Cautionary Statement Regarding Forward-Looking Statements



This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Securities Act of 1933, as amended (the "Securities Act"), which
are subject to risks, uncertainties, and assumptions that are difficult to
predict. All statements in this Quarterly Report on Form 10-Q, other than
statements of historical fact, are forward-looking statements. These
forward-looking statements are made pursuant to safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
include statements, among other things, concerning: the length and severity of
the ongoing COVID-19 (novel coronavirus) outbreak, including its impacts across
our businesses on demand, manufacturing operations, construction activities
associated with our expanding manufacturing capacity, O&M, financing, and our
global supply chains, actions that may be taken by governmental authorities to
contain the COVID-19 outbreak or to treat its impacts, and the ability of our
customers, suppliers, equipment vendors, and other counterparties to fulfill
their contractual obligations to us; effects resulting from certain module
manufacturing changes; our business strategy, including anticipated trends and
developments in and management plans for our business and the markets in which
we operate; future financial results, operating results, revenues, gross margin,
operating expenses, products, projected costs (including estimated future module
collection and recycling costs), warranties, solar module technology and cost
reduction roadmaps, restructuring, product reliability, investments, and capital
expenditures; our ability to continue to reduce the cost per watt of our solar
modules; the impact of public policies, such as tariffs or other trade remedies
imposed on solar cells and modules; the potential impact of proposed legislation
intended to encourage renewable energy investments through tax credits; effects
resulting from pending litigation; our ability to expand manufacturing capacity
worldwide; the impact of supply chain disruptions, further exacerbated by the
COVID-19 pandemic, that may affect the procurement of raw materials used in our
manufacturing process and the distribution of our modules; research and
development ("R&D") programs and our ability to improve the wattage of our solar
modules; sales and marketing initiatives; and competition. In some cases, you
can identify these statements by forward-looking words, such as "estimate,"
"expect," "anticipate," "project," "plan," "intend," "seek," "believe,"
"forecast," "foresee," "likely," "may," "should," "goal," "target," "might,"
"will," "could," "predict," "continue," "contingent," and the negative or plural
of these words, and other comparable terminology.

Forward-looking statements are only predictions based on our current
expectations and our projections about future events. All forward-looking
statements included in this Quarterly Report on Form 10-Q are based upon
information available to us as of the filing date of this Quarterly Report on
Form 10-Q and therefore speak only as of the filing date. You should not place
undue reliance on these forward-looking statements. We undertake no obligation
to update any of these forward-looking statements for any reason, whether as a
result of new information, future developments, or otherwise. These
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause our actual results, levels of activity,
performance, or achievements to differ materially from those expressed or
implied by these statements. These factors include, but are not limited to, the
severity and duration of the COVID-19 pandemic, including its potential impact
on the Company's business, financial condition, and results of operations;
structural imbalances in global supply and demand for PV solar modules; the
market for renewable energy, including solar energy; our competitive position
and other key competitive factors; reduction, elimination, or expiration of
government subsidies, policies, and support programs for solar energy projects;
the impact of public policies, such as tariffs or other trade remedies imposed
on solar cells and modules; the passage of proposed legislation intended to
encourage renewable energy investments through tax credits; our ability to
execute on our long-term strategic plans; our ability to execute on our solar
module technology and cost reduction roadmaps; our ability to improve the
wattage of our solar modules; interest rate fluctuations and our customers'
ability to secure financing; the loss of any of our large customers, or the
ability of our customers and counterparties to perform under their contracts
with us; the satisfaction of conditions precedent in our sales agreements; our
ability to attract new customers and to develop and maintain existing customer
and supplier relationships; our ability to convert existing or construct
production facilities to support new product lines; general economic and
business conditions, including those influenced by U.S., international, and
geopolitical events; environmental responsibility, including with respect
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to CdTe and other semiconductor materials; claims under our limited warranty
obligations; changes in, or the failure to comply with, government regulations
and environmental, health, and safety requirements; effects resulting from
pending litigation; future collection and recycling costs for solar modules
covered by our module collection and recycling program; supply chain disruption,
including the availability of shipping containers, port congestion, cancelled
shipments by logistic providers, and the cost of fuel, all of which may be
exacerbated by the COVID-19 pandemic; our ability to protect our intellectual
property; our ability to prevent and/or minimize the impact of cyber-attacks or
other breaches of our information systems; our continued investment in research
and development ("R&D"); the supply and price of components and raw materials,
including CdTe; our ability to attract and retain key executive officers and
associates; and the matters discussed in Item 1A. "Risk Factors" of our Annual
Report on Form 10-K for the year ended December 31, 2021, elsewhere in this
Quarterly Report on Form 10-Q, and our other reports filed with the SEC. You
should carefully consider the risks and uncertainties described in these
reports.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and the related notes thereto included in this Quarterly
Report on Form 10-Q. When referring to our manufacturing capacity, total sales,
and solar module sales, the unit of electricity in watts for megawatts ("MW")
and gigawatts ("GW") is direct current ("DC" or "DC") unless otherwise noted.
When referring to our projects or systems, the unit of electricity in watts for
MW and GW is alternating current ("AC" or "AC") unless otherwise noted.

Executive Overview



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.

Certain of our financial results and other key operational developments for the three months ended June 30, 2022 include the following:



•Net sales for the three months ended June 30, 2022 decreased by 1% to $621.0
million compared to $629.2 million for the same period in 2021. The decrease was
primarily driven by the prior period settlement of an outstanding
indemnification arrangement associated with the sale of one of our projects and
a lower average selling price per watt, partially offset by an increase in the
volume of modules sold to third parties. See Note 10. "Commitments and
Contingencies" to our condensed consolidated financial statements for further
discussion of our indemnification arrangements.

•Gross profit for the three months ended June 30, 2022 decreased 31.4 percentage
points to (3.7)% from 27.7% for the same period in 2021. The decrease in gross
profit was primarily due to a decrease in the average selling price per watt of
our modules, the prior period settlement of the indemnification matter mentioned
above, an impairment loss for our Luz del Norte PV solar power plant, and an
increase in sales freight, partially offset by the higher volume of modules
sold. See Note 5. "Consolidated Balance Sheet Details" to our condensed
consolidated financial statements for further discussion of the impairment of
our Luz del Norte project.

