Good day everyone, and welcome to the First Solar Third Quarter 2008 Earnings Conference Call. This call is being webcast live on the Investor Relations section of First Solar's website, at www.firstsolar.com. At this time, all participants are in listen-only mode. As a reminder, today's conference call is being recorded. I would now like to turn the call over to Mr. Larry Polizzotto, Vice President, Investor Relations for First Solar Incorporated. Mr. Polizzotto, you may begin.

After the markets closed [ph], the company issued a press release announcing its fiscal third quarter 2008 fiscal... financial results. If you did not received a copy of this press release, you can obtain one from the Investors section of First Solar's website, at www.firstsolar.com. In addition, we are posting to the IR website for the first time, key quarter statistics and historical data, and financial and operating performance. This will allow us to discuss in more detail, some of the analytics in this call. An audio replay of the conference call will also be available approximately two hours after the conclusion of the call. The audio replay will remain available until Friday, October 31, 2008, at 8:59 PM, Mountain Standard Time, or 11:59 PM, Eastern Daylight Time, and can be accessed by dialing 888-266-2081. If you are calling from the United States, 4703-925-2533. If you are calling from outside the United States and entering ID access number 1288925. A replay of the webcast will be available for 90 calendar days, approximately two hours after the conclusion of this call. If you are a shareholder of... subscriber to Factset, you can obtain a written transcript within two hours. With me today are Mike Ahearn, Chief Executive Officer; Jens Meyerhoff, Chief Financial Officer; Bruce Sohn, President of First Solar. Today Mike will begin with an overview of the company's third quarter achievements, then provide a market update and an assessment of the economy and current credit crises impact on our business. Jens will provide you with the third quarter 2008 financial results update guidance for 2008 and provide guidance for 2009. We will then open up the call for questions. I will remind you that all financial numbers reported and discussed in today's call will based on generally excepted accounting principles.…

Thank you, Larry and thank you for participating in our third quarter 2008 earnings call. We continue to perform at high levels throughout the third quarter. Third quarter production was a 137 megawatts, up 20% quarter-over-quarter and 97% year-over-year. This represents an annualized capacity of 49.3 megawatts per line. Net sales for the third quarter were $348.7 million, up 30.6% quarter-over-quarter, resulting in net income of $99.3 million or $1.20 per diluted share. Cost per watt in the third quarter was $1.08, including $0.04 of KLM ramp cost, representing a 9% decline quarter-over-quarter. We continue to solidify our position as the lowest cost manufacturer in the industry. The start up of our Malaysia manufacturing center continue to progress on plan. Plant 1 is operating at steady state and performing well. Plant 2 product qualification tests were completed successfully and product shipments have commenced and we expect to reach full capacity for Plant 2 by the end of this year, ahead of our original schedule. We generated $41.6 million of free cash flow in the third quarter, while continuing to fund high levels of growth. Our cash and investments grew to $729 million. And today, we announced a total of 625 megawatt of contract volumes, including contracts with European customers totaling 525 megawatts and contracts with the US customers totaling 100 megawatts. This represents a total of $1 billion of revenue at an assumed exchange rate of $1.15 per euro. We have been diligently assessing how the negative economic events are folding worldwide could impact our markets and our business going forward. I'd like to share our findings to-date with the understanding that this is an interim report and our findings and conclusions could change as the dynamic financial and economic conditions continued to revolve and their impact on the solar…

Thank you Mike and good afternoon. Net sales for the third quarter of 2008 was $348.7 million, an increase of 30.6% over the second quarter of 2008. The increase was primarily driven by continued strong demand supported by the ramp of Plant 1 in Malaysia and higher line throughput slightly offset by currency fluctuations as the euro declined sequentially from a $1.56 in Q2 to a $1.51 in Q3. Manufacturing cost per watt for the third quarter was $1.08, down 9% quarter-over-quarter and included $0.04 of Malaysia ramp up and $0.03 of stock-based compensation expenses. Excluding these expenses, core manufacturing costs per watt are now at a $1.01 and are expected to continued decline with the ramp of all plants in Malaysia. Cost per watt also benefited by $0.02 from the decline in euro. Gross margin for the third quarter was 56.1% and benefited from the significantly lower production cost offsetting the unfavorable impact of the euro decline and the ramp out from our plants in Malaysia. Gross margins is expected to decline sequentially due to the further decline of the euro exchange rate and continued ramp penalties from bringing up production capacity in Malaysia in the fourth quarter. Operating expense growth slowed in the end of the quarter, a trends we expect to continue through the remainder of 2008 and into '09, as we are reaching infrastructure scale in most areas. Operating expenses excluding plant startup costs were 16.9% of sales in the quarter. These plant startup costs increased by $1.7 million sequentially to $6.3 million in the third quarter as Plant 2 and Malaysia commenced production and we continued to incur startup expenses for Plant 3 and 4. Operating income for the third quarter was $130.2 million or 37.3% of net sales and included $17.3 million of stock-based…

