Item 15. Exhibits and Financial Statement Schedules

(a)Documents. The following documents are filed as part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238)

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

(b)Exhibits. Unless otherwise noted, the exhibits listed on the accompanying Index to Exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K.

(c)Financial Statement Schedules. All financial statement schedules have been omitted as the required information is not applicable or is not material to require presentation of the schedule, or because the information required is included in the consolidated financial statements and notes thereto of this Annual Report on Form 10-K.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of First Solar, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of First Solar, Inc. and its subsidiaries (“the Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Product Warranty Liability

As described in Notes 2 and 12 to the consolidated financial statements, the Company provides a limited PV solar module warranty which covers defects in materials and workmanship for up to 12.5 years and warrants that modules will produce at least a specified minimum percentage of their labeled power output rating, on either an individual module or system-level basis, for up to 30 years. The Company’s product warranty liability was $33.8 million as of December 31, 2022. Product warranty estimates are based primarily on the number of solar modules under warranty installed at customer locations, historical experience with and projections of warranty claims, and estimated per-module replacement costs.

The principal considerations for our determination that performing procedures relating to the product warranty liability is a critical audit matter are (i) the significant judgment by management in estimating the projections of warranty claims and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate the projections of warranty claims and related audit evidence.

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to valuation of the product warranty liability. These procedures also included, among others, testing the appropriateness of the methodology used and the reasonableness of the significant assumptions used by management in developing these estimates related to projections of warranty claims. Evaluating whether the significant assumptions relating to the product warranty liability were reasonable involved (i) testing historical warranty claims and settlements, (ii) evaluating the reasonableness and appropriateness of factors considered by management in estimating the final settlement of open customer claims, and (iii) evaluating the reasonableness and appropriateness of the methodology used by management to determine return rates used in the valuation of the product warranty liability.

/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona

February 28, 2023

We have served as the Company’s or its predecessor’s auditor since 2000, which includes periods before the Company became subject to SEC reporting requirements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

						December 31,
						2022						2021
ASSETS
Current assets:
Cash and cash equivalents						$	1,481,269					$	1,450,654
Marketable securities						1,096,712						375,389
Accounts receivable trade, net						324,337						429,436
Accounts receivable unbilled, net						30,654						25,273
Inventories						621,376						666,299
Other current assets						237,073						244,192
Total current assets						3,791,421						3,191,243
Property, plant and equipment, net						3,536,902						2,649,587
PV solar power systems, net						6,242						217,293
Project assets						30,108						315,488
Deferred tax assets, net						78,680						59,162
Restricted marketable securities						182,070						244,726
Goodwill						14,462						14,462
Intangible assets, net						31,106						45,509
Inventories						260,395						237,512
Other assets						319,842						438,764
Total assets						$	8,251,228					$	7,413,746
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	341,409					$	193,374
Income taxes payable						29,397						4,543
Accrued expenses						382,782						288,450
Current portion of long-term debt						—						3,896
Deferred revenue						263,215						201,868
Other current liabilities						21,245						34,747
Total current liabilities						1,038,048						726,878
Accrued solar module collection and recycling liability						128,114						139,145
Long-term debt						184,349						236,005
Deferred revenue						944,725						95,943
Other liabilities						119,937						256,224
Total liabilities						2,415,173						1,454,195
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 500,000,000 shares authorized; 106,609,094 and 106,332,315 shares issued and outstanding at December 31, 2022 and 2021, respectively						107						106
Additional paid-in capital						2,887,476						2,871,352
Accumulated earnings						3,140,289						3,184,455
Accumulated other comprehensive loss						(191,817)						(96,362)
Total stockholders’ equity						5,836,055						5,959,551
Total liabilities and stockholders’ equity						$	8,251,228					$	7,413,746

See accompanying notes to these consolidated financial statements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

						Years Ended December 31,
						2022						2021						2020
Net sales						$	2,619,319					$	2,923,377					$	2,711,332
Cost of sales						2,549,461						2,193,423						2,030,659
Gross profit						69,858						729,954						680,673
Operating expenses:
Selling, general and administrative						164,724						170,320						222,918
Research and development						112,804						99,115						93,738
Production start-up						73,077						21,052						40,528
Litigation loss						—						—						6,000
Total operating expenses						350,605						290,487						363,184
Gain on sales of businesses, net						253,511						147,284						—
Operating (loss) income						(27,236)						586,751						317,489
Foreign currency loss, net						(16,414)						(7,975)						(4,890)
Interest income						33,284						6,179						16,559
Interest expense, net						(12,225)						(13,107)						(24,036)
Other income (expense), net						31,189						314						(11,932)
Income before taxes and equity in earnings						8,598						572,162						293,190
Income tax (expense) benefit						(52,764)						(103,469)						107,294
Equity in earnings, net of tax						—						—						(2,129)
Net (loss) income						$	(44,166)					$	468,693					$	398,355
Net (loss) income per share:
Basic						$	(0.41)					$	4.41					$	3.76
Diluted						$	(0.41)					$	4.38					$	3.73
Weighted-average number of shares used in per share calculations:
Basic						106,551						106,263						105,867
Diluted						106,551						106,924						106,686

See accompanying notes to these consolidated financial statements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

						Years Ended December 31,
						2022						2021						2020
Net (loss) income						$	(44,166)					$	468,693					$	398,355
Other comprehensive (loss) income:
Foreign currency translation adjustments						(32,021)						(13,213)						(2,810)
Unrealized (loss) gain on marketable securities and restricted marketable securities, net of tax of $2,639, $1,497, and $(1,231)						(56,744)						(24,666)						21,659
Unrealized (loss) gain on derivative instruments, net of tax of $1,678, $(55), and $(31)						(6,690)						3,243						(1,241)
Other comprehensive (loss) income						(95,455)						(34,636)						17,608
Comprehensive (loss) income						$	(139,621)					$	434,057					$	415,963

See accompanying notes to these consolidated financial statements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

						Common Stock												Additional Paid-In Capital						Accumulated Earnings						Accumulated Other Comprehensive (Loss) Income						Total Stockholders’ Equity
						Shares						Amount
Balance at December 31, 2019						105,449						$	105					$	2,849,376					$	2,326,620					$	(79,334)					$	5,096,767
Cumulative-effect adjustment for the adoption of ASU 2016-13						—						—						—						(9,213)						—						(9,213)
Net income						—						—						—						398,355						—						398,355
Other comprehensive income						—						—						—						—						17,608						17,608
Common stock issued for share-based compensation						814						1						1,362						—						—						1,363
Tax withholding related to vesting of restricted stock						(283)						—						(13,118)						—						—						(13,118)
Share-based compensation expense						—						—						29,166						—						—						29,166
Balance at December 31, 2020						105,980						106						2,866,786						2,715,762						(61,726)						5,520,928
Net income						—						—						—						468,693						—						468,693
Other comprehensive loss						—						—						—						—						(34,636)						(34,636)
Common stock issued for share-based compensation						561						—						—						—						—						—
Tax withholding related to vesting of restricted stock						(209)						—						(15,989)						—						—						(15,989)
Share-based compensation expense						—						—						20,555						—						—						20,555
Balance at December 31, 2021						106,332						106						2,871,352						3,184,455						(96,362)						5,959,551
Net loss						—						—						—						(44,166)						—						(44,166)
Other comprehensive loss						—						—						—						—						(95,455)						(95,455)
Common stock issued for share-based compensation						444						1						—						—						—						1
Tax withholding related to vesting of restricted stock						(167)						—						(12,092)						—						—						(12,092)
Share-based compensation expense						—						—						28,216						—						—						28,216
Balance at December 31, 2022						106,609						$	107					$	2,887,476					$	3,140,289					$	(191,817)					$	5,836,055

See accompanying notes to these consolidated financial statements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

						Years Ended December 31,
						2022						2021						2020
Cash flows from operating activities:
Net (loss) income						$	(44,166)					$	468,693					$	398,355
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation, amortization and accretion						269,724						259,900						232,925
Impairments and net losses on disposal of long-lived assets						63,338						22,876						35,806
Share-based compensation						28,656						20,902						29,267
Deferred income taxes						(12,799)						49,847						36,013
Gain on sales of businesses, net						(253,511)						(147,284)						—
Gains on sales of marketable securities and restricted marketable securities						—						(11,696)						(15,346)
Liabilities assumed by customers for the sale of systems						(145,281)						(85,490)						(136,745)
Gain on debt forgiveness						(30,201)						—						—
Other, net						(1,029)						(3,484)						19,297
Changes in operating assets and liabilities:
Accounts receivable, trade and unbilled						118,724						(96,951)						345,150
Inventories						16,693						(136,365)						(145,396)
Project assets and PV solar power systems						(14,336)						23,402						106,867
Other assets						(72,602)						(69,942)						(33,065)
Income tax receivable and payable						43,592						(13,062)						(177,431)
Accounts payable and accrued expenses						5,569						48,968						(109,583)
Deferred revenue						912,946						47,062						(157,284)
Other liabilities						(11,948)						(139,817)						(391,710)
Net cash provided by operating activities						873,369						237,559						37,120
Cash flows from investing activities:
Purchases of property, plant and equipment						(903,605)						(540,291)						(416,635)
Purchases of marketable securities and restricted marketable securities						(3,375,008)						(2,147,136)						(901,924)
Proceeds from sales and maturities of marketable securities and restricted marketable securities						2,646,787						2,294,595						1,192,832
Proceeds from sales of businesses, net of cash and restricted cash sold						442,302						300,499						—
Other investing activities						(3,050)						(6,707)						(5,500)
Net cash used in investing activities						(1,192,574)						(99,040)						(131,227)
Cash flows from financing activities:
Repayment of long-term debt						(75,896)						(72,676)						(225,344)
Proceeds from borrowings under long-term debt, net of discounts and issuance costs						397,380						129,215						156,679
Payments of tax withholdings for restricted shares						(12,092)						(15,989)						(13,118)
Other financing activities						—						—						(804)
Net cash provided by (used in) financing activities						309,392						40,550						(82,587)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents						47,438						3,174						3,778
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents						37,625						182,243						(172,916)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of the period						1,455,837						1,273,594						1,446,510
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of the period						$	1,493,462					$	1,455,837					$	1,273,594
Supplemental disclosure of noncash investing and financing activities:
Property, plant and equipment acquisitions funded by liabilities						$	315,961					$	61,598					$	110,576

See accompanying notes to these consolidated financial statements.

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FIRST SOLAR, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. First Solar and Its Business

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

2. Summary of Significant Accounting Policies

Basis of Presentation. These consolidated financial statements include the accounts of First Solar, Inc. and its subsidiaries and are prepared in accordance with U.S. GAAP. We eliminated all intercompany transactions and balances during consolidation. Certain prior year balances were reclassified to conform to the current year presentation.

Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to accrued solar module collection and recycling liabilities, product warranties, accounting for income taxes, and long-lived asset impairments. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions.

Fair Value Measurements. We measure certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., 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. Our fair value measurements use the following hierarchy, which prioritizes valuation inputs based on the extent to which the inputs are observable in the market.

• 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 are observable in active markets are Level 2 valuation techniques.

• Level 3 – Valuation techniques in which one or more significant inputs are unobservable. Such inputs reflect our estimate of assumptions that market participants would use to price an asset or liability.

Cash and Cash Equivalents. We consider highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents with the exception of time deposits, which are presented as marketable securities.

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Restricted Cash and Restricted Cash Equivalents. Restricted cash and restricted cash equivalents consist of deposits held by various banks to secure certain of our letters of credit, as well as deposits held in custodial accounts to fund the estimated future costs of our solar module collection and recycling obligations. Restricted cash for our letters of credit is classified as current or noncurrent based on the maturity date of the corresponding letter of credit. Restricted cash and restricted cash equivalents held in custodial accounts are classified as noncurrent to align with the nature of the corresponding module collection and recycling liabilities.

Marketable Securities and Restricted Marketable Securities. We determine the classification of our marketable securities and restricted marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. As of December 31, 2022 and 2021, all of our marketable securities and restricted marketable securities were classified as available-for-sale debt securities. Accordingly, we record them at fair value and account for the net unrealized gains and losses as part of “Accumulated other comprehensive loss” until realized. We record realized gains and losses on the sale of our marketable securities and restricted marketable securities in “Other income (expense), net” computed using the specific identification method.

We may sell marketable securities prior to their stated maturities after consideration of our liquidity requirements. We view unrestricted securities with maturities beyond 12 months as available to support our current operations and, accordingly, classify such securities as current assets under “Marketable securities” in our consolidated balance sheets. Restricted marketable securities consist of long-term duration marketable securities that we hold in custodial accounts to fund the estimated future costs of our solar module collection and recycling obligations. Accordingly, we classify restricted marketable securities as noncurrent assets under “Restricted marketable securities” in our consolidated balance sheets.

Accounts Receivable Trade. We record trade accounts receivable for our unconditional rights to consideration arising from our performance under contracts with customers. The carrying value of such receivables, net of the allowance for credit losses, represents their estimated net realizable value. Our module sales generally include up to 45-day payment terms following the transfer of control of the products to the customer. In addition, certain module sales agreements require a down payment for a portion of the transaction price upon or shortly after entering into the agreement or related purchase order. As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product to a customer and when the customer pays for that product will be one year or less.

Accounts Receivable Unbilled. Accounts receivable unbilled represents a contract asset for revenue that has been recognized in advance of billing the customer, which was common for our project-related sales contracts. Revenue may be recognized in advance of billing the customer, resulting in an amount recorded to “Accounts receivable unbilled, net” or “Other assets” depending on the expected timing of payment for such unbilled receivables. Once we have an unconditional right to consideration, we typically bill our customer and reclassify the “Accounts receivable unbilled, net” to “Accounts receivable trade, net.” Billing requirements vary by contract but are generally structured around the completion of certain development, construction, or other specified milestones.