•As of June 30, 2022, we had 8.4 GWDC of total installed Series 6 nameplate
production capacity across all our facilities. We produced 2.2 GWDC of solar
modules during the three months ended June 30, 2022, which represented a 12%
increase in Series 6 module production from the same period in 2021. The
increase in production was primarily driven by higher throughput at our
manufacturing facilities. We expect to produce between 8.5 GWDC and 9.0 GWDC of
Series 6 and Series 6 Plus modules during 2022.
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•In May 2022, we entered into various agreements with certain subsidiaries of
PAG for the sale of our Japan project development business. In June 2022, we
completed the sale for an aggregate purchase price of ¥66.4 billion
($488.4 million), subject to certain customary post-closing adjustments. On the
closing date, we received proceeds of ¥44.1 billion ($324.5 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 $245.4 million, net of
transaction costs, which was included in "Gain on sales of businesses, net" in
our condensed consolidated statements of operations. In May 2022, we also
entered into an agreement with PAG for the sale of our Japan O&M business. The
completion of this transaction is contingent upon the achievement of certain
customary closing conditions. Assuming satisfaction of such closing conditions,
we expect this portion of the sale to be completed in the second half of 2022.

Market Overview



Solar energy is one of the fastest growing forms of renewable energy with
numerous economic and environmental benefits that make it an attractive
complement to and/or substitute for traditional forms of energy generation. In
recent years, the price of PV solar power systems, and accordingly the cost of
producing electricity from such systems, has decreased to levels that are
competitive with or below the wholesale price of electricity in many markets.
This price decline has opened new possibilities to develop systems in many
locations with limited or no financial incentives, thereby promoting the
widespread adoption of solar energy. As a result of such market opportunities,
we are in the process of expanding our manufacturing capacity by 6.6 GWDC by
constructing our third manufacturing facility in the U.S. and our first
manufacturing facility in India. These new facilities, which we expect to
produce our next generation Series 7 modules, are currently under construction
and are expected to commence operations in the first half of 2023 and the second
half of 2023, respectively. In the aggregate, we believe manufacturers of solar
cells and modules, particularly those in China, have significant installed
production capacity, relative to global demand, and the ability for additional
capacity expansion. Accordingly, we believe the solar industry may experience
periods of structural imbalance between supply and demand (i.e., where
production capacity exceeds global demand), and that excess capacity will also
put pressure on pricing. In light of such market realities, we continue to focus
on our strategies and points of differentiation, which include our advanced
module technology, our manufacturing process, our R&D capabilities, the
sustainability advantage of our modules, and our financial stability.

The solar industry continues to be characterized by intense pricing competition,
both at the module and system levels. This competition may result in an
environment in which pricing falls rapidly, thereby potentially increasing
demand for solar energy solutions but constraining the ability for project
developers and module manufacturers to sustain meaningful and consistent
profitability. Although module average selling prices in many global markets
have declined for several years, recent module spot pricing has increased, in
part, due to elevated commodity and freight costs. For example, polysilicon
pricing has been on the rise and, in June 2022, reached its highest level in the
past decade due to higher energy prices and reduced operating capacities of
silicon metal production in China and rising global demand for polysilicon.
Several other commodities, including aluminum, steel, natural gas, and lumber
have recently experienced significant price volatility. While the duration of
this elevated period of pricing is uncertain, module average selling prices in
global markets are expected to continue to decline in the long-term.

Competitive pricing for modules and systems, relative to the cost of traditional
forms of energy generation, is expected to contribute to diversification in
global electricity generation and further demand for solar energy. Over time,
however, declining average selling prices may adversely affect our results of
operations. Our results of operations could also be adversely affected if
competitors reduce pricing to levels below their costs, bid aggressively low
prices for module sale agreements, or are able to operate at minimal or negative
operating margins for sustained periods of time. For certain of our competitors,
including many in China, these practices may be enabled by their direct or
indirect access to sovereign capital or other forms of state-owned support.
Additionally, in certain markets an oversupply imbalance at the grid level may
reduce short-to-medium term demand for new solar installations relative to prior
years, lower pricing for power purchase agreements ("PPAs"), and lower margins
on module and system sales to such markets. However, we believe the effects of
such imbalance can be mitigated by modern solar
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We face intense competition from manufacturers of crystalline silicon solar
modules. Solar module manufacturers compete with one another on sales price per
watt, which may be influenced by several module value attributes, including
wattage (through a larger form factor or an improved conversion efficiency),
energy yield, degradation, sustainability, and reliability. Sales price per watt
may also be influenced by warranty terms and customer payment terms. While
conventional solar modules, including the solar modules we currently produce,
are monofacial, meaning their ability to produce energy is a function of direct
and diffuse irradiance on their front side, most module manufacturers offer
bifacial modules that also capture diffuse irradiance on the back side of a
module. Bifaciality compromises nameplate efficiency, but by converting both
front and rear side irradiance, such technology may improve the overall energy
production of a module relative to nameplate efficiency when applied in certain
applications, which could potentially lower the overall levelized cost of
electricity ("LCOE") of a system when compared to systems using conventional
solar modules, including the modules we currently produce. Additionally, certain
module manufacturers have introduced n-type mono-crystalline modules, such as
tunnel oxide passivated contact modules, which are expected to provide certain
improvements to module efficiency, temperature coefficient, and bifacial
performance, and claim to provide certain degradation advantages compared to
other mono-crystalline modules.

We believe we are among the lowest cost module manufacturers in the solar
industry on a module cost per watt basis, based on publicly available
information. This cost competitiveness allows us to compete favorably in markets
where pricing for modules and systems is highly competitive. Our cost
competitiveness is based in large part on our advanced thin film semiconductor
technology, module wattage (or conversion efficiency), proprietary manufacturing
process (which enables us to produce a CdTe module in a matter of hours using a
continuous and highly automated industrial manufacturing process, as opposed to
a batch process), and our focus on operational excellence. In addition, our CdTe
modules use approximately 2% of the amount of semiconductor material that is
used to manufacture conventional crystalline silicon solar modules. The cost of
polysilicon is a significant driver of the manufacturing cost of crystalline
silicon solar modules, and the timing and rate of change in the cost of silicon
feedstock and polysilicon could lead to changes in solar module pricing levels.
In recent years, polysilicon consumption per cell has been reduced through
various initiatives, such as the adoption of diamond wire saw technology, which
have contributed to declines in our relative manufacturing cost competitiveness
over conventional crystalline silicon module manufacturers.

