SAN JOSE, Calif., Aug. 10, 2011 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWRA)(NASDAQ: SPWRB) today announced financial results for its 2010 second quarter which ended July 4, 2010.
($ Millions except per-share 2nd 1st
data) Quarter 2nd Quarter Quarter
---------------------------- ------- ----------- -------
2010 2009 2010
---- ---- ----
GAAP revenue $384.2 $299.3 $347.3
---------------------------- ------ ------ ------
GAAP gross margin 22.9% 13.6% 20.7%
----------------- ---- ---- ----
GAAP net income (loss) ($6.2) $14.3 $12.6
---------------------- ----- ----- -----
GAAP net income (loss) per share ($0.06) $0.15 $0.13
-------------------------------- ------ ----- -----
Non-GAAP gross margin 26.3% 16.5% 22.5%
--------------------- ---- ---- ----
Non-GAAP net income per share $0.15 $0.09 $0.05
----------------------------- ----- ----- -----
*A reconciliation of Non-GAAP to GAAP results is included at the end
of this press release
"SunPower had a strong second quarter, as our Non-GAAP EPS of $0.15 exceeded our internal plan, and we remain on track to meet our 2010 financial and operating plans," said Tom Werner, SunPower's CEO. "Our growing pipeline of 2011 Utility and Power Plants (UPP) business bookings, as well as the continued momentum in our Residential and Commercial (R&C) business, adds to our confidence and visibility for 2011. Additionally, we are pleased with the significant progress we're making on our cost reduction roadmap and expect that our joint venture with AU Optronics (AUO) to accelerate this process."
During the second quarter, the company:
-- Announced a joint venture with AUO to operate the 1.4-gigawatt (GW)
Fab 3 facility in Malaysia, which will begin solar cell production in
the fourth quarter of this year
-- Recognized $28.3 million non-cash GAAP gain as a result of its equity
investment in Woongjin Energy Co.
-- Announced a new world record 24.2 percent efficient cell
-- Completed debt financing and an agreement to sell its 20-megawatt (MW)
Amherstburg, Ontario power plant to the Macquarie Power and Income
Fund
-- Completed debt financing of Euro 44.5 million for its Montalto 8-MW
power plant in Italy
-- Signed an additional 20-MW supply agreement with Casino Stores in
France
-- Signed a construction agreement with Naturener for a 9-MW power plant
project in Spain
-- Announced a 4.1-MW commercial system with Dow Jones & Company
-- Added more than 150 U.S. and European dealer partners in the second
quarter
"In the Residential and Commercial business, we expanded our global dealer footprint in the U.S., France and Italy, as well as hit a new milestone for project scale within our Commercial business with a 4-MW project for Dow Jones & Company," continued Werner. "In our Utility and Power Plants business, we executed on our second quarter construction plans, and yesterday announced a definitive Euro 48 million agreement for the sale of the equity of two Italian power plants totaling 28 MW. We also remain confident in our 2011 visibility on both volume and price, as we have more than 100 MW of UPP orders booked for next year with our 2011 first-quarter bookings at the best levels in two years.
"Operationally, we have accelerated our cost reduction plans for both panels and balance-of-system (BOS). We are forecasting our efficiency-adjusted cost per watt relative to conventional solar panels to be $1.36 as we exit the year and we expect to reach $1.08 by the fourth quarter of 2011. The efficiency adjusted value reflects our world-leading high-efficiency solar panels and resulting lower BOS and tracking costs. Additionally, we launched our Fab 3 joint venture with AUO in July and are analyzing new ways to leverage the operating and procurement strengths of both companies to maximize benefits of our new relationship. Finally, we are accelerating our BOS cost reduction roadmap, including the introduction of our standardized Oasis power plant in the second quarter, which reduces BOS costs by up to 25%," Werner concluded.
Q4 and Forecasted Efficiency Adjusted SunPower
Panel Cost Per Watt*
----------------------------------------------
Q4 2009 Q4 2010 Q4 2011
------- ------- -------
Cost per Watt** $1.91 $1.71 $1.48
--------------- ----- ----- -----
Efficiency Adjusted (vs. Conventional
14% panels) $1.47 $1.36 $1.08
------------------------------------- ----- ----- -----
Efficiency Adjusted (vs. Thin film 11%
panels) $1.01 $0.92 $0.71
-------------------------------------- ----- ----- -----
*Efficiency adjustments consider the BOS/tracking benefits of
high efficiency panels
**Base Cost/Watt excludes freight and pre-op expenses
Comparison: 14% efficiency panel on tracking system, 11%
efficiency panel on fixed tilt
To better align with its customers, the company re-segmented its business into two operating groups in the second quarter of 2010.
