Press Releases

SunPower Reports Second-Quarter 2014 Results

-- Q2 2014 GAAP Revenue of $508 Million, Non-GAAP Revenue of $621 Million

-- Q2 2014 GAAP Earnings Per Share of $0.09, Non-GAAP Earnings Per Share of $0.28

SAN JOSE, Calif., July 31, 2014 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWR) today announced financial results for its fiscal 2014 second quarter.    

($ Millions, except percentages and per-share data)

2nd Quarter

2014

1st Quarter

2014

2nd Quarter

2013

GAAP revenue

$507.9

$692.4

$576.5

GAAP gross margin

18.5%

23.5%

18.7%

GAAP net income

$14.1

$65.0

$19.6

GAAP net income per diluted share

$0.09

$0.42

$0.15

Non-GAAP revenue1

$621.1

$683.7

$650.0

Non-GAAP gross margin1

19.5%

22.0%

19.5%

Non-GAAP net income1

$43.9

$75.3

$62.8

Non-GAAP net income per diluted share1

$0.28

$0.49

$0.48

1Information about SunPower's use of non-GAAP financial information is provided under "Use of Non-GAAP Financial Measures" below.

"SunPower's second-quarter financial performance reflected solid execution as well as strong demand for our industry leading, high efficiency solar systems across all channels and geographic segments.  By leveraging our vertically integrated value chain from upstream to customer, we are competitive with traditional generation in many markets," said Tom Werner, SunPower president and CEO.  "We are continuing to reduce our costs and with the ramp of our next generation technology and processes in Fab 4 starting in early 2015, we will further expand our cell efficiency leadership, lower manufacturing costs and increase capacity to meet the robust demand for our solutions.  

"Regionally, our North America business continued to be a key driver of SunPower's performance.  Construction of the 579-megawatt (MW) ac Solar Star Projects for MidAmerican Solar is proceeding with more than one million panels installed to date, and 228 MW are connected to the grid.  We also added to our power plant bookings and potential assets for our holdco strategy during the quarter, as we signed an agreement with Xcel Energy for a 60-MW project while expanding our public sector business with a 19-MW project at Nellis Air Force Base, our second project at this location.  Demand for our high efficiency solutions in the commercial business remains strong; we added a number of new and repeat customers to our backlog during the quarter.  We also saw significant strength in our residential lease and cash business as customers continue to choose SunPower for our high quality, superior performance and flexible financing options. With our recently announced $200 million solar loan funding agreement with Admirals Bank and available lease capacity through our Google and Bank of America agreements, we have sufficient committed finance capacity to grow our residential business.   

"Our EMEA distributed generation business performed well. Pricing is stable and demand for our products, including our next generation SunPower® X-Series Solar Panels with efficiencies of 21.5 percent, remains robust.  We also connected 33 MW of power plant projects to the grid in South Africa during the quarter.  With a strong backlog and a favorable pricing trend expected for the balance of the year, we are confident in our ability to meet our 2014 goals in EMEA.

"Demand in Asia Pacific remained strong and we recorded our best revenue quarter in this region to date.  Japan remains a key market for us and accounted for more than 26 percent of our shipments in the second quarter.  In China, we shipped 15 MW of our SunPower® C7 Tracker cell packages in the second quarter against our recent 70-MW cell order announced last quarter.  Additionally, we are expanding our joint venture relationship with the TZ Group to other regions in China.    

"With our vertically integrated strategy, more than 8-gigawatts pipeline and industry leading technology, we are well-positioned to capitalize on the further development of the global solar market," concluded Werner. 

"We met our revenue and profit goals for the quarter as we saw strong demand in all of our key markets," said Chuck Boynton, SunPower CFO.  "Additionally, we strengthened our balance sheet during the quarter by retiring our 4.75 percent convertible bonds and successfully closing our $400 million, seven- year 0.875 percent convertible offering.  The result of these transactions is that we now have $1 billion in cash on the balance sheet, giving us the financial flexibility to support our holdco strategy and build Fab 4.  In addition, we continued to monetize our assets to drive cash flow, recently closing our second financing with Hannon Armstrong.  This financing gives us additional flexibility through a non-recourse debt structure that minimizes interest rate risk and maximizes the value of our existing lease assets.  Finally, we continue to add projects to our backlog and pipeline for inclusion in our holdco strategy with potential assets now totaling more than 600 megawatts."

Second-quarter fiscal 2014 non-GAAP results include net adjustments that increase net income by $29.8 million, including a $22.6 million gross margin adjustment related to the timing of revenue recognition from utility and power plant projects, $13.3 million in stock-based compensation expense, $5.3 million in non-cash interest expense, ($0.6) million of other adjustments and ($10.8) million in tax effect. 

Third Quarter and Fiscal Year 2014 Financial Outlook
The company's third quarter 2014 consolidated non-GAAP guidance is as follows: revenue of $600 million to $650 million, gross margin of 17 percent to 19 percent, net income per diluted share of $0.15 to $0.35 and megawatts recognized in the range of 325 megawatts to 360 megawatts.  On a GAAP basis, the company expects revenue of $575 million to $625 million, gross margin of 18 percent to 20 percent and net income per diluted share of $0.00 to $0.20.