Thank you. [Operator Instructions] Our first question comes to us from Mark Heller of Merrill Lynch.

Thanks. I was just wondering if you could update us on the company's current... total current backlog, both in megawatts and sales at this point?

For 2008 or for 2009?

Going forward in total.

I think in total I think the total backlog for the company right now under long-term contract is at approximately $6.3 billion.

That assumes what exchange?

That assumes an exchange rate are of $1.15 consistent with guidance we gave.

Your outlook for the utility market in the US, do you think it's an '09 opportunity for you guys or is it more looking at 2010 and beyond?

It's already been planned 2010 and beyond just because of the timelines involved in getting through, permitting approval processes, the RFP processes and so forth. So, there are small volumes planned. We continue to do these pilot projects and due to format of work that we are thinking second half of 2010 just went through larger volumes with start.

And just a sort of housekeeping question. It seems like production was 136.5 megawatts, but how much were sales in megawatts?

So I think you get all the statistics I think on our website there, Mark. With respect to ASPs and production volumes sold, we will not guide to that or share that information going forward as it tightened to pricing and pricing is becoming much more competitive discussion going forward and we will probably going to like to keep that to ourselves.

Thank you. Our next question comes from Vishal Shah from Barclays Capital.

Thanks for taking my question. Jens I wanted to just ask you about your guidance for 2009 of operating margins. It looks like given your cost structures were improved significantly as you ramped Malaysia and you demonstrated that, but it looks like your operating margin guidance is flat and moved slightly down for next year. Can you, maybe help us understand some of the moving parts there?

Yes, I mean I would say generally, a big driver of that is obviously the decline in the euro that we factored into the 2009 guidance right. By applying $1.15 exchange rate for the unhedged portion that obviously puts a sequential decline right into both, the revenues on a one-for-one basis but then also gross margin and operating margins. And I think, I would like to remind people on many calls prior to this one, we have always highlighted the benefits of the euro provided at exchange rates of a $1.50 to a $1.60. So here we're taking a conservative stance. We are not experts on predicting foreign exchange rates. I do not know who is but that's essentially underlying assumption there.

Thank you. Our next question comes from Rob Stone of Cowen and Company.

Hi guys. Jean say the 2008 tax rate is a lot lower than we were assuming, I think this 3.2. Can you comment on what the sustainable tax rate might be, so we are in 2010 and next couple of years?

So, the tax rate is so if you look at 2008 tax rate it essentially takes into account the full benefit of the tax holiday and obviously with having all the capacity up in running in Malaysia write that on a profit rata basis, it becomes very meaningful. So now, as we move into these outer years Rob, you could assume that if we never were to repatriate any cash within the near term rate we don't believe we'll be the fact, that we would remain right in this low teens. However, if we were to decide to repatriate cash back into the United States and then repatriation, we will be taxed at a US tax rate driving the effective rate up. We'd obviously advise you of such plans on a going forward basis.

For the next couple of years probably it stays in the low teens?

Yes, we assess and these were with respect to the global liquidity requirements right and were the cash if needed on an ongoing basis. I think through '09 right now that assessment has resulted in an answer where we do not believe the repatriation is required.

Last question if I may, I am a little bit of puzzled by the contrast between your comments about contract extensions where you say that they have essentially been extended under the same terms that we're all aware of before and yet you have elected not to provide details regarding ASP in the future. So, since your annual 6.5% decline in euro pricing was already well known, the less you are changing that which it didn't sound like you were intending to say, why are you no longer going to disclose?