Business % of Total Q2 % of Total Non-GAAP Q2 Non-GAAP Q1 Segment Revenues Q1 Revenues Gross Margin Gross Margin -------- ------------- ----------- ------------ ------------ Residential and Commercial (R&C) 69% 59% 26% 21% ----------- --- --- --- --- Utility and Power Plant (UPP) 31% 41% 26% 24% ------------ --- --- --- ---
On a Generally Accepted Accounting Principles (GAAP) basis, second-quarter 2010 results include a $0.50 per share tax expense (including tax expense associated with discontinued operations) and a $0.30 per share pre-tax gain resulting from the company's investment in Woongjin Energy, as well as a $0.36 per share pre-tax gain related to mark to market derivative contracts. On a Non-GAAP basis, second-quarter 2010 results exclude the one-time gain on Woongjin's initial public offering as well as the impact of mark to market derivative transactions.
"During the second quarter we continued to focus on improving our balance sheet and managing our liquidity," said Dennis Arriola, SunPower CFO. "Our joint venture with AUO will reduce our capital outlay for Fab 3 by approximately 50% and further deleverage our balance sheet. As we announced yesterday, we have made significant progress in financing and selling our Montalto projects in Italy and remain on track to debt finance and monetize the balance of the Italian projects currently under construction by the end of 2010. We have also substantially mitigated the risk of our expected second half of 2010 net Euro exposure as 93% of that exposure is hedged at a US dollar rate of 1.35 to one Euro. Finally, we finished the quarter with $737 million in total cash and investments, and $75 million in additional liquidity available under the IFC loan. We are well positioned to meet our second half of 2010 and full-year guidance."
2010 Guidance
Q3 2010 Q4 2010 FY 2010
------- ------- -------
Revenue ($MM) $450-490 $825-1,025 $2,000-2,250
Gross Margin (Non-GAAP) 18-20% 20-22% 20-22%
Gross Margin (GAAP) 16-18% 19-21% 18-20%
Net Income per diluted share
(Non-GAAP) $0.08-0.15 $1.05-1.35 $1.35-1.65
Net Income (loss) per
diluted share (GAAP) ($0.27)-(0.20) $0.40-0.65 $0.25-0.55
--------------------- -------------- ---------- ----------
All historical information included in the release reflects the company's change in segment reporting that was instituted in the second quarter of 2010.
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 2010 performance on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpowercorp.com/events.cfm. Historical information for the third and fourth quarter 2009 under the company's revised segment reporting is also included in the posted supplemental information and slides. The capacity of power plants in this release is described in approximate megawatts on an alternating current (ac) basis unless otherwise noted.
About SunPower
Founded in 1985, SunPower Corp. (NASDAQ: SPWRA)(NASDAQ: SPWRB) designs, manufactures and delivers the planet's most powerful solar technology broadly available today. Residential, business, government and utility customers rely on the company's experience and proven results to maximize return on investment. With headquarters in San Jose, Calif., SunPower has offices in North America, Europe, Australia and Asia. For more information, visit www.sunpowercorp.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and may be based on underlying assumptions. The company uses words and phrases such as "on track," "plan," "pipeline," "continued," "visibility," "roadmap," "expect," "will," "forecasting," "to be," "forecasted," "guidance" and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) the company's ability to meet its 2010 financial operating plans; (b) the company's strong pipeline of 2011 Utility and Power Plants bookings; (c) the continued momentum in Residential and Commercial businesses; (d) the company's ability to achieve its cost reduction roadmap; (e) the expected cost reduction benefits from the joint venture with AUO to build Fab 3; (f) the expected beginning of solar cell production of Fab 3 in the fourth quarter of 2010; (g) the company's ability to execute, close and monetize (1) the 20MW power plant in Amherstburg, Ontario, (2) the 20 MW supply agreement with Casino Stores in France, (3) the construction agreement for a 9MW power plant with Naturener, and (4) the 4MW project with Dow Jones & Company; (h) UPP bookings for 2011; (i) the company's panel, balance-of-system and tracking cost reduction plans; (j) cost per watt, and cost per watt metrics as adjusted relative to conventional solar panels, in the fourth quarters of 2010 and 2011; (k) the company's ability to leverage operating and procurement strengths of the company and AUO; (l) the company's ability to reduce capital outlay for Fab 3 and deleverage its balance sheet; (m) the company's ability to finance and sell/monetize projects under construction by the end of 2010; and (n) revenue, GAAP and non-GAAP gross margin, and GAAP and non-GAAP net (loss)/income per diluted share guidance for the third and fourth fiscal quarters of 2010 and for the full fiscal year 2010. Such forward-looking statements are based on information available to the company as of the date of this release and involve a number of risks and uncertainties, some beyond the company's control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including risks and uncertainties such as: (i) potential difficulties associated with operating the joint venture with AUO and integrating the SunRay business, and the company's ability to achieve the anticipated synergies and manufacturing benefits from these transactions; (ii) the company's ability to obtain and maintain an adequate supply of raw materials, components, and solar panels, as well as the price it pays for such items; (iii) general business