In terms of performance, in many climates our solar modules provide certain energy production advantages relative to competing crystalline silicon solar modules. For example, our CdTe solar technology provides:



•a superior temperature coefficient, which results in stronger system
performance in typical high insolation climates as the majority of a system's
generation, on average, occurs when module temperatures are well above 25°C
(standard test conditions);

•a superior spectral response in humid environments where atmospheric moisture alters the solar spectrum relative to standard test conditions;

•a better partial shading response than competing crystalline silicon technologies, which may experience significantly lower energy generation than CdTe solar modules when partial shading occurs; and

•an immunity to cell cracking and its resulting power output loss, a common failure often observed in crystalline silicon modules caused by poor manufacturing, handling, weather, or other conditions.


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In addition to these technological advantages, we also warrant that our solar
modules will produce at least 98% of their labeled power output rating during
the first year, with the warranty coverage reducing by a degradation factor
between 0.3% and 0.5%, depending on the module series, every year thereafter
throughout the limited power output warranty period of up to 30 years. As a
result of these and other factors, our solar modules can produce more annual
energy in real world operating conditions than conventional crystalline silicon
modules with the same nameplate capacity.

While our modules are generally competitive in cost, reliability, and performance attributes, there can be no guarantee such competitiveness will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in further declines in the average selling prices of our modules and additional margin compression. We continue to focus on enhancing the competitiveness of our solar modules by accelerating progress along our module technology and cost reduction roadmaps.

Certain Trends and Uncertainties



We believe that our business, financial condition, and results of operations may
be favorably or unfavorably impacted by the following trends and uncertainties.
See Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended
December 31, 2021 for discussions of other risks (the "Risk Factors") that may
affect us.

Our business is evolving worldwide and is shaped by the varying ways in which
our offerings can be compelling and economically viable solutions to energy
needs in various markets. In addressing electricity demands, we are focused on
providing utility-scale module offerings in key geographic markets that we
believe have a compelling need for mass-scale PV solar electricity, including
markets throughout the United States, India, Europe, and Japan. We closely
evaluate and monitor the appropriate level of resources required to support such
markets and their associated sales opportunities. When deployed in utility-scale
applications, our modules provide energy at a lower LCOE compared to traditional
forms of energy generation, making them an attractive alternative to or
replacement for aging fossil fuel-based generation resources. Accordingly,
future retirements of coal generation plants represent a significant increase in
the potential market for solar energy.

This focus on utility-scale module offerings exists within a current market
environment that includes rooftop and distributed generation solar. We believe
that utility-scale solar will continue to be a compelling offering for companies
with technology and cost leadership and will continue to represent an increasing
portion of the overall electricity generation mix. However, our module offerings
in certain markets may be driven, in part, by future demand for rooftop and
distributed generation solar solutions. For example, we continue to evaluate
opportunities to develop and leverage other solar cell technologies in
multi-junction applications that utilize our thin film CdTe semiconductor as the
base layer. We believe such applications have the potential to improve module
conversion efficiency up to 25% in the mid-term.

Demand for our solar energy solutions depends, in part, on market factors
outside our control. For example, many governments have proposed policies or
support programs intended to encourage renewable energy investments to achieve
decarbonization objectives and/or establish greater energy independence. While
we compete in many markets that do not require solar-specific government
subsidies or support programs, our net sales and profits remain subject to
variability based on the availability and size of government subsidies and
economic incentives. Adverse changes in these factors could increase the cost of
utility-scale systems, which could reduce demand for our solar modules. Recently
proposed government support programs include the following:

•United States. Legislation was recently introduced in the U.S. Congress to
incentivize domestic solar manufacturing and accelerate the transition to clean
energy by providing tax credits for U.S. solar manufacturers and project
developers. Among other things, such proposed legislation is expected to (i)
extend the ITC up to 40% for 10 years for solar projects that satisfy certain
domestic content, labor, and wage requirements; (ii) introduce certain
refundable tax credits for solar module components manufactured in the U.S.;
(iii) revive certain tax credits for capital investments in the manufacturing of
solar module
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components; and (iv) expand the scope of production tax credits for energy
storage projects. At this time, it is unclear whether and to what extent such
measures will be enacted into law. If such legislation is successfully signed
into law, or other similar policies or support programs are enacted, it could
positively impact our business, financial condition, and results of operations.

•India. In early 2022, the government of India announced an expansion to its
Production Linked Incentive ("PLI") scheme to INR 195 billion ($2.5 billion),
which is intended to promote the manufacturing of high efficiency solar modules
in India and to reduce India's dependency on foreign imports of solar modules.
Under the PLI scheme, manufacturers are selected through a competitive bid
process and receive certain cash incentives over a five-year period following
the commissioning of their manufacturing facilities. Such incentives are
expected to be based on, among other things, the efficiency and temperature
coefficient of the modules produced, the value of raw materials sourced from the
domestic market, the extent to which the manufacturer's operations are fully
integrated within India, and the quantity of modules sold from such
manufacturing operations. At this time, it is uncertain whether and to what
extent we may qualify for such incentives.

Demand for our solar energy solutions also depends on domestic or international
trade policies and government regulations, which may be proposed, revised,
and/or enacted across short- and long-term time horizons with varying degrees of
impact to our net sales, profit, and manufacturing operations. Changes in these
policies and regulations could adversely impact the competitive landscape of
solar markets, which could reduce demand for our solar modules. Recent revisions
or proposed changes to trade policy and government regulations include the
following:

•United States. In June 2022, the U.S. President authorized the U.S. Secretary
of Commerce to provide a 24-month antidumping and countervailing duty tariff
exemption for imported solar panels from certain Southeast Asian countries. For
more information about this development, see Item 1A. "Risk Factors."
Separately, the U.S. President also authorized the use of the Defense Production
Act ("DPA") to expand domestic production of clean energy technologies. At this
time, it is uncertain what impact, if any, these developments will have on
future investments in solar module manufacturing in the United States.

•United States. In June 2022, the U.S. Supreme Court issued a ruling in West
Virginia, et al. v. Environmental Protection Agency, et al., which limited the
Environmental Protection Agency's ("EPA") ability to regulate greenhouse gas
("GHG") emissions under the Clean Air Act using a "generation shifting" approach
from coal-fired power plants to renewable energy sources over time. At this
time, it is unclear what effect this ruling will have on future EPA regulation
of GHG emissions, the U.S. President's climate change initiatives,
internationally agreed-upon climate goals, the extent and timing of future coal
plant retirements in the United States, and/or future investments in renewable
energy.