Allowance for Credit Losses. The allowance for credit losses is a valuation account that is deducted from a financial asset’s amortized cost to present the net amount we expect to collect from such asset. We estimate allowances for credit losses using relevant available information from both internal and external sources. We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history, which we review annually, and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables. We estimate credit losses associated with our marketable securities and restricted marketable securities based on the external credit ratings for such investments and the historical loss rates associated with such credit ratings, which we obtain from third parties. Such methods and estimates are adjusted, as appropriate, for relevant past events, current conditions, and reasonable and supportable forecasts. We recognize writeoffs within the allowance for credit losses when cash receipts associated with our financial assets are deemed uncollectible.

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Inventories – Current and Noncurrent. We report our inventories at the lower of cost or net realizable value. We determine cost on a first-in, first-out basis and include both the costs of acquisition and manufacturing in our inventory costs. These costs include direct materials, direct labor, and indirect manufacturing costs, including depreciation and amortization. Our capitalization of indirect costs is based on the normal utilization of our plants. If our plant utilization is abnormally low, the portion of our indirect manufacturing costs related to the abnormal utilization level is expensed as incurred. Other abnormal manufacturing costs, such as wasted materials or excess yield losses, are also expensed as incurred.

As needed, we may purchase critical raw materials that are used in our core production process in quantities that exceed anticipated consumption within our normal operating cycle, which is 12 months. We classify such raw materials that we do not expect to consume within our normal operating cycle as noncurrent.

We regularly review the cost of inventories, including noncurrent inventories, against their estimated net realizable value and record write-downs if any inventories have costs in excess of their net realizable values. We also regularly evaluate the quantities and values of our inventories, including noncurrent inventories, in light of current market conditions and trends, among other factors, and record write-downs for any quantities in excess of demand or for any obsolescence. This evaluation considers the use of modules in our product warranties, module selling prices, product obsolescence, strategic raw material requirements, and other factors.

Property, Plant and Equipment. We report our property, plant and equipment at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the assets, required installation costs, interest capitalized during the construction period, and any expenditures that substantially add to the value of or substantially extend the useful life of the assets. We capitalize costs related to computer software obtained or developed for internal use, which generally includes enterprise-level business and finance software that we customize to meet our specific operational requirements. We expense repair and maintenance costs at the time we incur them.

We begin depreciation for our property, plant and equipment when the assets are placed in service. We consider such assets to be placed in service when they are both in the location and condition for their intended use. We compute depreciation expense using the straight-line method over the estimated useful lives of assets, as presented in the table below. We depreciate leasehold improvements over the shorter of their estimated useful lives or the remaining term of the lease. The estimated useful life of an asset is reassessed whenever applicable facts and circumstances indicate a change in the estimated useful life of such asset has occurred.

						Useful Lives in Years
Buildings and building improvements						25 – 40
Manufacturing machinery and equipment						5 – 15
Furniture, fixtures, computer hardware, and computer software						3 – 7
Leasehold improvements						up to 15

PV Solar Power Systems. PV solar power systems represent project assets that we may temporarily own and operate after being placed in service. We report our PV solar power systems at cost, less accumulated depreciation. We begin depreciation for PV solar power systems when they are placed in service. We compute depreciation expense for the systems using the straight-line method over the shorter of the term of the related PPA or 25 years.

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Project Assets. Project assets primarily consist of costs related to solar power projects in various stages of development that are capitalized prior to the completion of the sale of the projects. These project related costs include costs for land, development, and construction of a PV solar power system. Development costs may include legal, consulting, permitting, transmission upgrade, interconnection, and other similar costs. We typically classify project assets as noncurrent due to the nature of solar power projects (as long-lived assets) and the time required to complete all activities to develop, construct, and sell projects, which is typically longer than 12 months. We present all expenditures related to the development and construction of project assets as a component of cash flows from operating activities.

Asset Impairments. We assess long-lived assets classified as “held and used,” including our property, plant and equipment; PV solar power systems; project assets; operating lease assets; and intangible assets, for impairment whenever events or changes in circumstances arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not be recoverable. These events and changes in circumstances may include a significant decrease in the market price of a long-lived asset; a significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition; a significant adverse change in the business climate that could affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; a current-period operating or cash flow loss combined with a history of such losses or a projection of future losses associated with the use of a long-lived asset; or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group’s carrying value to determine if the asset group is recoverable. If the carrying value of the asset group exceeds the undiscounted future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third-party valuations, and/or (iii) information available regarding the current market value for such assets. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant judgment, and such projections may vary from the cash flows eventually realized.

We consider a long-lived asset to be abandoned after we have ceased use of the asset and we have no intent to use or repurpose it in the future. Abandoned long-lived assets are recorded at their salvage value, if any.

We classify long-lived assets or asset groups we plan to sell, excluding project assets and PV solar power systems to be sold as part of our ongoing operations, as held for sale on our consolidated balance sheets only after certain criteria have been met, including: (i) management has the authority and commits to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and the plan to sell the asset have been initiated, (iv) the sale of the asset is probable within 12 months, (v) the asset is being actively marketed at a reasonable sales price relative to its current fair value, and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. We record assets or asset groups held for sale at the lower of their carrying value or fair value less costs to sell. If, due to unanticipated circumstances, such assets or asset groups are not sold in the 12 months after being classified as held for sale, then held for sale classification would continue as long as the above criteria are still met.

Goodwill. Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value assigned to the individual assets acquired and liabilities assumed. We do not amortize goodwill, but instead test goodwill for impairment at least annually. We perform impairment tests between the scheduled annual test in the fourth quarter if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value.

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We may first make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value to determine whether it is necessary to perform a quantitative goodwill impairment test. Such qualitative impairment test considers various factors, including macroeconomic conditions, industry and market considerations, cost factors, the overall financial performance of a reporting unit, and any other relevant events affecting our company or a reporting unit. If we determine through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the quantitative impairment test is not required. If the qualitative assessment indicates it is more likely than not that a reporting unit’s fair value is less than its carrying value, we perform a quantitative impairment test. We may also elect to proceed directly to the quantitative impairment test without considering qualitative factors.

The quantitative impairment test is the comparison of the fair value of a reporting unit with its carrying amount, including goodwill. Our modules business represents our only reporting unit. We define the fair value of a reporting unit as the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. We primarily use an income approach to estimate the fair value of our reporting unit. Significant judgment is required when estimating the fair value of a reporting unit, including the forecasting of future operating results and the selection of discount and expected future growth rates used to determine projected cash flows. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired, and no further analysis is required. Conversely, if the carrying value of a reporting unit exceeds its estimated fair value, we record an impairment loss equal to the excess, not to exceed the total amount of goodwill allocated to the reporting unit.

Intangible Assets. Intangible assets primarily include developed technologies and our internally-generated intangible assets, substantially all of which are patents on technologies related to our products and production processes. We record an asset for patents after the patent has been issued based on the legal, filing, and other costs incurred to secure it. We amortize intangible assets on a straight-line basis over their estimated useful lives, which generally range from 5 to 20 years.

Leases. Upon commencement of a lease, we recognize a lease liability for the present value of the lease payments not yet paid, discounted using an interest rate that represents our ability to borrow on a collateralized basis over a period that approximates the lease term. We also recognize a lease asset, which represents our right to control the use of the underlying property, plant or equipment, at an amount equal to the lease liability, adjusted for prepayments and initial direct costs.

We subsequently recognize the cost of operating leases on a straight-line basis over the lease term, and any variable lease costs, which represent amounts owed to the lessor that are not fixed per the terms of the contract, are recognized in the period in which they are incurred. Any costs included in our lease arrangements that are not directly related to the leased assets, such as maintenance charges, are included as part of the lease costs. Leases with an initial term of one year or less are considered short-term leases and are not recognized as lease assets and liabilities. We also recognize the cost of such short-term leases on a straight-line basis over the term of the underlying agreement.

Many of our leases contain renewal or termination options that are exercisable at our discretion. At the commencement date of a lease, we include in the lease term any periods covered by a renewal option, and exclude from the lease term any periods covered by a termination option, to the extent we are reasonably certain to exercise such options. In making this determination, we seek to align the lease term with the expected economic life of the underlying asset.

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Deferred Revenue. When we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods to the customer under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Such deferred revenue results from advance payments received on sales of solar modules. Deferred revenue is classified as current or noncurrent based on the expected date that module shipments commence for each sales contract. As a practical expedient, we do not adjust the consideration in a contract for the effects of a significant financing component when we expect, at contract inception, that the period between a customer’s advance payment and our transfer of a promised product or service to the customer will be one year or less. Additionally, we do not adjust the consideration in a contract for the effects of a significant financing component when the consideration is received as a form of performance security.

Product Warranties. We provide a limited PV solar module warranty covering defects in materials and workmanship under normal use and service conditions for up to 12.5 years. We also typically warrant that modules installed in accordance with agreed-upon specifications will produce at least 98% of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor every year thereafter throughout the limited power output warranty period of up to 30 years. Among other things, our solar module warranty also covers the resulting power output loss from cell cracking. In resolving claims under both the limited defect and power output warranties, we typically have the option of either repairing or replacing the covered modules or, under the limited power output warranty, providing additional modules to remedy the power shortfall. Our limited module warranties also include an option for us to remedy claims under such warranties, generally exercisable only after the second year of the warranty period, by making certain cash payments. Under the limited workmanship warranty, the optional cash payment will be equal to the prevailing market price of the module, reduced by a degradation factor, and under the limited power output warranty, the cash payment will be equal to the shortfall in power output. Such limited module warranties are standard for module sales and may be transferred from the original purchasers of the solar modules to subsequent purchasers upon resale.

As an alternative form of our standard limited module power output warranty, we have also offered an aggregated or system-level limited module performance warranty. This system-level limited module performance warranty is designed for utility-scale systems and provides 25-year system-level energy degradation protection. This warranty represents a practical expedient to address the challenge of identifying, from the potential millions of modules installed in a utility-scale system, individual modules that may be performing below warranty thresholds by focusing on the aggregate energy generated by the system rather than the power output of individual modules. The system-level limited module performance warranty is typically calculated as a percentage of a system’s expected energy production, adjusted for certain actual site conditions, with the warranted level of performance declining each year in a linear fashion, but never falling below 80% during the term of the warranty. In resolving claims under the system-level limited module performance warranty to restore the system to warranted performance levels, we first must validate that the root cause of the issue is due to module performance; we then have the option of either repairing or replacing the covered modules, providing supplemental modules, or making a cash payment. Consistent with our limited module power output warranty, when we elect to satisfy a warranty claim by providing replacement or supplemental modules under the system-level module performance warranty, we do not have any obligation to pay for the labor to remove or install modules.

In addition to our limited solar module warranties described above, for PV solar power systems we have constructed, we have provided limited warranties for defects in engineering design, installation, and BoS part workmanship for a period of one to two years following the substantial completion of a system. In resolving claims under such BoS warranties, we have the option of remedying the defect through repair or replacement.

When we recognize revenue for sales of modules or projects, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and projections of warranty claims, and our estimated per-module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites.

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Accrued Solar Module Collection and Recycling Liability. Historically, we recognized expense at the time of sale for the estimated cost of our future obligations for collecting and recycling solar modules covered by our solar module collection and recycling program. See Note 12. “Commitments and Contingencies” to our consolidated financial statements for further information.

Derivative Instruments. We recognize derivative instruments on our consolidated balance sheets at fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 2022 and 2021, all of our derivative instruments were designated either as cash flow hedges or as derivative instruments not accounted for using hedge accounting methods.

We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in “Accumulated other comprehensive loss” until our earnings are affected by the variability of the cash flows from the underlying hedged item. We record any amounts excluded from effectiveness testing in current period earnings in the same income statement line item in which the earnings effect of the hedged item is reported. We report changes in the fair value of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments on the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument.

At the inception of a hedge, we formally document all relationships between hedging instruments and the underlying hedged items as well as our risk-management objective and strategy for undertaking the hedge transaction. We also formally assess (both at inception and on an ongoing basis) whether our derivative instruments are highly effective in offsetting changes in the fair value or cash flows of the underlying hedged items and whether those derivatives are expected to remain highly effective in future periods. When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in current period earnings.

Accumulated Other Comprehensive Income or Loss. Our accumulated other comprehensive income or loss includes foreign currency translation adjustments, unrealized gains and losses on available-for-sale debt securities, and unrealized gains and losses on derivative instruments designated and qualifying as cash flow hedges. We record these components of accumulated other comprehensive income or loss net of tax and release such tax effects when the underlying components affect earnings.

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

Revenue Recognition – Solar Power Project Sales. We recognize revenue for the sale of a development project or for the sale of a completed system when we enter into the associated sales contract with the customer. Such revenue recognition is dependent, in part, on our customers’ commitment to perform their obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities.

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As part of certain prior project sales, we conduct performance testing of a system to confirm it meets the operational and capacity expectations noted in its EPC agreement. In addition, we may provide an energy performance test during the first or second year of a system’s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain adjustments. In certain instances, a bonus payment may be received at the end of the applicable test period if the system performs above a specified level. Conversely, if there is an underperformance event with regard to these tests, we may incur liquidated damages as specified in the applicable EPC agreement. Such performance guarantees represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

Revenue Recognition – Operations and Maintenance. We recognize revenue for standard, recurring O&M services over time as customers receive and consume the benefits of such services, which typically include 24/7 system monitoring, certain PPA and other agreement compliance, large generator interconnection agreement compliance, performance engineering analysis, regular performance reporting, turn-key maintenance services including spare parts and corrective maintenance repair, warranty management, and environmental services. Costs of O&M services are expensed in the period in which they are incurred.

Revenue Recognition – Energy Generation. We sell energy generated by PV solar power systems under PPAs or on an open contract basis. For energy sold under PPAs, we recognize revenue each period based on the volume of energy delivered to the customer (i.e., the PPA off-taker) and the price stated in the PPA. For energy sold on an open contract basis, we recognize revenue at the point in time the energy is delivered to the grid based on the prevailing spot market prices.

Shipping and Handling Costs. We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales, and classify such costs as a component of cost of sales.

Taxes Collected from Customers and Remitted to Governmental Authorities. We exclude from our measurement of transaction prices all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales.

