,430,789

During 2010, we were granted a $16.3 million tax credit under the Advanced Energy Tax Credit program enacted by the American Reinvestment and Recovery Act of 2009 for the expansion of our Perrysburg, Ohio manufacturing facility, and we reduced the acquisition cost for the expansion of this facility accordingly.

Further, we are eligible to receive certain investment incentives related to building the expansion of our manufacturing plant in Frankfurt/Oder, Germany, including costs for the construction of buildings and the purchase of machinery and equipment. We account for these grants as a deduction to the carrying value of the fixed assets they fund when there is reasonable assurance that we comply with the conditions attached to the grants and the grants will be received. See Note 11. "Economic Development Funding," for further information about these grants.

Depreciation of property, plant and equipment was $47.1 million and $36.6 million for the three months ended March 31, 2011 and March 27, 2010, respectively.

Capitalized interest

We capitalized interest costs incurred into property, plant and equipment or project assets/deferred project costs as follows during the three months ended March 31, 2011 and March 27, 2010 (in thousands):



	Three Months Ended
	March 31, 2011			March 27, 2010
Interest cost incurred	$	(1,837	)	$	(2,275	)
Interest cost capitalized – property, plant and equipment	1,759			418
Interest cost capitalized - project assets and deferred project costs	78			1,857
Interest expense, net	$	—		$	—

Accrued expenses

Accrued expenses consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Accrued compensation and benefits	$	34,612	$	69,353
Accrued property, plant and equipment	57,121		53,741
Accrued inventory	36,780		25,686
Product warranty liability - current	12,608		11,226
Nonrecurring expenses in excess of normal product warranty liability and related expenses (1)	23,091		28,921
Other accrued expenses	64,744		55,344
Total accrued expenses	$	228,956	$	244,271

(1) The above-referenced $23.1 million of accrued nonrecurring expenses in excess of normal product warranty liability and related expenses as of March 31, 2011 consisted of the following, each related to the manufacturing excursion described below: (i) $19.4 million in estimated expenses for certain module replacement efforts voluntarily undertaken by us beyond

the normal product warranty; and (ii) $3.7 million in estimated nonrecurring post-sale expenses. During the period from June 2008 to June 2009, a manufacturing excursion occurred affecting less than 4% of the total product manufactured within the period. The excursion could result in possible premature power loss in affected modules. The root cause was identified and subsequently mitigated in June 2009. On-going testing confirms that the corrective actions have been effective. We have been working directly with impacted customers to replace the affected modules and these efforts are well underway and, in some cases, complete. Some of these efforts go beyond our normal warranty coverage.

Other current liabilities

Other current liabilities consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Deferred revenue (1)	$	—	$	14,718
Derivative instruments	45,532		22,996
Deferred tax liabilities	24,912		34,601
Other current liabilities	14,774		27,361
Total other current liabilities	$	85,218	$	99,676

(1) Deferred revenue is recognized in net sales once all revenue recognition criteria are met.

Other liabilities

Other liabilities consisted of the following at March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011		December 31, 2010
Other taxes payable	$	66,351	$	59,148
Other noncurrent liabilities	72,791		52,878
Total other liabilities	$	139,142	$	112,026

Note 9. 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 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. Our use of derivative instruments is subject to strict internal controls based on centrally defined, performed, and controlled policies and procedures.

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 point in time. 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 on our balance sheet. Depending on the substance of the hedging purpose for our derivative instruments, we account for changes in the fair value of some of them using cash flow hedge accounting pursuant to ASC 815 and of others by recording the changes in fair value directly to current earnings (so-called “economic hedges”). These accounting approaches, the various risk classes that we are exposed to in our business, and the risk management systems using derivative instruments that we apply to these risks are described below. See Note 10. "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 consolidated balance sheets as of March 31, 2011 and December 31, 2010 (in thousands):



	March 31, 2011
	Other Assets - Current		Other Assets - Noncurrent		Other Liabilities - Current		Other Liabilities - Noncurrent
Derivatives designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	238	$	—	$	41,144	$	1,914
Interest rate swap contracts	—		—		65		232
Total derivatives designated as hedging instruments	$	238	$	—	$	41,209	$	2,146

Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	5,676	$	—	$	4,323	$	—
Total derivatives not designated as hedging instruments	$	5,676	$	—	$	4,323	$	—
Total derivative instruments	$	5,914	$	—	$	45,532	$	2,146



	December 31, 2010
	Other Assets - Current		Other Assets - Noncurrent		Other Liabilities - Current		Other Liabilities - Noncurrent
Derivatives designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	10,115	$	880	$	12,384	$	58
Interest rate swap contracts	—		—		239		980
Total derivatives designated as hedging instruments	$	10,115	$	880	$	12,623	$	1,038

Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	10,871	$	—	$	10,373	$	—
Total derivatives not designated as hedging instruments	$	10,871	$	—	$	10,373	$	—
Total derivative instruments	$	20,986	$	880	$	22,996	$	1,038

The following tables present the amounts related to derivative instruments affecting our consolidated statements of operations for the three months ended March 31, 2011 and March 27, 2010 (in thousands):



	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives				Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	Three Months Ended			Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Three Months Ended
Derivative Type	March 31, 2011				March 31, 2011
Derivatives designated as cash flow hedges under ASC 815:
Foreign exchange forward contracts	$	(53,752	)	Net sales	$	(12,380	)
Interest rate swaps	717			Interest income (expense)	(205		)
Total derivatives designated as cash flow hedges	$	(53,035	)		$	(12,585	)



	Amount of Gain (Loss) on Derivatives Recognized in Income
	Three Months Ended
Derivative Type	March 31, 2011			Location of Gain (Loss) Recognized in Income on Derivatives
Derivatives designated as cash flow hedges under ASC 815:
Foreign exchange forward contracts	$	(12,380	)	Net sales
Interest rate swaps	$	(205	)	Interest income (expense)

Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	1,209		Other income (expense)
Foreign exchange forward contracts	$	3,082		Cost of sales



	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives				Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	Three Months Ended			Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Three Months Ended
Derivative Type	March 27, 2010				March 27, 2010
Derivatives designated as cash flow hedges under ASC 815:
Foreign exchange forward contracts	$	36,899		Net sales	$	1,295
Interest rate swaps	(455		)	Interest income (expense)	(319		)
Total derivatives designated as cash flow hedges	$	36,444			$	976



	Amount of Gain (Loss) on Derivatives Recognized in Income
	Three Months Ended
Derivative Type	March 27, 2010			Location of Gain (Loss) Recognized in Income on Derivatives
Derivatives designated as cash flow hedges under ASC 815:
Foreign exchange forward contracts	$	1,295		Net sales
Interest rate swaps	$	(319	)	Interest income (expense)

Derivatives not designated as hedging instruments under ASC 815:
Foreign exchange forward contracts	$	(5,563	)	Other income (expense)
Foreign exchange forward contracts	$	(4,514	)	Cost of sales
Foreign exchange forward contracts	$	(340	)	Net sales

Interest Rate Risk

We use interest rate swap agreements to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments; we do not use such swap agreements for speculative or trading purposes. 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 a notional value of €57.3 million ($80.8 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) and pursuant to which we are entitled to receive a six-month floating interest rate, the Euro Interbank Offered Rate

(Euribor), 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, 2011, the notional value of this interest rate swap contract was €43.2 million ($60.9 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). 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, 2011 and December 31, 2010.

Foreign Currency Exchange Risk

Cash Flow Exposure

We expect many of the components of our business to have material future cash flows, including revenues and expenses, that will be denominated in currencies other than the component's functional currency. Our primary cash flow exposures are customer collections and vendor payments. Changes in the exchange rates between our components' functional currencies and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge the value of a portion of these forecasted cash flows. As of March 31, 2011 and December 31, 2010, these foreign exchange contracts hedged our forecasted future cash flows for up to 18 months. These foreign exchange contracts qualified 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 gain or loss in “Accumulated other comprehensive income (loss)” and subsequently reclassify amounts into earnings when the hedged transaction is settled. We determined that these derivative financial instruments were highly effective as cash flow hedges at March 31, 2011 and December 31, 2010. In addition, during the three months ended March 31, 2011, we did not discontinue any cash flow hedges because a hedging relationship was no longer highly effective or it was probable that a forecasted transaction would not occur.