and economic conditions, including seasonality of the industry; (iv) growth trends in the solar power industry; (v) the continuation of governmental and related economic incentives promoting the use of solar power, particularly such incentives affecting the markets in which the company sells solar panels and constructs commercial systems and power plants; (vi) the significant investment required to construct power plants and the company's ability to sell or otherwise monetize power plants; (vii) the improved availability of financing arrangements for the company's customers; (viii) construction difficulties or potential delays, including permitting and transmission access and upgrades; (ix) increasing competition in the industry and lower average selling prices; (x) the joint venture's ability to ramp new production lines in Fab 3 and the company's ability to realize expected manufacturing efficiencies throughout its manufacturing operations; (xi) manufacturing difficulties that could arise; (xii) the success of the company's ongoing research and development efforts and the acceptance of the company's new products and services; (xiii) the company's international operations; (xiv) the company's liquidity, substantial indebtedness, and its ability to obtain additional financing; (xv) the company's ability to protect its intellectual property; (xvi) evolving regional permitting, financing, grid interconnection, technical, and other customer or regulatory requirements, and the company's ability to satisfy such requirements; (xvii) possible impairment of goodwill; (xviii) possible consolidation of AUO SunPower; and (ix) other risks described in the company's Annual Report on Form 10-K for the year ended January 3, 2010, and other filings with the Securities and Exchange Commission. These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date, and the company is under no obligation to, and expressly disclaims any responsibility to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
Segment Reporting Information
The UPP Segment refers to both our large-scale solar products and systems business including power plant project development and project sales, turn-key power plant EPC and O&M services, and our components business which includes large volume sales of solar panels to third parties. The R&C Segment refers to our solar equipment sales into the residential and small commercial market through our third-party global dealer network, as well as direct sales and EPC and O&M services for the commercial and public sectors installing rooftop and ground-mounted solar systems.
Non-GAAP Measures
To supplement the consolidated financial results prepared under 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 and promissory notes, stock-based compensation and interest expense as well as exclude non-cash net gains (losses) on mark-to-market derivative instruments and a gain on the change in our equity investment in a joint venture, and the related tax effects of these adjustments. In addition, the presentation of non-GAAP gross margin and non-GAAP operating income includes the results of discontinued operations. Management does not consider these non-cash items in evaluating the core operational activities of SunPower. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate SunPower's current performance. Most analysts covering SunPower use the non-GAAP measures as well. Given management's use of these non-GAAP measures, SunPower believes these measures are important to investors in understanding SunPower's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in SunPower's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data and may be different from non-GAAP measures used by other companies.
Fiscal Periods
The company reports on a fiscal-year basis and ends its quarters on the Sunday closest to the end of the applicable calendar quarter, except in a 53-week fiscal year, in which case the additional week falls into the fourth quarter of that fiscal year. Fiscal year 2010 consists of 52 weeks while fiscal year 2009 consists of 53 weeks. The second quarter of fiscal 2010 ended on July 4, 2010 and the second quarter of fiscal 2009 ended on June 28, 2009.
SunPower and Oasis are trademarks or registered trademarks of SunPower Corp. All other trademarks are the property of their respective owners.
SUNPOWER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Jul. 4, Jan. 3,
2010 2010
---- ----
(1)
ASSETS
Cash and cash equivalents $382,968 $615,879
Restricted cash and cash equivalents 353,886 310,658
Investments 172 172
Accounts receivable, net 199,603 248,833
Costs and estimated earnings in excess
of billings 57,587 26,062
Inventories 266,756 202,301
Advances to suppliers 186,866 190,628
Prepaid expenses and other assets 414,013 181,264
Property, plant and equipment, net 815,147 682,344
Project assets 102,143 15,617
Goodwill and other intangible assets,
net 442,549 223,137
Assets of discontinued operations 204,950 -
------- ---
Total assets $3,426,640 $2,696,895
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $329,310 $234,692
Accrued and other liabilities 371,926 190,830
Billings in excess of costs and
estimated earnings 9,276 17,346
Bank loans 271,591 248,953
Convertible debt 721,530 536,574
Customer advances 91,621 92,120
Liabilities of discontinued operations 166,432 -
------- ---
Total liabilities 1,961,686 1,320,515
Stockholders' equity 1,464,954 1,376,380
--------- ---------
Total liabilities and stockholders'
equity $3,426,640 $2,696,895
========== ==========
(1) As adjusted to reflect the adoption of new accounting guidance
for share lending arrangements that were
executed in connection with the Company's convertible debt offerings
in fiscal 2007.
SUNPOWER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
------------------
Jun.