For fiscal year 2014, the company's expectations are unchanged and are as follows:  non-GAAP revenue of $2.50 billion to $2.65 billion, gross margin of 19 percent to 21 percent, net income per diluted share of $1.10 to $1.40, capital expenditures of $150 million to $170 million and gigawatts recognized in the range of 1.225 gigawatts to 1.3 gigawatts.  On a GAAP basis, the company expects revenue of $2.55 billion to $2.70 billion, gross margin of 20 percent to 22 percent and net income per diluted share of $0.75 to $1.05

The company will host a conference call for investors this afternoon to discuss its second-quarter 2014 performance at 1:30 p.m. Pacific Time.  The call will be webcast and can be accessed from SunPower's website at http://investors.sunpower.com/events.cfm.

This press release contains both GAAP and non-GAAP financial information.  Non-GAAP historical figures are reconciled to the closest GAAP equivalent categories in the financial attachment of this press release.  Please note that the company has posted supplemental information and slides related to its second-quarter 2014 performance on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpower.com/events.cfm.  The capacity of power plants in this release is described in approximate megawatts on a direct current (dc) basis unless otherwise noted.

About SunPower Corp.
SunPower Corp. (NASDAQ: SPWR) designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems available today. Residential, business, government and utility customers rely on the company's quarter century of experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system. Headquartered in San Jose, Calif., SunPower has offices in North America, Europe, Australia, Africa and Asia. For more information, visit www.SunPower.com.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding:  (a) expanding our manufacturing capacity; (b) anticipated construction timelines and milestones for our major projects; (c) growing demand in residential leasing and financing arrangements and capacity relating to our residential lease program; (d) financing strategies for our solar power systems, including any Holdco strategies; (e) growing demand in EMEA and Asia; (f) our growing international project pipeline; (g) our joint venture initiatives in China; (h) our efforts to reduce panel manufacturing costs; (i) our positioning for long-term profitability; (j) strategically managing cash; (k) guidance for the third fiscal quarter of 2014, including non-GAAP revenue, gross margin, net income per diluted share and MW recognized and GAAP revenue, gross margin and net income (loss) per diluted share; (l) guidance for fiscal year 2014, including non-GAAP revenue, gross margin, net income per diluted share and GW recognized and GAAP revenue, gross margin and net income per diluted share; (m) reducing operating expenses; (n) generating free cash flow; (o) additional leasing capacity; and (p) optimization of our cost and capital structure.  These forward-looking statements are based on our current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (1) competition in the industry and downward pressure on average selling prices; (2) our liquidity, substantial indebtedness, and our ability to obtain additional financing for our projects and our customers; (3) risks relating to our residential lease business, including risks of customer default, challenges securing lease financing, and declining conventional electricity prices; (4) our ability to meet our cost reduction targets; (5) regulatory changes and the availability of economic incentives promoting use of solar energy; (6) challenges inherent in constructing and maintaining certain of our large projects, such as the Solar Star projects; (7) the success of our ongoing research and development efforts and commercialization of new products and services; (8) fluctuations in our operating results; (9) manufacturing difficulties that could arise; and (10) challenges managing our joint ventures. A detailed discussion of these factors and other risks that affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or on the SEC Filings section of our Investor Relations website at investors.sunpower.com. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events

SunPower is a registered trademark of SunPower Corp. All other trademarks are the property of their respective owners.

 

 

 SUNPOWER CORPORATION 

 CONSOLIDATED BALANCE SHEETS 

 (In thousands) 

 (Unaudited) 







Jun. 29,


Dec. 29,



2014


2013


Assets





Current assets:





   Cash and cash equivalents

$    980,858


$    762,511


   Restricted cash and cash equivalents, current portion

17,085


13,926


   Accounts receivable, net

345,873


360,594


   Costs and estimated earnings in excess of billings

31,863


31,787


   Inventories

229,721


245,575


   Advances to suppliers, current portion

78,767


58,619


   Project assets - plants and land, current portion

10,622


69,196


   Prepaid expenses and other current assets

830,611


646,270


Total current assets

2,525,400


2,188,478







Restricted cash and cash equivalents, net of current portion

23,761


17,573


Restricted long-term marketable securities

7,566


8,892


Property, plant and equipment, net

526,494


533,387


Solar power systems leased and to be leased, net

346,774


345,504


Project assets - plants and land, net of current portion

51,918


6,411


Advances to suppliers, net of current portion

317,028


324,695


Long-term financing receivables, net

230,119


175,273


Other long-term assets

292,912


298,477


Total assets

$ 4,321,972


$ 3,898,690







Liabilities and Equity





Current liabilities:





   Accounts payable

$    428,874


$    443,969


   Accrued liabilities

406,348


358,157


   Billings in excess of costs and estimated earnings

249,070


308,650


   Short-term debt

17,433


56,912


   Convertible debt, current portion

235,222


455,889


   Customer advances, current portion

38,431


36,883


Total current liabilities

1,375,378


1,660,460







Long-term debt

156,975


93,095


Convertible debt, net of current portion

700,079


300,079


Customer advances, net of current portion

158,089


167,282


Other long-term liabilities

529,170


523,991


Total liabilities

2,919,691


2,744,907







Redeemable noncontrolling interests in subsidiaries

27,841


-







Equity:





   Preferred stock

-


-


   Common stock

131


122


   Additional paid-in capital

2,186,107


1,980,778


   Accumulated deficit

(727,346)


(806,492)


   Accumulated other comprehensive loss

(3,698)


(4,318)


   Treasury stock, at cost

(106,741)


(53,937)


   Total stockholders' equity

1,348,453


1,116,153


   Noncontrolling interests in subsidiaries

25,987


37,630


   Total equity

1,374,440


1,153,783


Total liabilities and equity

$ 4,321,972


$ 3,898,690


 


SUNPOWER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)













THREE MONTHS ENDED

SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013













Revenue:











   AMERICAS

$  333,048


$  471,023


$  367,609


$   804,071


$   851,731


   EMEA

64,709


126,258


107,010


190,967


175,662


   APAC

110,114


95,141


101,897


205,255


184,556


   Total revenue

507,871


692,422


576,516


1,200,293


1,211,949


Cost of revenue:











   AMERICAS

257,781


350,313


285,939


608,094


702,020


   EMEA

54,653


99,441


97,396


154,094


188,890


   APAC

101,292


79,679


85,320


180,971


153,865


   Total cost of revenue

413,726


529,433


468,655


943,159


1,044,775


Gross margin

94,145


162,989


107,861


257,134


167,174


Operating expenses:











   Research and development

16,581


16,746


13,035


33,327


26,205


   Selling, general and administrative

71,499


73,928


62,035


145,427


132,127


   Restructuring charges

(717)


(461)


928


(1,178)


591


      Total operating expenses

87,363


90,213


75,998


177,576


158,923


Operating income

6,782


72,776


31,863


79,558


8,251


        Other expense, net

(15,718)


(17,905)


(24,101)


(33,623)


(59,136)


Income (loss) before income taxes and equity in earnings of unconsolidated investees

(8,936)


54,871


7,762


45,935


(50,885)


Benefit from (provision for) for income taxes

8,168


(13,620)


(4,506)


(5,452)


(7,495)


Equity in earnings of unconsolidated investees

1,936


1,783


1,009


3,719


676


Net income (loss)

1,168


43,034


4,265


44,202


(57,704)


     Net loss attributable to noncontrolling interests and redeemable noncontrolling interests

12,934


22,010


15,300


34,944


22,573


Net income (loss) attributable to stockholders

$    14,102


$    65,044


$    19,565


$     79,146


$    (35,131)













Net income (loss) per share attributable to stockholders:











   - Basic

$        0.11


$        0.53


$        0.16


$         0.63


$        (0.29)


   - Diluted

$        0.09


$        0.42


$        0.15


$         0.52


$        (0.29)


Weighted-average shares:











   - Basic

129,747


122,196


120,943


125,972


120,248


   - Diluted

156,333


160,434


133,973


154,886


120,248


 

SUNPOWER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)













THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29, 


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013












Cash flows from operating activities:











Net income (loss)


$     1,168


$   43,034


$     4,265


$   44,202


$ (57,704)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:











   Depreciation and amortization expense


24,026


25,371


24,593


49,397


48,360

   Stock-based compensation


13,348


14,867


10,505


28,215


19,021

   Non-cash interest expense


5,322


5,170


12,181


10,492


24,071

   Equity in earnings of unconsolidated investees


(1,936)


(1,783)


(1,009)


(3,719)


(676)

   Deferred income taxes and other tax liabilities


(14,551)


17,985


2,423


3,434


7,147

   Other, net


39


9


1,068


48


2,162

   Changes in operating assets and liabilities, net of effect of acquisition:











   Accounts receivable


(83,483)


93,574


(167,794)


10,091


(107,454)

   Costs and estimated earnings in excess of billings


(14,085)


14,009


(4,073)


(76)


(4,922)

   Inventories


(2,067)


4,043


32,316


1,976


26,710

   Project assets


(24,159)


22,491


3,957


(1,668)


(31,293)

   Prepaid expenses and other assets


(45,204)


(11,994)


(119,125)


(57,198)


104,162

   Long-term financing receivables, net


(22,513)


(32,333)


(23,694)


(54,846)


(49,492)

   Advances to suppliers


(5,218)


(7,263)


(3,486)


(12,481)


(7,805)

   Accounts payable and other accrued liabilities


(15,241)


(16,972)


70,517


(32,213)


41,692

   Billings in excess of costs and estimated earnings


57,429


(117,009)


112,076


(59,580)


109,379

   Customer advances


(4,918)


(2,727)


(20,899)


(7,645)


(22,674)

Net cash provided by (used in) operating activities


(132,043)


50,472


(66,179)


(81,571)


100,684

Cash flows from investing activities:











   Decrease (increase) in restricted cash and cash equivalents


(7,054)


(2,293)


29


(9,347)


17,826

   Purchases of property, plant and equipment


(11,518)


(8,800)


(7,839)


(20,318)


(19,881)

   Cash paid for solar power systems, leased and to be leased


(9,948)


(14,989)


(23,387)


(24,937)


(65,075)

   Proceeds from sales or maturities of marketable securities


1,380


-


-


1,380


-

   Proceeds from sale of equipment to third-party


-


-


6


-


17

   Purchases of marketable securities


(30)


-


(99,928)


(30)


(99,928)

   Cash paid for acquisitions, net of cash acquired


(5,894)


-


-


(5,894)


-

   Cash paid for investments in unconsolidated investees


-


(5,013)


(1,411)


(5,013)


(1,411)

Net cash used in investing activities


(33,064)


(31,095)


(132,530)


(64,159)


(168,452)

Cash flows from financing activities:











   Proceeds from issuance of convertible debt, net of issuance costs


395,275


-


296,283


395,275


296,283

   Cash paid for repurchase of convertible debt


(42,101)


(1)


-


(42,102)


-

   Proceeds from settlement of 4.75% Bond Hedge


-


68,842


-


68,842


-

   Payments to settle 4.75% Warrants


-


(81,077)


-


(81,077)


-

   Proceeds from settlement of 4.50% Bond Hedge


110


-


-


110


-

   Proceeds from issuance of non-recourse debt financing, net of issuance costs


34,306


39,108


-


73,414


-

   Proceeds from issuance of project loans, net of issuance costs


-


-


32,554


-


56,615

   Assumption of project loan by customer


-


(40,672)


-


(40,672)


-

   Proceeds from residential lease financing


-


-


17,458


-


56,548

   Repayment of residential lease financing


(8,473)


(7,213)


-


(15,686)


-

   Proceeds from sale-leaseback financing


-


16,685


6,907


16,685


40,757

   Repayment of sale-leaseback financing


-


(779)


(5,124)


(779)


(5,124)

   Contributions from noncontrolling interests and redeemable noncontrolling interests


22,226


30,552


31,551


52,778


43,866

   Distributions to noncontrolling interests and redeemable noncontrolling interests


(519)


(1,117)


-


(1,636)


-

   Proceeds from exercise of stock options


562


68


24


630


49

   Purchases of stock for tax withholding obligations on vested restricted stock


(9,298)


(43,506)


(5,444)


(52,804)


(16,183)

   Repayment of bank loans, project loans and other debt


(718)


(7,850)


(101,211)


(8,568)


(281,712)

Net cash provided by (used in) financing activities


391,370


(26,960)


272,998


364,410


191,099

Effect of exchange rate changes on cash and cash equivalents


(146)


(187)


684


(333)


(258)

Net increase (decrease) in cash and cash equivalents


226,117


(7,770)


74,973


218,347


123,073

Cash and cash equivalents, beginning of period


754,741


762,511


505,587


762,511


457,487

Cash and cash equivalents, end of period


$ 980,858


$ 754,741


$ 580,560


$ 980,858


$ 580,560












Non-cash transactions:











   Assignment of financing receivables to a third party financial institution


$     2,760


$     1,496


$   11,265


$     4,256


$   45,234

   Costs of solar power systems, leased and to be leased, sourced from existing inventory


6,783


7,120


14,178


13,903


29,714

   Costs of solar power systems, leased and to be leased, funded by liabilities


1,867


1,634


1,708


1,867


1,708

   Costs of solar power systems under sale-leaseback financing arrangements sourced from project assets


-


15,269


4,333


15,269


24,399

   Property, plant and equipment acquisitions funded by liabilities


9,326


5,544


6,356


9,326


6,356

   Issuance of common stock upon conversion of convertible debt


188,229


34


-


188,263


-

 


SUNPOWER CORPORATION

REVENUE BY SIGNIFICANT CATEGORY

(In thousands)

(Unaudited)








THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29, 


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

Revenue:











   Solar power products1


$ 237,212


$ 238,578


$ 238,403


$    475,790


$    424,283

   Solar power systems2


224,852


403,755


299,610


628,607


704,525

   Residential leases3


32,679


38,732


28,673


71,411


63,923

   Other revenue4


13,128


11,357


9,830


24,485


19,218



$ 507,871


$ 692,422


$ 576,516


$ 1,200,293


$ 1,211,949












1 Solar power products represents direct sales of panels, balance of system components, and inverters to dealers, systems integrators, and residential, commercial, and utility customers in all regions.


2 Solar power systems represents revenue recognized in connection with our construction and development contracts.


3 Residential leases represents revenue recognized on solar power systems leased to customers under our solar lease program.


4 Other revenue includes revenue related to our solar power services and solutions, such as post-installation systems monitoring and maintenance and commercial power purchase agreements.