Research and Development. We incur research and development costs during the process of researching and developing new products and enhancing our existing products, technologies, and manufacturing processes. Our research and development costs consist primarily of employee compensation, materials, outside services, and depreciation. We expense these costs as incurred until the resulting product has been completed, tested, and made ready for commercial manufacturing.

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

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Share-Based Compensation. We recognize share-based compensation expense for the estimated grant-date fair value of equity awards issued as compensation to employees over the requisite service period, which is generally four or five years. For awards with performance conditions, we recognize share-based compensation expense if it is probable that the performance conditions will be achieved. We account for forfeitures of share-based awards as such forfeitures occur. Accordingly, when an associate’s employment is terminated, all previously unvested awards granted to such associate are forfeited, which results in a benefit to share-based compensation expense in the period of such associate’s termination equal to the cumulative expense recorded through the termination date for the unvested awards. We recognize share-based compensation expense for awards with graded vesting schedules on a straight-line basis over the requisite service periods for each separately vesting portion of the award as if each award was in substance multiple awards.

Foreign Currency Translation. The functional currencies of certain of our foreign subsidiaries are their local currencies. Accordingly, we apply period-end exchange rates to translate their assets and liabilities and daily transaction exchange rates to translate their revenues, expenses, gains, and losses into U.S. dollars. We include the associated translation adjustments as a separate component of “Accumulated other comprehensive loss” within stockholders’ equity. The functional currency of our subsidiaries in Canada, Chile, Malaysia, Singapore, and Vietnam is the U.S. dollar; therefore, we do not translate their financial statements. Gains and losses arising from the remeasurement of monetary assets and liabilities denominated in currencies other than a subsidiary’s functional currency are included in “Foreign currency loss, net” in the period in which they occur.

Income Taxes. We use the asset and liability method to account for income taxes whereby we calculate deferred tax assets or liabilities using the enacted tax rates and tax law applicable to when any temporary differences are expected to reverse. We establish valuation allowances, when necessary, to reduce deferred tax assets to the extent it is more likely than not that such deferred tax assets will not be realized. We do not provide deferred taxes related to the U.S. GAAP basis in excess of the outside tax basis in the investment in our foreign subsidiaries to the extent such amounts relate to indefinitely reinvested earnings and profits of such foreign subsidiaries.

Income tax expense includes (i) deferred tax expense, which generally represents the net change in deferred tax assets or liabilities during the year plus any change in valuation allowances, and (ii) current tax expense, which represents the amount of tax currently payable to or receivable from taxing authorities. We only recognize tax benefits related to uncertain tax positions that are more likely than not of being sustained upon examination. For those positions that satisfy such recognition criteria, the amount of tax benefit that we recognize is the largest amount of tax benefit that is more likely than not of being sustained on ultimate settlement of the uncertain tax position.

Per Share Data. Basic net income or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed giving effect to all potentially dilutive common shares, including restricted stock and performance units, unless there is a net loss for the period. In computing diluted net income per share, we utilize the treasury stock method.

Government Grants. We account for government assistance that is not subject to the scope of ASC 740 using a grant accounting model, by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance, and recognize such grants when we have reasonable assurance that we will comply with the grant’s conditions and that the grant will be received. Government grants whose primary condition is the purchase, construction, or acquisition of a long-lived asset are considered asset-based grants and are recognized as a reduction to such asset’s cost basis, which reduces future depreciation. Other government grants not related to long-lived assets are considered income-based grants, which are initially recognized as “Government grants receivable” and are also recognized as a reduction to the related cost of activities that generated the benefit. Proceeds received from asset-based grants are presented as cash inflows from investing activities on the consolidated statements of cash flows, whereas proceeds received from income-based grants are presented as cash inflows from operating activities.

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3. Sales of Businesses

Sale of Japan Project Development Business

In May 2022, we entered into various agreements with certain subsidiaries of PAG, a private investment firm, for the sale of our Japan project development business. The transaction included our approximately 293 MWDC utility-scale solar project development platform, which comprised the business of developing, contracting for the construction of, and selling utility-scale PV solar power systems. Additionally, PAG agreed to certain module purchase commitments.

In June 2022, we completed the sale of our Japan project development business and, following certain customary post-closing adjustments, received total consideration of ¥66.4 billion ($490.8 million) and transferred cash and restricted cash of ¥8.4 billion ($61.9 million) to PAG. As a result of this transaction, we recognized a gain of $245.2 million, net of transaction costs, during the year ended December 31, 2022, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

Sales of North American and International O&M Operations

In August 2020, we entered into an agreement with a subsidiary of Clairvest for the sale of our North American O&M operations. In March 2021, we completed the transaction and, following certain customary post-closing adjustments, received total consideration of $149.1 million. As a result of this transaction, we recognized a gain of $115.8 million, net of transaction costs and post-closing adjustments, during the year ended December 31, 2021, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

In January 2022, we completed the sale of our Chilean O&M operations to a separate subsidiary of Clairvest and, following certain customary post-closing adjustments, received total consideration of $1.9 million. As a result of this transaction, we recognized a gain of $1.6 million, net of transaction costs and post-closing adjustments, during the year ended December 31, 2022, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

In September 2022, we completed the sale of our Australian O&M operations to a separate subsidiary of Clairvest and, following certain customary post-closing adjustments, received total consideration of $6.0 million. As a result of this transaction, we recognized a gain of $4.4 million, net of transaction costs and post-closing adjustments, during the year ended December 31, 2022, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

In September 2022, we also completed the sale of our Japanese O&M operations to a subsidiary of PAG and, following certain customary post-closing adjustments, received total consideration of ¥692.7 million ($4.8 million). As a result of this transaction, we recognized a gain of $1.4 million, net of transaction costs and post-closing adjustments, during the year ended December 31, 2022, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

Sale of U.S. Project Development Business

In January 2021, we entered into an agreement with Leeward, a subsidiary of the Ontario Municipal Employees Retirement System, for the sale of our U.S. project development business. In March 2021, we completed the transaction and received consideration of $151.4 million for the sale of such business. As a result of this transaction, we recognized a gain of $31.5 million, net of transaction costs and post-closing adjustments, during the year ended December 31, 2021, which was included in “Gain on sales of businesses, net” in our consolidated statements of operations.

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4. Goodwill and Intangible Assets

Goodwill

Goodwill for the modules business consisted of the following at December 31, 2022 and 2021 (in thousands):

						December 31, 2021						Acquisitions (Impairments)						December 31, 2022
Gross amount						$	407,827					$	—					$	407,827
Accumulated impairment losses						(393,365)						—						(393,365)
Total						$	14,462					$	—					$	14,462

						December 31, 2020						Acquisitions (Impairments)						December 31, 2021
Gross amount						$	407,827					$	—					$	407,827
Accumulated impairment losses						(393,365)						—						(393,365)
Total						$	14,462					$	—					$	14,462

We performed our annual impairment analysis in the fourth quarters of 2022, 2021, and 2020. ASC 350-20 allows companies to perform a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value to determine whether it is necessary to perform a quantitative goodwill impairment test. Such qualitative assessment considers various factors, including macroeconomic conditions, industry and market considerations, cost factors, the overall financial performance of a reporting unit, and any other relevant events affecting our company or a reporting unit.

We performed a qualitative assessment for our modules business in each respective period and concluded that it was not more likely than not that the fair value of the modules business was less than its carrying amount. Accordingly, a quantitative goodwill impairment test for the modules business was not required in any period presented.

Intangible assets, net

The following tables summarize our intangible assets at December 31, 2022 and 2021 (in thousands):

						December 31, 2022
						Gross Amount						Accumulated Amortization						Net Amount
Developed technology						$	97,347					$	(68,650)					$	28,697
Patents						8,970						(6,561)						2,409
Total						$	106,317					$	(75,211)					$	31,106

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

Amortization of intangible assets was $10.9 million, $10.9 million, and $10.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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Estimated future amortization expense for our definite-lived intangible assets was as follows at December 31, 2022 (in thousands):

						Amortization Expense
2023						$	10,510
2024						10,380
2025						3,910
2026						2,526
2027						2,426
Thereafter						1,354
Total amortization expense						$	31,106

5. Cash, Cash Equivalents, and Marketable Securities

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

						2022						2021
Cash and cash equivalents:
Cash						$	1,476,945					$	1,450,654
Money market funds						4,324						—
Total cash and cash equivalents						1,481,269						1,450,654
Marketable securities:
Foreign debt						59,777						103,317
U.S. debt						56,463						18,627
Time deposits						980,472						253,445
Total marketable securities						1,096,712						375,389
Total cash, cash equivalents, and marketable securities						$	2,577,981					$	1,826,043

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

						Balance Sheet Line Item						2022						2021
Cash and cash equivalents						Cash and cash equivalents						$	1,481,269					$	1,450,654
Restricted cash – current						Other current assets						3,175						1,532
Restricted cash – noncurrent						Other assets						2,734						3,651
Restricted cash equivalents – noncurrent						Other assets						6,284						—
Total cash, cash equivalents, restricted cash, and restricted cash equivalents												$	1,493,462					$	1,455,837

During the years ended December 31, 2021 and 2020, we sold marketable securities for proceeds of $5.5 million and $188.1 million, respectively, and realized gains of less than $0.1 million and $0.2 million, respectively, on such sales. See Note 10. “Fair Value Measurements” to our consolidated financial statements for information about the fair value of our marketable securities.

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

						As of December 31, 2022
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign debt						$	59,940					$	—					$	140					$	23					$	59,777
U.S. debt						58,308						—						1,823						22						56,463
Time deposits						980,810						—						—						338						980,472
Total						$	1,099,058					$	—					$	1,963					$	383					$	1,096,712

						As of December 31, 2021
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign debt						$	103,263					$	81					$	18					$	9					$	103,317
U.S. debt						19,003						10						384						2						18,627
Time deposits						253,531						—						—						86						253,445
Total						$	375,797					$	91					$	402					$	97					$	375,389

The following table presents the change in the allowance for credit losses related to our available-for-sale marketable securities for the years ended December 31, 2022 and 2021 (in thousands):

						2022						2021
Allowance for credit losses, beginning of period						$	97					$	121
Provision for credit losses, net						667						423
Sales and maturities of marketable securities						(381)						(447)
Allowance for credit losses, end of period						$	383					$	97

The contractual maturities of our marketable securities as of December 31, 2022 were as follows (in thousands):

						Fair Value
One year or less						$	983,472
One year to two years						73,086
Two years to three years						31,841
Three years to four years						4,427
Four years to five years						—
More than five years						3,886
Total						$	1,096,712

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6. Restricted Marketable Securities

Restricted marketable securities consisted of the following as of December 31, 2022 and 2021 (in thousands):

						2022						2021
Foreign government obligations						$	46,886					$	64,855
Supranational debt						8,661						10,997
U.S. debt						109,328						145,326
U.S. government obligations						17,195						23,548
Total restricted marketable securities						$	182,070					$	244,726

Our restricted marketable securities represent long-term investments to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. We have established a trust under which estimated funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.; First Solar Malaysia Sdn. Bhd.; and First Solar Manufacturing GmbH are grantors. As of December 31, 2022 and 2021, such custodial accounts also included noncurrent restricted cash and cash equivalents balances of $6.7 million and $0.9 million, respectively, which were reported within “Other assets.” Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years.

During the year ended December 31, 2021, we sold all our restricted marketable securities for proceeds of $258.9 million and realized gains of $11.7 million on such sales, and repurchased $255.6 million of restricted marketable securities as part of our ongoing management of the custodial accounts. During the year ended December 31, 2020, we sold certain restricted marketable securities for proceeds of $115.2 million and realized gains of $15.1 million on such sales, and repurchased $114.5 million of restricted marketable securities as part of our ongoing management of the custodial accounts. See Note 10. “Fair Value Measurements” to our consolidated financial statements for information about the fair value of our restricted marketable securities.

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

						As of December 31, 2022
						Amortized Cost						Unrealized Gains						Unrealized Losses						Allowance for Credit Losses						Fair Value
Foreign government obligations						$	64,008					$	—					$	17,112					$	10					$	46,886
Supranational debt						11,146						—						2,485						—						8,661
U.S. debt						148,288						—						38,932						28						109,328
U.S. government obligations						24,551						—						7,352						4						17,195
Total						$	247,993					$	—					$	65,881					$	42					$	182,070

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

The following table presents the change in the allowance for credit losses related to our restricted marketable securities for the years ended December 31, 2022 and 2021 (in thousands):

						2022						2021
Allowance for credit losses, beginning of period						$	53					$	13
Provision for credit losses, net						(11)						69
Sales of restricted marketable securities						—						(29)
Allowance for credit losses, end of period						$	42					$	53

As of December 31, 2022, the contractual maturities of our restricted marketable securities were between 8 years and 17 years.

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7. Consolidated Balance Sheet Details

Accounts receivable trade, net

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

						2022						2021
Accounts receivable trade, gross						$	325,379					$	430,100
Allowance for credit losses						(1,042)						(664)
Accounts receivable trade, net						$	324,337					$	429,436

Accounts receivable unbilled, net

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

						2022						2021
Accounts receivable unbilled, gross						$	30,654					$	25,336
Allowance for credit losses						—						(63)
Accounts receivable unbilled, net						$	30,654					$	25,273

Allowance for credit losses

The following tables present the change in the allowances for credit losses related to our accounts receivable for the years ended December 31, 2022 and 2021 (in thousands):

Accounts receivable trade						2022						2021
Allowance for credit losses, beginning of period						$	664					$	3,009
Provision for credit losses, net						553						(2,224)
Writeoffs						(175)						(121)
Allowance for credit losses, end of period						$	1,042					$	664

Accounts receivable unbilled						2022						2021
Allowance for credit losses, beginning of period						$	63					$	303
Provision for credit losses, net						(63)						(240)
Allowance for credit losses, end of period						$	—					$	63

Inventories

Inventories consisted of the following at December 31, 2022 and 2021 (in thousands):

						2022						2021
Raw materials						$	397,912					$	404,727
Work in process						66,641						65,573
Finished goods						417,218						433,511
Inventories						$	881,771					$	903,811
Inventories – current						$	621,376					$	666,299
Inventories – noncurrent						$	260,395					$	237,512

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Other current assets

Other current assets consisted of the following at December 31, 2022 and 2021 (in thousands):

						2022						2021
Spare maintenance materials and parts						$	114,428					$	112,070
Operating supplies						47,492						41,034
Prepaid expenses						43,262						28,232
Prepaid income taxes						8,314						41,379
Restricted cash						3,175						1,532
Derivative instruments (1)						2,018						5,816
Other						18,384						14,129
Other current assets						$	237,073					$	244,192

——————————

(1)See Note 8. “Derivative Financial Instruments” to our consolidated financial statements for discussion of our derivative instruments.

