Current Report

 

 

SUNPOWER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
		Sep. 27,				Dec. 28,
		2009				2008
ASSETS
Cash and cash equivalents		$	472,126			$	202,331
Restricted cash			320,788				175,277
Investments			9,222				40,756
Accounts receivable, net			243,528				194,222
Costs and estimated earnings in excess of billings			73,519				30,326
Inventories			239,211				251,542
Prepaid expenses and other assets			197,131				175,005
Advances to suppliers			137,853				162,610
Property, plant and equipment, net			695,409				629,247
Goodwill and other intangible assets, net			227,444				236,210
Total assets		$	2,616,231			$	2,097,526
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	232,547			$	263,241
Accrued and other liabilities			195,561				191,140
Long-term debt			188,915				54,598
Convertible debt			530,956				357,173
Billings in excess of costs and estimated earnings			17,484				11,806
Customer advances			97,142				110,394
Total liabilities			1,262,605				988,352
Stockholders' equity			1,353,626				1,109,174
Total liabilities and stockholders' equity		$	2,616,231			$	2,097,526

 

SUNPOWER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		THREE MONTHS ENDED												NINE MONTHS ENDED
		Sep. 27,				Jun. 28,				Sep. 28,				Sep. 27,				Sep. 28,
		2009				2009				2008				2009				2008
Revenue:
Systems		$	168,412			$	108,724			$	193,330			$	383,233			$	642,774
Components			297,895				188,920				184,170				594,505				391,178
			466,307				297,644				377,500				977,738				1,033,952
Cost of revenue:
Cost of systems revenue			144,859				91,793				158,829				325,003				511,316
Cost of components revenue			232,164				147,388				113,358				457,240				271,288
			377,023				239,181				272,187				782,243				782,604
Gross margin			89,284				58,463				105,313				195,495				251,348
Operating expenses:
Research and development			8,250				6,853				6,049				23,067				15,504
Selling, general and administrative			46,473				41,755				46,075				130,511				123,141
Total operating expenses			54,723				48,608				52,124				153,578				138,645
Operating income			34,561				9,855				53,189				41,917				112,703
Other income (expense):
Gain on purchased options			—				21,193				—				21,193				—
Interest and other income (expense), net			(9,269	)			(5,956	)			(8,784	)			(27,319	)			(17,597	)
Other income (expense), net			(9,269	)			15,237				(8,784	)			(6,126	)			(17,597	)
Income before income taxes and equity in earnings of unconsolidated investees			25,292				25,092				44,405				35,791				95,106
Income tax provision			15,088				4,054				21,856				10,580				31,275
Income before equity in earnings of unconsolidated investees			10,204				21,038				22,549				25,211				63,831
Equity in earnings of unconsolidated investees, net of taxes			2,627				3,133				2,132				7,005				4,006
Net income		$	12,831			$	24,171			$	24,681			$	32,216			$	67,837
Net income per share of class A and class B common stock:
- Basic		$	0.14			$	0.27			$	0.30			$	0.36			$	0.84
- Diluted		$	0.13			$	0.26			$	0.29			$	0.35			$	0.80
Weighted-average shares:
- Basic			94,668				90,873				80,465				89,764				79,614
- Diluted			96,319				98,412				84,064				91,513				83,477

 