Well, I would say I think pricing, I mean I believe we are probably one of the very few companies across various industries that has been giving this type of level of detail and generally, I would say that that is closer has not surfaced to well and negotiations as we move into new markets and open up new customers and therefore we want to be slightly more guarded. You shouldn't imply anything around the long-term contact out of that change.

Thank you. Our next question comes to us from Stephen O'Rourke of Deutsche Bank.

Thank you, good afternoon. Jens you gave a capital spending number in '09 that would include the build-out of Malaysia 3 and 4 and the Pearisburg facility. In this environment how are you thinking about further expansion and for a decision that you make in '09, what would be the lead time from that decision to bringing a factory into production?

So, since I have Bruce here with me, I'll probably tackle the first part of your question and then let Bruce talk through the timing. So, I would say, generally, we're obviously as I mentioned before, on a consistent basis try to map demand and supply, and that has resulted right historically in decisions to build more capacity of primarily against long-term commitments coming from our customers, as Mike mentioned. I don't think we have changed that profile has not changed. So that is an ongoing process. So now I would say, given where we're standing today, this may not be today as a right time to build out massive capacity, even though I think we always maintain a stage of readiness and optionality to do so. But I think the next few weeks for themselves will give us more clarity around the situation in the market and the especially the liquidity situation around the credit market. And from thereon I think we can resume the profit under the lead times I think that Bruce will explain to you.

Yes, typical lead times that would be that about five to six quarters between the time that we actually breaks ground than the time that we begin shipping, in this environment probably limited predominantly by our ability to actually construct and depending on the exact location where we chose to site the facility.

Thank you. Our next question comes from Timothy Arcuri of Citigroup.

Hi two things, I guess first of all has your concept of good clarity and really how you price, has it changed given that we've seen natural gas prices get cut in half during the last few months. Does that make you when you're signing these contracts, does it make you have to get anymore aggressive with your ASP profiles into the out years and then I have a follow-up question? Thanks.

No, it doesn't have any impact on these kind of price discussion at all Tim. In the European markets, the discussion... the market demand is really driven by the feed-in tariff rates which are fixed by law and don't respond our modify relation to changes in gas prices or anything else. And so, our customers and that whole channel for that matter is really gauging economics after feed-in tariffs and plant digression rates in the tariffs. So it's invariable there, I think we have more to do with cost of capital. In the US, I don't think it really has worked that way, either I mean the RPS programs are in place, the targets are there, the pipelines and the whole process of securing business works on a long-term basis. In California, they set a market price reference periodically that will update for changes in forward gas prices but it's not... this isn't a very immediate reactive market in that fashion. So we don't see that, have not seen that as an issue.

And for the same time, we really didn't see a benefit out of the rise... temporary rise to certain gas prices either.

Yes, that's true.

Of course right okay. And then Jens last thing for you; so it looks like the CapEx next year is a lot less than I actually though it would be. I guess if that... it seems to imply that there is not going to be any spending on anything beyond Malaysia next year. So if that's the case then what's the earliest that we could expect to have production out of the next fab. It would seem that even the first half of 2010 if you are not spending anything in 2009, if I wouldn't be getting any production out of the new fab in the first half of 2010?

Yes, I wouldn't imply, I mean what we are implying right now in the CapEx guidance is to cover both the Pearisburg expansion and completion of Malaysia. And if it... I would not imply out of this guidance that we have decided not to build another plant in 2009. We just happened to announce loan and as the time we believe as the right time to announce that we would obviously update that guidance. The comment around being a free cash flow positive in 2009 will tolerate of significantly higher CapEx number than the one underlying our '09 guidance.

Thank you. Our next question is from Nick Allen of Morgan Stanley.

Hi, can you talk a little bit more about the contingency plans regarding your other customers that may affect accounting in 2009?

Well, I would say probably at this point of time I will not talk about this in too much detail, Nick honestly. I mean fundamentally right now as we assessed our pipeline, we believe that the economics are robust under the current long-term contracts. So there is essentially more or less a contingent scenario around either unique customer-specific scenarios and circumstances or we'll provide contingency against maybe unlikely but possible significant further deterioration of a cost of capital.