Use of Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, the company uses non-GAAP measures that are adjusted for certain items from the most directly comparable GAAP measures, as described below. Management adjusts for these items because it does not consider such items when evaluating the core operational activities of the company. The specific non-GAAP measures listed below are revenue, gross margin, net income, net income per diluted share, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. Management believes that each of these non-GAAP measures is useful to investors, enabling them to better assess changes in each of these key elements of the company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, each of these non-GAAP financial measures provides investors with another method to assess the company's operating results in a manner that is focused on its ongoing, core operating performance, absent the effects of these items. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Many of the analysts covering the company also use these non-GAAP measures in their analyses. Given management's use of these non-GAAP measures, the company believes these measures are important to investors in understanding the company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with GAAP or intended to be a replacement for GAAP financial data; the non-GAAP measures should be reviewed together with the GAAP measures 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.

Non-GAAP revenue includes adjustments relating to utility and power plant projects as described below. Non-GAAP gross margin includes adjustments relating to utility and power plant projects, stock-based compensation, non-cash interest expense, and other items as described below. In addition to those same adjustments, non-GAAP net income and non-GAAP net income per diluted share are adjusted for the tax effect of these non-GAAP adjustments as described below. In addition to the same adjustments as non-GAAP gross margin, EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for (benefit from) income taxes, and depreciation. Free cash flow includes adjustments relating to investing cash flows and lease financings as described below.

Non-GAAP Adjustments

  • Utility and power plant projects. The company includes adjustments related to the revenue recognition of utility and power plant projects based on the separately-identifiable components of transactions in order to reflect the substance of the transactions. This treatment is consistent with accounting rules relating to such projects under International Financial Reporting Standards (IFRS). On a GAAP basis, such projects are accounted for under U.S. GAAP real estate accounting guidance. Management calculates separate revenue and cost of revenue amounts each fiscal period in accordance with the two treatments above and the aggregate difference for the company's affected projects is included in the relevant reconciliation tables below. Over the life of each project, cumulative revenue and gross margin will be equivalent under the two treatments; however, revenue and gross margin will generally be recognized earlier under the company's non-GAAP treatment than under the company's GAAP treatment. Among other factors, this is due to the attribution of non-GAAP revenue and margin to the company's project development efforts at the time of initial project sale as required under IFRS accounting rules, whereas no separate attribution to this element occurs under U.S. GAAP real estate accounting guidance. Within each project, the relationship between the adjustments to revenue and gross margins is generally consistent. However, as the company may have multiple utility and power plant projects in progress at any given time, the relationship in the aggregate will occasionally appear otherwise. Management believes that this adjustment for utility and power plant projects enables investors to evaluate the company's revenue generation performance relative to the direct costs of revenue of its core businesses.

  • Stock-based compensation. Stock-based compensation relates primarily to the company's equity incentive awards. Stock-based compensation is a non-cash expense that varies from period to period and is dependent on market forces that are difficult to predict. Due to this unpredictability, management excludes this item from its internal operating forecasts and models. Management believes that this adjustment for stock-based compensation provides investors with a basis to measure the company's core performance, including compared with the performance of other companies, without the period-to-period variability created by stock-based compensation.

  • Non-cash interest expense. The company separately accounted for the fair value liabilities of the embedded cash conversion option and the over-allotment option on its 4.5% senior cash convertible debentures issued in 2010 as an original issue discount and a corresponding derivative conversion liability. As a result, the company incurs interest expense that is substantially higher than interest payable on its 4.5% senior cash convertible debentures. The company excludes non-cash interest expense because the expense does not reflect its financial results in the period incurred. In addition, in connection with the Liquidity Support Agreement with Total executed on February 28, 2012, the company issued warrants to Total to acquire 9,531,677 shares of its common stock. The fair value of the warrants was recorded as debt issuance costs and amortized over the expected life of the agreement. As a result, the Company incurred non-cash interest expense associated with the amortization of the warrants. Management believes that this adjustment for non-cash interest expense provides investors with a basis to evaluate the company's performance, including compared with the performance of other companies, without non-cash interest expense.

  • Other. Beginning in the first quarter of fiscal 2013, the company combined amounts previously disclosed under separate captions into "Other" when such amounts no longer have a significant impact on the current fiscal period. Management believes that these adjustments provide investors with a basis to evaluate the company's performance, including compared with the performance of other companies, without similar impacts.

    The adjustments recorded in "Other" for the second quarter of fiscal 2014 are primarily driven by adjustments which would have previously been disclosed under "Restructuring charges."

  • Tax effect. This amount is used to present each of the adjustments described above on an after-tax basis in connection with the presentation of non-GAAP net income and non-GAAP net income per diluted share. The company's non-GAAP tax amount is based on estimated cash tax expense and reserves. The company forecasts its annual cash tax liability and allocates the tax to each quarter in proportion to earnings for that period. This approach is designed to enhance investors' ability to understand the impact of the company's tax expense on its current operations, provide improved modeling accuracy, and substantially reduce fluctuations caused by GAAP to non-GAAP adjustments, which may not reflect actual cash tax expense.

  • EBITDA adjustments. When calculating EBITDA, in addition to adjustments described above, the company excludes the impact during the period of the following items:
    • Cash interest expense, net of interest income
    • Provision for (benefit from) income taxes
    • Depreciation

Management presents this non-GAAP financial measure to enable investors with a basis to evaluate the company's performance, including compared with the performance of other companies.