Jul. 4, Apr. 4, 28,
2010 2010 2009
---- ---- ----
(1)
Revenue:
Utility and power plants $119,999 $144,094 $124,295
Residential and commercial 264,239 203,180 175,046
------- ------- -------
384,238 347,274 299,341
Cost of revenue:
Utility and power plants 97,224 111,428 114,968
Residential and commercial 199,163 164,103 143,695
------- ------- -------
296,387 275,531 258,663
Gross margin 87,851 71,743 40,678
Operating expenses:
Research and development 11,206 10,407 6,937
Selling, general and
administrative 78,376 64,280 42,775
------ ------ ------
Total operating expenses 89,582 74,687 49,712
------ ------ ------
Operating loss (1,731) (2,944) (9,034)
Other income (expense):
Gain on change in equity
interest in unconsolidated
investee 28,348 - -
Gain (loss) on mark-to-
market derivatives 34,070 (2,218) 21,193
Interest and other income
(expense), net (29,837) (16,258) (6,191)
------- ------- ------
Other income (expense), net 32,581 (18,476) 15,002
Income (loss) from
continuing operations
before income taxes and
equity in earnings of
unconsolidated investees 30,850 (21,420) 5,968
Benefit from (provision
for) income taxes (46,992) 30,875 5,223
Equity in earnings of
unconsolidated investees 2,030 3,118 3,133
----- ----- -----
Income (loss) from
continuing operations (14,112) 12,573 14,324
Income from discontinued
operations, net of taxes 7,896 - -
----- --- ---
Net income (loss) $(6,216) $12,573 $14,324
======= ======= =======
Net income (loss) per share
of class A and class B
common stock:
Net income (loss) per share
- basic:
Continuing operations $(0.15) $0.13 $0.16
Discontinued operations 0.09 - -
---- --- ---
Net income (loss) per share
- basic $(0.06) $0.13 $0.16
====== ===== =====
Net income (loss) per share
- diluted:
Continuing operations $(0.15) $0.13 $0.15
Discontinued operations 0.09 - -
---- --- ---
Net income (loss) per share
- diluted $(0.06) $0.13 $0.15
====== ===== =====
Weighted-average shares:
- Basic 95,564 95,154 90,873
- Diluted 95,564 96,472 92,640
SIX MONTHS ENDED
----------------
Jun.
Jul. 4, 28,
2010 2009
---- ----
(1)
Revenue:
Utility and power plants $264,093 $233,551
Residential and commercial 467,419 277,433
------- -------
731,512 510,984
Cost of revenue:
Utility and power plants 208,652 210,612
Residential and commercial 363,266 227,459
------- -------
571,918 438,071
Gross margin 159,594 72,913
Operating expenses:
Research and development 21,613 14,817
Selling, general and administrative 142,656 85,179
------- ------
Total operating expenses 164,269 99,996
------- ------
Operating loss (4,675) (27,083)
Other income (expense):
Gain on change in equity interest in
unconsolidated investee 28,348 -
Gain (loss) on mark-to-market
derivatives 31,852 21,193
Interest and other income (expense),
net (46,095) (18,435)
------- -------
Other income (expense), net 14,105 2,758
Income (loss) from continuing
operations before income taxes and
equity in earnings of unconsolidated
investees 9,430 (24,325)
Benefit from (provision for) income
taxes (16,117) 24,419
Equity in earnings of unconsolidated
investees 5,148 4,378
----- -----
Income (loss) from continuing
operations (1,539) 4,472
Income from discontinued operations,
net of taxes 7,896 -
----- ---
Net income (loss) $6,357 $4,472
====== ======
Net income (loss) per share of class A
and class B common stock:
Net income (loss) per share - basic:
Continuing operations $(0.02) $0.05
Discontinued operations 0.09 -
---- ---
Net income (loss) per share - basic $0.07 $0.05
===== =====
Net income (loss) per share - diluted:
Continuing operations $(0.02) $0.05
Discontinued operations 0.09 -
---- ---
Net income (loss) per share - diluted $0.07 $0.05
===== =====
Weighted-average shares:
- Basic 95,359 87,311
- Diluted 96,644 89,110
(1) As adjusted to reflect the adoption of new accounting guidance
for share lending arrangements that were executed in connection with
the Company's convertible debt offerings in fiscal 2007.
(In thousands, except per share data)
THREE MONTHS ENDED
Jul. Jun.
4, Apr. 4, 28,
2010 2010 2009
(Presented on a GAAP Basis)
Gross
margin $87,851 $71,743 $40,678
Operating
income
(loss) $(1,731) $(2,944) $(9,034)
Net
income
(loss)
per
share
of
class
A and
class
B
common
stock:
-Basic $(0.06) $0.13 $0.16
-Diluted $(0.06) $0.13 $0.15
SIX MONTHS
ENDED
Jun.
Jul. 4, 28,
2010 2009
(Presented on a GAAP Basis)
Gross
margin $159,594 $72,913
Operating
income
(loss) $(4,675) $(27,083)
Net
income
(loss)
per
share
of
class
A and
class
B
common
stock:
-Basic $0.07 $0.05
-Diluted $0.07 $0.05
THREE MONTHS ENDED
Apr. Jun.
Jul. 4, 4, 28,
2010 2010 2009
(Presented on a non-GAAP Basis)
Gross
margin $103,282 $78,141 $49,270
Operating
income
(loss) $33,032 $13,526 $8,380
Net
income
(loss)
per
share
of
class
A and
class
B
common
stock:
-Basic $0.15 $0.05 $0.09
-Diluted $0.15 $0.05 $0.09
SIX MONTHS
ENDED
Jun.
