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Suntech Reports Fourth Quarter and Full Year 2011 Financial Results

Posted on 2012-03-08
WUXI, China, March 8, 2012 /PRNewswire-Asia/ -- Suntech Power Holdings Co., Ltd. (NYSE: STP), the world's largest producer of solar
panels, today announced financial results for its fourth fiscal quarter and full year ended December 31, 2011.
Fourth Quarter 2011 Highlights
Total net revenues were $629.0 million.
Total PV shipments decreased 9.7% sequentially and increased 3.2% year-over-year.
Gross profit margin was 9.9%.
Net loss attributable to holders of American Depository Shares (ADS) was $136.9 million, or $0.76 per diluted ADS.
Improved accounts receivable and inventory by $489.6 million from the third quarter of 2011.
Generated positive operating cash flow of $240.1 million.
Full Year 2011 Highlights
Total net revenues were $3,146.6 million in 2011.
Total PV shipments were 2,096MW, representing 33.3% growth year-over-year.
Gross profit margin was 12.3%.
Net loss attributable to holders of ADSs was $1,006.7 million, or $5.58 per diluted ADS.
Generated positive operating cash flow of $80.1 million.
Suntech achieved 2.4GW of PV cell and module capacity, and 1.6GW of silicon ingot and wafer capacity.
"In the fourth quarter, our customers continued to demonstrate their preference to work with global suppliers that are dedicated to delivering
high performance and superior quality solar panels," said Dr. Zhengrong Shi, Suntech's chairman and CEO. "With strong demand ahead of
subsidy reductions in multiple markets, we again exceeded our shipment guidance and met our gross profit target for the fourth quarter of
2011."
"In 2011, we continued to invest in our customer service capabilities and built on our foundation as a leading global brand. This was
recognized in the EuPD's independent survey amongst end-customers in Germany, France and Italy that selected Suntech as the first
China-based company to receive the Top PV Brand award. We are committed to driving further product and service innovation in the
industry to ensure we continue to deliver the best value proposition to our customers.
"Looking into 2012, we expect excess capacity and further policy adjustments in Europe and the U.S. will result in a sustained period of
intense competition in the solar industry. In this context, our top priorities are to continue to drive down our production cost, invest in
channel development and bring to market the most competitive product offerings. These actions will help us maintain our position as the
leading supplier of solar products."
Fourth Quarter 2011 Results
Net Revenues
Total net revenues for the fourth quarter of 2011 were $629.0 million, a decrease of 22% from $809.8 million in the third quarter of 2011 and
a decrease of 33% from $945.1 million in the fourth quarter of 2010. The sequential decrease of revenues was due to a decline in
shipments and a decline in the average selling price of PV products.
Cost of Revenues
Cost of revenues was $566.7 million in the fourth quarter of 2011, compared to $702.0 million in the third quarter of 2011 and $780.7 million
in the fourth quarter of 2010.
Gross Profit
For the fourth quarter of 2011, gross profit was $62.3 million and gross margin was 9.9% compared to $107.8 million and 13.3%,
respectively, in the third quarter of 2011; and $164.4 million and 17.4% in the fourth quarter of 2010.
Operating Expenses
Operating expenses for the fourth quarter of 2011 were $114.6 million, which represented 18.2% of revenues, compared to $613.1 million,
or 75.7% of revenues, in the third quarter of 2011, and $74.3 million, or 7.9% of revenues, in the fourth quarter of 2010. Operating expenses
in the fourth quarter of 2011 included $19.0 million of expenses due to planned lower utilization of production facilities.
Due to the challenging solar market conditions and the significant reduction in the Company's market capitalization in the third quarter of
2011, Suntech initiated an assessment of its goodwill, intangibles, and certain investments. Suntech recently completed its analysis and,
as a result, operating expenses in the third quarter of 2011 included non-cash, impairment charges of $482.9 million. The impairment
charges consisted of $407.2 million of goodwill and intangible assets; a $54.6 million impairment of fixed assets; and a $21.1 million
provision for prepayments to affiliated companies, Nitol Solar and Shunda. In addition, operating expenses in third quarter of 2011 included
a reserve for litigation of $17.5 million. Excluding the reserve and these impairments, non-GAAP[1] operating expenses for the third quarter
of 2011 were $112.7 million.