During the three months ended March 31, 2011, we purchased foreign exchange forward contracts to hedge the exchange risk on forecasted cash flows denominated in euro. As of March 31, 2011, the unrealized loss on these contracts was $42.8 million and the total notional value of the contracts was €714.0 million ($1.0 billion at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). The weighted average forward exchange rate for these contracts was $1.34/€1.00 at March 31, 2011. As of December 31, 2010, the unrealized loss on these types of contracts was $1.4 million and the total notional value of the contracts was €742.0 million ($1.0 billion at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). The weighted average forward exchange rate for these contracts was $1.33/€1.00 at December 31, 2010.

In the following 12 months, we expect to reclassify to earnings $40.9 million of net unrealized losses related to these forward contracts that are included in "Accumulated other comprehensive loss" at March 31, 2011 as we realize the earnings effect of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual exchange rate when we realize the related forecasted transactions. During the three months ended March 31, 2011, we realized a loss of $12.6 million related to our cash flow hedges.

Transaction Exposure

Many components of our business have assets and liabilities (primarily receivables, investments, accounts payable, debt, solar module collection and recycling liabilities, and inter-company transactions) that are denominated in currencies other than the component's functional currency. Changes in the exchange rates between our components' functional currencies and the other currencies in which these assets and liabilities are denominated can create fluctuations in our reported consolidated financial position, results of operations, and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to hedge assets and liabilities against the short-term effects of currency exchange rate fluctuations. The gains and losses on the foreign exchange forward contracts will offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency assets and liabilities.

During the three months ended March 31, 2011, we purchased foreign exchange forward contracts to hedge balance sheet exposures related to transactions with third parties. We recognize gains or losses from the fluctuation in foreign exchange rates and the valuation of these derivative contracts in "Cost of sales" and "Foreign currency gain (loss)" on our consolidated statements of operations, depending on where the gain or loss from the hedged item is classified on our consolidated statements of operations. As of March 31, 2011, the total unrealized gain on our foreign exchange forward contracts was $1.4 million. These contracts have maturities of less than three months.

As of March 31, 2011, the notional values of our foreign exchange forward contracts were as follows (notional amounts and U.S. dollar equivalents in millions):



				Balance sheet close rate on
Transaction	Currency	Notional Amount	U.S. Equivalent	March 31, 2011
Purchase	Euro	€245.9	$346.7	$1.41/€1.00
Sell	Euro	€234.8	$331.1	$1.41/€1.00
Purchase	Malaysian ringgit	MYR 111.9	$36.9	$0.33/MYR1.00
Sell	Malaysian ringgit	MYR 29.4	$9.7	$0.33/MYR1.00
Purchase	Japanese yen	JPY 378.0	$3.8	$0.01/JPY1.00
Purchase	Canadian dollar	CAD 1.2	$1.2	$1.03/CAD1.00
Sell	Canadian dollar	CAD 3.5	$3.6	$1.03/CAD1.00

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, investments, trade accounts receivable, interest rate swap contracts, and foreign exchange forward contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place cash, cash equivalents, investments, interest rate swap contracts, and foreign exchange forward contracts 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.

Note 10. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and provides financial statement disclosure requirements for fair value measurements. ASC 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. ASC 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:


•	Level 1 — Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

•

Level 2 — Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.


•	Level 3 — Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about the assumptions that market participants would use to price an asset or liability.