Property, plant and equipment, net

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

						2022						2021
Land						$	35,259					$	18,359
Buildings and improvements						893,049						693,289
Machinery and equipment						2,762,801						2,527,627
Office equipment and furniture						146,467						139,611
Leasehold improvements						40,160						40,517
Construction in progress						1,121,938						461,708
Property, plant and equipment, gross						4,999,674						3,881,111
Accumulated depreciation						(1,462,772)						(1,231,524)
Property, plant and equipment, net						$	3,536,902					$	2,649,587

We assess our property, plant and equipment for impairment whenever events or changes in circumstances arise that may indicate that the carrying amount of such assets may not be recoverable. We consider a long-lived asset to be abandoned after we have ceased use of the asset and we have no intent to use or repurpose it in the future, and such abandoned assets are recorded at their salvage value, if any. During 2020, we recorded an impairment loss of $17.4 million in “Cost of sales” for certain abandoned module manufacturing equipment, including framing and assembly tools, as such equipment was no longer compatible with our long-term module technology roadmap.

Depreciation of property, plant and equipment was $244.9 million, $233.2 million, and $198.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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PV solar power systems, net

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

						2022						2021
PV solar power systems, gross						$	11,593					$	281,660
Accumulated depreciation						(5,351)						(64,367)
PV solar power systems, net						$	6,242					$	217,293

Depreciation of PV solar power systems was $9.2 million, $11.8 million, and $19.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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

In November 2021, the off-taker for our 4 MWAC PV solar power plant located in Samoa notified us of its intention to terminate the PPA. Given the limited availability of alternative off-take opportunities, including both contracted and uncontracted sales of electricity produced by the project, we determined it was more likely than not that the carrying amount of the project was not recoverable due to our expectation that the project would be disposed of significantly before the end of its previously estimated useful life. As a result, we measured the fair value of the plant using an income approach valuation technique and recorded an impairment loss of $10.2 million in “Cost of sales” for the difference between the estimated fair value and carrying value of the plant.

During 2022, we received multiple non-binding offers to purchase our Luz del Norte PV solar power plant and elected to pursue such opportunities in coordination with the project’s lenders. As a result of the expected sale, we compared the undiscounted future cash flows for the project to its carrying value and determined that the project was not recoverable. Accordingly, we measured the fair value of the project using a market approach valuation technique and recorded an impairment loss of $57.8 million in “Cost of sales” in our consolidated statements of operations. Such impairment loss was comprised of $55.6 million for PV solar power systems, $1.3 million for intangible assets, and $0.9 million for operating lease assets. In December 2022, we completed the sale of the project to a subsidiary of Toesca Asset Management (“Toesca”). In connection with the sale, the project’s lenders agreed to forgive a portion of the loan balance. See Note 11. “Debt” to our consolidated financial statements for further information related to this transaction.

Project assets

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

						2022						2021
Project assets – development costs, including project acquisition and land costs						$	30,108					$	117,407
Project assets – construction costs						—						198,081
Project assets						$	30,108					$	315,488

In June 2022, we completed the sale of the majority of our project assets to PAG in connection with the sale of our Japan project development business. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information about this transaction.

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Other assets

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

						2022						2021
Operating lease assets (1)						$	93,185					$	207,544
Advance payments for raw materials						91,260						86,962
Income tax receivables						56,993						39,862
Accounts receivable unbilled, net						11,498						20,840
Restricted cash equivalents						6,284						—
Restricted cash						2,734						3,651
Accounts receivable trade, net						1,500						21,293
Indirect tax receivables						123						21,873
Other						56,265						36,739
Other assets						$	319,842					$	438,764

——————————

(1)See Note 9. "Leases" to our consolidated financial statements for discussion of our lease arrangements.

Accrued expenses

Accrued expenses consisted of the following at December 31, 2022 and 2021 (in thousands):

						2022						2021
Accrued property, plant and equipment						$	148,777					$	42,031
Accrued freight						77,136						61,429
Accrued compensation and benefits						47,939						34,606
Accrued inventory						44,679						42,170
Accrued other taxes						19,765						23,103
Product warranty liability (1)						10,660						13,598
Accrued project costs						4,601						48,836
Other						29,225						22,677
Accrued expenses						$	382,782					$	288,450

——————————

(1) See Note 12. “Commitments and Contingencies” to our consolidated financial statements for discussion of our “Product Warranties.”

Other current liabilities

Other current liabilities consisted of the following at December 31, 2022 and 2021 (in thousands):

						2022						2021
Operating lease liabilities (1)						$	9,193					$	12,781
Derivative instruments (2)						6,668						3,550
Other taxes payable						1,185						8,123
Other						4,199						10,293
Other current liabilities						$	21,245					$	34,747

——————————

(1)See Note 9. "Leases" to our consolidated financial statements for discussion of our lease arrangements.

(2)See Note 8. “Derivative Financial Instruments” to our consolidated financial statements for discussion of our derivative instruments.

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Other liabilities

Other liabilities consisted of the following at December 31, 2022 and 2021 (in thousands):

						2022						2021
Operating lease liabilities (1)						$	40,589					$	145,912
Deferred tax liabilities, net (2)						28,929						27,699
Product warranty liability (3)						23,127						38,955
Other						27,292						43,658
Other liabilities						$	119,937					$	256,224

——————————

(1)See Note 9. "Leases" to our consolidated financial statements for discussion of our lease arrangements.

(2)See Note 16. “Income Taxes” to our consolidated financial statements for discussion of our net deferred tax liabilities.

(3)See Note 12. “Commitments and Contingencies” to our consolidated financial statements for discussion of our “Product Warranties.”

8. Derivative Financial Instruments

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

Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within “Accumulated other comprehensive loss” if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., “economic hedges”), we record the changes in fair value directly to earnings. See Note 10. “Fair Value Measurements” to our 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 December 31, 2022 and 2021 (in thousands):

						December 31, 2022
						Other Current Assets						Other Assets						Other Current Liabilities						Other Liabilities
Derivatives designated as hedging instruments:
Commodity swap contracts						$	—					$	17					$	4,447					$	144
Total derivatives designated as hedging instruments						$	—					$	17					$	4,447					$	144
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts						$	2,018					$	—					$	2,221					$	—
Total derivatives not designated as hedging instruments						$	2,018					$	—					$	2,221					$	—
Total derivative instruments						$	2,018					$	17					$	6,668					$	144

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						December 31, 2021
						Other Current Assets												Other Current Liabilities
Derivatives designated as hedging instruments:
Foreign exchange forward contracts						$	1,336											$	139
Total derivatives designated as hedging instruments						$	1,336											$	139
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts						$	4,480											$	3,411
Total derivatives not designated as hedging instruments						$	4,480											$	3,411
Total derivative instruments						$	5,816											$	3,550

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

						Foreign Exchange Forward Contracts						Commodity Swap Contracts						Total
Balance as of December 31, 2019						$	(962)					$	—					$	(962)
Amounts recognized in other comprehensive income (loss)						(3,881)						1,472						(2,409)
Amounts reclassified to earnings impacting:
Cost of sales						1,199						—						1,199
Balance as of December 31, 2020						(3,644)						1,472						(2,172)
Amounts recognized in other comprehensive income (loss)						2,864						1,531						4,395
Amounts reclassified to earnings impacting:
Cost of sales						1,906						(3,003)						(1,097)
Balance as of December 31, 2021						1,126						—						1,126
Amounts recognized in other comprehensive income (loss)						545						(8,101)						(7,556)
Amounts reclassified to earnings impacting:
Cost of sales						(1,671)						859						(812)
Balance as of December 31, 2022						$	—					$	(7,242)					$	(7,242)

During the years ended December 31, 2022 and 2021, we recognized unrealized losses of less than $0.1 million within “Cost of sales” for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges. During the year ended December 31, 2020, we recognized unrealized gains of $1.2 million within “Cost of sales” for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges.

The following table presents the pretax amounts related to derivative instruments designated as net investment hedges affecting accumulated other comprehensive income (loss) and our consolidated statements of operations for the year ended December 31, 2022 (in thousands):

						Foreign Exchange Forward Contracts
Balance as of December 31, 2021						$	—
Amounts recognized in other comprehensive income (loss)						(667)
Balance as of December 31, 2022						$	(667)

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During the year ended December 31, 2022, we recognized unrealized gains of $0.9 million within “Other income (expense), net” for amounts excluded from effectiveness testing for our derivative instruments designated as net investment hedges.

The following table presents gains and losses related to derivative instruments not designated as hedges affecting our consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020 (in thousands):

												Amount of Gain (Loss) Recognized in Income
						Income Statement Line Item						2022						2021						2020
Foreign exchange forward contracts						Cost of sales						$	583					$	57					$	(462)
Foreign exchange forward contracts						Foreign currency loss, net						75,421						15,053						(6,317)
Interest rate swap contracts						Interest expense, net						—						(315)						(7,259)

Interest Rate Risk

From time to time, we may use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments. We do not use such swap contracts for speculative or trading purposes. During the years ended December 31, 2021 and 2020, all of our interest rate swap contracts related to project specific debt facilities. Such swap contracts did not qualify for accounting as cash flow hedges in accordance with ASC 815 due to our expectation to sell the associated projects before the maturity of their project specific debt financings and corresponding swap contracts. Accordingly, changes in the fair values of these swap contracts were recorded directly to “Interest expense, net.”

Foreign Currency Risk

Cash Flow Exposure

We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries’ functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. As of December 31, 2021, these foreign exchange forward contracts hedged our forecasted cash flows for periods up to 11 months. These foreign exchange forward contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of December 31, 2021.

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

						December 31, 2021
Currency						Notional Amount						USD Equivalent
U.S. dollar (1)						$38.4						$38.4
British pound						GBP 10.6						$14.4

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

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Net Investment Exposure

The functional currencies of certain of our foreign subsidiaries are their local currencies. Accordingly, we apply period-end exchange rates to translate their assets and liabilities and daily transaction exchange rates to translate their revenues, expenses, gains, and losses into U.S. dollars. We include the associated translation adjustments as a separate component of “Accumulated other comprehensive loss” within stockholders’ equity. From time to time, we may seek to mitigate the impact of such translation adjustments by entering into foreign exchange forward contracts that are designated as hedges of net investments in certain foreign subsidiaries. In June 2022, we entered into a foreign exchange forward contract with a notional value of ¥8.0 billion ($60.6 million), which matured in December 2022. Such foreign exchange forward contract qualified for and was designated as a hedge of our net investment in a certain foreign subsidiary in Japan. We report unrealized gains or losses on this contract, which are based on spot exchange rates, as a component of our foreign currency translation adjustments within “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the net investments are sold or substantially liquidated.

Transaction Exposure and Economic Hedging

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

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

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

						December 31, 2022
Transaction						Currency						Notional Amount						USD Equivalent
Sell						Canadian dollar						CAD 4.2						$3.1
Sell						Chilean peso						CLP 5,996.5						$7.0
Purchase						Euro						€160.2						$170.5
Sell						Euro						€38.4						$40.9
Sell						Indian rupee						INR 27,119.5						$327.4
Purchase						Japanese yen						¥2,982.7						$22.4
Sell						Japanese yen						¥8,950.3						$67.1
Purchase						Malaysian ringgit						MYR 99.8						$22.6
Sell						Malaysian ringgit						MYR 13.7						$3.1
Sell						Mexican peso						MXN 34.6						$1.8
Purchase						Singapore dollar						SGD 1.4						$1.0

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						December 31, 2021
Transaction						Currency						Notional Amount						USD Equivalent
Purchase						Australian dollar						AUD 3.2						$2.3
Purchase						Brazilian real						BRL 2.6						$0.5
Sell						Brazilian real						BRL 2.6						$0.5
Purchase						British pound						GBP 2.5						$3.4
Sell						Chilean peso						CLP 4,058.6						$4.8
Purchase						Euro						€77.6						$88.0
Sell						Euro						€38.6						$43.8
Sell						Indian rupee						INR 10,943.0						$147.1
Purchase						Japanese yen						¥667.5						$5.8
Sell						Japanese yen						¥31,524.6						$273.9
Purchase						Malaysian ringgit						MYR 17.0						$4.1
Sell						Malaysian ringgit						MYR 24.5						$5.9
Sell						Mexican peso						MXN 34.6						$1.7
Purchase						Singapore dollar						SGD 5.5						$4.1

Commodity Price Risk

We use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. During the year ended December 31, 2022, we entered into various commodity swap contracts to hedge a portion of our forecasted cash flows for purchases of aluminum frames between July 2022 and December 2023. Such swaps had an aggregate initial notional value based on metric tons of forecasted aluminum purchases, equivalent to $70.5 million, and entitle us to receive a three-month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contracts proportionately adjusts with forecasted purchases of aluminum frames. As of December 31, 2022, the notional value associated with these contracts were $30.5 million.

These commodity swap contracts qualify for accounting as cash flow hedges in accordance with ASC 815, and we designated them as such. We report unrealized gains or losses on such contracts in “Accumulated other comprehensive loss” and subsequently reclassify applicable amounts into earnings when the hedged transactions occur and impact earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of December 31, 2022. In the following 12 months, we expect to reclassify into earnings $6.6 million of net unrealized losses related to these commodity swap contracts that are included in “Accumulated other comprehensive loss” at December 31, 2022 as we realize the earnings effects of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual commodity pricing when we realize the related forecasted transactions.

