Operator: Good day, everyone, and welcome to First Solar's Fourth Quarter 2012 Earnings Call. This call is being webcast live on the Investors' section of First Solar's website at firstsolar.com. At this time, all participants are in a listen-only mode. As a reminder, today's call is being recorded.
I would now like to turn the call over to David Brady, Vice President of Treasury and Investor Relations for First Solar Incorporated. Mr. Brady, you may begin.
David Brady - VP, Treasury and IR: Thank you. Good afternoon, everyone, and thank you for joining us. Today the Company issued a press release announcing its financial results for the fourth quarter and full year 2012. A copy of the press release and the presentation are available on the Investors' section of First Solar's website at firstsolar.com.
With me today are Jim Hughes, Chief Executive Officer and Mark Widmar, Chief Financial Officer. Our agenda for the call will be as follows. Jim will provide a review of our progress in 2012 relative to our long-term strategy; and then Mark will review fourth quarter and full year financial results and provide guidance for the first quarter of 2013. We will then open up the call for questions.
Most of the financial numbers reported and discussed on today's call are based on U.S. Generally Accepted Accounting Principles, in a few cases where we report non-GAAP measures, we have provided reconciliations to GAAP equivalents at the back of our presentation.
Please note that during the course of this call, the Company will make projections and other comments that are forward-looking statements within the meaning of the Federal Securities laws. The forward-looking statements in this call are based on current information and expectations and are subject to uncertainties and changes in circumstances, and do not constitute guarantees of future performance. Those statements involve a number of factors that could cause actual results to differ materially from those statements, including the risks as described in the Company's most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. First Solar assumes no obligation to update any forward-looking information contained in this call or with respect to the announcements described herein.
It is now my pleasure to introduce Jim Hughes, Chief Executive Officer. Jim?
James A. Hughes - CEO: Thanks, David. Today, we announced another significant milestone for First Solar. A new record for our CdTe cell efficiency at 18.7%. This was set using materials and processes used in a manufacturing environment and confirmed by the U.S. Department of Energy's National Renewable Energy Laboratory or NREL. This breaks our previous record for cell efficiency at 17.3%. This is a tremendous achievement on the part of our technology team led by Raffi Garabedian and validates our continued investment in R&D. Based on this new record we will be updating our efficiency and cost roadmaps in the near future.
Now turning to our 2012 performance. A little over a year ago we took the bold step of announcing the fundamental change to our strategic plan to transition from traditional subsidized markets towards sustainable high growth markets with the fundamental need for energy and higher radiance levels where Solar can compete economically with other existing energy sources. In order to make that transition, we needed to long scale of the business to align production capacity with anticipated demand while we develop sustainable market. Two, reallocate rescources to establish a strong local presence on the ground in each of our target markets. Three; establish relationships with key strategic partners. Four; continue to reduce our operating and system costs to enable competitive solar pricing without subsidies. Five; provide customer-oriented comprehensive solutions that are reliable and seamlessly integrate with the local grid.
A year later and we have made tremendous progress in meeting these goals. We have completed our restructuring efforts and the associate cash cost have been substantially incurred. Slide 6 shows the details with respect to our captive pipeline of projects. With the addition of the module springs project and the completion of the first phase of Copper Mountain 2 our project pipeline now stands at 2.9 gigawatts AC which represents the sum of the contracted megawatts of the projects in our pipeline excluding those that have been delivered through Q1 2013 today. As of the end of the fourth quarter, we have recognized revenue for approximately 679 megawatts AC equivalents leaving 2.2 gigawatts of revenue remaining to be recognized. Please note that although we have provided these slides historically and do so today as a continuation of that process, we will cease to show it going forward because we believe that the following slide showing our expected revenue and shipments are a more robust representation of our future demand.
Slide 7 shows the total anticipated demand and the change in that demand that occurred during the year. This data represents our total business which includes third party module sales in addition to our advanced systems project pipeline which contains only those projects which have secured PPAs in place. It shows that we had 1.4 gigawatts AC of shipments and 1.1 gigawatts of new bookings in 2012 for an ending balance of 2 gigawatts AC of future demand. This effectively equates to a book to bill ratio of 0.8 for 2012. Our goal is to target a ratio of at least 1 to 1 for 2013.