When available, we use quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, we measure fair value using valuation techniques that use, when possible, current market-based or independently-sourced market parameters, such as interest rates and currency rates. 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 or one-time basis:

•

Cash equivalents. At March 31, 2011, our cash equivalents consisted of commercial paper, corporate debt securities, and money market mutual funds. At December 31, 2010, our cash equivalents consisted of commercial paper and money market mutual funds. We value our commercial paper and corporate debt securities 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), and 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, investments, and restricted investments. At March 31, 2011, our marketable securities and investments consisted of certificates of deposit, 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. At December 31, 2010, 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. We value our marketable securities, investments, 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, 2011 and December 31, 2010, our derivative assets and liabilities consisted of foreign exchange forward contracts involving major currencies and interest rate swap contracts involving benchmark interest rates. 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 terms of the 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 valuations of our derivative assets and liabilities.

•

Solar module collection and recycling liability. We account for our obligation to collect and recycle the solar modules that we sell in a similar manner to the accounting for asset retirement obligations that is prescribed by ASC 410, Asset Retirement and Environmental Obligations. When we sell solar modules, we initially record our liability for collecting and recycling those particular solar modules at the fair value of this liability, and then in subsequent periods, we accrete this fair value to the estimated future cost of collecting and recycling the solar modules. Therefore, this is a one-time nonrecurring fair value measurement of the collection and recycling liability associated with each particular solar module sold.

Since there is not an established market for collecting and recycling our solar modules, we value our liability using a valuation model (an income approach). This fair value measurement requires us to use significant unobservable inputs, which are primarily estimates of collection and recycling process costs and estimates of future changes in costs due to inflation and future currency exchange rates. Accordingly, we classify these valuation techniques as Level 3. We estimate collection and recycling process costs based on analyses of the collection and recycling technologies that we are currently developing; we estimate future inflation costs based on analysis of historical trends; and we estimate future currency exchange rates based on current rate information. We consider the effect of our own credit standing in our measurement of the fair value of this liability.

At March 31, 2011 and December 31, 2010, information about inputs into the fair value measurements of our assets and liabilities that we make on a recurring basis was as follows (in thousands):



	As of March 31, 2011
			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	$	4,998	$	—	$	4,998	$	—
Corporate debt securities	52		—		52		—
Money market mutual funds	33,280		33,280		—		—
Marketable securities and investments:
Certificates of deposit	2,001		—		2,001		—
Commercial paper	5,698		—		5,698		—
Corporate debt securities	155,436		—		155,436		—
Federal agency debt	48,363		—		48,363		—
Foreign agency debt	92,251		—		92,251		—
Foreign government obligations	9,096		—		9,096		—
Supranational debt	44,181		—		44,181		—
U.S. government obligations	201		—		201		—
Restricted investments	147,471		—		147,471		—
Derivative assets	5,914		—		5,914		—
Total assets	$	548,942	$	33,280	$	515,662	$	—
Liabilities:
Derivative liabilities	$	47,678	$	—	$	47,678	$	—



	As of December 31, 2010
			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	$	1,200	$	—	$	1,200	$	—
Money market mutual funds	22,289		22,289		—		—
Marketable securities:
Commercial paper	13,343		—		13,343		—
Corporate debt securities	98,602		—		98,602		—
Federal agency debt	45,875		—		45,875		—
Foreign agency debt	133,165		—		133,165		—
Foreign government obligations	9,143		—		9,143		—
Supranational debt	48,032		—		48,032		—
Restricted investments	85,984		—		85,984		—
Derivative assets	21,866		—		21,866		—
Total assets	$	479,499	$	22,289	$	457,210	$	—
Liabilities:
Derivative liabilities	$	24,034	$	—	$	24,034	$	—

Fair Value of Financial Instruments

The carrying values and fair values of our financial instruments at March 31, 2011 and December 31, 2010 were as follows (in thousands):



	March 31, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Marketable securities - current and noncurrent	$	355,226	$	355,226	$	348,160	$	348,160
Investments - current	$	2,001	$	2,001	$	—	$	—
Foreign exchange forward contract assets	$	5,914	$	5,914	$	21,866	$	21,866
Restricted investments (excluding restricted cash)	$	147,471	$	147,471	$	85,984	$	85,984
Notes receivable - noncurrent	$	9,852	$	9,085	$	9,314	$	8,836
Liabilities:
Long-term debt, including current maturities	$	131,700	$	133,392	$	237,391	$	240,176
Interest rate swap contract liabilities	$	297	$	297	$	1,219	$	1,219
Foreign exchange forward contract liabilities	$	47,381	$	47,381	$	22,815	$	22,815

The carrying values on our balance sheet of our cash and cash equivalents, accounts receivable, restricted cash, accounts payable, income taxes payable, and accrued expenses approximate their fair values due to their short maturities; therefore, we exclude them from the foregoing table.