•India. In May 2022, the government of India, through its Ministry of
Environment, Forest and Climate Change and Ministry of New and Renewable Energy
("MNRE"), proposed legislation intended to regulate electronic waste
("e-waste"). Among other things, such proposed legislation expands the scope of
India's existing e-waste regulations to include PV solar modules, including
certain recycling obligations for solar module manufacturers, and limits the use
of certain hazardous substances, such as cadmium. The MNRE has engaged various
stakeholders, including First Solar, in an effort to propose modifications
intended to closely align this policy with the European Union's Waste Electrical
and Electronic Equipment Directive. At this time, it is unclear whether and to
what extent such policy will be enacted into law. If such legislation is
successfully signed into law without modification, it could negatively impact
our business, financial condition, and results of operations.

Our ability to provide solar modules on economically attractive terms is also
affected by the availability and cost of logistics services associated with the
procurement of raw materials or equipment used in our manufacturing process and
the shipping, handling, storage, and distribution of our modules. For example,
the cost of ocean freight throughout many parts of the world remains at elevated
levels due to the limited availability of shipping containers,
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port congestion, cancellations of shipments by logistics providers, and elevated
fuel costs. Such factors may disrupt our supply chain and adversely impact our
manufacturing operations as several of our key raw materials and components are
either single-sourced or sourced from a limited number of international
suppliers. Due to ongoing schedule reliability issues with many ships, we are
adjusting our shipping plans to include additional lead time for module
deliveries and utilizing our U.S. distribution network to better meet our
customer commitments. We are also employing module contract structures that
provide additional consideration to us if the cost of logistics services exceeds
a defined threshold. Additionally, our manufacturing capacity expansions in the
U.S. and India are expected to bring manufacturing activities closer to customer
demand, further mitigating our exposure to the cost of ocean freight. While it
is currently unclear how long these issues will persist, they may be further
exacerbated by the disruption of major shipping routes or other economic
disruptions caused by the COVID-19 pandemic.

We generally price and sell our solar modules on a per watt basis. As of
June 30, 2022, we had entered into contracts with customers for the future sale
of 37.3 GWDC of solar modules for an aggregate transaction price of
$10.0 billion, which we expect to recognize as revenue through 2026 as we
transfer control of the modules to the customers. Such volume includes contracts
for the sale of 20.5 GWDC of solar modules that include transaction price
adjustments associated with future module technology improvements, including new
product designs and enhancements to certain energy related attributes. Based on
these potential technology improvements, the contracted module volumes as of
June 30, 2022, and the expected timing of module deliveries, such adjustments,
if realized, could result in additional revenue of up to $0.4 billion, the
majority of which would be recognized in 2024 and 2025. In addition to these
price adjustments, certain of our contracts with customers may also include
favorable price adjustments for the proposed extension of the U.S. investment
tax credit and sales freight described above. Such contracts may also include
price adjustments related to potential changes to certain commodity prices.

We continually evaluate forecasted global demand, competition, and our
addressable market and seek to effectively balance manufacturing capacity with
market demand and the nature and extent of our competition. We continue to
increase the nameplate production capacity of our existing manufacturing
facilities by improving our production throughput, increasing module wattage (or
conversion efficiency), and improving manufacturing yield losses. Additionally,
we are in the process of expanding our manufacturing capacity by 6.6 GWDC by
constructing our third manufacturing facility in the U.S. and our first
manufacturing facility in India. Such additional capacity, and any other
potential investments to add or otherwise modify our existing manufacturing
capacity in response to market demand and competition, may require significant
internal and possibly external sources of capital, and may be subject to certain
risks and uncertainties described in the Risk Factors.

In response to the COVID-19 pandemic, governmental authorities have recommended
or ordered the limitation or cessation of certain business or commercial
activities in jurisdictions in which we do business or have operations. While
some of these orders permit the continuation of essential business operations,
or permit the performance of minimum business activities, these orders are
subject to continuous revision or may be revoked or superseded, or our
understanding of the applicability of these orders and exemptions may change at
any time. As a result, we may at any time be ordered by governmental
authorities, or we may determine, based on our understanding of the
recommendations or orders of governmental authorities or the availability of our
personnel, that we have to curtail or cease business operations or activities
altogether, including manufacturing, fulfillment, R&D activities, the
implementation of our technology roadmap, or construction activities associated
with our expanding manufacturing capacity. At this time, such limitations have
had a minimal effect on our manufacturing facilities, and we have implemented a
wide range of safety measures intended to enable the continuity of our
operations and inhibit the spread of COVID-19 at our manufacturing,
administrative, and other sites and facilities. While we continue to work with
relevant government agencies in Malaysia and Vietnam to allow the essential
travel of personnel that support the implementation of our technology roadmap,
such implementation may be delayed due to travel restrictions, quarantine
requirements, other government orders, or increases in COVID-19 infection rates.
Refer to the Risk Factors for more information related to impacts of COVID-19 on
our business.

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Results of Operations

The following table sets forth our condensed consolidated statements of
operations as a percentage of net sales for the three and six months ended
June 30, 2022 and 2021:

                                                               Three Months Ended                             Six Months Ended
                                                                    June 30,                                      June 30,
                                                           2022                   2021                   2022                   2021
Net sales                                                    100.0  %               100.0  %               100.0  %               100.0  %
Cost of sales                                                103.7  %                72.3  %               101.2  %                74.9  %
Gross (loss) profit                                           (3.7) %                27.7  %                (1.2) %                25.1  %
Selling, general and administrative                            6.3  %                 5.8  %                 7.7  %                 6.2  %
Research and development                                       4.1  %                 3.8  %                 5.3  %                 3.1  %
Production start-up                                            2.1  %                 0.3  %                 2.1  %                 0.9  %
Gain on sales of businesses, net                              39.5  %                (0.3) %                25.0  %                10.4  %
Operating income                                              23.3  %                17.5  %                 8.8  %                25.3  %
Foreign currency loss, net                                    (0.5) %                (0.2) %                (0.7) %                (0.3) %
Interest income                                                0.5  %                 0.2  %                 0.5  %                 0.2  %
Interest expense, net                                         (0.5) %                (0.7) %                (0.6) %                (0.5) %
Other (expense) income, net                                   (0.3) %                (0.5) %                (0.2) %                 0.4  %
Income tax expense                                           (13.5) %                (3.2) %                (6.5) %                (4.7) %

Net income                                                     9.0  %                13.1  %                 1.3  %                20.4  %



Segment Overview

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 PV solar power systems. Our residual business operations include
certain project development activities and O&M services, which are primarily
concentrated in Japan, as well as the results of operations from PV solar power
systems we own and operate in certain international regions.