Slide 8 shows the expected net revenue of total business in 2013 and beyond excluding O&M after removing revenue that was recognized in 2012 and adding new bookings over the same period. Expected revenue does not have a direct correlation to expected module shipments because the shipments do not represent total systems revenues and do not consider the timing of when all revenue recognition criteria are met including timing of module installation.
Looking at our business this way through an accounting lens, if you will, we have over $8 billion of expected revenue in the future. That is $1.4 billion lower than at the start of the year.
During the third quarter, our book-to-bill activity was very encouraging, but Q4 was a disappointment. The market continues to be extremely competitive and we were out of price position with respect to a couple of key opportunities. Going forward, we are taking actions to address this. Meanwhile our updated installed system cost roadmap, will enable us to be more competitive in strategically important markets and opportunities and gives us confidence in our one-to-one book-to-bill expectations for 2013.
In summary, our anticipated command, which we have good visibility gives us the solid foundation, to weather the current challenges facing the industry as we continue our strategy to develop the tremendous long-term growth potential of sustainable markets.
We also increased our representation on the ground globally. With the recent addition of Johan Cilliers and Ahmed Nada, we have business development leaders in offices established in the majority of our target markets. Johan joined the Company as Managing Director of our new South African subsidiary in Cape Town. Johan, formerly of GE, Siemens and Eskom has over 25 years of energy industry experience in South Africa.
Ahmed joined the Company as Vice President of Business Development for the Middle East and will be based in our Dubai office. Ahmed has 20 years of energy and power industry experience throughout the Middle East and spent 14 years with GE.
I would also like to take this opportunity to welcome Tim Rebhorn as our new Senior Vice President of Project Development, reporting directly to me. Tim, former CEO of Quail Nuclear Specialty Services has over 30 years of experience in the energy industry. He brings proven strengths and business development, project development, and mergers and acquisitions and will play a crucial role in implementing our strategy to develop sustainable markets for Solar around the world.
In order to facilitate our development in new markets, we continue to work with local developers and pursue strategic partnerships were beneficial to First Solar. For example, we recently achieved another significant milestone, our first major acquisition in South America.
On January 9, we announced the acquisition of Solar Chile and its portfolio of early-to-mid-stage utility scale projects totaling 1.5 gigawatts in Northern Chile, the region which offers the highest solar uraniums in the world. Under the terms of the agreement, the Solar Chile team has also joined First Solar. Combining their knowledge of the local market and the project portfolio with First Solar's resources technology and strong execution track record will rapidly provide Chile with significant solar generation capacity and serve its fast-growing fundamental power needs.
In China, we completed shipments to supply a project owned by Zhenfa with 2 megawatt of our modules in Q1. This represents our first commercial demonstration project in China, providing us the opportunity to showcase our technology and encourage its adoption in another key sustainable market. We are also currently in discussions with respect to a broader cooperation with Zhenfa, one of the largest providers of integrated PV power generation systems in China.
In an effort to reduce our cost to be able to price solar competitively, we have reduced our operating expenses from $587 million in 2011 to $421 million in 2012, excluding restructuring and one-time items. Exiting 2012, we reached a quarterly run rate of less than $100 million, while still substantially expanding our global footprint and maintaining sizable investments in our R&D program.
Our average total system installed cost also fell from $1.59 in 2011 to a $1.39 in 2012, excluding $0.20 of development cost and based on the standard cost of our North American project, larger than 100 megawatts excluding any site-specific non-standard cost. The year-over-year reduction was driven primarily by improvements in conversion efficiencies that Mark will provide more detail on shortly.
Finally with respect to the goals we set ourselves to provide customer oriented comprehensive solutions that are reliable and seamlessly integrated with the local grid, we provide a vertically integrated offering globally that provides customers with their choice of project development services, our cad tel module, engineering procurement and construction services, project financing, operations and maintenance services, superior grid management technology and warranty and performance guarantee coverage at the system level.
We are the only Company in the solar sector that can provide such an array of services worldwide. I am very proud of the team here at First Solar and what we have achieved in a very short time especially given the fundamental change in strategy that we undertook. In the space of a year we have significantly expanded our geographical profile globally but there is still plenty to do.
Turning to Slide 10, today I am announcing that we will be holding an Analysts Day on April 9th in New York City. We will take this opportunity to lay out the following. Full 2013 guidance alongside annual targets out to 2015, the experience we have gained in our strategic plan for each significant market, our competitive positioning relative to work areas including updated costs and efficiency roadmaps, technology advancements and how we plan to roll that down across all of our manufacturing lines, with time set aside for participants to ask questions of myself and the executive management team. This entire event will also be webcast for the public at large. I know that both myself and my team look forward to speaking with you then and sharing with you how I plan to continue to develop a world powered by clean and affordable energy while providing long term value to our shareholders.