SUNPOWER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		THREE MONTHS ENDED												NINE MONTHS ENDED
		Sep. 27,				Jun. 28,				Sep. 28,				Sep. 27,				Sep. 28,
		2009				2009				2008				2009				2008
Cash flows from operating activities:
Net income		$	12,831			$	24,171			$	24,681			$	32,216			$	67,837
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation			13,074				11,647				18,911				34,204				52,026
Depreciation			21,414				20,569				13,688				60,348				35,741
Amortization of other intangible assets			4,146				4,098				4,201				12,296				12,552
Impairment of long-lived assets			190				489				(2,353	)			1,997				3,136
Non-cash interest expense			5,250				5,915				4,038				16,186				12,717
Amortization of debt issuance costs			733				1,184				537				2,454				1,611
Gain on purchased options			-				(21,193	)			-				(21,193	)			-
Equity in earnings of unconsolidated investees			(2,627	)			(3,133	)			(2,132	)			(7,005	)			(4,006	)
Excess tax benefits from stock-based award activity			(12,134	)			(2,610	)			(19,260	)			(14,744	)			(33,899	)
Deferred income taxes and other tax liabilities			10,151				(3,505	)			19,658				277				29,738
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable			(18,794	)			(65,422	)			47,808				(43,285	)			(55,324	)
Costs and estimated earnings in excess of billings			(60,787	)			23,168				(7,556	)			(41,416	)			(17,700	)
Inventories			28,977				87,807				19,498				20,914				(48,301	)
Prepaid expenses and other assets			13,938				(35,291	)			(4,604	)			(9,440	)			(29,636	)
Advances to suppliers			3,435				13,449				15,461				24,877				19,102
Accounts payable and other accrued liabilities			98,997				(101,114	)			(5,853	)			(31,345	)			76,513
Billings in excess of costs and estimated earnings			(33,479	)			42,968				(21,178	)			4,877				(60,064	)
Customer advances			(5,553	)			774				41,754				(13,639	)			45,884
Net cash provided by operating activities			79,762				3,971				147,299				28,579				107,927
Cash flows from investing activities:
Increase in restricted cash and cash equivalents			(103,247	)			(33,151	)			(26,202	)			(145,583	)			(42,153	)
Purchases of property, plant and equipment			(38,426	)			(59,566	)			(55,224	)			(150,093	)			(150,302	)
Proceeds from sale of equipment to third-party			1,976				7,902				—				9,878				—
Purchases of available-for-sale securities			—				—				(14,778	)			—				(65,748	)
Proceeds from sales or maturities of available-for-sale securities			9,867				1,501				12,027				29,545				133,948
Cash paid for acquisitions, net of cash acquired			—				—				(4,827	)			—				(18,311	)
Cash paid for investments in joint ventures and other non-public companies			—				—				(2,000	)			—				(24,625	)
Net cash used in investing activities			(129,830	)			(83,314	)			(91,004	)			(256,253	)			(167,191	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issuance costs			54,701				29,773				—				137,735				—
Proceeds from issuance of convertible debt, net of issuance costs			—				225,018				—				225,018				—
Proceeds from offering of class A common stock, net of offering expenses			(114	)			218,895				—				218,781				—
Cash paid for repurchased convertible debt			(7,687	)			(67,949	)			—				(75,636	)			—
Cash paid for purchased options			—				(97,336	)			—				(97,336	)			—
Proceeds from warrant transactions			—				71,001				—				71,001				—
Proceeds from exercise of stock options			570				442				1,451				1,408				3,786
Excess tax benefits from stock-based award activity			12,134				2,610				19,260				14,744				33,899
Purchases of stock for tax withholding obligations on vested restricted stock			(586	)			(763	)			(1,659	)			(3,708	)			(5,853	)
Net cash provided by financing activities			59,018				381,691				19,052				492,007				31,832
Effects of exchange rate changes on cash and equivalents			6,341				5,377				(8,273	)			5,462				(1,166	)
Net increase (decrease) in cash and cash equivalents			15,291				307,725				67,074				269,795				(28,598	)
Cash and cash equivalents at beginning of period			456,835				149,110				189,542				202,331				285,214
Cash and cash equivalents at end of period		$	472,126			$	456,835			$	256,616			$	472,126			$	256,616
Non-cash transactions:
Additions to property, plant and equipment included in accounts payable and other accrued liabilities		$	—			$	—			$	42,942			$	—			$	46,780
Non-cash interest expense capitalized and added to the cost of qualified assets			873				1,510				2,547				4,456				6,367
Issuance of common stock for purchase acquisition			—				1,471				3,054				1,471				3,054
Change in goodwill relating to adjustments to acquired net assets			—				—				—				—				231

 

About SunPower’s Non-GAAP Financial Measures

 