For the year ended December 31, 2021, we changed our reportable segments to
align with revisions to our internal reporting structure and long-term strategic
plans. Following this change, our modules business represents our only
reportable segment. We previously operated our business in two segments, which
included our modules and systems businesses. Systems business activities
primarily involved (i) project development, (ii) EPC services, and (iii) O&M
services, which now comprise our residual business operations and are
categorized as "Other" in the tables below. All prior year balances were revised
to conform to the current year presentation.

Net sales



We generally price and sell our solar modules on a per watt basis. During the
three and six months ended June 30, 2022, we sold the majority of our solar
modules to developers and operators of systems in the United States, and
substantially all of our modules business net sales were denominated in
U.S. dollars. 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.
Net sales from our residual business operations primarily consists of revenue
recognized for sales of development projects or completed systems, including any
modules installed in such systems and any revenue from energy generated by such
systems. In certain prior periods, our residual business operations also
included EPC services we provided to third parties.

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The following table shows net sales by reportable segment for the three and six
months ended June 30, 2022 and 2021:

                                     Three Months Ended                                                         Six Months Ended
                                          June 30,                                                                  June 30,
(Dollars in thousands)             2022               2021                Three Month Change                2022                2021                     Six Month Change
Modules                        $ 607,445          $ 542,956          $  64,489              12  %       $ 962,326          $ 1,077,626          $       (115,300)            (11) %
Other                             13,510             86,224            (72,714)            (84) %          25,669              354,928                  (329,259)            (93) %
Net sales                      $ 620,955          $ 629,180          $  (8,225)             (1) %       $ 987,995          $ 1,432,554          $       (444,559)            (31) %



Net sales from our modules segment increased $64.5 million for the three months
ended June 30, 2022 compared to the three months ended June 30, 2021 primarily
due to a 27% increase in the volume of watts sold, partially offset by a 12%
decrease in the average selling price per watt. Net sales from our residual
business operations decreased $72.7 million for the three months ended June 30,
2022 compared to the three months ended June 30, 2021 primarily due to the prior
period settlement of an outstanding indemnification arrangement associated with
the sale of one of our projects. Under the terms of the indemnification
arrangement, we received $65.1 million for our portion of the settlement
payment, which we recorded as revenue in the prior period. See Note 10.
"Commitments and Contingencies" to our condensed consolidated financial
statements for discussion of our indemnification arrangements.

Net sales from our modules segment decreased $115.3 million for the six months
ended June 30, 2022 compared to the six months ended June 30, 2021 primarily due
to a 13% decrease in the average selling price per watt, partially offset by a
3% increase in the volume of watts sold. Net sales from our residual business
operations decreased $329.3 million for the six months ended June 30, 2022
compared to the six months ended June 30, 2021 primarily due to sales of certain
projects in the United States in the prior period and the settlement of the
indemnification matter in the prior period described above.

Cost of sales



Our modules business cost of sales includes the cost of raw materials and
components for manufacturing solar modules, such as glass, transparent
conductive coatings, CdTe and other thin film semiconductors, laminate
materials, connector assemblies, edge seal materials, and frames. In addition,
our cost of sales includes direct labor for the manufacturing of solar modules
and manufacturing overhead, such as engineering, equipment maintenance, quality
and production control, and information technology. Our cost of sales also
includes depreciation of manufacturing plant and equipment, facility-related
expenses, environmental health and safety costs, and costs associated with
shipping, warranties, and solar module collection and recycling (excluding
accretion). Cost of sales for our residual business operations primarily
consists of project-related costs, such as development costs (legal, consulting,
transmission upgrade, interconnection, permitting, and other similar costs), EPC
costs (consisting primarily of solar modules, inverters, electrical and mounting
hardware, project management and engineering, and construction labor), and
site-specific costs.

The following table shows cost of sales by reportable segment for the three and six months ended June 30, 2022 and 2021:



                                     Three Months Ended                                                          Six Months Ended
                                          June 30,                                                                   June 30,
(Dollars in thousands)             2022               2021                Three Month Change                 2022                2021                     Six Month Change
Modules                        $ 576,278          $ 433,609          $  142,669              33  %       $ 919,970          $   867,839          $        52,131               6  %
Other                             67,877             21,453              46,424             216  %          79,762              205,830                 (126,068)            (61) %
Total cost of sales            $ 644,155          $ 455,062          $  189,093              42  %       $ 999,732          $ 1,073,669          $       (73,937)             (7) %
% of net sales                     103.7  %            72.3  %                                               101.2  %              74.9  %



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Cost of sales increased $189.1 million, or 42%, and increased 31.4 percentage
points as a percent of net sales for the three months ended June 30, 2022
compared to the three months ended June 30, 2021. The increase in cost of sales
was driven by a $142.7 million increase in our modules segment cost of sales
primarily due to higher costs of $109.5 million from an increase in the volume
of modules sold and higher sales freight of $31.4 million. The increase in cost
of sales was also driven by a $46.4 million increase in our residual business
operations cost of sales primarily due to the impairment loss in the current
period for our Luz del Norte PV solar power plant, partially offset by sales of
certain projects in the United States in the prior period. See Note 5.
"Consolidated Balance Sheet Details" to our condensed consolidated financial
statements for discussion of the impairment of our Luz del Norte project.

Cost of sales decreased $73.9 million, or 7%, and increased 26.3 percentage
points as a percent of net sales for the six months ended June 30, 2022 compared
to the six months ended June 30, 2021. The decrease in cost of sales was driven
by a $126.1 million decrease in our residual business operations cost of sales
primarily due to sales of certain projects in the United States in the prior
period, partially offset by the impairment loss for our Luz del Norte PV solar
power plant described above. The decrease in cost of sales was partially offset
by a $52.1 million increase in our modules segment cost of sales primarily due
to higher sales freight of $52.4 million and higher costs of $22.7 million from
an increase in the volume of modules sold, partially offset by continued module
cost reductions, which decreased cost of sales by $21.4 million, and
manufacturing related charges of $7.3 million in the prior period associated
with the ongoing COVID-19 pandemic.

Gross (loss) profit



Gross (loss) profit may be affected by numerous factors, including the selling
prices of our modules and the selling prices of projects and services included
in our residual business operations, our manufacturing costs, project
development costs, the capacity utilization of our manufacturing facilities, and
foreign exchange rates. Gross (loss) profit may also be affected by the mix of
net sales from our modules business and residual business operations.