Now I would like to hand the call over to Mark, who will discuss our Q4 2012 financial results and provide our guidance for Q1.
Mark Widmar - CFO and CAO: Thanks, Jim, and good afternoon. Turning to Slide 12, I'd like to begin by highlighting just a few key financial and operational accomplishments achieved during 2012. Beginning with costs, we made significant progress in driving down our total installed system cost. We exceeded both our module manufacturing and our balance of system cost reduction targets of 2012 compared to our December 2011 announced guidance.
On a cost per watt basis, full year module manufacturing cost, excluding our German manufacturing plant and underutilization declined approximately 11% versus 2011 to $0.66, and our exit rate cost per watt for our best plant reached $0.64.
On a year-on-year basis, we reduced average standard balance of system cost by approximately 14% to $0.73. These improvements are a direct result of our continued investment in research and development efforts to improve module conversion efficiency as well as improved engineering, procurement, and construction techniques and a constant focus on operational excellence.
We have the financial strength to continue to invest in our technology which we believe has significant upside potential and we believe our cost reduction roadmaps are less reliant on raw material and procurement efficiencies than our crystalline silicon competitors. Although we are encouraged by the steady progress of reducing costs, we remain focused on continuing to accelerate our efforts and consequently will provide new costs and efficiency roadmaps during our Analyst Day in early April.
Looking at sales and operations, from a sales and operations perspective, we accomplished key milestones during 2012, including surpassing 7 gigawatts DC of cumulative module production, enough to provide clean electricity for approximately 3.5 million homes and displaced 4.7 million metric tonnes of CO2 annually.
During 2012, we surpassed 250 megawatts AC of grid connected power at Agua, making it the world's largest operational solar power plant.
Lastly, as we work diligently to transition to our new targeted sustainable markets; we have recently completed the ramp-down of our German manufacturing operations with minimal residual inventory and have executed our restructuring program within our announced cost targets.
Looking at operating expenses, operating expenses for the full year 2012, excluding restructuring, were $421 million, down approximately 28% versus 2011. We worked aggressively throughout the year to operationalize cost reduction initiatives, which, as previously announced, were expected to reduce our ongoing annualized cost by between $70 million and $120 million, depending on the range of factory utilization as is expected to be split evenly between cost of goods sold and SG&A.
Exiting 2012, we reached a quarterly run rate of less than $100 million while still substantially expanding our global footprint and maintaining sizable investments in our R&D program. Looking at cash flows, we continue to strengthen our balance sheet position, led by a positive cash flow.
At year-end, our total cash balance was over $1 billion, including marketable securities. During the year, we reduced our long-term debt by $101 million, leaving a total debt balance of $563 million and a net cash position of $441 million. On a free cash flow basis, we generated $330 million in positive cash flows during 2012, which is reflective of our progress in building on our advanced system project pipeline.
Leveraging our balance sheet and project finance expertise, we have reached a significant milestone of facilitating financing of approximately 2 gigawatts or approximately $9 billion of First Solar power plants in the form of debt and equity financing, including public and private bond markets, the Federal Financing Bank and financial institutions worldwide, which have a long history of supporting First Solar's bankable technology.
Now, turning to Slide 13, I will focus on Q4 and the full year 2012 results. In Q4, our production was 512 megawatts, up 5% versus Q3 but down 5% year-over-year. The year-over-year decrease is reflective of our previously announced capacity reductions which were taken to better align our supply with market demand. Sequentially, the production increase is a result of slightly higher capacity utilization driven by increased demand from third party module volume. In the fourth quarter we ran our factories at approximately 84% capacity utilization, up slightly from 83% in Q3. Q4 demand was lower than previously anticipated as a customer in India was not able to finalize the necessary permitting approvals and has elected to cancel the project. Consequently, we took proactive measures to curtail production to better optimize inventory levels.