We estimated the fair value of our long-term debt in accordance with ASC 820 using a discounted cash flows approach (an income approach). We incorporated the credit risk of our counterparty for all asset fair value measurements and our credit risk for all liability fair value measurements.

Note 11. Economic Development Funding

On February 11, 2011 we were approved to receive taxable investment incentives ("Investitionszuschüsse") of approximately €6.3 million ($8.9 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) from the State of Brandenburg, Germany. These funds will reimburse us for certain costs incurred related to the expansion of our manufacturing plant in Frankfurt/Oder, Germany, including costs for the construction of buildings and the purchase of machinery and equipment. Receipt of these incentives is conditional upon the State of Brandenburg having sufficient funds allocated to this program to pay the reimbursements we claim. Based on several factors, including the fiscal budget and credit rating of the State of Brandenburg among others, we believe that there is reasonable assurance that we will receive these grants. In addition, we are required to operate our facility for a minimum of five years and employ a specified number of associates during this period. We expect to meet these conditions based on our operating plans and current commitments. Our incentive approval expires on December 31, 2012. As of March 31, 2011 we had accrued €3.1 million ($4.4 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) that we are eligible to receive under this program based on qualifying expenditures that we had incurred through that date.

We are also eligible to recover up to approximately €17.2 million ($24.3 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) of expenditures related to the construction of our plant in Frankfurt/Oder, Germany under the German Investment Grant Act of 2010 ("Investitionszulagen"). This Act permits us to claim tax-exempt reimbursements for certain costs that we will incur related to the expansion of our manufacturing plant in Frankfurt/Oder, Germany, including costs for the construction of buildings and the purchase of machinery and equipment. Tangible assets subsidized under this program have to remain in the region for at least five years. We expect to meet these conditions based on our operating plans and current commitments. As of March 31, 2011, we had accrued €8.6 million ($12.1 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) that we are eligible to receive under this program based on qualifying expenditures that we had incurred through that date.

We account for these grants as a deduction to the carrying value of the fixed assets they fund when there is reasonable assurance that we comply with the conditions attached to the grants and the grants will be received.

Note 12. Notes 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 ($24.7 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00) 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, 2011 and December 31, 2010, the balance on this credit facility was €7.0 million ($9.9 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). The outstanding amount of this credit facility is included within “Other assets” on our consolidated balance sheets.

Note 13. Debt

Our long-term debt at March 31, 2011 and December 31, 2010 consisted of the following (in thousands):



Type	March 31, 2011			December 31, 2010
Revolving Credit Facility	$	—		$	100,000
Malaysian Facility Agreement - Fixed rate term loan	62,032			65,009
Malaysian Facility Agreement - Floating rate term loan (1)	62,032			65,009
Director of Development of the State of Ohio	7,671			8,112
Capital lease obligations	2,208			1,736
	133,943			239,866
Less unamortized discount	(2,243		)	(2,475		)
Total long-term debt	131,700			237,391
Less current portion	(28,169		)	(26,587		)
Noncurrent portion	$	103,531		$	210,804

(1) We entered into an interest rate swap contract related to this loan. See Note 9. "Derivative Financial Instruments," to our condensed consolidated financial statements.

We did not have any short-term debt at March 31, 2011 and December 31, 2010.

Revolving Credit Facility

On September 4, 2009, we entered into a revolving credit facility with several financial institutions as lenders. JPMorgan Securities LLC and Banc of America Securities LLC served as Joint-Lead Arrangers and Bookrunners, with JPMorgan Chase Bank, N.A. also acting as Administrative Agent. The credit agreement provided First Solar, Inc. and certain of its subsidiaries with a senior secured three-year revolving credit facility in an aggregate available amount of $300.0 million, a portion of which was available for letters of credit. Proceeds from the credit facility could be used for working capital and other general corporate purposes.