  • Free cash flow adjustments. When calculating free cash flow, the company includes the impact during the period of the following items:
    • Net cash used in investing activities
    • Proceeds from issuance of non-recourse debt financing, net of issuance costs
    • Proceeds from residential lease financing
    • Repayment of residential lease financing
    • Proceeds from sale-leaseback financing
    • Repayment of sale-leaseback financing
    • Contributions from noncontrolling interests and redeemable noncontrolling interests
    • Distributions to noncontrolling interests and redeemable noncontrolling interests

Management presents this non-GAAP financial measure to enable investors with a basis to evaluate the company's performance, including compared with the performance of other companies.

For more information about these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP Measures to Non-GAAP Measures" set forth at the end of this release, 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

(In thousands, except percentages and per share data)

(Unaudited)












Adjustments to Revenue:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

GAAP revenue


$  507,871


$ 692,422


$  576,516


$ 1,200,293


$ 1,211,949

   Utility and power plant projects


113,195


(8,709)


74,200


104,486


13,399

   Other


-


-


(672)


-


(672)

Non-GAAP revenue


$  621,066


$ 683,713


$  650,044


$ 1,304,779


$ 1,224,676












Adjustments to Gross margin:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

GAAP gross margin


$    94,145


$ 162,989


$  107,861


$    257,134


$    167,174

   Utility and power plant projects


22,614


(16,608)


16,142


6,006


84,280

   Stock-based compensation expense


3,350


3,556


2,517


6,906


4,227

   Non-cash interest expense


699


700


593


1,399


1,121

   Other


24


-


(630)


24


173

Non-GAAP gross margin


$  120,832


$ 150,637


$  126,483


$    271,469


$    256,975












GAAP gross margin (%)


18.5%


23.5%


18.7%


21.4%


13.8%

Non-GAAP gross margin (%)


19.5%


22.0%


19.5%


20.8%


21.0%












Adjustments to Net income (loss):












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

GAAP net income (loss) attributable to stockholders


$    14,102


$   65,044


$    19,565


$      79,146


$    (35,131)

   Utility and power plant projects


22,614


(16,608)


16,142


6,006


84,280

   Stock-based compensation expense


13,348


14,867


10,505


28,215


19,021

   Non-cash interest expense


5,323


5,170


12,181


10,493


24,071

   Other


(654)


(445)


825


(1,099)


2,645

   Tax effect


(10,824)


7,317


3,594


(3,507)


(4,854)

Non-GAAP net income attributable to stockholders


$    43,909


$   75,345


$    62,812


$    119,254


$      90,032












Adjustments to Net income (loss) per diluted share:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

Net income (loss) per diluted share











   Numerator:











   GAAP net income (loss) available to common stockholders1


$    14,653


$   67,679


$    19,758


$      80,328


$    (35,131)

   Non-GAAP net income available to common stockholders1


$    44,460


$   77,980


$    62,812


$    122,885


$      90,032












Denominator:











   GAAP weighted-average shares


156,333


160,434


133,973


154,886


120,248

Effect of dilutive securities:











   Stock options


-


-


-


-


100

   Restricted stock units


-


-


-


-


3,789

   Upfront Warrants (held by Total)


-


-


-


-


3,455

   0.75% debentures due 2018


-


-


(4,276)


-


-

   0.875% debentures due 2021


-


-


-


(857)


-

   4.75% debentures due 2014


-


-


-


5,021


-

   Non-GAAP weighted-average shares1


156,333


160,434


129,697


159,050


127,592












   GAAP net income (loss) per diluted share


$        0.09


$       0.42


$        0.15


$          0.52


$        (0.29)

   Non-GAAP net income per diluted share


$        0.28


$       0.49


$        0.48


$          0.77


$          0.71












1 In accordance with the if-converted method, net income (loss) available to common stockholders excludes interest expense related to the 0.75%, 0.875%, and 4.75% debentures if the debentures are considered converted in the calculation of net income (loss) per diluted share.  If the conversion option for a debenture is not in the money for the relevant period, the potential conversion of the debenture under the if-converted method is excluded from the calculation of non-GAAP net income (loss) per diluted share.

 

Revenue by Significant Category:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

GAAP Solar power products


$  237,212


$ 238,578


$  238,403


$    475,790


$    424,283

   Other


-


-


(672)


-


(672)

Non-GAAP Solar power products


$  237,212


$ 238,578


$  237,731


$    475,790


$    423,611












GAAP Solar power systems


$  224,852


$ 403,755


$  299,610


$    628,607


$    704,525

   Utility and power plant projects


113,195


(8,709)


74,200


104,486


13,399

Non-GAAP Solar power systems


$  338,047


$ 395,046


$  373,810


$    733,093


$    717,924












EBITDA:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

GAAP net income (loss) attributable to stockholders


$    14,102


$   65,044


$    19,565


$      79,146


$    (35,131)

   Utility and power plant projects


22,614


(16,608)