Note, as previously announced, the Frankfurt/Oder manufacturing facility continued production through the fourth quarter and then was subsequently shut down permanently at the end of 2012. Our module manufacturing costs per watt for the fourth quarter excluding the German plant, was $0.68. On a comparable basis, module manufacturing cost per watt was increased $0.01 quarter-over-quarter due to the impact of various one-times, primarily related to the reramping of our (KLM) production lines. Excluding these one-time items and assuming our plants operated at full production for the entire quarter, our module manufacturing costs per watt would have been $0.66. Assuming full utilization, our best plant manufacturing cost during Q4 was $0.64 per watt, which on a year-over-year basis is $0.05 lower. Note, as previously communicated, these metrics include warranty, freight, and end of life costs associated with the module, which collectively impact the module cost per watt by $0.10.
The average conversion efficiency of our module was 12.9% in the fourth quarter, which was up 0.7 percentage points year-over-year and 0.2 percentage points quarter-over-quarter. Our best line in Q4 produced modules with an efficiency of 13.1%.
Moving on to the P&L portion of the presentation, on Slide 14; fourth quarter net sales were a record $1.1 billion, increasing 28% quarter-over-quarter and 63% year-over-year. The sequential increase in net sales was primarily driven by increased revenue recognition for Topaz and increased sales volume to third-party module customers. As a percentage of total net sales, our Solar Power Systems revenue, which includes both our EPC revenue and our solar modules used in our systems business decreased from 93% of total sales in the third quarter to 87% in the fourth quarter due to a greater production of third-party module sales.
For 2012, net sales increased to $3.4 billion which is 22% higher than last year, but is slightly below our guidance range. The decrease relative to guidance is attributed to lower than planned third-party module sales and to lower revenue recognized for certain system projects in Canada and the Northeast United States, which were delayed due to weather and other temporary interruptions. The revenue for these projects, which is based on substantial completion and financial close, is now expected to be recognized in the first half of 2013.
Gross margin in the fourth quarter was 27.3%, down from 28.4% in the prior quarter. The gross margin decline is primarily reflective of a less favorable mix of project margins, due to the declining impact of Agua Caliente, as this project heads towards completion. The write down of certain refurbished module inventory during the quarter was also a factor.
The total margin decrease was partially offset by a credit related to lower estimated future collection and recycling cost.
Note, regarding our module end-of-life program beginning in the fourth quarter of 2012, we made prospective changes to our solar module collection and recycling program outside of the EU. For new contracted sales, customers as part of their overall power plant decommissioning obligation will now be responsible for ensuring modules that are either recycled or responsibly disposed at their end of their life.
First Solar will offer competitively priced term-based recycling services to customers to help them meet these obligations. This change forwards our ongoing transition to be in a premier provider of adaptable solar energy solutions for our power plant customers.
On a full year basis, 2012 gross margins declined 9.8 percentage points to 25.3% versus 35.1% in 2011. This decline is primarily attributed to lower ASPs and less volume sold through our legacy markets via module-only sales, (indiscernible) that by higher volume and gross margins on our systems business.
Operating expenses including restructuring decreased $10 million quarter-over-quarter to $120 million as Q4 benefited from the impact of previously announced restructuring and cost reduction initiatives as well as a credit related to the change in estimates of future collection and recycling cost. As mentioned earlier, our year-end normalized exit rate for 2012 was slightly less than $100 million, excluding start-up, which is consistent with our prior communications.
Note, as we move through 2013, this run rate may fluctuate from quarter-to-quarter as we simultaneously work to develop new sustainable markets and work to redeploy resources from legacy markets and continue to invest in technologies for innovation and cost reduction.
Consistent with our stated strategy, we will continue to focus on lowering general and administrative expenses in order to prioritize and internally fund R&D and sales marketing activities to facilitate market enabling growth. When we announced our restructuring activities we said that we anticipated between $385 million and $510 million of related charges. In 2012 total restructuring related charges were approximately $490 million with approximately $25 million occurred in Q4.
The total amount of approximately $490 million includes approximately $170 million of restructuring expense and approximately $20 million of costs associated with the repayment of our debt for our German manufacturing center and the establishment of a deferred tax valuation allowance for our European operations. We also expect to incur up to $10 million of additional restructuring program charges in the first half of 2013. On a reported basis fourth quarter operating income was $172 million compared to operating income of a $107 million in the third quarter. Excluding restructuring our third quarter operating income was $131 million and rose to $197 million in the fourth quarter.
The increase was primarily reflected due to higher volumes and revenue in Q4. For the full year operating income excluding restructuring and costs in excess of normal warranty was $487 million compared with $596 million for 2011 excluding restructuring, goodwill impairment charges and the costs in excess of normal warranty.