The following table shows gross (loss) profit for the three and six months ended
June 30, 2022 and 2021:

                                      Three Months Ended                                                            Six Months Ended
                                           June 30,                                                                     June 30,
(Dollars in thousands)              2022               2021                  Three Month Change                  2022               2021                     Six Month Change
Gross (loss) profit             $ (23,200)         $ 174,118          $  (197,318)             (113) %       $ (11,737)         $ 358,885          $

      (370,622)             (103) %
% of net sales                       (3.7) %            27.7  %                                                   (1.2) %            25.1  %



Gross profit decreased 31.4 percentage points to (3.7)% during the three months
ended June 30, 2022 from 27.7% during the three months ended June 30, 2021
primarily due to a decrease in the average selling price per watt of our
modules, the $65.1 million prior period indemnification matter described above,
the impairment loss in the current period for our Luz del Norte PV solar power
plant described above, and an increase in sales freight, partially offset by the
higher volume of modules sold.

Gross profit decreased 26.3 percentage points to (1.2)% during the six months ended June 30, 2022 from 25.1% during the six months ended June 30, 2021 primarily due to a decrease in the average selling price per watt of our modules, the impairment of our Luz del Norte PV solar power plant described above, the higher volume of projects sold during the prior period, the indemnification matter described above, and an increase in sales freight, partially offset by continued module cost reductions.


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Selling, general and administrative

Selling, general and administrative expense consists primarily of salaries and
other personnel-related costs, professional fees, insurance costs, and other
business development and selling expenses.

The following table shows selling, general and administrative expense for the three and six months ended June 30, 2022 and 2021:



                                        Three Months Ended                                                     Six Months Ended
                                             June 30,                                                              June 30,
(Dollars in thousands)                2022              2021               Three Month Change               2022              2021                    Six Month Change
Selling, general and
administrative                     $ 38,894          $ 36,346          $   2,548              7  %       $ 75,622          $ 88,433          $       (12,811)            (14) %
% of net sales                          6.3  %            5.8  %                                              7.7  %            6.2  %



Selling, general and administrative expense for the three months ended June 30,
2022 was consistent with the three months ended June 30, 2021. Selling, general
and administrative expense for the six months ended June 30, 2022 decreased
compared to the six months ended June 30, 2021 primarily due to a decrease in
employee compensation expense driven by reductions in headcount from the sales
of our North American O&M operations and U.S. project development business in
the prior period, lower professional fees, lower expected credit losses for our
accounts receivable, and higher charges for impairments of certain project
assets in the prior period.

Research and development



Research and development expense consists primarily of salaries and other
personnel-related costs; the cost of products, materials, and outside services
used in our R&D activities; and depreciation and amortization expense associated
with R&D specific facilities and equipment. We maintain a number of programs and
activities to improve our technology and processes in order to enhance the
performance and reduce the costs of our solar modules.

The following table shows research and development expense for the three and six months ended June 30, 2022 and 2021:



                                     Three Months Ended                                                     Six Months Ended
                                          June 30,                                                              June 30,
(Dollars in thousands)             2022              2021               Three Month Change               2022              2021                Six Month Change
Research and development        $ 25,229          $ 23,935          $   1,294              5  %       $ 52,337          $ 43,808          $  8,529              19  %
% of net sales                       4.1  %            3.8  %                                              5.3  %            3.1  %


Research and development expense for the three months ended June 30, 2022 increased compared to the three months ended June 30, 2021 primarily due to higher employee compensation expense resulting from increases in headcount and increased material and module testing costs.

Research and development expense for the six months ended June 30, 2022 increased compared to the six months ended June 30, 2021 primarily due to increased material and module testing costs, lower share-based compensation expense in the prior period driven by the forfeiture of unvested shares by our former Chief Technology Officer, who retired in March 2021, and increased freight costs.


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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.

The following table shows production start-up expense for the three and six months ended June 30, 2022 and 2021:



                                    Three Months Ended                                                        Six Months Ended
                                         June 30,                                                                 June 30,
(Dollars in thousands)             2022              2021                Three Month Change                2022              2021                Six Month Change
Production start-up            $  13,231          $ 1,715          $   11,516               >100%       $ 20,569          $ 13,069          $  7,500              57  %
% of net sales                       2.1  %           0.3  %                                                 2.1  %            0.9  %



During the three and six months ended June 30, 2022, we incurred production
start-up expense primarily for our third manufacturing facility in the U.S. and
for certain manufacturing upgrades at our Malaysian facilities. During the six
months ended June 30, 2021, we incurred production start-up expense primarily
for the transition to Series 6 module manufacturing at our second facility in
Kulim, Malaysia, which commenced commercial production in early 2021.

Gain on sales of businesses, net

The following table shows gain on sales of businesses, net for the three and six months ended June 30, 2022 and 2021:



                                      Three Months Ended                                                         Six Months Ended
                                           June 30,                                                                  June 30,
(Dollars in thousands)              2022              2021                 Three Month Change                 2022               2021                 Six Month Change
Gain on sales of
businesses, net                 $ 245,381          $ (1,745)         $  247,126               >100%       $ 247,288          $ 149,150          $  98,138              66  %
% of net sales                       39.5  %           (0.3) %                                                 25.0  %            10.4  %



In May 2022, we entered into various agreements with certain subsidiaries of PAG
for the sale of our Japan project development business. In June 2022, we
completed the sale for an aggregate purchase price of ¥66.4 billion
($488.4 million), subject to certain customary post-closing adjustments. On the
closing date, we received proceeds of ¥44.1 billion ($324.5 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 $245.4 million, net of
transaction costs, during the three months ended June 30, 2022. In January 2022,
we completed the sale of certain international O&M operations to a subsidiary of
Clairvest for 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 six months ended June 30, 2022.

In March 2021, we completed the sale of our North American O&M Operations to a
subsidiary of Clairvest and received initial consideration of $146.0 million. As
a result of this transaction, we recognized a gain of $117.8 million, net of
transaction costs, during the six months ended June 30, 2021. In March 2021, we
also completed the sale of our U.S. project development business to Leeward 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, during the six months ended June 30, 2021.

See Note 2. "Sales of Businesses" to our condensed consolidated financial statements for further information related to these transactions.


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Foreign currency loss, net

Foreign currency loss, net consists of the net effect of gains and losses resulting from holding assets and liabilities and conducting transactions denominated in currencies other than our subsidiaries' functional currencies.

