Note 21. Segment Reporting

6 Months Ended

Jun. 30, 2012

Segment Reporting Information, Profit (Loss) [Abstract]

Segment Reporting Disclosure [Text Block]

21. Segment Reporting

ASC 280, Segment Reporting, establishes standards for companies to report in their financial statements information about operating segments, products, services, geographic areas, and major customers. The method of determining what information to report is generally based on the way that management organizes the operating segments within the Company for making operating decisions and assessing financial performance.

We operate our business in two segments. Our components segment involves the design, manufacture, and sale of solar modules which convert sunlight into electricity. Third-party customers of our components segment include project developers, system integrators, and operators of renewable energy projects.

Our second segment is our fully integrated systems business (“systems segment”), through which we provide a complete PV solar power system, which includes project development, engineering, procurement and construction (“EPC”) products, operating and maintenance (“O&M”) services, when applicable, and project finance, when required. We may provide our full EPC product or any combination of individual products within our EPC capabilities. All of our systems segment products and services are for PV solar power systems which use our solar modules, and such products and services are sold directly to investor owned utilities, independent power developers and producers, commercial and industrial companies, and other system owners.

Our Chief Operating Decision Maker (“CODM”), consisting of certain members of senior executive staff, views both our ability to provide customers with a complete PV solar power system through the fully integrated systems segment and the manufacturing of solar modules from the components segment as the drivers of our resource allocation, profitability, and cash flows. The complete PV solar power systems sold through our systems segment drive resource allocation, profitability, and cash flows through delivering state of the art construction techniques and process management to reduce the installed cost of our PV systems, and accordingly, the systems segment is considered by our CODM as a direct contributor to our profitability. Therefore, for the three months ended June 30, 2012, our CODM viewed both our components and systems segments as contributors to our operating results.

Prior to the three months ended June 30, 2012, our CODM viewed the systems segment as an enabler to drive module throughput from our components segment, with a primary objective to achieve break-even results before income taxes. During the three months ended June 30, 2012, we finalized and announced the details related to our Long Term Strategic Plan, which is primarily focused on providing complete utility scale PV solar power solutions, which use our modules, to sustainable markets. Additionally, James Hughes was appointed as Chief Executive Officer. These factors led to a change in how our CODM views and measures the profitability of our operating segments and which therefore changed the information reviewed by the CODM to allocate resources and evaluate profitability of such segments.

In our operating segment financial disclosures, we include an allocation of sales value for all solar modules manufactured by our components segment and installed in projects sold or built by our systems segment in the net sales of our components segment. In the gross profit of our operating segment disclosures, we include the corresponding cost of sales value for the solar modules installed in projects sold or built by our systems segment in the components segment. The cost of solar modules is comprised of the manufactured cost incurred by our components segment.

After we have determined the amount of revenue earned for our systems projects following the applicable accounting guidance for the underlying sales arrangements, we allocate module revenue from the systems segment to the components segment based on how our CODM strategically views these segments. The amount of module revenue allocated from the systems segment to the components segment is equal to an estimated average selling price for such solar modules as if the modules were sold to a third party EPC customer through a long term supply agreement that establishes pricing at the beginning of each year. In order to develop the estimate of the average selling price used for this revenue allocation, we utilize a combination of our actual third party module sale transactions, our competitor benchmarking and our internal pricing lists used to provide module price quotes to customers. This allocation methodology and the estimated average selling prices are consistent with how our CODM views the value proposition our components business brings to a utility scale systems project and the financial information reviewed by our CODM in assessing our components business performance.

Our components and systems segments have certain of their own dedicated administrative key functions, such as accounting, legal, finance, project finance, human resources, procurement, and marketing. Costs for these functions are recorded and included within the respective selling, general and administrative costs for our components and systems segments. Our corporate key functions consist primarily of company-wide corporate tax, corporate treasury, corporate accounting/finance, corporate legal, investor relations, corporate communications, and executive management functions. These corporate functions and the assets supporting such functions benefit both the components and systems segments. We allocate corporate costs to the components and systems segments as part of selling, general and administrative costs, based upon the estimated benefits provided to each segment from these corporate functions.

Prior period segment information has been restated to conform to the three months ended June 30, 2012, presentation. None of the changes in the measure of our operating segments profitability impact the determination of our reportable operating segments or our previously reported consolidated financial results.

Financial information about our operating segments during the three and six months ended June 30, 2012 and June 30, 2011 was as follows (in thousands):

	Three Months Ended								Three Months Ended
	June 30, 2012								June 30, 2011
	Components			Systems		Total			Components		Systems			Total
Net sales	$	287,681		$	669,651	$	957,332		$	495,269	$	37,505		$	532,774
Gross profit	$	(10,352	)	$	254,093	$	243,741		$	213,199	$	(18,401	)	$	194,798
(Loss) income before income taxes	$	(92,917	)	$	228,264	$	135,347		$	126,766	$	(54,809	)	$	71,957
Goodwill	$	—		$	65,444	$	65,444		$	393,365	$	65,443		$	458,808
Total assets	$	3,565,152		$	1,922,182	$	5,487,334		$	4,070,801	$	868,431		$	4,939,232
	Six Months Ended								Six Months Ended
	June 30, 2012								June 30, 2011
	Components			Systems		Total			Components		Systems			Total
Net sales	$	455,811		$	998,576	$	1,454,387		$	1,023,678	$	76,389		$	1,100,067
Gross profit	$	(32,811	)	$	353,297	$	320,486		$	480,346	$	(25,883	)	$	454,463
(Loss) income before income taxes	$	(606,371	)	$	285,232	$	(321,139	)	$	304,444	$	(99,480	)	$	204,964
Goodwill	$	—		$	65,444	$	65,444		$	393,365	$	65,443		$	458,808
Total assets	$	3,565,152		$	1,922,182	$	5,487,334		$	4,070,801	$	868,431		$	4,939,232

Product Revenue

The following table sets forth the total amounts of solar modules and solar power systems revenue recognized for the three and six months ended June 30, 2012 and June 30, 2011. For the purposes of the following table, (i) “Solar module revenue” is composed of total revenues from the sale of solar modules to third parties, which does not include any systems segment product or service offerings, (ii) “Solar power system revenue” is composed of total revenues from the sale of our solar power systems and related products and services including the solar modules installed in such solar power systems.

	Three Months Ended				Six Months Ended
(Dollars in thousands)	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Solar module revenue	$	54,598	$	427,350	$	122,007	$	933,092
Solar power system revenue	902,734		105,424		1,332,380		166,975
Net sales	$	957,332	$	532,774	$	1,454,387	$	1,100,067