Thank you.

Our next question is from Satya Kumar of Credit Suisse.

Hi thanks. Jens, can you talk a little bit about the cost reduction, the efficiency seems to have plateaued around 10.6% plus-minus? Can you talk a little bit about where your balance of system costs are now for larger projects in Germany and how much progress you're making towards splitting that account to the dollar for what target? And how we should think about the efficiencies improving over the next few quarters?

I'd say so essentially obviously the dollar target does not necessary apply to Germany because the balance of plant costs drive in the German, European markets are predominately managed for customers there as them being the integrators. So our long-term target to get to a dollar per watt on the balance of plant side right, essentially applies to our own efforts designing our own solution of optimizing the construction profits right and gaining economies of scale. And that obviously is combined with the ability of the module to have a higher watt and higher conversion efficiency. So I would say based on what we have learned out of all pilot projects, we have not only seen I think in some cases that we outperformed our initial estimates but also that we learnt, we learnt a lot that indicates to us that there is a significant opportunity to further lower the balance of plant cost.

Thank you. Next we will hear from Kelly Doherty of McCoy Capital.

Hi thanks for taking my questions. Previously you have been talking about focusing just on U.S. utility, so I am wondering if you can give us a little bit more insight into your decision enter the residential market. Obviously credit is tough and the housing markets specifically in California is a little bit difficult. So I am wondering what do you find so compelling about the market or perhaps it was the opportunity to invest with Solar City itself?

Kelly we have actually been, we have been talking to Solar City following them and talking to them for about 18 months and thinking about our strategy for entering the distributed generation side of the market in the US. And we started with utility scale because that plays very well to our core business and our strengths and we saw opportunities to hit a price point on this large projects. But, the distributive side of the market in the US, we think is going to be very significant. The problem is it's highly fragmented and until that 30% ITC was extended it didn't had no visibility into whether there be a market over the next several years that would warrant investing the resources and time. So, as the ITC was extended we started to refine our thinking a little bit and we believe, Solar City provides a way to a partnering relationship for us to drive some pretty significant growth into the distributed side. We think there's price elasticity in some of these markets that hasn't been tapped with higher cost modules and we think that Solar City is very good at things that we don't want to do, which is aggregate demand and do the hand-to-hand work with the end user in the tranches. So, it's an alignment that will allow our business module to work and we think we can expand market and move away from subsidy dependence, just like we're doing on the utility side.

Thank you. We have time for two questions from the phone. This one from Jesse Pichel of Piper Jaffray.

Thank you for taking my question. Can you talk a little bit about efficiency improvements on the horizon and what significant milestones should we look for?

As of reverse, yes so the efficiency internally we maintain a roadmap that really looks at the gamut of opportunities to improve the performance of the modules ranging from transmission of the light into the module, the conversion of the light into current and then heating it outside of the modules through the back contact. And we continue to have a range of engineering solutions that should allow us to continue to improve the performance of the module over time. And as we have stated many times before these improvements tend to be event driven, they don't occur in individual quarters, particularly in order they come out linearly as perhaps say, growth rate or something that like that much look at. Nevertheless, we believe we are still on track for a long-term plan to achieve our long-terms financials, given the roadmap that we have laid out for ourselves and the laid out which the engineers are able to deploy and qualify new improvements.

Thank you. Our final question comes from Michael Molnar of Goldman Sachs.

Good afternoon. Thanks for taking my question. Just a quick one as most of my questions have been answered. The longer term goal of $0.70, a lot production cost from 2010 to 2012 I think. First, can you tell us given that we are getting very close to 2009, any color on if that's likely to happen more towards the beginning or end of that goal. And second, if you can remind me if that includes or excludes stock-based comp costs?

Yes it includes that. It includes SPC and no, we don't give any thing that granular Michael. I mean I can state that we are continuing to track to all the milestones that would get us to that level within that timeframe. So, in that respect, we feel we'd continue to feel confident but we wouldn't provide that kind of guidance or visibility right now.

I mean there's maybe, some more visibility into this. We have multiple plants that are producing at this point in time at a sub-one dollar level.

Thank you. Ladies and gentlemen, thank you for your questions and for your participation in today's conference. This does conclude our program. And you may now disconnect. .