8. Restricted Cash and Investments
Restricted cash and investments consisted of the following at December 31, 2013 and 2012 (in thousands):
|
| | | | | | | | |
| | 2013 | | 2012 |
Restricted cash, noncurrent | | $ | 167 |
| | $ | 184 |
|
Restricted investments, noncurrent | | 279,274 |
| | 301,216 |
|
Total restricted cash and investments, noncurrent (1) | | $ | 279,441 |
| | $ | 301,400 |
|
(1) There was zero and $5.1 million of restricted cash included within prepaid expenses and other current assets at December 31, 2013 and 2012, respectively, primarily related to required cash collateral for certain letters of credit provided for projects under development in foreign jurisdictions.
At December 31, 2013 and 2012, our restricted investments consisted of long-term marketable securities that we hold through a custodial account to fund the estimated future costs of our collecting and recycling modules covered under our solar module collection and recycling program. We have classified our restricted investments as “available-for-sale.” Accordingly, we record them at fair value and account for net unrealized gains and losses as a part of accumulated other comprehensive income (loss). We report realized gains and losses on the maturity or sale of our restricted investments in other income (expense), net computed using the specific identification method. Restricted investments are classified as noncurrent as the underlying accrued solar module collection and recycling liability is also noncurrent in nature.
We fund the estimated collection and recycling obligations incremental to amounts already pre-funded in prior years for the cumulative module sales covered by our solar module collection and recycling program within 90 days of the end of each year, assuming for this purpose a service life of 25 years for our solar modules. To ensure that our collection and recycling program for covered modules is available at all times and the pre-funded amounts are accessible regardless of our financial status in the future (even in the case of our own insolvency), we have established a trust structure (the “Trust”) under which estimated required funds are put into custodial accounts with an established and reputable bank as the investment advisor in the name of the Trust, for which First Solar, Inc. (“FSI”), First Solar Malaysia Sdn. Bhd. (“FS Malaysia”), and First Solar Manufacturing GmbH are grantors. Only the trustee can distribute funds from the custodial accounts and these funds cannot be accessed for any purpose other than to cover qualified costs of module collection and recycling, either by us or a third party executing the required collection and recycling services. Investments in this custodial account must meet the criteria of the highest quality investments, such as highly rated government or agency bonds. We closely monitor our exposure to European markets and maintain holdings primarily consisting of German and French sovereign debt securities which are not currently at risk of default. Under the trust agreements, each year we determine the annual pre-funding requirement (if any) based upon the difference between the current estimated future costs of collecting and recycling all solar modules covered under our program combined with the rate of return restricted investments will earn prior to being utilized to cover qualified collection and recycling costs and amounts already pre-funded in prior years. Based primarily upon reductions in the estimated future costs of collecting and recycling solar modules covered under our program combined with the cumulative amounts pre-funded since the inception of our program, we have determined that no incremental funding will be required in the first quarter of 2014 for all historical covered module sales through December 31, 2013.
The following table summarizes unrealized gains and losses related to our restricted investments by major security type as of December 31, 2013 and 2012 (in thousands):
|
| | | | | | | | | | | | | | | | |
| | As of December 31, 2013 |
Security Type | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Foreign government obligations | | $ | 205,484 |
| | $ | 22,295 |
| | $ | 1,489 |
| | $ | 226,290 |
|
U.S. government obligations | | 55,916 |
| | 1,372 |
| | 4,304 |
| | 52,984 |
|
Total | | $ | 261,400 |
| | $ | 23,667 |
| | $ | 5,793 |
| | $ | 279,274 |
|
|
| | | | | | | | | | | | | | | | |
| | As of December 31, 2012 |
Security Type | | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
Foreign government obligations | | $ | 188,350 |
| | $ | 47,921 |
| | $ | — |
| | $ | 236,271 |
|
U.S. government obligations | | 53,368 |
| | 11,577 |
| | — |
| | 64,945 |
|
Total | | $ | 241,718 |
| | $ | 59,498 |
| | $ | — |
| | $ | 301,216 |
|
As of December 31, 2013, the contractual maturities of these restricted investments were between 14 years and 23 years. As of December 31, 2012, the contractual maturities of these restricted investments were between 15 years and 24 years. As of December 31, 2013, the gross unrealized loss of $5.8 million had been in a continuous loss position for less than 12 months.