16,142


6,006


84,280

   Stock-based compensation expense


13,348


14,867


10,505


28,215


19,021

   Non-cash interest expense


5,323


5,170


12,181


10,493


24,071

   Other


(654)


(445)


825


(1,099)


2,645

   Cash interest expense, net of interest income


11,048


14,834


12,998


25,882


28,455

   Provision for (benefit from) income taxes


(8,168)


13,620


4,506


5,452


7,495

   Depreciation


24,026


25,371


24,551


49,397


48,171

EBITDA


$    81,639


$ 121,853


$  101,273


$    203,492


$    179,007












Free Cash Flow:












THREE MONTHS ENDED


SIX MONTHS ENDED



Jun. 29,


Mar. 30,


Jun. 30,


Jun. 29,


Jun. 30,



2014


2014


2013


2014


2013

Net cash provided by (used in) operating activities


$(132,043)


$   50,472


$  (66,179)


$    (81,571)


$    100,684

   Net cash used in investing activities


(33,064)


(31,095)


(132,530)


(64,159)


(168,452)

   Proceeds from issuance of non-recourse debt financing,
net of issuance costs


34,306


39,108


-


73,414


-

   Proceeds from residential lease financing


-


-


17,458


-


56,548

   Repayment of residential lease financing


(8,473)


(7,213)


-


(15,686)


-

   Proceeds from sale-leaseback financing


-


16,685


6,907


16,685


40,757

   Repayment of sale-leaseback financing


-


(779)


(5,124)


(779)


(5,124)

   Contributions from noncontrolling interests and
redeemable noncontrolling interests


22,226


30,552


31,551


52,778


43,866

   Distributions to noncontrolling interests and
redeemable noncontrolling interests


(519)


(1,117)


-


(1,636)


-

Free cash flow


$(117,567)


$   96,613


$(147,917)


$    (20,954)


$      68,279












 


Q3 2014 GUIDANCE (in thousands except percentages and per share data)

Q3 2014

FY 2014

Revenue (GAAP)

$575,000-$625,000

$2,550,000-$2,700,000

Revenue (non-GAAP) (1)

$600,000-$650,000

$2,500,000-$2,650,000

Gross margin (GAAP)

18%-20%

20%-22%

Gross margin (non-GAAP) (2)

17%-19%

19%-21%

Net income per diluted share (GAAP)

$0.00-$0.20

$0.75-$1.05

Net income per diluted share (non-GAAP) (3)

$0.15-$0.35

$1.10-$1.40



(1)

Estimated non-GAAP amounts above include a net increase (decrease) of $25 million for Q3 2014 and $(50) million for fiscal 2014 of revenue primarily related to utility and power plant projects.



(2)

Estimated non-GAAP amounts above for Q3 2014 include net adjustments that increase gross margin by approximately $3 million related to stock-based compensation expense, and $1 million related to non-cash interest expense. Estimated non-GAAP amounts above for fiscal 2014 include net adjustments that increase (decrease) gross margin by approximately $(40) million related to the non-GAAP revenue adjustments that are discussed above, $12 million related to stock-based compensation expense, and $5 million related to non-cash interest expense.



(3)

Estimated non-GAAP amounts above for Q3 2014 include net adjustments that increase (decrease) net income by approximately $15 million related to stock-based compensation expense, $6 million related to non-cash interest expense, $3 million related to other items, and $(1) million in tax effect. Estimated non-GAAP amounts above for fiscal 2014 include net adjustments that increase (decrease) net income by approximately $(40) million related to the non-GAAP revenue adjustments that are discussed above, $60 million related to stock-based compensation expense, $25 million related to non-cash interest expense, $8 million related to other items, and $2 million in tax effect.

The following supplemental data represent the adjustments, individual charges and credits that are included or excluded from SunPower's non-GAAP revenue, gross margin, net income (loss) and net income (loss) per diluted share measures for each period presented in the Consolidated Statements of Operations contained herein.



SUPPLEMENTAL DATA



(In thousands, except percentages)


































THREE MONTHS ENDED


































June 29, 2014



 Revenue 


 Gross margin 


 Operating expenses 


 Other income (expense), net 


 Benefit from (provision for) income taxes 


 Net income (loss)
attributable to
stockholders 



AMERICAS


EMEA


APAC


AMERICAS


EMEA


APAC


 Research and
development 


 Selling, general
and administrative 


 Restructuring charges 




GAAP


$             333,048


$            64,709


$          110,114


$            75,267


22.6%


$           10,056


15.5%


$           8,822


8.0%












$                                                                             14,102

   Utility and power plant projects


113,195


-


-


22,614




-




-




-


-


-


-


-


22,614

   Stock-based compensation expense


-


-


-


1,837




511




1,002




1,912


8,086


-


-


-


13,348

   Non-cash interest expense


-


-


-


371




97




231




6


23


-


4,595


-


5,323

   Other


-


-


-


24




-




-




-


1


(717)


38


-


(654)

   Tax effect


-


-


-


-




-




-




-


-


-


-


(10,824)


(10,824)