The fourth quarter GAAP net income was a $154 million or $1.74 per fully diluted share versus $1 per fully diluted share in the third quarter. On a non-GAAP basis excluding restructuring charges of $0.30 per share our fourth quarter net income per share was $2.04. For the year the GAAP net loss was $96 million or $1.11 per share compared to a loss of $0.46 per share in 2011. On a non-GAAP basis excluding restructuring and costs in excess of normal warranty, our full year net income per share was $4.90 which was $0.20 higher than the top-end of our 2012 guidance range. The reconciliation of GAAP to non-GAAP numbers can be found in the back of this presentation.
Turning to Slide 15, I will review the balance sheet and cash flow summary. As highlighted earlier, cash and marketable securities increased to $1 billion, up from $717 million at the end of Q3. Accounts receivable trade balance increased by $86 million quarter-over-quarter due primarily to higher shipments to third-party module customers. Our unbilled customer accounts receivable was essentially flat sequentially, but down by $132 million versus the fourth quarter of 2011. This year-over-year decrease was driven by the construction ramp of the Agua Caliente project in 2011 and subsequent billing and collection in 2012.
Inventories including balanced systems decreased $129 million sequentially due to higher module shipments to third party sales and greater installations of modules and balance of system components.
Project assets increased by $108 million as construction activity ramped for our Amherstburg, Belmont, Walpole and Maryland solar projects, which we anticipate to recognize revenue during the first half of 2013.
Deferred project cost decreased by $10 million, primarily due to continued revenue recognition for Topaz which was essentially offset by the continued ramp of construction on Desert Sunlight. To-date, we have not recognized any revenue for Desert Sunlight because all of the revenue recognition criteria have not yet been met.
However, we are receiving cash payments for this project as milestones are achieved. Included in our other assets balance sheet account is approximately $270 million of (repayments) which represents the portion of a system project contract price earned by us for work performed, the held for payment by our customer as a form of security until we have reached certain construction milestones. Such (indiscernible) amounts relate to construction work already performed, but are non-current in nature, as they are expected to be build and collected from customers beyond the next 12 months.
Our debt increased slightly to $563 million versus $530 million in the prior quarter. Year-over-year total debt decreased by approximately $100 million, primarily due to the repayment of outstanding debt related to our German manufacturing facility, which was closed at the end of 2012. Operating cash flow for the quarter was $328 million and free cash flow was $253 million. Full-year 2012, we generated operating cash flow of $762 million, which includes restructuring payments and charges in excess of normal warranty of approximately $120 million. During Q4, capital expenditures continue to decline totaling $40 million for the quarter. This expected decrease is reflected in the completed capital commitments related to previously planned capacity expansion. Full-year capital expenditures were $379 million, depreciation was $61 million compared to $66 million last quarter.
Moving to Slide 16, I will now cover the guidance portion of today's call. Although there are some signs of improvement in market fundamentals, we expect that throughout 2013 general market economics are likely to remain under pressure due to excess supply with many weak competitors continuing to be processed by sovereign and local government. However, we are somewhat buffered near term against these headwinds, due to our captive pipeline, which also provides some underlying visibility to our 2013 outlook. Notwithstanding this, we are in the midst of working to book our remaining volume targets and also evaluating, negotiating and developing a number of transactions or market opportunities, which if transacted could materially impact our 2013 guidance. Consequently we have decided to only provide guidance for the first quarter today and then follow up with full year 2013 guidance during our Analyst Day in April when we'll have better visibility on the full year. The outstanding items for 2013 will primarily impact the second half of the year. As we look at the first half of the year, we see financial and operational results improving from Q1 to Q2. Moreover, we anticipate that first half results will be stronger than the second half of the year as Agua and AVSR essentially completed by mid-year. Additionally, as we sell off the second half of 2013 bookings, we anticipate a larger portion of third party module sales in target markets as opposed to system project sales when compared to the first half 2013 which will also result in lower profitability in the second half of the year.
Our first quarter guidance is as follows. We expect Q1 net sales in the range of $650 million to $750 million, gross margin to range between 25% to 27%. Operating expense, $95 million to $100 million, operating income to be between $90 million and $100 million. Our Q1 tax rate is expected to range between 13% and 11% including a three 3% reduction from a one-time discrete adjustment for the extension of the research and experimentation tax credit that were enacted in January 2013.Earnings per share of $0.70 to $0.90 per fully diluted shares and cash flow provided by operations to range between 0 and $100 million the first quarter cash flows will be impacted by the timing of our annual bonus payment, restructuring and product development.