Operating Income and Margin
Loss from operations in the fourth quarter of 2011 was $52.3 million and operating margin was negative 8.3%, compared to loss from
operations of $505.3 million and operating margin of negative 62.4% in the third quarter of 2011; and income from operations of $90.1
million and operating margin of 9.5% in the fourth quarter of 2010. For comparison purposes, non-GAAP loss from operations in the third
quarter of 2011 was $4.9 million and non-GAAP operating margin was negative 0.6%.
Interest Expense
Net interest expense was $37.4 million in the fourth quarter of 2011 compared to net interest expense of $35.7 million in the third quarter of
2011 and $23.5 million in the fourth quarter of 2010. Net interest expense in the fourth quarter of 2011 included $10.4 million in non-cash
expenses of which $8.6 million was related to the 2013 convertible bonds. This compares to $10.3 million in non-cash interest expense in
the third quarter of 2011.
Foreign Exchange and Other Income/Expense
Foreign exchange loss was $23.5 million in the fourth quarter of 2011 compared to a foreign exchange loss of $56.3 million in the third
quarter of 2011 and a loss of $2.8 million in the fourth quarter of 2010. The foreign exchange gain or loss is the result of the translation of
the value of assets and liabilities denominated in foreign currencies from period to period. The foreign exchange loss in the fourth quarter of
2011 was primarily non-cash.
Net other expense consists primarily of gains and losses related to foreign currency hedging activities. Net other gain was $15.4 million in
the fourth quarter of 2011, compared with net other expense of $50.1 million in the third quarter of 2011 and net other expense of $0.4
million in the fourth quarter of 2010. As a result of the impairment assessment initiated in third quarter of 2011, the net other expense in
the third quarter of 2011 included a $40 million non-cash impairment of Suntech's investment in Nitol Solar.
The net impact of losses related to foreign exchange fluctuations and hedging was approximately $8.1 million in the fourth quarter of 2011.
Tax Benefit/Expense
Tax benefit in the fourth quarter of 2011 was $19.0 million, compared to a tax benefit of $50.5 million in the third quarter of 2011 and a tax
expense of $28.6 million in the fourth quarter of 2010.

 

Equity in Earnings of Affiliates
Equity in earnings of affiliates in the fourth quarter of 2011 was a loss of $58.1 million, compared to a loss of $45.1 million in the third
quarter of 2011 and a gain of $323.8 million in the fourth quarter of 2010. The loss in the fourth quarter of 2011 was primarily related to a
non-cash decrease in the fair value of Suntech's investment in the Global Solar Fund (GSF) due to an adjustment of the weighted average
cost of capital used to calculate the valuation of solar projects owned by GSF investee companies, and a transfer of a portion of Suntech's
holding in GSF to settle amounts owing under a previously agreed upon incentive plan to the manager of the General Partner of GSF. As a
result of such transfer, the Company's holding in GSF has declined from 86% to 79%. The loss in the third quarter of 2011 was primarily
related to a $48 million impairment of Suntech's investment in Shunda Holdings, which was a result of the impairment assessment in the
third quarter of 2011. The equity in earnings of affiliates in the fourth quarter of 2010 was primarily related to a $250 million non-cash
increase in the fair value of GSF's investments.
Net Income and Earnings per ADS
Net loss attributable to holders of ADS was $136.9 million, or $0.76 per diluted ADS, for the fourth quarter of 2011, compared to a net loss
of $642.2 million, or $3.56 per diluted ADS, for the third quarter of 2011 and a net gain of $358.0 million, or $1.83 per diluted ADS, for the
fourth quarter of 2010. Non-GAAP net loss attributable to holders of ADSs in the third quarter of 2011 was $53.8 million, or $0.30 per
diluted ADS.