Jul. 4, 28,
2010 2009
(Presented on a non-GAAP Basis)
Gross
margin $181,423 $85,694
Operating
income
(loss) $46,558 $3,937
Net
income
(loss)
per
share
of
class
A and
class
B
common
stock:
-Basic $0.20 $0.01
-Diluted $0.20 $0.01
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 and promissory notes, stock-based compensation and interest expense as well as exclude non-cash net gains (losses) on mark-to-market derivative instruments and a gain on the change in our equity investment in a joint venture, and the related tax effects of these adjustments. In addition, the presentation of non-GAAP gross margin and non-GAAP operating income includes the results of discontinued operations. 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 and promissory notes, stock-based compensation, interest expense, net gains (losses) on mark-to-market derivative instruments, a gain on the change in our equity investment in a joint venture and the presentation of the results of discontinued operations. 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 charges including amortization of intangible assets, stock-based compensation and interest expense. In addition, the presentation of non-GAAP gross margin includes the results of discontinued operations. This non-GAAP financial measure 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 charges including amortization of intangible assets and promissory notes, stock-based compensation and interest expense. In addition, the presentation of non-GAAP operating income includes the results of discontinued operations. Non-GAAP operating income 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 and promissory notes, stock-based compensation, interest expense, net gains (losses) on mark-to-market derivative instruments, a gain on the change in our equity investment in a joint venture 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, patents, project assets, purchased technology and trade names. 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 Amortization of promissory notes. Included in the total consideration for the acquisition of SunRay completed on March 26, 2010 is $14 million in promissory notes to SunRay's management shareholders issued by SunPower. Since the vesting and payment of the promissory notes are contingent on future employment, the promissory notes are considered deferred compensation and therefore are not included in the purchase price allocated to the net assets acquired. SunPower excludes this non-cash charge over the service period required under the terms of the promissory notes 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 Non-cash interest expense. SunPower separately accounted for the liability and equity components of its convertible debt issued in 2007 in a manner that reflected interest expense equal to its non-convertible debt borrowing rate. Under new accounting guidance effective in the first quarter of 2010, SunPower measured the two existing share lending arrangements entered into in connection with its convertible debt issued in 2007 at fair value and amortized the imputed share lending costs in current and prior periods. 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.
In addition, SunPower 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 April 2010 as an original issue discount and a corresponding derivative conversion liability. As a result, SunPower incurs interest expense that is substantially higher than interest payable on its 4.5% senior cash 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 (loss) on mark-to-market derivative instruments. In connection with the issuance of its 4.5% senior cash convertible debentures in April 2010, SunPower entered into certain convertible debenture hedge and warrant transactions with respect to its class A common stock intended to reduce the potential cash payments that would occur upon conversion of the debentures. The convertible debenture hedge and warrant transactions consisting of call option instruments are deemed to be mark-to-market derivatives during the period in which the cash convertible debt remains outstanding. In addition, the embedded cash conversion option of the debt is deemed to be a mark-to-market derivative instrument during the period in which the cash convertible debt remains outstanding. Finally, the over-allotment option in favor of the debenture underwriters is deemed a mark-to-market derivative instrument during the period the over-allotment option remained unexercised. SunPower excluded the $34.1 million net gain in the second quarter 2010 and $2.2 million net loss in the first quarter 2010 relating to the above mentioned derivative instruments 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 a net non-cash gain or loss on mark-to-market derivative instruments.
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 was unexercised. 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 in the second quarter 2009 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 Gain on change in equity interest in unconsolidated investee. On June 30, 2010, Woongjin Energy Co., Ltd completed its initial public offering and the sale of 15.9 million new shares of common stock. SunPower did not participate in this common stock issuance by Woongjin Energy. As a result of the new common stock issuance by Woongjin Energy in the IPO, SunPower's percentage equity interest in Woongjin Energy decreased from 42.1% to 31.3% of Woongjin Energy's issued and outstanding shares of common stock. In connection with the IPO, SunPower recognized a non-cash gain of $28.3 million representing the excess of the IPO price over SunPower's per share carrying value of its shares. SunPower excluded the $28.3 million gain in the second quarter 2010 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 change in the company's equity interest in Woongjin Energy.
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.
o Income from discontinued operations, net of taxes. In connection with SunPower's acquisition of SunRay on March 26, 2010, it acquired an already completed and operating solar power plant owned by SunRay. As SunPower intended to sell the solar power plant, the assets, liabilities and results of operations of the power plant were classified as discontinued operations in its financial statements in accordance with GAAP. During the quarter ended July 4, 2010, SunPower generated electricity revenue and incurred costs and expenses associated with this owned asset. The presentation of SunPower's Condensed Consolidated Statements of Operations discloses the results of operations of the solar power plant as a one line item classification as discontinued operations in accordance with GAAP. As such, the presentation of GAAP gross margin and GAAP operating income in the second quarter 2010 excludes the results of these discontinued operations. SunPower reclassified the results of the solar power plant operations from the one line discontinued operations classification for GAAP purposes to the natural account classifications (revenue, cost of sales, etc.) within non-GAAP gross margin and non-GAAP operating income. SunPower believes this reclassification of the solar power plants results of operations provides an appropriate representation of the results of SunPower's operations during the quarter in operating a solar power plant.