In CapEx of $80 million which is reflective of the commencement of an accelerated schedule to upgrade production lines with technology advancements developed by our internal R&D team, which are expected to improve the (best line) module conversion efficiency by approximately 1 full percentage point over the 2012 exit rate.
Now moving to Slide 17, I'd like to summarize our progress this year. During 2012, we continue to demonstrate progress in executing on our long-term strategy and expanding our global presence with the addition of multiple geographies to our portfolio of sustainable markets. We continue to make great progress on cost reductions on all fronts, including module, BoS and OpEx, and our R&D team is driving fundamental technology advancements and will provide a more detailed update during our Analyst Day in April.
We continue to have one of the strongest balance sheets of the industry, driving bankability and confidence with our customers and have facilitated the financing over $9 billion of debt and equity financing on approximately two gigawatts of solar PV projects.
With this, we conclude our prepared remarks and open up the call for questions. Operator?
Operator: Vishal Shah, Deutsche Bank.
Vishal Shah - Deutsche Bank: Just wanted to understand your visibility for the year? What percentage of your shipments or capacity is committed for the second half and what markets do you think there's the most uncertainty at this point?
James A. Hughes - CEO: When you look at where we're currently having visibility to for the year, we still have about 25% of book yet to be finalized and most of that sits in the second half of the year. So, to give you an understanding of more than half of the business, the second half of the year is still in progress.
Operator: Stephen Chin, UBS.
Stephen Chin - UBS Securities: Just a question with bookings. Jim, you talked about a book-to-bill goal of 1 or so for 2013 and if you look at your bookings so far you're tracking close to 1.6 gigawatts. So, how should we think about your book-to-bill for 2013? Is it going to be significantly higher than 1? And Mark, if we add the 1Q booking so far, how does the backlog look in terms of billions of dollars?
James A. Hughes - CEO: I'll let Mark go ahead and take both of those.
Mark Widmar - CFO and CAO: So, from a book-to-bill standpoint, I mean as we highlighted, that our objective is and what we've currently visibility on the pipeline that we're working on, is that we will be able to at least achieve a ratio of 1 to 1. So, if we end up shipping – I think you used the reference of 1.6 or 1.8, whatever the number was that you referenced, we have a pipeline that we would have visibility to ensure that we can book at least that amount of what we would ship in 2013. Having said that, as we also indicated in our announcement, is that the market continued to be very, very competitive and we need to ensure that the strength of the First Solar value proposition is well understood by the customer and that we're aggressively working to maintain customer intimacies that allow us to ensure we can deliver against that type of commitment. Your second question – can you repeat the second half of the question, I didn't catch the whole thing?
Stephen Chin - UBS Securities: Yeah, Mark, just if you add the bookings so far in 1Q '13, how does the backlog look in terms of billions of dollars?
Mark Widmar - CFO and CAO: Yeah, well, that effectively is what we reflected on the slide in the presentation, that if you take the revenue basis that we would roll forward which includes some activity here in the first quarter, we have about $8 billion of revenue. About $4.4 billion of that is actually contracted; the other $3.6 billion would be associated with projects that we are currently in the process of selling or negotiating on which would include Silver State South and Stateline and those types of projects.
Operator: Shahriar Pourreza, Citigroup Global Markets.
Shahriar Pourreza - Citi: Just shifting real quick to India, let me ask you on the local content requirements. We are hearing that some of the syn cell manufacturers are operating at very low utilization levels. Are you hearing any kind of a backlash down there?
James A. Hughes - CEO: In terms of India what we are hearing is that the local manufacturers are operating at almost no capacity utilization, there is very low production currently going on. We continue to work closely with the government to make them aware that local content requirements are actually going to drive up costs for the local markets and ultimately don't benefit the economy and also don’t allow a sustainable local manufacturing base to be developed. So we are hearing very low production coming out of the local providers. We are relatively confident that while some aspects the national or regional programs may have some element of local content requirements we really don’t see it as a significant barrier to our goals for the marketplace. We see as much opportunity outside of the state sponsored programs as we do inside those programs. So we don’t spend a lot of our time and effort fretting about the local content requirements although we do actively engage the government and make our view known.
Operator: Sanjay Shrestha, Lazard.