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9. Leases

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

The following table presents certain quantitative information related to our lease arrangements for the years ended December 31, 2022 and 2021, and as of December 31, 2022 and 2021 (in thousands):

						2022						2021
Operating lease cost						$	14,634					$	17,681
Variable lease cost						2,517						2,041
Short-term lease cost						339						817
Total lease cost						$	17,490					$	20,539
Payments of amounts included in the measurement of operating lease liabilities						$	15,359					$	19,405
Lease assets obtained in exchange for operating lease liabilities						$	4,394					$	21,187
						December 31, 2022						December 31, 2021
Operating lease assets						$	93,185					$	207,544
Operating lease liabilities – current						9,193						12,781
Operating lease liabilities – noncurrent						40,589						145,912
Weighted-average remaining lease term						6 years						19 years
Weighted-average discount rate						5.1		%				2.8		%

In June 2022, we completed the sale of our Japan project development business to PAG, which included the transfer of various land leases associated with the business. As a result, we derecognized lease assets of $87.7 million, current lease liabilities of $3.0 million, and noncurrent lease liabilities of $77.9 million. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information about this transaction.

As of December 31, 2022, the future payments associated with our lease liabilities were as follows (in thousands):

						Total Lease Liabilities
2023						$	11,319
2024						10,895
2025						9,814
2026						8,343
2027						5,768
Thereafter						11,384
Total future payments						57,523
Less: interest						(7,741)
Total lease liabilities						$	49,782

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10. Fair Value Measurements

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

• Cash Equivalents and Restricted Cash Equivalents. At December 31, 2022, our cash equivalents and restricted cash equivalents consisted of money market funds. We value our cash equivalents and restricted cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1.

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

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

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

												Fair Value Measurements at Reporting Date Using
						December 31, 2022						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents:
Money market funds						$	4,324					$	4,324					$	—					$	—
Restricted cash equivalents:
Money market funds						6,284						6,284						—						—
Marketable securities:
Foreign debt						59,777						—						59,777						—
U.S. debt						56,463						—						56,463						—
Time deposits						980,472						980,472						—						—
Restricted marketable securities						182,070						—						182,070						—
Derivative assets						2,035						—						2,035						—
Total assets						$	1,291,425					$	991,080					$	300,345					$	—
Liabilities:
Derivative liabilities						$	6,812					$	—					$	6,812					$	—

												Fair Value Measurements at Reporting Date Using
						December 31, 2021						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities:
Foreign debt						$	103,317					$	—					$	103,317					$	—
U.S. debt						18,627						—						18,627						—
Time deposits						253,445						253,445						—						—
Restricted marketable securities						244,726						—						244,726						—
Derivative assets						5,816						—						5,816						—
Total assets						$	625,931					$	253,445					$	372,486					$	—
Liabilities:
Derivative liabilities						$	3,550					$	—					$	3,550					$	—

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Fair Value of Financial Instruments

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

						December 31, 2022												December 31, 2021
						Carrying Value						Fair Value						Carrying Value						Fair Value
Assets:
Accounts receivable unbilled, net - noncurrent						$	11,498					$	10,304					$	20,840					$	18,846
Accounts receivable trade, net - noncurrent						1,500						1,339						21,293						18,605
Liabilities:
Long-term debt, including current maturities (1)						$	185,000					$	160,986					$	246,737					$	243,865

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(1)Excludes unamortized discounts and issuance costs.

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

Credit Risk

We have certain financial and derivative instruments that subject us to credit risk. These consist primarily of cash, cash equivalents, marketable securities, accounts receivable, restricted cash, restricted cash equivalents, restricted marketable securities, foreign exchange forward contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place these instruments with various high-quality financial institutions and limit the amount of credit risk from any one counterparty. We monitor the credit standing of our counterparty financial institutions. Our net sales are primarily concentrated among a limited number of customers. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. We typically require some form of payment security from our customers, including, but not limited to, advance payments, parent guarantees, letters of credit, bank guarantees, or surety bonds.

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11. Debt

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

												Balance (USD)
Loan Agreement						Currency						2022						2021
India Credit Facility						USD						$	185,000					$	—
Luz del Norte Credit Facilities						USD						—						183,829
Kyoto Credit Facility						JPY						—						62,908
Long-term debt principal												185,000						246,737
Less: unamortized discounts and issuance costs												(651)						(6,836)
Total long-term debt												184,349						239,901
Less: current portion												—						(3,896)
Noncurrent portion												$	184,349					$	236,005

India Credit Facility

In July 2022, FS India Solar Ventures Private Limited, our indirect wholly-owned subsidiary, entered into a finance agreement (the “India Credit Facility”) with the U.S. International Development Finance Corporation (“DFC”) for aggregate borrowings up to $500.0 million for the development and construction of an approximately 3.3 GWDC solar module manufacturing facility located in Tamil Nadu, India. Principal on the India Credit Facility is payable in scheduled semi-annual installments through the facility’s expected maturity in August 2029. The India Credit Facility is guaranteed by First Solar, Inc.

Luz del Norte Credit Facilities

In August 2014, Parque Solar Fotovoltaico Luz del Norte SpA (“Luz del Norte”), our indirect wholly-owned subsidiary and project company, entered into credit facilities (the “Luz del Norte Credit Facilities”) with DFC and the International Finance Corporation (“IFC”) to provide limited-recourse senior secured debt financing for the design, development, financing, construction, testing, commissioning, operation, and maintenance of a 141 MWAC PV solar power plant located near Copiapó, Chile. In December 2022, we completed the sale of the project to a subsidiary of Toesca. In connection with the sale, DFC and IFC agreed to forgive a portion of the outstanding loan balance, resulting in a gain of $30.2 million recorded within "Other income, net” in our consolidated statements of operations. The remaining outstanding balance of $145.3 million was assumed by Toesca.

Kyoto Credit Facility

In July 2020, First Solar Japan GK, our wholly-owned subsidiary, entered into a construction loan facility with Mizuho Bank, Ltd. for borrowings up to ¥15.0 billion ($142.8 million), which are intended to be used for the construction of a 38 MWAC PV solar power plant located in Kyoto, Japan. In May 2022, we repaid the remaining $73.2 million principal balance on the credit facility.

Momura Credit Facility

In May 2022, FS Japan Project 25 GK (“Momura”), our indirect wholly-owned subsidiary and project company, entered into a credit agreement with Nomura Capital Investment Co., Ltd. and Aozora Bank, Ltd. for aggregate borrowings up to ¥21.5 billion ($168.1 million) for the development and construction of a 53 MWAC PV solar power plant located in Tochigi, Japan. The credit facility consisted of an ¥18.8 billion ($146.6 million) term loan facility, a ¥1.9 billion ($15.1 million) consumption tax facility, and a ¥0.8 billion ($6.4 million) debt service reserve facility. In June 2022, we completed the sale of our Japan project development business, and the credit facility’s outstanding balance of $107.2 million was assumed by PAG. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information about this transaction.

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Yatsubo Credit Facility

In May 2022, FS Japan Project 24 GK (“Yatsubo”), our indirect wholly-owned subsidiary and project company, entered into a credit agreement with Nomura Capital Investment Co., Ltd. and Aozora Bank, Ltd. for aggregate borrowings up to ¥10.9 billion ($85.0 million) for the development and construction of a 26 MWAC PV solar power plant located in Tochigi, Japan. The credit agreement consisted of a ¥9.5 billion ($74.2 million) term loan facility, a ¥1.0 billion ($7.6 million) consumption tax facility, and a ¥0.4 billion ($3.2 million) debt service reserve facility. In June 2022, we completed the sale of our Japan project development business, and the credit facility’s outstanding balance of $70.0 million was assumed by PAG. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information about this transaction.

Orido Credit Facility

In May 2022, FS Japan Project B5 GK (“Orido”), our indirect wholly-owned subsidiary and project company, entered into a credit agreement with Nomura Capital Investment Co., Ltd. and Aozora Bank, Ltd. for aggregate borrowings up to ¥5.3 billion ($41.3 million) for the development and construction of a 14 MWAC PV solar power plant located in Tochigi, Japan. The credit agreement consisted of a ¥4.6 billion ($36.0 million) term loan facility, a ¥0.5 billion ($3.6 million) consumption tax facility, and a ¥0.2 billion ($1.7 million) debt service reserve facility. In June 2022, we completed the sale of our Japan project development business, and the credit facility’s outstanding balance of $18.0 million was assumed by PAG. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information about this transaction.

Interest Rate Risk

As of December 31, 2022, our long-term debt borrowing rates were as follows:

Loan Agreement						Interest Rate						Effective Interest Rate
India Credit Facility						U.S. Treasury Constant Maturity Yield plus 1.75%						4.96%

During the years ended December 31, 2022, 2021, and 2020, we paid $11.6 million, $12.7 million, and $14.9 million, respectively, of interest related to our long-term debt arrangements.

Future Principal Payments

At December 31, 2022, the future principal payments on our long-term debt were due as follows (in thousands):

						Total Debt
2023						$	—
2024						13,117
2025						33,633
2026						33,633
2027						33,652
Thereafter						70,965
Total long-term debt future principal payments						$	185,000

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12. Commitments and Contingencies

Commercial Commitments

During the normal course of business, we enter into commercial commitments in the form of letters of credit and surety bonds to provide financial and performance assurance to third parties. As of December 31, 2022, the majority of these commercial commitments supported our modules business.

As of December 31, 2022, the issued and outstanding amounts and available capacities under these commitments were as follows (in millions):

						Issued and Outstanding						Available Capacity
Bilateral facilities (1)						$	117.4					$	98.8
Surety bonds						9.1						232.8

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(1)Of the total letters of credit issued under the bilateral facilities, $5.5 million was secured with cash.

Product Warranties

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

Product warranty activities during the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):

						2022						2021						2020
Product warranty liability, beginning of period						$	52,553					$	95,096					$	129,797
Accruals for new warranties issued						4,727						9,266						9,424
Settlements						(12,690)						(12,337)						(22,464)
Changes in estimate of product warranty liability						(10,803)						(39,472)						(21,661)
Product warranty liability, end of period						$	33,787					$	52,553					$	95,096
Current portion of warranty liability						$	10,660					$	13,598					$	22,278
Noncurrent portion of warranty liability						$	23,127					$	38,955					$	72,818

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During the year ended December 31, 2022 and 2021, we revised our limited product warranty liability estimate based on updated information regarding our warranty claims, which reduced our product warranty liability by $10.2 million and $33.1 million, respectively. This updated information reflected lower-than-expected warranty claims for our older series of module technology as well as the evolving claims profile of our newest series of module technology, resulting in reductions to our projected module return rates. During the year ended December 31, 2020, we revised this estimate based on updated information regarding our warranty claims, which reduced our product warranty liability by $19.7 million. This updated information reflected lower-than-expected settlements for our older series of module technology and revisions to projected settlements, resulting in a lower projected return rate.

Indemnifications

In certain limited circumstances, we have provided indemnifications to customers or other parties under which we are contractually obligated to compensate such parties for losses they suffer resulting from a breach of a representation, warranty, or covenant; the resolution of specific matters associated with a project’s development or construction; or guarantees of a third party’s payment or performance obligations. For contracts that have such indemnification provisions, we initially recognize a liability under ASC 460 for the estimated premium that would be required by a guarantor to issue the same indemnity in a standalone arm’s-length transaction with an unrelated party. We may base these estimates on the cost of insurance or other instruments that cover the underlying risks being indemnified and may purchase such instruments to mitigate our exposure to potential indemnification payments. We subsequently measure such liabilities at the greater of the initially estimated premium or the contingent liability required to be recognized under ASC 450. We recognize any indemnification liabilities as a reduction of earnings associated with the related transaction.

After an indemnification liability is recorded, we derecognize such amount pursuant to ASC 460 depending on the nature of the indemnity, which derecognition typically occurs upon expiration or settlement of the arrangement, and any contingent aspects of the indemnity are accounted for in accordance with ASC 450. As of December 31, 2022 and 2021, we accrued $2.5 million and $3.8 million of current indemnification liabilities, respectively. As of December 31, 2022, the maximum potential amount of future payments under our indemnifications was $97.1 million, and we held insurance and other instruments allowing us to recover up to $28.0 million of potential amounts paid under the indemnifications.

In September 2017, we made an indemnification payment in connection with the sale of one of our projects following the underpayment of anticipated cash grants by the United States government. In February 2018, the associated project entity commenced legal action against the United States government seeking full payment of the cash grants. In May 2021, the parties reached an agreement, pursuant to which the United States government made a settlement payment to the project entity. Under the terms of the indemnification arrangement, we received $65.1 million for our portion of the settlement payment, which we recorded as revenue during the year ended December 31, 2021.

Solar Module Collection and Recycling Liability

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

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

We periodically review our estimates of expected future recycling costs and may adjust our liability accordingly. Such adjustments are presented within “Cost of sales” on our consolidated statements of operations. During the year ended December 31, 2022, we completed our annual cost study of obligations under our module collection and recycling program and reduced the associated liability by $7.5 million primarily due to lower estimated capital and chemical costs resulting from improvements to our module recycling technology. During the year ended December 31, 2021, we completed our annual cost study of obligations under our module collection and recycling program and increased the associated liability by $10.8 million primarily due to lower estimated by-product credits for certain semiconductor materials recovered during the recycling process and updates to certain valuation assumptions. During the year ended December 31, 2020, we completed our annual cost study of obligations under our module collection and recycling program and reduced the associated liability by $18.9 million primarily due to changes to the estimated timing of cash flows associated with capital, labor, and maintenance costs and updates to certain valuation assumptions.

Our module collection and recycling liability was $128.1 million and $139.1 million as of December 31, 2022 and 2021, respectively. During the years ended December 31, 2022, 2021, and 2020, we recognized accretion expense of $5.5 million, $5.4 million and $5.2 million, respectively, associated with this liability. See Note 6. “Restricted Marketable Securities” to our consolidated financial statements for more information about our arrangements for funding this liability.