For more information on 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 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
------------------
Jul. 4, Apr. 4, Jun. 28,
2010 2010 2009
---- ---- ----
GAAP utility and power
plants gross margin $22,775 19% $32,666 23% $9,327 8%
Amortization of
intangible assets 774 689 683
Stock-based
compensation expense 1,632 1,191 2,053
Non-cash interest
expense 275 401 561
Discontinued
operations 7,905 - -
----- --- ---
Non-GAAP utility and
power plants gross
margin $33,361 26% $34,947 24% $12,624 10%
======= ======= =======
GAAP residential and
commercial gross
margin $65,076 25% $39,077 19% $31,351 18%
Amortization of
intangible assets 2,125 2,124 2,112
Stock-based
compensation expense 2,327 1,491 2,504
Non-cash interest
expense 393 502 679
--- --- ---
Non-GAAP residential
and commercial gross
margin $69,921 26% $43,194 21% $36,646 21%
======= ======= =======
GAAP total gross
margin $87,851 23% $71,743 21% $40,678 14%
Amortization of
intangible assets 2,899 2,813 2,795
Stock-based
compensation expense 3,959 2,682 4,557
Non-cash interest
expense 668 903 1,240
Discontinued
operations 7,905 - -
----- --- ---
Non-GAAP total gross
margin $103,282 26% $78,141 23% $49,270 16%
======== ======= =======
GAAP operating loss $(1,731) $(2,944) $(9,034)
Amortization of
intangible assets 11,702 4,759 4,098
Stock-based
compensation expense 11,591 10,808 12,076
Amortization of
promissory notes 2,919 - -
Non-cash interest
expense 668 903 1,240
Discontinued
operations 7,883 - -
----- --- ---
Non-GAAP operating
income $33,032 $13,526 $8,380
======= ======= ======
SIX MONTHS ENDED
----------------
Jul. 4, Jun. 28,
2010 2009
---- ----
GAAP utility and power plants
gross margin $55,441 21% $22,939 10%
Amortization of intangible
assets 1,463 1,366
Stock-based compensation
expense 2,823 2,560
Non-cash interest expense 676 844
Discontinued operations 7,905 -
----- ---
Non-GAAP utility and power
plants gross margin $68,308 25% $27,709 12%
======= =======
GAAP residential and commercial
gross margin $104,153 22% $49,974 18%
Amortization of intangible
assets 4,249 4,222
Stock-based compensation
expense 3,818 2,893
Non-cash interest expense 895 896
--- ---
Non-GAAP residential and
commercial gross margin $113,115 24% $57,985 21%
======== =======
GAAP total gross margin $159,594 22% $72,913 14%
Amortization of intangible
assets 5,712 5,588
Stock-based compensation
expense 6,641 5,453
Non-cash interest expense 1,571 1,740
Discontinued operations 7,905 -
----- ---
Non-GAAP total gross margin $181,423 25% $85,694 17%
======== =======
GAAP operating loss $(4,675) $(27,083)
Amortization of intangible
assets 16,461 8,150
Stock-based compensation
expense 22,399 21,130
Amortization of promissory
notes 2,919 -
Non-cash interest expense 1,571 1,740
Discontinued operations 7,883 -
----- ---
Non-GAAP operating income $46,558 $3,937
======= ======
NET INCOME (LOSS) PER SHARE:
THREE MONTHS ENDED
------------------
Jun.
Jul. 4, Apr. 4, 28,
2010 2010 2009
---- ---- ----
Basic:
------
GAAP net income (loss) per share $(0.06) $0.13 $0.16
Reconciling items:
Amortization of intangible assets 0.12 0.05 0.04
Stock-based compensation expense 0.12 0.11 0.13
Amortization of promissory notes 0.03 - -
Non-cash interest expense 0.10 0.07 0.06
Mark-to-market derivatives (0.36) 0.02 (0.23)
Gain on change in equity interest in
unconsolidated investee (0.30) - -
Tax effect 0.50 (0.33) (0.07)
---- ----- -----
Non-GAAP net income per share $0.15 $0.05 $0.09
===== ===== =====
Diluted:
GAAP net income (loss) per share $(0.06) $0.13 $0.15
Reconciling items:
Amortization of intangible assets 0.12 0.05 0.04
Stock-based compensation expense 0.12 0.11 0.13
Amortization of promissory notes 0.03 - -
Non-cash interest expense 0.10 0.07 0.07
Mark-to-market derivatives (0.36) 0.02 (0.23)
Gain on change in equity interest in
unconsolidated investee (0.30) - -
Tax effect 0.50 (0.33) (0.07)
---- ----- -----
Non-GAAP net income per share $0.15 $0.05 $0.09
===== ===== =====
Weighted-average shares:
GAAP net income (loss) per share:
- Basic 95,564 95,154 90,873
- Diluted 95,564 96,472 92,640
Non-GAAP net income per share:
- Basic 95,564 95,154 90,873
- Diluted 96,816 96,472 92,640
SIX MONTHS ENDED
----------------
Jun.