Non-GAAP


$             446,243


$            64,709


$          110,114


$          100,113


22.4%


$           10,664


16.5%


$         10,055


9.1%












$                                                                             43,909

































































March 30, 2014



 Revenue 


 Gross margin 


 Operating expenses 


 Other income (expense), net 


 Benefit from (provision for) income taxes 


 Net income (loss)
attributable to
stockholders 



AMERICAS


EMEA


APAC


AMERICAS


EMEA


APAC


 Research and
development 


 Selling, general
and administrative 


 Restructuring charges 




GAAP


$             471,023


$          126,258


$            95,141


$          120,710


25.6%


$           26,817


21.2%


$         15,462


16.3%












$                                                                             65,044

   Utility and power plant projects


(8,709)


-


-


(16,608)




-




-




-


-


-


-


-


(16,608)

   Stock-based compensation expense


-


-


-


2,071




655




830




1,797


9,514


-


-


-


14,867

   Non-cash interest expense


-


-


-


421




124




155




7


23


-


4,440


-


5,170

   Other


-


-


-


-




-




-




-


7


(461)


9


-


(445)

   Tax effect


-


-


-


-




-




-




-


-


-


-


7,317


7,317

Non-GAAP


$             462,314


$          126,258


$            95,141


$          106,594


23.1%


$           27,596


21.9%


$         16,447


17.3%












$                                                                             75,345

































































June 30, 2013



 Revenue 


 Gross margin 


 Operating expenses 


 Other income (expense), net 


 Benefit from (provision for) income taxes 


 Net income (loss)
attributable to
stockholders 



AMERICAS


EMEA


APAC


AMERICAS


EMEA


APAC


 Research and
development 


 Selling, general
and administrative 


 Restructuring charges 




GAAP


$             367,609


$          107,010


$          101,897


$            81,670


22.2%


$             9,614


9.0%


$         16,577


16.3%












$                                                                             19,565

   Utility and power plant projects


74,200


-


-


16,142




-




-




-


-


-


-


-


16,142

   Stock-based compensation expense


-


-


-


1,136




618




763




1,225


6,763


-


-


-


10,505

   Non-cash interest expense


-


-


-


291




132




170




19


23


-


11,546


-


12,181

   Other


-


-


(672)


42




-




(672)




-


500


928


27


-


825

   Tax effect


-


-


-


-




-




-




-


-


-


-


3,594


3,594

Non-GAAP


$             441,809


$          107,010


$          101,225


$            99,281


22.5%


$           10,364


9.7%


$         16,838


16.6%












$                                                                             62,812

































































SIX MONTHS ENDED


































June 29, 2014



 Revenue 


 Gross margin 


 Operating expenses 


 Other income (expense), net 


 Benefit from (provision for) income taxes 


 Net income (loss)
attributable to
stockholders 



AMERICAS


EMEA


APAC


AMERICAS


EMEA


APAC


 Research and
development 


 Selling, general
and administrative 


 Restructuring charges 




GAAP


$             804,071


$          190,967


$          205,255


$          195,977


24.4%


$           36,873


19.3%


$         24,284


11.8%












$                                                                             79,146

   Utility and power plant projects


104,486


-


-


6,006




-




-




-


-


-


-


-


6,006

   Stock-based compensation expense


-


-


-


3,908




1,166




1,832




3,709


17,600


-


-


-


28,215

   Non-cash interest expense


-


-


-


792




221




386




13


46


-


9,035


-


10,493

   Other


-


-


-


24




-




-




-


8


(1,178)


47


-


(1,099)

   Tax effect


-


-


-


-




-




-




-


-


-


-


(3,507)


(3,507)

Non-GAAP


$             908,557


$          190,967


$          205,255


$          206,707


22.8%


$           38,260


20.0%


$         26,502


12.9%












$                                                                           119,254

































































June 30, 2013



 Revenue 


 Gross margin 


 Operating expenses 


 Other income (expense), net 


 Benefit from (provision for) income taxes 


 Net income (loss)
attributable to
stockholders 



AMERICAS


EMEA


APAC


AMERICAS


EMEA


APAC


 Research and
development 


 Selling, general
and administrative 


 Restructuring charges 




GAAP


$             851,731


$          175,662


$          184,556


$          149,711


17.6%


$         (13,228)


-7.5%


$         30,691


16.6%












$                                                                           (35,131)

   Utility and power plant projects


13,399


-


-


84,280




-




-




-


-


-


-


-


84,280

   Stock-based compensation expense


-


-


-


1,914




1,059




1,254




2,347


12,447


-


-


-


19,021

   Non-cash interest expense


-


-


-


511




261




349




36


46


-


22,868


-


24,071

   Other


-


-


(672)


401




186




(414)




-


1,854


591


27


-


2,645

   Tax effect


-


-


-


-




-




-




-


-


-


-


(4,854)


(4,854)

Non-GAAP


$             865,130


$          175,662


$          183,884


$          236,817


27.4%


$         (11,722)


-6.7%


$         31,880


17.3%












$                                                                             90,032

































 

 

SOURCE SunPower Corp.