To supplement its consolidated financial results presented in accordance with GAAP, SunPower uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude non-cash charges related to amortization of intangible assets, stock-based compensation, impairment of long-lived assets and interest expense, non-cash gain on purchased options related to its convertible debt offering, and the related tax effects of these non-GAAP adjustments. The specific non-GAAP measures listed below are gross margin, operating income and net income per share. Management believes that each of these non-GAAP measures (gross margin, operating income and net income per share) are useful to investors by enabling them to better assess changes in each of these key elements of SunPower's results of operations across different reporting periods on a consistent basis, independent of these non-cash items. Thus, each of these non-GAAP financial measures provides investors with another method for assessing SunPower's operating results in a manner that is focused on its ongoing core operating performance, absent the effects of amortization of intangible assets, stock-based compensation, impairment of long-lived assets, interest expense and a gain on purchased options related to its convertible debt offering. Management also uses these non-GAAP measures internally to assess the business and financial performance of current and historical results, for strategic decision making, forecasting future results and evaluating the company's current performance. Many of the analysts covering SunPower also use these non-GAAP measures in their analyses. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP results should be reviewed together with the GAAP results and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies.

 

o  Non-GAAP gross margin. The use of this non-GAAP financial measure allows management to evaluate the gross margin of the company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including amortization of intangible assets, stock-based compensation, impairment of long-lived assets and interest expense. In addition, it is an important component of management's internal performance measurement process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate SunPower’s revenue generation performance relative to the direct costs of revenue of its core businesses.

 

o  Non-GAAP operating income. The use of this non-GAAP financial measure allows management to evaluate the operating results of the company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including amortization of intangible assets, stock-based compensation, impairment of long-lived assets and interest expense. In addition, it is an important component of management's internal performance measurement process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to understand the results of operations of the company’s core businesses and to compare results of operations on a more consistent basis against that of other companies in the industry.

 

o  Non-GAAP net income per share. Management presents this non-GAAP financial measure to enable investors and analysts to assess the company's operating results and trends across different reporting periods on a consistent basis, independent of non-cash items including amortization of intangible assets, stock-based compensation, impairment of long-lived assets, interest expense, a gain on purchased options related to its convertible debt offering and the tax effects of these non-GAAP adjustments. In addition, investors and analysts can compare SunPower's operating results on a more consistent basis against that of other companies in the industry.   It should be noted that diluted weighted-average shares are determined on a GAAP basis and the resulting share count is used for computing both GAAP and Non-GAAP diluted net income per share.

 

Non-Cash Items

 

o  Amortization of intangible assets. SunPower incurs amortization of intangible assets as a result of acquisitions, which includes in-process research and development, purchased technology, patents and tradenames. SunPower excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from prior acquisitions and have no direct correlation to the operation of SunPower’s core businesses.

o  Stock-based compensation. Stock-based compensation relates primarily to SunPower stock awards such as stock options and restricted stock. Stock-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are difficult to predict. As a result of this unpredictability, management excludes this item from its internal operating forecasts and models. Management believes that non-GAAP measures adjusted for stock-based compensation provide investors with a basis to measure the company’s core performance against the performance of other companies without the variability created by stock-based compensation.

 

o  Impairment of long-lived assets. SunPower incurred an impairment of long-lived assets in the first quarter of fiscal 2008 totaling $5.5 million, which relates to the discontinuation of its imaging detector product line and for the write-off of certain solar manufacturing equipment which became obsolete due to new processes. The costs associated with a $3.3 million write-off of certain solar product manufacturing equipment were recovered from the vendor in the third quarter of fiscal 2008. SunPower excluded this item because the expense is not reflective of its ongoing operating results in the period incurred. Excluding this data provides investors with a basis to compare the company’s performance against the performance of other companies without non-cash expenses such as impairment of long-lived assets.

o  Non-cash interest expense. Under new accounting guidance, SunPower separately accounts for the liability and equity components of its convertible debt in a manner that reflects interest expense equal to its non-convertible debt borrowing rate. As a result, SunPower incurs interest expense that is substantially higher than interest payable on its 1.25% senior convertible debentures and 0.75% senior convertible debentures. SunPower excludes non-cash interest expense because the expense is not reflective of its ongoing financial results in the period incurred. Excluding this data provides investors with a basis to compare the company’s performance against the performance of other companies without non-cash interest expense.