Legal Proceedings

Class Action

On January 7, 2022, a putative class action lawsuit titled City of Pontiac General Employees’ Retirement System v. First Solar, Inc., et al., Case No. 2:22-cv-00036-MTL, was filed in the United States District Court for the District of Arizona (hereafter “Arizona District Court”) against the Company and certain of our current officers (collectively, “Putative Class Action Defendants”). The complaint was filed on behalf of a purported class consisting of all purchasers of First Solar common stock between February 22, 2019 and February 20, 2020, inclusive. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 based on allegedly false and misleading statements related to the Company’s Series 6 solar modules and its project development business. It seeks unspecified damages and an award of costs and expenses. On April 25, 2022, the Arizona District Court issued an order appointing the Palm Harbor Special Fire Control & Rescue District Firefighters’ Pension Plan and the Greater Pennsylvania Carpenters’ Pension Fund as Lead Plaintiffs. On June 23, 2022, Lead Plaintiffs filed an Amended Complaint that brings the same claims and seeks the same relief as the original complaint. Putative Class Action Defendants filed a motion to dismiss on August 22, 2022. Lead Plaintiffs filed their opposition to the motion to dismiss on October 21, 2022. Putative Class Action Defendants filed a reply in support of their motion to dismiss on November 21, 2022. On January 10, 2023, the Court granted the Putative Class Action Defendants’ motion to dismiss in full, with leave to amend by February 10, 2023. On February 10, 2023, Lead Plaintiffs filed a Second Amended Complaint. Putative Class Action Defendants filed a motion to dismiss the Second Amended Complaint on February 24, 2023. Given the early stage of the litigation, at this time we are not in a position to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of possible loss, if any, from this action.

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Derivative Action

On September 13, 2022, a derivative action titled Federman v. Widmar, et al., Case No. 2:22-cv-01541-JAT, was filed by a putative stockholder purportedly on behalf of the Company in the Arizona District Court against our current directors and certain officers of the Company (collectively, “Derivative Action Defendants”), alleging violations of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, contribution and indemnification, aiding and abetting, and gross mismanagement. The complaint generally alleges that the Derivative Action Defendants caused or allowed false and misleading statements to be made concerning the Company’s Series 6 modules and project development business. The action includes claims for, among other things, damages in favor of the Company and an award of costs and expenses to the putative plaintiff stockholder, including attorneys’ fees. The Company believes that the plaintiff in the derivative action lacks standing to pursue litigation on behalf of First Solar. On February 17, 2023, the case was transferred to Judge Liburdi, who is also presiding over the related putative class action. The plaintiff in the derivative action intends to file an amended derivative complaint, which the parties have jointly stipulated will be due by March 10, 2023. Given the early stage of the litigation, at this time we are not in a position to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of possible loss, if any, from this action.

Opt Out Action

First Solar was party to a suit titled Maverick Fund, L.D.C. v. First Solar, Inc., et al., Case No. 2:15-cv-01156-ROS, filed in 2015 in the Arizona District Court by putative stockholders that opted out of our previously settled class action lawsuit.

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

Other Matters and Claims

On July 12, 2021, Southern Power Company and certain of its affiliates (“Southern”) filed an arbitration demand with the American Arbitration Association against two subsidiaries of the Company, alleging breach of the EPC agreements for five projects in the United States, for which the Company’s subsidiaries served as EPC contractor. The arbitration demand asserts breach of obligations to design and engineer the projects in accordance with the EPC agreements, particularly as such obligations relate to the procurement of tracker systems and inverters. The Company and its subsidiaries deny the claims, and defended the claims in arbitration hearings, which concluded in late February 2023. At this time, the Company believes that Southern is seeking damages of approximately $60 million. The parties are in the process of submitting post-hearing briefs and proposals, which are due in early May 2023. The arbitration panel will choose from the parties’ proposals by issuing an award later this year. At this time, given the inherent risks and uncertainties involved in arbitration, we believe the likelihood of a potential loss is reasonably possible, but we are unable to estimate the amount or range of potential loss, if any, from this arbitration.

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During the year ended December 31, 2022, we received several indemnification demands from certain customers, for whom we provided EPC services, regarding claims that such customers’ PV tracker systems infringe, in part, on patents owned by Sade, the owner of a company called Trabant Solar, Inc. In January 2023, we were notified by two of our customers that Sade served them with patent infringement complaints, and we have assumed the defense of these claims. We have conducted due diligence on the patents and claims and believe that we will prevail in the actions. Additionally, we anticipate the commencement of an Inter Partes Review before the United States Patent and Trademark Office seeking to invalidate such claims. Given the early stage of the litigation, at this time we are not in a position to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of possible loss, if any, from these actions.

We are party to other legal matters and claims in the normal course of our operations. While we believe the ultimate outcome of these matters and claims will not have a material adverse effect on our financial position, results of operations, or cash flows, the outcome of such matters and claims is not determinable with certainty, and negative outcomes may adversely affect us.

13. Revenue from Contracts with Customers

The following table presents the disaggregation of revenue from contracts with customers for the years ended December 31, 2022, 2021, and 2020 along with the reportable segment for each category (in thousands):

Category						Segment						2022						2021						2020
Solar modules						Modules						$	2,428,278					$	2,331,380					$	1,736,060
Solar power systems						Other						153,290						513,362						794,797
Energy generation (1)						Other						25,756						37,614						61,948
O&M services						Other						11,995						43,060						115,590
EPC services (2)						Other						—						(2,039)						2,937
Net sales												$	2,619,319					$	2,923,377					$	2,711,332

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(1)During the year ended December 31, 2020, the majority of energy generated and sold by our PV solar power systems was accounted for under ASC 840 consistent with the classification of the associated PPAs.

(2)For certain of our EPC agreements, we provide an energy performance test during the first or second year of a system’s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain adjustments. If there is an underperformance event with regard to these tests, we may incur liquidated damages as specified in the applicable EPC agreement. During the year ended December 31, 2021, we accrued liquidated damages for certain of these agreements, which we recognized as a reduction to revenue.

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

We recognize revenue for sales of development projects or completed systems when we enter into the associated sales contract. For certain prior project sales, including sales of solar power systems with EPC services, such revenue included estimated amounts of variable consideration. These estimates may require significant judgment to determine the most likely amount of net contract revenues. The cumulative effect of revisions to estimates is recorded in the period in which the revisions are identified and the amounts can be reasonably estimated. During the years ended December 31, 2022 and 2021, we recorded revenue of $1.5 million and $71.3 million, respectively, due to net changes in transaction prices for certain projects we previously sold, which represented 0.9% and 2.1% of the aggregate revenue for such projects, respectively. Changes for the year ended December 31, 2021 were primarily due to a $65.1 million settlement of an outstanding indemnification arrangement associated with the prior sale of a project. See Note 12. “Commitments and Contingencies” to our consolidated financial statements for discussion of

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our indemnification arrangements. During the year ended December 31, 2020, revenue decreased $17.0 million due to net changes in transaction prices for certain projects we previously sold, partially offset by a $7.5 million increase in revenue due to net changes in input cost estimates for such projects, which represented 0.5% of the aggregate revenue for such projects.

The following table reflects the changes in our contract assets, which we classify as “Accounts receivable unbilled, net” and our contract liabilities, which we classify as “Deferred revenue,” for the year ended December 31, 2022 (in thousands):

						2022						2021						Change
Accounts receivable unbilled, net (1)						$	42,152					$	46,113					$	(3,961)					(9)		%
Deferred revenue						$	1,207,940					$	297,811					$	910,129					306		%

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(1)Includes $11.5 million and $20.8 million of noncurrent accounts receivable unbilled, net classified as “Other assets” on our consolidated balance sheets as of December 31, 2022 and 2021, respectively.

During the year ended December 31, 2022, our contract assets decreased by $4.0 million primarily due to billings for certain prior project sales. During the year ended December 31, 2022, our contract liabilities increased by $910.1 million primarily due to advance payments received for sales of solar modules in the current year, partially offset by the recognition of revenue for sales of solar modules for which payment was received in prior years. During the years ended December 31, 2022 and 2021, we recognized revenue of $279.1 million and $182.0 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods.

As of December 31, 2022, we had entered into contracts with customers for the future sale of 61.4 GWDC of solar modules for an aggregate transaction price of $17.7 billion, which we expect to recognize as revenue through 2029 as we transfer control of the modules to the customers. Such aggregate transaction price excludes estimates of variable consideration associated with (i) future module technology improvements, including new product designs and enhancements to certain energy related attributes, (ii) the extension of the ITC, (iii) sales freight in excess of a defined threshold, (iv) changes to certain commodity prices, and (v) the module wattage committed for delivery, among other things. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price. These contracts may also be subject to amendments made by us or requested by our customers. These amendments may increase or decrease the volume of modules to be sold under the contract, change delivery schedules, or otherwise adjust the expected revenue under these contracts.

14. Stockholders’ Equity

Preferred Stock

As of December 31, 2022 and 2021, we had authorized 30,000,000 shares of undesignated preferred stock, $0.001 par value, none of which was issued and outstanding. Our board of directors is authorized to determine the rights, preferences, and restrictions on any series of preferred stock that we may issue.

Common Stock

As of December 31, 2022 and 2021, we had authorized 500,000,000 shares of common stock, $0.001 par value, of which 106,609,094 and 106,332,315 shares, respectively, were issued and outstanding. Each share of common stock is entitled to a single vote. We have not declared or paid any dividends through December 31, 2022.

15. Share-Based Compensation

The following table presents share-based compensation expense recognized in our consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020 (in thousands):

						2022						2021						2020
Cost of sales (1)						$	3,174					$	892					$	3,183
Selling, general and administrative (1)						22,367						19,578						22,093
Research and development (2)						3,080						432						3,991
Production start-up						35						—						—
Total share-based compensation expense						$	28,656					$	20,902					$	29,267

——————————

(1)On March 31, 2021, we completed the sales of our North American O&M operations and U.S. project development business, which resulted in the forfeiture of unvested shares for associates departing the Company as part of the transactions. See Note 3. “Sales of Businesses” to our consolidated financial statements for further information related to these transactions.

(2)Effective March 15, 2021, our former Chief Technology Officer retired from the Company, which resulted in the forfeiture of his unvested shares during the year ended December 31, 2021.

Share-based compensation expense capitalized in inventory and PV solar power systems was $0.3 million and $0.7 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, we had $36.5 million of unrecognized share-based compensation expense related to unvested restricted stock and performance units, which we expect to recognize over a weighted-average period of approximately 1.6 years. During the years ended December 31, 2022, 2021, and 2020, we recognized an income tax benefit in our statement of operations of $7.3 million, $7.5 million, and $7.3 million, respectively, related to share-based compensation expense, including excess tax benefits. We authorize our transfer agent to issue new shares, net of shares withheld for taxes as appropriate, for the vesting of restricted stock and performance units or grants of unrestricted stock.

Share-Based Compensation Plans

During the year ended December 31, 2020, we adopted our 2020 Omnibus Plan, under which directors, officers, employees, and consultants of First Solar, Inc. (including any of its affiliates) are eligible to participate in various forms of share-based compensation. The 2020 Omnibus Plan is administered by the compensation committee(or any other committee designated by our board of directors), which is authorized to, among other things, determine the recipients of grants, the exercise price, and the vesting schedule of any awards made under the 2020 Omnibus Plan. Our board of directors may amend, modify, or terminate the 2020 Omnibus Plan without the approval of our stockholders, except for amendments that would increase the maximum number of shares of our common stock available for awards under the 2020 Omnibus Plan, increase the maximum number of shares of our common stock that may be delivered by incentive stock options, or modify the requirements for participation in the 2020 Omnibus Plan.

The 2020 Omnibus Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted shares, restricted stock units, performance units, cash incentive awards, performance compensation awards, and other equity-based and equity-related awards. In addition, the shares underlying any forfeited, expired, terminated, or canceled awards, or shares surrendered as payment for taxes required to be withheld, become available for new award grants. We may not grant awards under the 2020 Omnibus Plan after 2030, which is the tenth anniversary of the 2020 Omnibus Plan’s approval by our stockholders. As of December 31, 2022, we had 6,500,832 shares available for future issuance under the 2020 Omnibus Plan.

Restricted Stock and Performance Units

We issue shares to the holders of restricted stock units on the date the restricted units vest. The majority of shares issued are net of applicable withholding taxes, which we pay on behalf of our associates. As a result, the actual number of shares issued will be less than the number of restricted stock units granted. Prior to vesting, restricted stock units do not have dividend equivalent rights or voting rights, and the shares underlying the restricted stock units are not considered issued and outstanding.

In April 2018, the compensation committee approved grants of performance units for key executive officers and associates to be earned over an approximately three-year performance period, which ended in December 2020. Vesting of the 2018 grants of performance units was contingent upon the relative attainment of target gross margin, operating expense, and contracted revenue metrics. In February 2021, the compensation committee certified the achievement of the vesting conditions applicable to the grants, which approximated the target level of performance. Accordingly, each participant received one share of common stock for each vested performance unit, net of any tax withholdings.

In July 2019, the compensation committee approved additional grants of performance units for key executive officers to be earned over a multi-year performance period, which ended in December 2021. Vesting of the 2019 grants of performance units was contingent upon the relative attainment of target cost per watt, module wattage, gross profit, and operating income metrics. In March 2022, the compensation committee certified the achievement of the vesting conditions applicable to the grants, which approximated the maximum level of performance. Accordingly, each participant received one share of common stock for each vested performance unit granted, net of any tax withholdings.

In March 2020, the compensation committee approved additional grants of performance units for key executive officers to be earned over a multi-year performance period, which ended in December 2022. Vesting of the 2020 grants of performance units is contingent upon the relative attainment of target contracted revenue, module wattage, and return on capital metrics, to be certified by the compensation committee in 2023.