The following table shows foreign currency loss, net for the three and six months ended June 30, 2022 and 2021:



                                     Three Months Ended                                                       Six Months Ended
                                          June 30,                                                                June 30,
(Dollars in thousands)             2022               2021                Three Month Change               2022              2021                 Six Month Change
Foreign currency loss,
net                            $   (2,984)         $ (1,000)         $  (1,984)            198  %       $ (7,182)         $ (3,595)         $  (3,587)            100  %



Foreign currency loss, net for the three and six months ended June 30, 2022
increased compared to the three and six months ended June 30, 2021 primarily due
to higher costs associated with hedging activities related to our subsidiaries
in India and the differences between our economic hedge positions and the
underlying exposures.

Interest income



Interest income is earned on our cash, marketable securities, restricted cash,
and restricted marketable securities. Interest income also includes interest
earned from late customer payments.

The following table shows interest income for the three and six months ended
June 30, 2022 and 2021:

                                      Three Months Ended                                                        Six Months Ended
                                           June 30,                                                                 June 30,
(Dollars in thousands)               2022                2021               Three Month Change                2022              2021               Six Month Change
Interest income                $    2,880             $ 1,288          $   1,592             124  %       $   5,205          $ 2,244          $  2,961             132  %



Interest income for the three and six months ended June 30, 2022 increased
compared to the three and six months ended June 30, 2021 primarily due to higher
interest rates on restricted marketable securities, time deposits, and cash,
partially offset by lower average balances associated with marketable
securities.

Interest expense, net



Interest expense, net is primarily comprised of interest incurred on long-term
debt, settlements of interest rate swap contracts, and changes in the fair value
of interest rate swap contracts that do not qualify for hedge accounting in
accordance with ASC 815. We may capitalize interest expense to our project
assets or property, plant and equipment when such costs qualify for interest
capitalization, which reduces the amount of net interest expense reported in any
given period.

The following table shows interest expense, net for the three and six months ended June 30, 2022 and 2021:



                                     Three Months Ended                                                       Six Months Ended
                                          June 30,                                                                June 30,
(Dollars in thousands)             2022               2021                Three Month Change               2022              2021                Six Month Change
Interest expense, net          $   (3,236)         $ (4,623)         $   1,387             (30) %       $ (6,101)         $ (7,619)         $  1,518             (20) %



Interest expense, net for the three and six months ended June 30, 2022 decreased
compared to the three and six months ended June 30, 2021 primarily due to
changes in the fair value of interest rate swap contracts in the prior period,
which did not qualify for hedge accounting, lower interest expense associated
with project debt, and lower amortization of debt discounts and issuance costs
in the current period.

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Other (expense) income, net

Other (expense) income, net is primarily comprised of miscellaneous items and
realized gains and losses on the sale of marketable securities and restricted
marketable securities.

The following table shows other (expense) income, net for the three and six months ended June 30, 2022 and 2021:



                                     Three Months Ended                                                       Six Months Ended
                                          June 30,                                                                June 30,
(Dollars in thousands)             2022               2021                Three Month Change                2022              2021                Six Month Change
Other (expense) income,
net                            $   (1,883)         $ (3,247)         $   1,364             (42) %       $  (2,095)         $ 5,201          $  (7,296)            140  %



Other expense, net for the three months ended June 30, 2022 was consistent with
the three months ended June 30, 2021. Other expense, net for the six months
ended June 30, 2022 increased compared to the six months ended June 30, 2021
primarily due to higher realized gains from sales of restricted marketable
securities in the prior period.

Income tax expense



Income tax expense or benefit, deferred tax assets and liabilities, and
liabilities for unrecognized tax benefits reflect our best estimate of current
and future taxes to be paid. We are subject to income taxes in both the United
States and numerous foreign jurisdictions in which we operate, principally
Japan, Malaysia, and Vietnam. Significant judgments and estimates are required
to determine our consolidated income tax expense. The statutory federal
corporate income tax rate in the United States is 21%, and the tax rates in
Japan, Malaysia, and Vietnam are 30.6%, 24%, and 20%, respectively. In Malaysia,
we have been granted a long-term tax holiday, scheduled to expire in 2027,
pursuant to which substantially all of our income earned in Malaysia is exempt
from income tax, conditional upon our continued compliance with certain
employment and investment thresholds. In Vietnam, we have been granted a
long-term tax incentive, scheduled to expire at the end of 2036, pursuant to
which income earned in Vietnam is subject to reduced annual tax rates,
conditional upon our continued compliance with certain revenue and R&D spending
thresholds.

The following table shows income tax expense for the three and six months ended
June 30, 2022 and 2021:

                                     Three Months Ended                                                         Six Months Ended
                                          June 30,                                                                  June 30,
(Dollars in thousands)             2022               2021                Three Month Change                 2022               2021                Six Month Change
Income tax expense             $ (83,799)         $ (20,346)         $  (63,453)            312  %       $ (64,300)         $ (66,836)         $  2,536              (4) %
Effective tax rate                  60.0  %            19.8  %                                                83.7  %            18.6  %



Our tax rate is affected by recurring items, such as tax rates in foreign
jurisdictions and the relative amounts of income we earn in those jurisdictions.
The rate is also affected by discrete items that may occur in any given period,
but are not consistent from period to period. Income tax expense increased by
$63.5 million during the three months ended June 30, 2022 compared to the three
months ended June 30, 2021 primarily due to losses in certain jurisdictions for
which no tax benefit could be recorded, higher pretax income in the current
period, and the remeasurement of our net deferred tax assets in Vietnam as a
result of a new long-term tax incentive granted in May 2022. Income tax expense
decreased by $2.5 million during the six months ended June 30, 2022 compared to
the six months ended June 30, 2021 primarily due to lower pretax income in the
current period, partially offset by losses in certain jurisdictions for which no
tax benefit could be recorded and the remeasurement of our net deferred tax
assets in Vietnam mentioned above.

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Critical Accounting Policies and Estimates

In preparing our condensed consolidated financial statements in conformity with
U.S. GAAP, we make estimates and assumptions that affect the amounts of reported
assets, liabilities, revenues, and expenses, as well as the disclosure of
contingent liabilities. Some of our accounting policies require the application
of significant judgment in the selection of the appropriate assumptions for
making these estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty. We base our judgments and estimates on our
historical experience, our forecasts, and other available information as
appropriate. We believe the judgments and estimates involved in accrued solar
module collection and recycling, product warranties, accounting for income
taxes, and long-lived asset impairments have the greatest potential impact on
our condensed consolidated financial statements. The actual results experienced
by us may differ materially and adversely from our estimates. To the extent
there are material differences between our estimates and the actual results, our
future results of operations will be affected. For a description of the
accounting policies that require the most significant judgment and estimates in
the preparation of our condensed consolidated financial statements, refer to our
Annual Report on Form 10-K for the year ended December 31, 2021. There have been
no material changes to our accounting policies during the six months ended
June 30, 2022.