Jul. 4, 28,
2010 2009
---- ----
Basic:
------
GAAP net income (loss) per share $0.07 $0.05
Reconciling items:
Amortization of intangible assets 0.17 0.09
Stock-based compensation expense 0.23 0.24
Amortization of promissory notes 0.03 -
Non-cash interest expense 0.17 0.13
Mark-to-market derivatives (0.33) (0.24)
Gain on change in equity interest in
unconsolidated investee (0.30) -
Tax effect 0.16 (0.26)
---- -----
Non-GAAP net income per share $0.20 $0.01
===== =====
Diluted:
GAAP net income (loss) per share $0.07 $0.05
Reconciling items:
Amortization of intangible assets 0.17 0.09
Stock-based compensation expense 0.23 0.24
Amortization of promissory notes 0.03 -
Non-cash interest expense 0.16 0.13
Mark-to-market derivatives (0.33) (0.24)
Gain on change in equity interest in
unconsolidated investee (0.29) -
Tax effect 0.16 (0.26)
---- -----
Non-GAAP net income per share $0.20 $0.01
===== =====
Weighted-average shares:
GAAP net income (loss) per share:
- Basic 95,359 87,311
- Diluted 96,644 89,110
Non-GAAP net income per share:
- Basic 95,359 87,311
- Diluted 96,644 89,110
The following supplemental data represents the individual charges and credits that are excluded from SunPower's non-GAAP financial measures for each period presented in the Condensed Consolidated Statements of Operations contained herein.
SUPPLEMENTAL DATA
(In thousands)
THREE MONTHS ENDED
July 4, 2010
------------
Revenue
Utility Residential
and and
power
plants commercial
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Amortization
of
promissory
notes - -
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations 7,905 -
----- ---
$7,905 $ -
====== === ===
April 4, 2010
-------------
Revenue
-------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$ - $ -
=== ===
June 28, 2009
-------------
Revenue
-------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$ - $ -
=== ===
SIX MONTHS ENDED
July 4, 2010
------------
Revenue
-------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Amortization
of
promissory
notes - -
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations 7,905 -
----- ---
$7,905 $ -
====== ===
June 28, 2009
-------------
Revenue
-------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$ - $ -
=== ===
THREE MONTHS ENDED
July 4, 2010
------------
Cost of revenue
Utility Residential
and and
power
plants commercial
Amortization
of
intangible
assets $774 $2,125
Stock-
based
compensation
expense 1,632 2,327
Amortization
of
promissory
notes - -
Non-
cash
interest
expense 275 393
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations - -
--- ---
$2,681 $4,845
====== ======
April 4, 2010
-------------
Cost of revenue
---------------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $689 $2,124
Stock-
based
compensation
expense 1,191 1,491
Non-
cash
interest
expense 401 502
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$2,281 $4,117
====== ======
June 28, 2009
-------------
Cost of revenue
---------------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $683 $2,112
Stock-
based
compensation
expense 2,053 2,504
Non-
cash
interest
expense 561 679
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$3,297 $5,295
====== ======
SIX MONTHS ENDED
July 4, 2010
------------
Cost of revenue
---------------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $1,463 $4,249
Stock-
based
compensation
expense 2,823 3,818
Amortization
of
promissory
notes - -
Non-
cash
interest
expense 676 895
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations - -
--- ---
$4,962 $8,962
====== ======
June 28, 2009
-------------
Cost of revenue
---------------
Utility Residential
and and
power
plants commercial
------ ----------
Amortization
of
intangible
assets $1,366 $4,222
Stock-
based
compensation
expense 2,560 2,893
Non-
cash
interest
expense 844 896
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$4,770 $8,011
====== ======
THREE MONTHS ENDED
July 4, 2010
------------
Operating
expenses
Research Selling,
and general
and
development administrative
Amortization
of
intangible
assets $ - $8,803
Stock-
based
compensation
expense 2,253 5,379
Amortization
of
promissory
notes - 2,919
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations - (22)
--- ---
$2,253 $17,079
====== =======
April 4, 2010
-------------
Operating
expenses
----------
Research Selling,
and general
and
development administrative
----------- ---------------
Amortization
of
intangible
assets $ - $1,946
Stock-
based
compensation
expense 1,683 6,443
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$1,683 $8,389
====== ======
June 28, 2009
-------------
Operating
expenses