Sanjay Shrestha - Lazard Capital Markets: Two part question guys. First just trying to understand the second half comment Mark you made about still having to book a business and how do we also – is that related to just a module business or is there anything from a permitting standpoint on your some of the large scale project, which is why you guys are making that comment? Second part of that question is how should we think about cash flow for the full year?
Mark Widmar - CFO and CAO: So as we indicated in the script, I mean, there is a portion, a relatively high portion of that unbooked business would mainly be third-party module only sales. For those of you who have kind of followed the rhythm, I guess of what happens in India, as you know; our historical pattern is that it typically happens in the second half of the year. So there is a relatively large portion of that unbooked business that is module and a good portion of that would be focused on India as an example. There are also similar to – as we've announced here with Macho Springs, there are other projects that we are actively in negotiations that would impact 2013 as well, that will have more of a systems view to it, beyond just the module and will include the EPC. So there is some of that, mainly here in the U.S. where there would be a project that we would step into, but a high percentage of that backlog that is still, or I should say that pipeline that we still need to book would be module only sales. Now on the cash flow standpoint, when you look at the first quarter as we highlight, relatively low cash flow, a part of that is driven as I indicated, the timing of our annual bonus gets paid in the first quarter. There is still some restructuring payments that will happen in the first quarter, that sort of cash flow use diminishes as we move throughout the year. But there is still some relatively aggressive project development expenditures in the first quarter that as I look at that run rate, that should come down as we progress through the second half of the year. We have not given full year guidance. We will give guidance in the Analysts Day, but one thing I think maybe to think about from a cash flow standpoint, when you – if you may remember, we said in our captive pipeline, we had about $3.4 billion of cash flows tied up in that project. If you roll that number forward to where we sit right now there is still about $2.8 billion, $2.9 billion of cash that will come between now and call it within next, call it eight quarters. So, we'll give you more color around that, so there is still significant amount of cash flows that are in front of us and we'll give you more detail around that in the Analyst Day.
Operator: Brian Lee, Goldman Sachs.
Brian Lee - Goldman Sachs: I had two quick ones. If I look at your slides on the expected shipments you did 1.4 gigawatts on the $2.3 billion starting number in 2012. Is it reasonable to assume you'd ship a similar ratio in 2013 on the current 2 gigawatt balance? Then I guess as a follow up to that how of the mix is going to be roughly volumes for projects versus third-party?
Mark Widmar - CFO and CAO: We, I thought rather way to get into all that detail when we go through the analyst deck, we'll have more color around that and we can give you better details that would help you in kind of how to think through the mix of the business and also in the volumes that we anticipate to book in 2013.
Operator: Satya Kumar, Credit Suisse.
Satya Kumar - Credit Suisse: Mark, I just wanted to clarify this $2.8 billion to $2.9 billion net cash receipts number that you gave over the eight quarters, that's down about $550 million for the previous quarter, which is higher than the operating cash flow, which is around $330 million. I was wondering if you could reconcile that decline in net cash receipts with the operating cash flow?
Mark Widmar - CFO and CAO: What I was trying to provide, if you remember right, we talked about our captive pipeline and we talked about anticipating net cash receipts between the time we announced, I think was last April and then the end of 2014. If you roll that forward in terms of what the actual, again, associated with that project pipeline how much of those net cash receipts have been truly been received, it's a little over $0.5 million. We still have almost $2.8 billion in front of us. As you recall from my remarks in the script, we highlight before, for example, have $270 million retentions. That is still yet to be collected. When you look at where we are a with the construction of these projects, other than Agua for the most part are either neutral or slightly below in a negative cash position given where they are in the state of their development and also the ramp and the cost that we incur on the front end relative to when the cash flows start to come in on those projects. So, I'm just trying to give you a view that, hey, there's still substantial cash flows that will be generated here over the next eight quarters associated with that pipeline.
Operator: Joe Osha, Bank of America Merrill Lynch.
Joseph Osha - Bank of America Merrill Lynch: Jim, you've talked about Macho Springs and then also reasonably about California pricing of $0.075 to $0.085 kilowatt our hour, when you look at those projects and think about whether to take the business or not, is there some kind of return on invested capital or margin hurdle rate that you use to decide whether you want to do it or not?