Balance Sheet
Cash and restricted cash totaled $709.0 million as of December 31, 2011, compared with $567.7 million as of September 30, 2011. The
increase in cash was primarily due to a reduction in accounts receivable and inventory in the fourth quarter of 2011.
Inventory was $516.5 million as of December 31, 2011, compared with $696.3 million as of September 30, 2011. The decrease in inventory
was due to stringent inventory control. Inventory turnover days improved to 82 days in the fourth quarter of 2011 from 89 days in the third
quarter of 2011.
Accounts receivable totaled $475.3 million as of December 31, 2011, compared with $785.1 million as of September 30, 2011. The
decrease was due to continuous collection efforts in the fourth quarter of 2011. Days sales outstanding improved to 68 days in the fourth
quarter of 2011, compared to 87 days in the third quarter of 2011.
Accounts payable totaled $542.2 million as of December 31, 2011, compared with $632.0 million as of September 30, 2011. The decrease
in accounts payable was primarily due to lower procurement in line with lower shipments. Accounts payable days increased to 86 days in
the fourth quarter of 2011 from 81 days in the third quarter of 2011.
Net debt, which reflects total debt less cash and restricted cash, declined by $206.9 million in the fourth quarter of 2011 from $1,802.5
million as of September 30, 2011 to $1,595.5 million as of December 31, 2011. The fourth quarter decline in the net debt was primarily due
to an increase in the cash position, and the repayment of some credit facilities.
Cash Flow
In the fourth quarter of 2011, cash provided from operations was $240.1 million, compared to cash used in operations of $27.2 million in the
third quarter of 2011, and cash used in operations of $307.6 million in the fourth quarter of 2010. The cash provided from operations in the
fourth quarter of 2011 was primarily due to stringent working capital management and the reduction in accounts receivable and inventory.
Non-Cash Items
In the fourth quarter of 2011, the major non-cash related expenses were share-based compensation charges of $2.1 million; depreciation
and amortization expenses of $35.1 million; non-cash interest expenses $10.4 million; and equity in loss of affiliates of $58.1 million.
Capital Expenditures
In the fourth quarter of 2011, capital expenditures totaled $37.6 million, compared to $80.8 million in the third quarter of 2011 and $12.2
million in the fourth quarter of 2010. Capital expenditures in the fourth quarter of 2011 were primarily related to outstanding payments for
plant and equipment.
Full Year 2011 Results
Net Revenues
Total net revenues for the full year 2011 were $3,146.6 million, compared with $2,901.9 million in 2010. The year-over-year increase was
primarily due to a 33.3% increase in shipments of PV products, which was offset by a decline in the average selling price of PV products.
Gross Profit
For the full year 2011, gross profit was $386.6 million and gross margin was 12.3% compared to gross profit of $543.1 million and gross
margin of 18.7% for the full year 2010. The decrease in gross margin was primarily a result of the reduction in the average selling price of
PV products exceeding the reduction in cost of goods sold.
The gross profit in 2011 was impacted by a $91.9 million write-off of the unamortized cost of warrants previously issued to MEMC in
conjunction with a supply agreement, which was terminated in the second quarter of 2011. Non-GAAP gross profit in the full year 2011 was
$478.5 million and non-GAAP gross margin was 15.2%.
Operating Expenses
Operating expenses for the full year 2011 were $1,019.9 million compared to $345.9 million for the full year 2010. In order to facilitate
comparison between Suntech and its peers, since the second quarter of 2011, Suntech has reclassified freight expense as an operating
expense. Previously, freight expense was a component of cost of revenues. Freight expense was $39.3 million and $61.7 million in 2010
and 2011, respectively. Comparable numbers in historical periods have also been adjusted accordingly.
Operating expenses in 2011 included $120 million of expenses related to the termination of a supply contract with MEMC; a $17.5 million
provision for litigation; a $407.2 million impairment of goodwill and intangible assets; a $54.6 million impairment of fixed assets; and a
$21.1 million non-cash provision for prepayments to affiliated companies, Nitol Solar and Shunda. Excluding these impairments and
provisions, non-GAAP operating expenses for 2011 were $399.5 million. Non-GAAP operating expenses for 2010 were $283.3 million.