On October 15, 2010, we entered into an amended and restated credit agreement governing our revolving credit facility which provides First Solar, Inc. and certain of its subsidiaries with a senior secured five-year revolving credit facility in an aggregate available amount of $600.0 million, all of which is available for letters of credit. Subject to certain conditions, we have the right to request an increase in the aggregate commitments under the credit facility up to $750.0 million.

Borrowings under the amended and restated credit agreement currently bear interest at (i) London Interbank Offered Rate (LIBOR) (adjusted for eurocurrency reserve requirements) plus a margin of 2.25% or (ii) a base rate as defined in the credit agreement plus a margin of 1.25%, depending on the type of borrowing requested by us. These margins are subject to adjustments depending on our consolidated leverage ratio. The amended and restated credit agreement contains various financial condition covenants with which we must comply, including a debt to EBITDA ratio covenant, a minimum EBITDA covenant, and a minimum liquidity covenant. Under the amended and restated credit agreement we are also subject to customary non-financial covenants. We were in compliance with these covenants at March 31, 2011.

At March 31, 2011, we had no borrowings outstanding and $140.8 million in letters of credit issued under the revolving credit facility, leaving a total remaining availability of $459.2 million, all of which can be used for the issuance of letters of credit. As of March 31, 2011, based on the applicable indices, the all-in effective three month LIBOR borrowing rate would have been 2.78%. At December 31, 2010, we had $100.0 million in borrowings outstanding and $126.4 million in letters of credit issued under the revolving credit facility.

In addition to paying interest on outstanding principal under the credit agreement, we are required to pay a commitment fee, currently at the rate of 0.375% per annum, to the lenders based on the average daily unused commitments under the facility. The commitment fee may also be adjusted due to changes in our consolidated leverage ratio. We also pay a letter of credit fee equal to the applicable margin for eurocurrency revolving loans on the face amount of each letter of credit and a fronting fee.

In connection with our revolving credit facility, we entered into a guarantee and collateral agreement and various foreign security agreements. Loans made to First Solar Manufacturing GmbH (a borrowing subsidiary under the credit facility) are (i) guaranteed by First Solar, Inc. pursuant to the guarantee and collateral agreement, (ii) guaranteed by certain of First Solar, Inc.'s direct and indirect subsidiaries organized under the laws of Germany, pursuant to a German guarantee agreement, (iii) secured by share pledge agreements, (iv) secured by a security interest in inter-company receivables held by First Solar Holdings GmbH, First Solar GmbH, and First Solar Manufacturing GmbH, pursuant to assignment agreements, and (v) subject to a security trust agreement, which sets forth additional terms regarding the foregoing German security documents and arrangements.

Malaysian Facility Agreement

On May 6, 2008, in connection with the plant expansion at our Malaysian manufacturing center, First Solar Malaysia Sdn. Bhd. (FS Malaysia), our indirect wholly owned subsidiary, entered into an export financing facility agreement (Malaysian Facility Agreement) with a consortium of banks. The total available loan amount was €134.0 million ($188.9 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). Pursuant to the Malaysian Facility Agreement, we began semi-annual repayments of the principal balances of these credit facilities during 2008. Amounts repaid under these credit facilities cannot be re-borrowed. These credit facilities consisted of the following (in thousands):



				Outstanding		Outstanding
Malaysian Borrowings	Denomination	Interest Rate	Maturity	March 31, 2011		December 31, 2010
Fixed-rate euro-denominated term loan	EUR	4.54%	2016	$	62,032	$	65,009
Floating-rate euro-denominated term loan	EUR	Euribor plus 0.55%	2016	62,032		65,009
Total (1)				$	124,064	$	130,018

(1) €88.0 million outstanding at March 31, 2011 ($124.1 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00).