----------
Research Selling,
and general
and
development administrative
----------- ---------------
Amortization
of
intangible
assets $ - $1,303
Stock-
based
compensation
expense 1,566 5,953
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$1,566 $7,256
====== ======
SIX MONTHS ENDED
July 4, 2010
------------
Operating
expenses
----------
Research Selling,
and general
and
development administrative
----------- ---------------
Amortization
of
intangible
assets $ - $10,749
Stock-
based
compensation
expense 3,936 11,822
Amortization
of
promissory
notes - 2,919
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Gain on
change
in
equity
interest
in
unconsolidated
investee - -
Tax
effect - -
Discontinued
operations - (22)
--- ---
$3,936 $25,468
====== =======
June 28, 2009
-------------
Operating
expenses
----------
Research Selling,
and general
and
development administrative
----------- ---------------
Amortization
of
intangible
assets $ - $2,562
Stock-
based
compensation
expense 2,913 12,764
Non-
cash
interest
expense - -
Mark-
to-
market
derivatives - -
Tax
effect - -
--- ---
$2,913 $15,326
====== =======
THREE MONTHS ENDED
July 4, 2010
------------
Benefit
from
(provision
Other income for)
(expense), income
net taxes
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Amortization
of
promissory
notes - -
Non-
cash
interest
expense 8,710 -
Mark-
to-
market
derivatives (34,070) -
Gain
on
change
in
equity
interest
in
unconsolidated
investee (28,348) -
Tax
effect - 47,457
Discontinued
operations 3,627 (3,614)
$(50,081) $43,843
======== =======
April 4, 2010
Benefit
from
(provision
Other income for)
(expense), income
net taxes
---------- -------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense 5,487 -
Mark-
to-
market
derivatives 2,218 -
Tax
effect - (31,589)
$7,705 $(31,589)
====== ========
June 28, 2009
-------------
Benefit
from
(provision
Other income for)
(expense), income
net taxes
---------- -------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense 4,910 -
Mark-
to-
market
derivatives (21,193) -
Tax
effect - (7,009)
$(16,283) $(7,009)
======== =======
SIX MONTHS ENDED
July 4, 2010
------------
Benefit
from
(provision
Other income for)
(expense), income
net taxes
---------- -------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Amortization
of
promissory
notes - -
Non-
cash
interest
expense 14,197 -
Mark-
to-
market
derivatives (31,852) -
Gain
on
change
in
equity
interest
in
unconsolidated
investee (28,348) -
Tax
effect - 15,868
Discontinued
operations 3,627 (3,614)
$(42,376) $12,254
======== =======
June 28, 2009
-------------
Benefit
from
(provision
Other income for)
(expense), income
net taxes
---------- -------
Amortization
of
intangible
assets $ - $ -
Stock-
based
compensation
expense - -
Non-
cash
interest
expense 9,581 -
Mark-
to-
market
derivatives (21,193) -
Tax
effect - (23,170)
-
$(11,612) $(23,170)
======== ========
THREE MONTHS ENDED
July 4, 2010
------------
Income
from
discontinued
operations,
net of
taxes
Amortization
of
intangible
assets $ -
Stock-
based
compensation
expense -
Amortization
of
promissory
notes -
Non-
cash
interest
expense -
Mark-
to-
market
derivatives -
Gain
on
change
in
equity
interest
in
unconsolidated
investee -
Tax
effect -
Discontinued
operations (7,896)
$(7,896)
=======
April 4, 2010
-------------
Income
from
discontinued
operations,
net of
taxes
------------
Amortization
of
intangible
assets $ -
Stock-
based
compensation
expense -
Non-
cash
interest
expense -
Mark-
to-
market
derivatives -
Tax
effect -
$ -
===
June 28, 2009
-------------
Income
from
discontinued
operations,
net of
taxes
------------
Amortization
of
intangible
assets $ -
Stock-
based
compensation
expense -
Non-
cash
interest
expense -
Mark-
to-
market
derivatives -
Tax
effect -
$ -
===
SIX MONTHS ENDED
July 4, 2010
------------
Income
from
discontinued
operations,
net of
taxes
------------
Amortization
of
intangible
assets $ -
Stock-
based
compensation
expense -
Amortization
of
promissory
notes -
Non-
cash
interest
expense -
Mark-
to-
market
derivatives -
Gain
on
change
in
equity
interest
in
unconsolidated
investee -
Tax
effect -
Discontinued
operations (7,896)
$(7,896)
=======
June 28, 2009
-------------
Income
from
discontinued
operations,
net of
taxes
------------
Amortization
of
intangible
assets $ -
Stock-
based
compensation
expense -
Non-
cash
interest
expense -
Mark-
to-
market
derivatives -
Tax
effect -
$ -
===
First Call Analyst:
FCMN Contact:
SOURCE: SunPower Corp.
CONTACT: Investors, Bob Okunski, +1-408-240-5447,
Bob.Okunski@sunpowercorp.com, of SunPower Corp.
Web Site: http://www.sunpowercorp.com/