Operating Income and Margin
Loss from operations was $633.3 million and operating margin was negative 20.1% for the full year 2011 compared to operating income of
$197.2 million and operating margin of 6.8% for the full year 2010.
Non-GAAP operating income for the full year 2011 was $79.0 million and non-GAAP operating margin was 2.5%. Non-GAAP operating
income for the full year 2010 was $259.8 million and non-GAAP operating margin was 9.0%.
Equity in Earnings of Affiliates
Equity in earnings of affiliates was a loss of $98.7 million in 2011 compared to a gain in equity in earnings of affiliates of $250.8 million in
2010. The equity in earnings of affiliates in 2010 was primarily related to a $269.5 million non-cash increase in the fair value of GSF's
investments; $49.5 million equity income on consolidation of the acquisition of a wafer company; and $24 million equity income from
earnings of the wafer business prior to acquisition in the fourth quarter of 2010. This was offset by an equity loss related to the impairment
of the investment in Shunda Holdings of $101.1 million in 2010. Equity in loss of affiliates in 2011 was primarily due to an impairment
Suntech's investment in Shunda Holdings and a decrease in the fair value of Suntech's investment in GSF.
Net Income and Earnings per ADS
Net loss attributable to holders of ADSs was $1,006.7 million, or $5.58 per diluted ADS for the full year 2011, compared to net income of
$236.9 million, or $1.30 per diluted ADS for the full year 2010.
Non-GAAP net loss attributable to holders of ADSs was $192.3 million or $1.07 per diluted ADS for the full year 2011. Non-GAAP net
income attributable to holders of ADSs was $400.6 million, or $2.21 for the full year 2010.
Cash Flow
In the full year 2011, cash provided by operations was $80.1 million, compared to cash used in operations of $30.0 million in the full year
2010.
Capital Expenditures
In the full year 2011, capital expenditures, which were primarily related to the construction of manufacturing facilities, totaled $366.8
million, lower than previously stated guidance of $400 million. This is compared to $276.0 million for the full year 2010. Depreciation and
amortization expenses totaled $141.6 million in 2011, compared to $84.9 million in 2010.
Business Outlook
As a result of lower than expected inventory level and seasonal weakness in demand, Suntech expects shipments in the first quarter of
2012 to decline by approximately 30% from the fourth quarter of 2011.
Gross margin in the first quarter of 2012 is expected to be in the range of 3% to 6%.
For the fiscal year ending December 31, 2012, Suntech expects shipments to be in the range of 2.1GW to 2.5GW.
Suntech expects to maintain cell and module production capacity at 2.4GW and wafer capacity at 1.6GW in 2012. Full year 2012 capital
expenditures are expected to be in the range of $120 million to $150 million.
2011 Results Preliminary and Unaudited
The results presented in this press release are preliminary and unaudited. The Company is in the process of completing its 2011 audit, and
adjustments to the results set forth in this press release may be identified as a result of this process. The Company's 2011 audited
financial statements will be included in its 2011 Annual Report on Form 20-F to be filed with the U.S. Securities and Exchange
Commission.
Fourth Quarterand Full Year 2011 Conference Call Information
Suntech management will host a conference call today, Thursday, March 8, 2012 at 8:00a.m. U.S. Eastern Time (which corresponds to
1:00p.m. Greenwich Mean Time on March 8, 2012 and 9:00p.m. Beijing/Hong Kong time on March 8, 2012) to discuss the company's
results.
Dial-in details for the earnings conference call are as follows:
US Toll Free: +1.866.519.4004
US Toll/International: +1.718.354.1231
UK: + 44.203.059.8139
Hong Kong: +852.2475.0994
Passcode: Suntech
A replay of the conference call may be accessed until March 15, 2012 by dialing:
US Toll Free: +1-866-214-5335
US Toll/International: +1-718-354-1232
Passcode: 46992303
Additionally, a live and archived webcast of this conference call will be available on the Investors section of Suntech's website at
http://ir.suntech-power.com.
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