These credit facilities were used by FS Malaysia for the purpose of (i) partially financing the purchase of certain equipment to be used at our Malaysian manufacturing center, and (ii) financing fees to be paid to Euler-Hermes Kreditversicherungs-AG, the German Export Credit Agency of Hamburg, Federal Republic of Germany, which guarantees 95% of FS Malaysia's obligations related to these Malaysian credit facilities.

In addition to paying interest on outstanding principal under the facilities, FS Malaysia is obligated to pay annual agency fees and security agency fees.

In connection with the Malaysian credit facilities, First Solar, Inc. entered into a first demand guaranty agreement dated May 6, 2008 in favor of the lenders. Thereby FS Malaysia's obligations related to the Malaysian Facility Agreement are guaranteed, on an unsecured basis, by First Solar, Inc. In connection with the Malaysian credit facilities, all of FS Malaysia's obligations are

secured by a first party, first legal charge over the equipment financed by the Malaysian credit facilities, and the other documents, contracts, and agreements related to that equipment. Also in connection with the Malaysian credit facilities, any payment claims of First Solar, Inc. against FS Malaysia are subordinated to the claims of the lenders.

The Malaysian Facility Agreement contains various financial covenants with which we must comply, including debt-to-equity ratios, total leverage ratios, interest coverage ratios, and debt service coverage ratios. The Malaysian Facility Agreement also contains various customary non-financial covenants with which FS Malaysia must comply, including submitting various financial reports and business forecasts to the lenders, maintaining adequate insurance, complying with applicable laws and regulations, and restrictions on FS Malaysia's ability to sell or encumber assets, or make loan guarantees to third parties. We were in compliance with these covenants through March 31, 2011.

State of Ohio Loan

During the year ended December 31, 2005, we received the following loan from the Director of Development of the State of Ohio (in thousands):



	Original					Outstanding		Outstanding
Ohio Borrowing	Loan Amount		Denomination	Interest Rate	Maturity	March 31, 2011		December 31, 2010
Director of Development of the State of Ohio	$	15,000	USD	2.25%	2015	$	7,671	$	8,112
Total	$	15,000				$	7,671	$	8,112

France Facility Agreement

On March 30, 2010, in connection with the construction of our planned manufacturing facility in Blanquefort, France, First Solar France Manufacturing SAS, our indirect wholly owned subsidiary, entered into a facility agreement with EDF Energies Nouvelles SA (EDF-EN) for the purpose of partially financing the construction of the manufacturing facility. The total available loan amount under this non-revolving credit facility is a maximum principal amount of €50.0 million ($70.5 million at the balance sheet close rate on March 31, 2011 of $1.41/€1.00). Pursuant to the terms and conditions set forth in the facility agreement, advances will be made available commencing on the start of construction of the French plant and ending June 15, 2012. Advances must be repaid in quarterly installments through the tenth anniversary of the first commercial shipments from the French plant, subject to accelerated mandatory prepayment in the event of a default under the facility or the termination of the related venture agreement or off-take agreement with EDF-EN and affiliated entities. Amounts repaid under this credit facility cannot be re-borrowed. The borrowings will bear interest at a rate of 4%. Any advances drawn under this facility will be unsecured. As of March 31, 2011, there were no borrowings under this facility.

Our debt-financing agreements bear interest at Euribor and London Interbank Offered Rate (LIBOR). A disruption of the credit environment, as previously experienced, could negatively impact interbank lending and, therefore, negatively impact both floating rates. An increase in the LIBOR rate would increase our cost of borrowing under our revolving credit facility. An increase in the Euribor rate would not impact our cost of borrowing under our Malaysian Facility Agreement as we entered into an interest rate swap agreement to mitigate such risk.

Note 14. Commitments and Contingencies

Financial Guarantees

In the normal course of business, we occasionally enter into agreements with third parties under which we guarantee the performance of our subsidiaries related to certain service contracts, which may include services such as development, engineering, procurement of permits and equipment, construction management, and monitoring and maintenance related to solar power plants. These agreements meet the definition of a guarantee according to ASC 460, Guarantees. As of