James A. Hughes - CEO: We don't use a (single farm) hurdle rate when we evaluate projects or opportunities. We look at all of the risks, enhance the timing, quite frankly the timing of module deliveries and what our book looks like at that given time. I'd say it's a bid of the capital asset pricing type of analysis where we try to look at the specific risk associated with each project and what the return on capital that we are going to see, we look at it both in terms of what is it on – looked at on a margin basis and then also looked at on a return on capital basis and try to make sure that we are taking account of the risk inherent in the projects as we decide whether it's something we want to do. So we try to take all of those things into consideration. We don't use a simple firm, absolute hurdle rates. I've never used that in any business that I've run. I don't think that. I think it leads to very poor decision making.
Operator: Amir Rozwadowski, Barclays Capital.
Amir Rozwadowski - Barclays Capital: You've mentioned that there was some competitive pricing, particularly in the system side. I was wondering if you could highlight sort of the environment on pricing for systems projects because we've seen some notable competitors in Asia really try to push forward with their systems business. I guess the second part of my question was as you look at some of those project discussions that you're having for the back half of this year, can you provide us some color in terms of what type of margin profile they are versus your prior expectations or your current pipeline of business?
James A. Hughes - CEO: I'll come in on the first half and then let Mark take the last half. I think as I commented in the last earnings call, we're kind of – while we're beginning to see signs of stability, I think – I said in the last earnings call that we were entering a period where there was going to be some price discovery between buyers and sellers. I think we've seen that very clearly in the fourth quarter. I think for us as a Company we probably pushed a little hard in that discovery process. So, we'll adjust accordingly. In terms of the other competitors and their systems business, frankly, that's not where most of the systems pressure we're seeing. The systems pressure we're seeing is really traditional EPC providers that have come into the space and are competing using modules other than our own. It's been less of seeing the other module manufacturers expand their offering to include systems. Now, that's not universally true, but that's generally kind of the market situation that we've seen in the various geographies around the globe. I'll let Mark take the second half.
Mark Widmar - CFO and CAO: Yeah, when you look at kind of the system pricing and the competitive positioning and aggressiveness, it also depends on what the timeline is and where we're bidding at. So, near-term if we're bidding a project, it's going to be relatively aggressive and relative to expectations as we previously communicated around margin expectations, and I'll talk more op margin potentially. Those projects could be pretty aggressive. As we get further out on the timeline and you have the benefit of not only the enhancements that we're making on the module side, but also the enhancements that we're making and significantly driving down our BoS cost, the margin profile starts to be more attractive and more consistent with what we would be targeting. But it is a very aggressive market at this point in time and I think you're going to find that over time the strength of a Company like First Solar with the balance sheet that we have and the capacity that we have is going to sustain ourselves whereas some of our other competitors it's not clear that they are going to be able to – sustain to be able to execute successfully, given how they are currently engaged in the market.
Operator: Ben Schuman, Pacific Crest.
Ben Schuman - Pacific Crest: I guess just to add on that last question, if we look at a 1 to 1 book-to-bill in terms of revenue this year, what would that equate to roughly in terms of gross margin if you look at where projects are being priced right now relative to a lot of high margin projects being built this year?
Mark Widmar - CFO and CAO: If you're trying to ask me the question that, okay 1 to 1 either megawatts or revenue, it's not going to drive the same level of gross margin dollars. I'm not going to do the math back into that equation for you, but what we have said is when we reported margins here that are still in the upper 20, we said that we believe the margin in this business will normalize to something in the teens, and that's where I think is still the way to think about the margins over time. I'm not going to kind of walk the math and say what does that imply and how many megawatts I have to make myself hold in the bottom line, but I think the margins will continue to trend that way, so we've said that over a year ago and that's kind of – nothing has changed our view in that regard.
Operator: Stephen Simko, Morningstar Equity Research.
Stephen Simko - Morningstar Equity Research: When looking at the conversion efficiency record that was announced today I'm looking back at the previous announcement you guys had where you announced the 17.3% cell. If I'm remembering correctly I think you guys highlighted that would equate to a 14.4% module, so the question I had is, could we assume a similar 3% difference between cell and module on this new efficiency that you announced? Any color on what's led the 1.5% improvement from that 17.3%.
James A. Hughes - CEO: Those are things that we're going to plan on covering in a fair amount of detail on the Analyst Deck. So rather than generalize back to the prior records, I'd say way till the April Analyst Day where we will lay out what that record still means in terms of module performance and when and how that module performance would flow through our production and thus into our cost structure over time.
Operator: That does conclude our question and answer session at this time. That does conclude our conference call. Thank you everyone for your participation.