o  Gain on purchased options related to SunPower’s convertible debt offering. In connection with the issuance of its 4.75% senior convertible debentures in May 2009, SunPower entered into certain convertible debenture hedge transactions with respect to its class A common stock intended to reduce the potential dilution that would occur upon conversion of the debentures. The convertible debenture hedge transactions consisting of call option instruments are deemed to be a mark-to-market derivative during the period in which the over-allotment option in favor of the debenture underwriters is unexercised. SunPower entered into the underwriting agreement on April 28, 2009 and the debenture underwriters exercised the over-allotment option on April 29, 2009. During the one-day period that the underwriters’ over-allotment option was outstanding, SunPower’s class A common stock price increased substantially. SunPower excluded the $21.2 million gain relating to the purchased options from its non-GAAP results because it was not realized in cash and it is not reflective of the company’s ongoing financial results. Excluding this data provides investors with a basis to compare the company’s performance against the performance of other companies without non-cash income from a gain on purchased options.

 

o  Tax effect. This amount is used to present each of the amounts described above on an after-tax basis with the presentation of non-GAAP net income per share.

 

For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP results of operations measures to non-GAAP measures" set forth at the end of this release and which should be read together with the preceding financial statements prepared in accordance with GAAP.

 

SUNPOWER CORPORATION
RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited)
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
		THREE MONTHS ENDED												NINE MONTHS ENDED
		Sep. 27,				Jun. 28,				Sep. 28,				Sep. 27,				Sep. 28,
		2009				2009				2008				2009				2008
GAAP gross margin		$	89,284			$	58,463			$	105,313			$	195,495			$	251,348
Amortization of intangible assets			2,802				2,795				2,947				8,390				9,066
Stock-based compensation expense			4,302				4,630				4,875				9,755				13,718
Impairment of long-lived assets			—				—				(3,286	)			—				2,203
Non-cash interest expense			365				1,240				244				2,105				477
Non-GAAP gross margin		$	96,753			$	67,128			$	110,093			$	215,745			$	276,812
GAAP operating income		$	34,561			$	9,855			$	53,189			$	41,917			$	112,703
Amortization of intangible assets			4,146				4,098				4,201				12,296				12,552
Stock-based compensation expense			13,074				11,647				18,911				34,204				52,026
Impairment of long-lived assets			—				—				(3,286	)			—				2,203
Non-cash interest expense			365				1,240				244				2,105				477
Non-GAAP operating income		$	52,146			$	26,840			$	73,259			$	90,522			$	179,961
NET INCOME PER SHARE:
		THREE MONTHS ENDED												NINE MONTHS ENDED
		Sep. 27,				Jun. 28,				Sep. 28,				Sep. 27,				Sep. 28,
		2009				2009				2008				2009				2008
Basic:
GAAP net income per share		$	0.14			$	0.27			$	0.30			$	0.36			$	0.84
Reconciling items:
Amortization of intangible assets			0.04				0.04				0.05				0.14				0.16
Stock-based compensation expense			0.13				0.13				0.23				0.38				0.64
Impairment of long-lived assets			—				—				(0.04	)			—				0.03
Non-cash interest expense			0.06				0.06				0.05				0.18				0.16
Gain on purchased options			—				(0.23	)			—				(0.24	)			—
Tax effect			0.05				(0.02	)			—				(0.07	)			(0.21	)
Non-GAAP net income per share		$	0.42			$	0.25			$	0.59			$	0.75			$	1.62
Diluted:
GAAP net income per share		$	0.13			$	0.26			$	0.29			$	0.35			$	0.80
Reconciling items:
Amortization of intangible assets			0.04				0.04				0.05				0.13				0.15
Stock-based compensation expense			0.14				0.11				0.22				0.37				0.62
Impairment of long-lived assets			—				—				(0.04	)			—				0.03
Non-cash interest expense			0.06				0.06				0.05				0.18				0.15
Gain on purchased options			—				(0.21	)			—				(0.23	)			—
Tax effect			0.05				(0.02	)			—				(0.07	)			(0.20	)
Non-GAAP net income per share		$	0.42			$	0.24			$	0.57			$	0.73			$	1.55
Weighted-average shares:
GAAP net income per share:
- Basic			94,668				90,873				80,465				89,764				79,614
- Diluted			96,319				98,412				84,064				91,513				83,477
Non-GAAP net income per share:
- Basic			94,668				90,873				80,465				89,764				79,614
- Diluted			96,319				98,412				84,064				91,513				83,477