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

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

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

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

The following is a summary of our restricted stock unit activity, including performance unit activity, for the year ended December 31, 2022:

						Number of Shares						Weighted-Average Grant-Date Fair Value
Unvested restricted stock units at December 31, 2021						1,316,860						$	60.09
Restricted stock units granted (1)						462,234						89.21
Restricted stock units vested						(425,019)						62.20
Restricted stock units forfeited						(43,188)						64.86
Unvested restricted stock units at December 31, 2022						1,310,887						$	69.51

——————————

(1)Restricted stock units granted include the maximum amount of performance units available for issuance under our long-term incentive program for key executive officers and associates. The actual number of shares to be issued will depend on the relative attainment of the performance metrics described above.

We estimate the fair value of our restricted stock unit awards based on our stock price on the grant date. For the years ended December 31, 2021 and 2020, the weighted-average grant-date fair value for restricted stock units granted in such years was $78.86 and $45.01, respectively. The total fair value of restricted stock units vested during 2022, 2021, and 2020 was $26.4 million, $27.8 million, and $32.9 million, respectively.

Unrestricted Stock

During the years ended December 31, 2022, 2021, and 2020, we awarded 19,868; 19,513; and 27,731, respectively, of fully vested, unrestricted shares of our common stock, excluding amounts withheld for taxes, to the chairman and independent members of our board of directors. Accordingly, we recognized $1.9 million, $1.8 million, and $1.5 million of share-based compensation expense for these awards during the years ended December 31, 2022, 2021, and 2020, respectively.

16. Income Taxes

In August 2022, the U.S. President signed into law the IRA, which revised U.S. tax law by, among other things, including a new CAMT of 15% on certain large corporations, imposing a 1% excise tax on stock buybacks, and providing various incentives to address climate change, including the introduction of the advanced manufacturing production credit. The provisions of the IRA are generally effective for tax years beginning after 2022. Given the complexities of the IRA, which is pending technical guidance and regulations from the IRS and U.S. Treasury Department, we will continue to monitor these developments and evaluate the potential future impact to our results of operations.

In November 2022, the U.S. Treasury Department released proposed foreign tax credit (“FTC”) regulations addressing various aspects of the U.S. FTC regime. Among other items, these proposed regulations provide certain exceptions for determining creditable foreign withholding taxes. Taxpayers may rely on these proposed regulations, which apply to tax years beginning on or after December 28, 2021. As a result of these proposed regulations, foreign withholding taxes will continue to be creditable.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act includes a number of federal corporate tax relief provisions that are intended to support the ongoing liquidity of U.S. corporations. Among other provisions, the CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years. As a result of the CARES Act, we expect to carry back our 2019 and 2020 net operating losses to our 2016 U.S. corporate income tax return, which restores certain foreign tax credits we expect to utilize by amending our 2017 and 2018 U.S. corporate income tax returns. Such amended returns restore other general business credits we expect to utilize in future tax years before the credits expire and eliminate the transition tax liability for accumulated earnings of foreign subsidiaries resulting from the Tax Cuts and Jobs Act. As a result, we recorded a tax benefit of $89.7 million for the year ended December 31, 2020, which represents the one-time income tax benefit for the difference between the statutory federal corporate income tax rate of 35% applicable to our 2016 U.S. corporate income tax return and the current federal corporate income tax rate of 21%. Any changes to the estimate will be recorded in the period the carry back claims are filed.

Although we continue to evaluate our plans for the reinvestment or repatriation of unremitted foreign earnings, we expect to indefinitely reinvest the earnings of our foreign subsidiaries to fund our international operations, with the exception of certain subsidiaries for which applicable taxes have been recorded as of December 31, 2022. Accordingly, we have not recorded any provision for additional U.S. or foreign withholding taxes related to the outside basis differences of our foreign subsidiaries in which we expect to indefinitely reinvest their earnings. However, our future plans for repatriation of unremitted foreign earnings could be affected by our current and future expansion activities and the timing of the IRA credits, the majority of which are expected to be refunded in cash.

The U.S. and non-U.S. components of our income or loss before income taxes for the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):

						2022						2021						2020
U.S. (loss) income						$	(17,652)					$	315,297					$	22,475
Non-U.S. income						26,250						256,865						270,715
Income before taxes and equity in earnings						$	8,598					$	572,162					$	293,190

The components of our income tax expense or benefit for the years ended December 31, 2022, 2021, and 2020 were as follows (in thousands):

						2022						2021						2020
Current expense (benefit):
Federal						$	8,434					$	9,531					$	(149,162)
State						399						3,469						4,027
Foreign						49,984						10,109						26,303
Total current expense (benefit)						58,817						23,109						(118,832)
Deferred (benefit) expense:
Federal						(13,928)						58,510						12,681
State						(700)						3,775						7,591
Foreign						8,575						18,075						(8,734)
Total deferred (benefit) expense						(6,053)						80,360						11,538
Total income tax expense (benefit)						$	52,764					$	103,469					$	(107,294)

Our Malaysian subsidiary has been granted a long-term tax holiday that expires in 2027. The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with meeting certain employment and investment thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday in 2027.

Our Vietnamese subsidiary had previously been granted a tax incentive that provided a two-year tax exemption, which began in 2020, and reduced annual tax rates through the end of 2025. In May 2022, our Vietnamese subsidiary was granted a new long-term tax incentive that provides an additional two-year tax exemption and reduced annual tax rates through 2036, conditional upon our continued compliance with certain revenue and R&D spending thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday.

Our income tax results differed from the amount computed by applying the relevant U.S. statutory federal corporate income tax rate to our income or loss before income taxes for the following reasons for the years ended December 31, 2022, 2021, and 2020 (in thousands):

						2022												2021												2020
						Tax						Percent						Tax						Percent						Tax						Percent
Statutory income tax expense						$	1,806					21.0		%				$	120,154					21.0		%				$	61,570					21.0		%
Effect of tax holiday						27,424						318.9		%				(32,339)						(5.7)		%				(11,500)						(3.9)		%
Changes in valuation allowance						22,239						258.6		%				2,603						0.5		%				(31,671)						(10.8)		%
Non-deductible expenses						10,776						125.3		%				3,955						0.7		%				3,834						1.3		%
Change in tax contingency						4,326						50.3		%				2,198						0.4		%				(59,010)						(20.1)		%
Foreign dividend income						2,857						33.2		%				2,611						0.5		%				3,004						1.0		%
Effect of CARES Act						1,127						13.1		%				1,880						0.3		%				(89,699)						(30.6)		%
State tax, net of federal benefit						700						8.1		%				4,757						0.8		%				11,059						3.8		%
Share-based compensation						(1,017)						(11.8)		%				(2,991)						(0.5)		%				(720)						(0.2)		%
Return to provision adjustments						(1,767)						(20.5)		%				(4,932)						(0.9)		%				2,414						0.8		%
Foreign tax rate differential						(4,227)						(49.1)		%				4,632						0.8		%				6,135						2.1		%
Tax credits						(12,654)						(147.2)		%				(3,395)						(0.6)		%				(8,091)						(2.8)		%
Other						1,174						13.8		%				4,336						0.8		%				5,381						1.8		%
Reported income tax expense (benefit)						$	52,764					613.7		%				$	103,469					18.1		%				$	(107,294)					(36.6)		%

During the year ended December 31, 2022, we received net tax refunds of $3.9 million. During the years ended December 31, 2021 and 2020, we made net tax payments of $38.2 million and $22.2 million, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities calculated under U.S. GAAP and the amounts calculated for preparing our income tax returns. The items that gave rise to our deferred taxes as of December 31, 2022 and 2021 were as follows (in thousands):

						2022						2021
Deferred tax assets:
Net operating losses						$	122,950					$	110,979
Tax credits						103,260						86,885
Capitalized research and development						32,932						—
Accrued expenses						28,226						35,193
Long-term contracts						23,531						9,065
Compensation						13,167						10,551
Equity in earnings						4,172						4,174
Deferred expenses						1,735						1,786
Inventory						1,490						10,057
Restricted marketable securities and derivatives						357						—
Goodwill and intangible assets						221						1,784
Other						23,249						24,244
Deferred tax assets, gross						355,290						294,718
Valuation allowance						(135,763)						(123,917)
Deferred tax assets, net of valuation allowance						219,527						170,801
Deferred tax liabilities:
Property, plant and equipment						(150,477)						(106,361)
Investment in foreign subsidiaries						(5,689)						(15,583)
Acquisition accounting / basis difference						(4,065)						(4,065)
Capitalized interest						(1,331)						(1,338)
Restricted marketable securities and derivatives						—						(4,337)
Other						(8,214)						(7,654)
Deferred tax liabilities						(169,776)						(139,338)
Net deferred tax assets						$	49,751					$	31,463

We use the deferral method of accounting for investment tax credits under which the credits are recognized as reductions in the carrying value of the related assets. The use of the deferral method also results in a basis difference from the recognition of a deferred tax asset and an immediate income tax benefit for the future tax depreciation of the related assets. Such basis differences are accounted for pursuant to the income statement method.

The following table shows changes in the valuation allowance against our deferred tax assets during the years ended December 31, 2022, 2021, and 2020 (in thousands):

						2022						2021						2020
Valuation allowance, beginning of year						$	123,917					$	127,711					$	151,705
Additions						58,922						8,976						23,884
Reversals						(47,076)						(12,770)						(47,878)
Valuation allowance, end of year						$	135,763					$	123,917					$	127,711

We maintained a valuation allowance of $135.8 million and $123.9 million as of December 31, 2022 and 2021, respectively, against certain of our deferred tax assets, as it is more likely than not that such amounts will not be fully realized. During the year ended December 31, 2022, the valuation allowance increased by $11.8 million primarily due to current year operating losses in certain jurisdictions, partially offset by the partial release of the valuation allowance in jurisdictions with current year operating income.

As of December 31, 2022, we had federal and aggregate state net operating loss carryforwards of $9.0 million and $423.3 million, respectively. As of December 31, 2021, we had federal and aggregate state net operating loss carryforwards of $10.4 million and $428.5 million, respectively. If not used, the federal net operating loss carryforwards incurred prior to 2018 will begin to expire in 2030, and the state net operating loss carryforwards will begin to expire in 2029. Federal net operating losses arising in tax years beginning in 2018 may be carried forward indefinitely, and the associated deduction is limited to 80% of taxable income. The utilization of our net operating loss carryforwards is also subject to an annual limitation under Section 382 of the IRC due to changes in ownership. Based on our analysis, we do not believe such limitation will impact our realization of the net operating loss carryforwards as we anticipate utilizing them prior to expiration.

As of December 31, 2022, we had U.S. foreign tax credit carryforwards of $9.3 million, federal and state research and development credit carryforwards of $63.8 million, and investment tax credits of $55.4 million available to reduce future federal and state income tax liabilities. If not used, these credits will begin to expire in 2028, 2029, and 2029, respectively.

The following table shows a reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2022, 2021, and 2020 (in thousands):

						2022						2021						2020
Unrecognized tax benefits, beginning of year						$	7,811					$	5,370					$	72,169
Increases related to prior year tax positions						4,569						—						169
Decreases related to prior year tax positions						—						(44)						(256)
Decreases from lapse in statute of limitations						(361)						(492)						(67,396)
Increases related to current tax positions						2,474						2,977						684
Unrecognized tax benefits, end of year						$	14,493					$	7,811					$	5,370

If recognized, $14.5 million of unrecognized tax benefits, excluding interest and penalties, would reduce our annual effective tax rate. Due to the uncertain and complex application of tax laws and regulations, it is possible that the ultimate resolution of uncertain tax positions may result in liabilities that could be materially different from these estimates. In such an event, we will record additional tax expense or benefit in the period in which such resolution occurs. Our policy is to recognize any interest and penalties that we may incur related to our tax positions as a component of income tax expense or benefit. During the years ended December 31, 2022, 2021, and 2020, we recognized interest and penalties of $0.3 million, $0.3 million, and $5.3 million, respectively, related to unrecognized tax benefits.

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

The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which we operate:

						Tax Years
Vietnam						2012 - 2021
Singapore						2017 - 2021
United States						2018 - 2021
Malaysia						2019 - 2021

In certain of the jurisdictions noted above, we operate through more than one legal entity, each of which has different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, tax years are not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination.

17. Net (Loss) Income per Share

The calculation of basic and diluted net (loss) income per share for the years ended December 31, 2022, 2021, and 2020 was as follows (in thousands, except per share amounts):

						2022						2021						2020
Basic net (loss) income per share
Numerator:
Net (loss) income						$	(44,166)					$	468,693					$	398,355
Denominator:
Weighted-average common shares outstanding						106,551						106,263						105,867
Diluted net (loss) income per share
Denominator:
Weighted-average common shares outstanding						106,551						106,263						105,867
Effect of restricted stock and performance units						—						661						819
Weighted-average shares used in computing diluted net (loss) income per share						106,551						106,924						106,686
Net (loss) income per share:
Basic						$	(0.41)					$	4.41					$	3.76
Diluted						$	(0.41)					$	4.38					$	3.73

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

						2022						2021						2020
Anti-dilutive shares						576						14						—

18. Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss, net of tax, for the year ended December 31, 2022 (in thousands):

						Foreign Currency Translation Adjustment						Unrealized (Loss) Gain on Marketable Securities and Restricted Marketable Securities						Unrealized Gain (Loss) on Derivative Instruments						Total
Balance as of December 31, 2021						$	(89,452)					$	(8,036)					$	1,126					$	(96,362)
Other comprehensive loss before reclassifications						(27,306)						(59,383)						(7,556)						(94,245)
Amounts reclassified from accumulated other comprehensive loss						(4,715)						—						(812)						(5,527)
Net tax effect						—						2,639						1,678						4,317
Net other comprehensive loss						(32,021)						(56,744)						(6,690)						(95,455)
Balance as of December 31, 2022						$	(121,473)					$	(64,780)					$	(5,564)					$	(191,817)

The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020 (in thousands):

Comprehensive Income Components						Income Statement Line Item						2022						2021						2020
Foreign currency translation adjustment:
Foreign currency translation adjustment						Cost of sales						$	—					$	269					$	370
Foreign currency translation adjustment						Gain on sales of businesses, net						3,756						—						—
Foreign currency translation adjustment						Other income (expense), net						959						(1,203)						2,560
Total foreign currency translation adjustment												4,715						(934)						2,930
Unrealized gain on marketable securities and restricted marketable securities						Other income (expense), net						—						11,696						15,346
Unrealized gain (loss) on derivative instruments:
Foreign exchange forward contracts						Cost of sales						1,671						(1,906)						(1,199)
Commodity swap contracts						Cost of sales						(859)						3,003						—
Total unrealized gain (loss) on derivative instruments												812						1,097						(1,199)
Total gain reclassified												$	5,527					$	11,859					$	17,077

19. Segment and Geographical Information

Our primary segment is our modules business, which involves the design, manufacture, and sale of CdTe solar modules, which convert sunlight into electricity. Third-party customers of our modules segment include developers and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners. Our residual business operations include certain project development activities, O&M services, the results of operations from PV solar power systems we owned and operated in certain international regions, and the sale of such systems to third-party customers.