Recent Accounting Pronouncements

None.

Liquidity and Capital Resources



As of June 30, 2022, we believe that our cash, marketable securities, cash flows
from operating activities, and contracts with customers for the future sale of
solar modules will be sufficient to meet our working capital and capital
expenditure needs for at least the next 12 months. As necessary, we also believe
we will have adequate access to the capital markets. We monitor our working
capital to ensure we have adequate liquidity, both domestically and
internationally. We intend to maintain appropriate debt levels based upon cash
flow expectations, our overall cost of capital, and expected cash requirements
for operations, such as construction activities and purchases of manufacturing
equipment for our manufacturing facility in India. However, our ability to raise
capital on terms commercially acceptable to us could be constrained if there is
insufficient lender or investor interest due to company-specific, industry-wide,
or broader market concerns. Any incremental debt financings could result in
increased debt service expenses and/or restrictive covenants, which could limit
our ability to pursue our strategic plans. Additionally, given the duration of
these and other capital investments and the currency risk relative to the U.S.
dollar in certain international markets in which we operate, we continue to
explore local financing alternatives. Should these financing alternatives be
unavailable or too cost prohibitive, we could be exposed to significant currency
risk and our liquidity could be adversely impacted.

As of June 30, 2022 and December 31, 2021, we had $1.8 billion in cash and
marketable securities. Cash receipts from module sales, proceeds from the sale
of our Japan project development business, and net proceeds from sales and
maturities of marketable securities were offset by purchases of property, plant
and equipment, expenditures for the construction of certain projects in Japan,
and other operating expenditures. As of June 30, 2022, $1.0 billion of our cash
and marketable securities was held by our foreign subsidiaries and was primarily
based in U.S. dollar, Japanese yen, and Indian rupee denominated holdings.

We utilize a variety of tax planning and financing strategies in an effort to
ensure that our worldwide cash is available in the locations in which it is
needed. If certain international funds were needed for our operations in the
United States, we may be required to accrue and pay certain U.S. and foreign
taxes to repatriate such funds. We maintain the intent and ability to
permanently reinvest our accumulated earnings outside the United States, with
the exception of our subsidiaries in Canada and Germany. In addition, changes to
foreign government banking regulations may restrict our ability to move funds
among various jurisdictions under certain circumstances, which could negatively
impact our access to capital, resulting in an adverse effect on our liquidity
and capital resources.
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We continually evaluate forecasted global demand and seek to balance our
manufacturing capacity with such demand. We previously announced our plans to
invest approximately $1.4 billion to expand our solar manufacturing capacity by
6.6 GWDC by constructing our third manufacturing facility in the U.S. and our
first manufacturing facility in India. These new facilities are currently under
construction and are expected to commence operations in the first half of 2023
and the second half of 2023, respectively. In addition, we continue to increase
the nameplate production capacity of our existing manufacturing facilities by
improving our production throughput, increasing module wattage (or conversion
efficiency), and improving manufacturing yield losses. During 2022, we expect to
spend $0.9 billion to $1.1 billion for capital expenditures, including the new
facilities mentioned above and upgrades to machinery and equipment that we
believe will further increase our module wattage and expand capacity and
throughput at our manufacturing facilities.

We have also committed and expect to commit significant working capital to
purchase various raw materials used in our module manufacturing process. Our
failure to obtain raw materials and components that meet our quality, quantity,
and cost requirements in a timely manner could interrupt or impair our ability
to manufacture our solar modules or increase our manufacturing costs.
Accordingly, we may enter into long-term supply agreements to mitigate potential
risks related to the procurement of key raw materials and components, and such
agreements may be noncancelable or cancelable with a significant penalty. For
example, we have entered into long-term supply agreements for the purchase of
certain specified minimum volumes of substrate glass and cover glass for our PV
solar modules. Our remaining purchases under these supply agreements are
expected to be approximately $1.6 billion of substrate glass and approximately
$346 million of cover glass. We have the right to terminate these agreements
upon payment of specified termination penalties (which, in aggregate, are up to
$292 million as of June 30, 2022 and decline over the remaining supply periods).

We have also committed certain financial resources to fulfill our solar module
collection and recycling obligations, and have established a trust under which
these funds are put into custodial accounts with an established and reputable
bank. As of June 30, 2022, such funds were comprised of restricted marketable
securities of $200.3 million and restricted cash balances of $4.0 million. As of
June 30, 2022, our module collection and recycling liability was $134.1 million.
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 adjust the funded 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.

As of June 30, 2022, we had no off-balance sheet debt or similar obligations,
other than financial assurance related instruments, which are not classified as
debt. We do not guarantee any third-party debt. See Note 10. "Commitments and
Contingencies" to our condensed consolidated financial statements for further
information about our financial assurance related instruments.

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Cash Flows

The following table summarizes key cash flow activity for the six months ended June 30, 2022 and 2021 (in thousands):


                                                                                   Six Months Ended
                                                                                       June 30,
                                                                               2022               2021
Net cash used in operating activities                                      $ (50,821)         $ (102,229)
Net cash provided by investing activities                                    138,287             470,088
Net cash provided by (used in) financing activities                          125,616              (9,090)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

                                                               39,934                 906
Net increase in cash, cash equivalents and restricted cash                 

$ 253,016 $ 359,675

Operating Activities

The decrease in net cash used in operating activities was primarily driven by higher cash receipts from module sales in the current period and higher operating expenditures in the prior period, partially offset by higher expenditures for the construction of certain projects in Japan and certain advance payments for raw materials in the current period.

Investing Activities



The decrease in net cash provided by investing activities was primarily due to
higher purchases of property, plant and equipment, lower net sales and
maturities of marketable securities and restricted marketable securities, and
proceeds from the sales of our North American O&M operations and U.S. project
development business in the prior period, partially offset by proceeds from the
sale of our Japan project development business in the current period.

Financing Activities



The increase in net cash provided by financing activities was primarily due to
higher net borrowings under project specific debt financings for the
construction of certain projects in Japan. Such project specific debt financings
were assumed by PAG when we completed the sale of our Japan project development
business.

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