Our business is managed by our Chief Executive Officer, who is also considered our chief operating decision maker (“CODM”). Our CODM views sales of solar modules as the primary driver of our consolidated operating results. Our modules segment contributes to our operating results by providing the fundamental technologies and solar modules that drive our business and sales opportunities. Accordingly, our CODM generally makes decisions about allocating resources and assessing performance of the company based on the gross profit of our modules segment. However, information about our modules segment assets is not reported to the CODM for purposes of making such decisions. Accordingly, we exclude such asset information from our reportable segment financial disclosures.

The following tables provide a reconciliation of certain financial information for our reportable segment to information presented in our consolidated financial statements for the years ended December 31, 2022, 2021, and 2020 (in thousands):

						Year Ended December 31, 2022
						Modules						Other						Total
Net sales						$	2,428,278					$	191,041					$	2,619,319
Gross profit (loss)						115,397						(45,539)						69,858
Depreciation and amortization expense						230,827						9,361						240,188
Goodwill						14,462						—						14,462

						Year Ended December 31, 2021
						Modules						Other						Total
Net sales						$	2,331,380					$	591,997					$	2,923,377
Gross profit						472,926						257,028						729,954
Depreciation and amortization expense						219,712						12,189						231,901
Goodwill						14,462						—						14,462

						Year Ended December 31, 2020
						Modules						Other						Total
Net sales						$	1,736,060					$	975,272					$	2,711,332
Gross profit						429,131						251,542						680,673
Depreciation and amortization expense						181,402						20,813						202,215
Goodwill						14,462						—						14,462

The following table presents net sales for the years ended December 31, 2022, 2021, and 2020 by geographic region, based on the customer country of invoicing (in thousands):

						2022						2021						2020
United States						$	2,193,619					$	2,456,597					$	1,843,433
Chile						173,279						32,050						21,870
France						67,656						121,537						127,097
Japan						46,426						207,609						469,657
India						37,215						37,650						33,848
Canada						82						5,288						118,865
All other foreign countries						101,042						62,646						96,562
Net sales						$	2,619,319					$	2,923,377					$	2,711,332

The following table presents long-lived assets, which include property, plant and equipment, operating lease assets, project assets, and PV solar power systems as of December 31, 2022 and 2021 by geographic region, based on the physical location of the assets (in thousands):

						2022						2021
United States						$	1,876,218					$	1,112,369
Malaysia						791,750						862,156
Vietnam						611,031						652,639
India						341,616						106,966
Japan						30,454						420,071
Chile						—						213,846
All other foreign countries						15,368						21,865
Long-lived assets						$	3,666,437					$	3,389,912

20. Concentrations of Risks

Customer Concentration Risk. The following customers each comprised 10% or more of our total net sales for the years ended December 31, 2022, 2021, and 2020:

						2022						2021						2020
						% of Net Sales						% of Net Sales						% of Net Sales
Customer #1						14		%				*						*
Customer #2						10		%				*						*
Customer #3						10		%				*						*
Customer #4						*						12		%				*
Customer #5						*						10		%				11		%
Customer #6						*						*						10		%

——————————

*Net sales for these customers were less than 10% of our total net sales for the period.

Supplier Risk. Several of our key raw materials and components, in particular CdTe and substrate glass, and manufacturing equipment are either single-sourced or sourced from a limited number of suppliers. Failure of any of our key suppliers to perform could disrupt our supply chain and adversely impact our operations by impairing our ability to deliver solar modules to customers in the required quality and quantities and at a price that is profitable to us.

Production Risk. Shortages of essential components and equipment could occur due to increases in demand or interruptions of supply, which may be exacerbated by the availability of logistics services, thereby adversely affecting our ability to meet customer demand for our products. Our solar modules are currently produced at our facilities in Perrysburg, Ohio; Lake Township, Ohio; Kulim, Malaysia; and Ho Chi Minh City, Vietnam. Damage to or disruption of these facilities could interrupt our business and adversely affect our ability to generate net sales.

INDEX TO EXHIBITS

The following exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K:

												Incorporated by Reference
Exhibit Number						Exhibit Description						Form						File No.						Date of First Filing						Exhibit Number
3.1						Amended and Restated Certificate of Incorporation of First Solar, Inc.						S-1/A						333-135574						10/25/06						3.1
3.2						Amended and Restated Bylaws of First Solar, Inc.						8-K						001-33156						7/23/21						3.1
4.1						Description of the Registrant’s Securities						10-K						001-33156						2/21/20						4.1
10.1+						Form of Change in Control Severance Agreement						S-1/A						333-135574						10/25/06						10.15
10.2						Form of Director and Officer Indemnification Agreement						10-K						001-33156						2/27/13						10.20
10.3+						Employment Agreement, dated March 15, 2011, and Change in Control Severance Agreement, dated April 4, 2011 between First Solar, Inc. and Mark Widmar						10-Q						001-33156						5/5/11						10.3
10.4+						Employment Agreement, effective July 1, 2012, and Change in Control Severance Agreement, effective July 1, 2012 between First Solar, Inc. and Georges Antoun						10-Q						001-33156						8/3/12						10.1
10.5+						Non-Competition and Non-Solicitation Agreement, effective as of March 15, 2011, between First Solar, Inc. and Mark Widmar						10-Q						001-33156						5/7/13						10.2
10.6+						Change in Control Severance Agreement, effective as of July 1, 2012, between First Solar, Inc. and Georges Antoun						10-Q						001-33156						5/7/13						10.3
10.7+						Amendment to Change in Control Severance Agreement						10-Q						001-33156						8/7/13						10.1
10.8						Restricted Cash Assignment of Deposits						10-Q						001-33156						8/6/14						10.2
10.9+						First Solar, Inc. 2015 Omnibus Incentive Compensation Plan						DEF 14A						001-33156						4/8/15						App. A
10.10+						Amendment to Employment Agreement, effective as of July 1, 2016, between First Solar, Inc. and Mark Widmar, and Amendment to Non-Competition and Non-Solicitation Agreement, effective as of July 1, 2016, between First Solar, Inc. and Mark Widmar, and Second Amendment to Change-in-Control Severance Agreement, effective as of July 1, 2016, between First Solar, Inc. and Mark Widmar						10-Q						001-33156						4/28/16						10.1
10.11+						Employment Agreement, effective as of October 24, 2016, and Change-in-Control Severance Agreement, effective as of October 24, 2016, between First Solar, Inc. and Alexander Bradley						10-Q						001-33156						11/3/16						10.1
10.12+						Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of October 7, 2019 between First Solar, Inc. and Caroline Stockdale						10-K						001-33156						2/21/20						10.34
10.13+						Form of Performance Unit Award Agreement - Form Perf Unit-010						10-K						001-33156						2/21/20						10.46
10.14+						First Solar, Inc. 2020 Omnibus Incentive Compensation Plan						DEF 14A						001-33156						4/1/20						App. A
10.15+						Form of Grant Notice for 2020-2022 Executive Performance Equity Plan						10-Q						001-33156						5/8/20						10.1
10.16+						Employment Agreement, First Amendment to Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Patrick Buehler						10-Q						001-33156						10/28/20						10.1
10.17+						Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Jason Dymbort						10-Q						001-33156						10/28/20						10.2

												Incorporated by Reference
Exhibit Number						Exhibit Description						Form						File No.						Date of First Filing						Exhibit Number
10.18+						Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Markus Gloeckler						10-Q						001-33156						10/28/20						10.3
10.19+						Employment Agreement, First Amendment to Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Michael Koralewski						10-Q						001-33156						10/28/20						10.4
10.20+						First Amendment to Employment Agreement, effective as of October 8, 2020 between First Solar, Inc. and Caroline Stockdale						10-Q						001-33156						10/28/20						10.5
10.21+						Employment Agreement, First Amendment to Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non-Competition and Non-Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Kuntal Kumar Verma						10-Q						001-33156						10/28/20						10.6
10.22+						First Amendment to Employment Agreement, effective as of January 8, 2021 between First Solar, Inc. and Markus Gloeckler						10-K						001-33156						2/26/21						10.46
10.23+						Form of Performance Unit Award Agreement - Form Perf Unit-011						10-K						001-33156						2/26/21						10.47
10.24+						Form of Performance Unit Award Agreement - Form Perf Unit-012						10-K						001-33156						2/26/21						10.48
10.25+						Form of Grant Notice for 2021-2023 Executive Performance Equity Plan						10-Q						001-33156						7/30/21						10.1
10.26+						Form of Performance Unit Award Agreement - Form Perf Unit-013						10-K						001-33156						3/1/22						10.31
10.27+						Form of Performance Unit Award Agreement - Form Perf Unit-014						10-Q						001-33156						4/28/22						10.1
10.28+						Form of Grant Notice for 2022-2024 Executive Performance Equity Plan						10-Q						001-33156						4/28/22						10.6
10.29‡§						Business Purchase and Sale Agreement, dated May 12, 2022, among First Solar Japan GK, PAG Renewables Holding Pte. Ltd. and PAG Renewables FM Holding Pte. Ltd.						10-Q						001-33156						7/28/22						10.1
10.30‡§						First Amendment to Business Purchase and Sale Agreement, dated June 24, 2022, among First Solar Japan GK, PAG Renewables Holding Pte. Ltd. and PAG Renewables FM Holding Pte. Ltd.						10-Q						001-33156						7/28/22						10.2
10.31‡§						Membership Interests Purchase and Sale Agreement, dated May 12, 2022, among First Solar Japan GK, Kyoto Solar Plant L.P., Yatsubo Solar Plant L.P., Momura Solar Plant L.P., Iwaki Solar Plant L.P., Hita Solar Plant L.P., Shimo Onuki Solar Plant L.P., Orido Solar Plant L.P., Handa Solar Plant L.P. and Tochigi Solar Plant L.P.						10-Q						001-33156						7/28/22						10.3
10.32‡§						First Amendment to Membership Interests Purchase and Sale Agreement, dated June 24, 2022, among First Solar Japan GK, Kyoto Solar Plant L.P., Yatsubo Solar Plant L.P., Momura Solar Plant L.P., Iwaki Solar Plant L.P., Hita Solar Plant L.P., Shimo Onuki Solar Plant L.P., Orido Solar Plant L.P., Handa Solar Plant L.P. and Tochigi Solar Plant L.P.						10-Q						001-33156						7/28/22						10.4
10.33‡§						TK Interests Purchase and Sale Agreement, dated May 12, 2022, among TK Investco 7 Pte. Ltd., TK Investco 8 Pte. Ltd., TK Investco 10 Pte. Ltd., TK Investco 11 Pte. Ltd. and Gioia Investment Pte. Ltd.						10-Q						001-33156						7/28/22						10.5

												Incorporated by Reference
Exhibit Number						Exhibit Description						Form						File No.						Date of First Filing						Exhibit Number
10.34‡§						First Amendment to TK Interests Purchase and Sale Agreement, dated June 24, 2022, among TK Investco 7 Pte. Ltd., TK Investco 8 Pte. Ltd., TK Investco 10 Pte. Ltd., TK Investco 11 Pte. Ltd. and Gioia Investment Pte. Ltd.						10-Q						001-33156						7/28/22						10.6
10.35‡§						Finance Agreement between FS India Solar Ventures Private Limited and United States International Development Finance Corporation dated July 27, 2022						10-Q						001-33156						7/28/22						10.7
10.36‡§						Guaranty Agreement, dated August 4, 2022, between First Solar, Inc. and United States International Development Finance Corporation						10-Q						001-33156						10/27/22						10.1
10.37+*						Form of Performance Unit Award Agreement - Form Perf Unit-015						—						—						—						—
10.38+*						Form of RSU Award Agreement						—						—						—						—
10.39+*						Form of Grant Notice for RSU Award Agreement						—						—						—						—
10.40+*						Form of Option Award Agreement						—						—						—						—
10.41+*						Form of Share Award Agreement						—						—						—						—
10.42+*						Form of Cash Incentive Award Agreement						—						—						—						—
10.43+*						Form of Performance Cash Incentive Award Agreement						—						—						—						—
21.1*						List of Subsidiaries of First Solar, Inc.						—						—						—						—
23.1*						Consent of Independent Registered Public Accounting Firm						—						—						—						—
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended						—						—						—						—
31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as amended						—						—						—						—
32.1†						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002						—						—						—						—
101.INS*						XBRL Instance Document – the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document						—						—						—						—
101.SCH*						XBRL Taxonomy Extension Schema Document						—						—						—						—
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document						—						—						—						—
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document						—						—						—						—
101.LAB*						XBRL Taxonomy Label Linkbase Document						—						—						—						—
101.PRE*						XBRL Taxonomy Extension Presentation Document						—						—						—						—
104*						Cover page formatted as Inline XBRL and contained in Exhibit 101						—						—						—						—

——————————

+ Management contract, compensatory plan, or arrangement.

‡ Portions of this exhibit have been redacted in compliance with Item 601(b)(10) of Regulation S-K.

§ Exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

• Filed herewith.

† Furnished herewith. This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.