SunPower Reports Second-Quarter 2013 Results

Q2 2013 GAAP Revenue of $577 Million, Non-GAAP Revenue of $650 Million

Jul 31, 2013, 16:05 ET from SunPower Corp.

SAN JOSE, Calif., July 31, 2013 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWR) today announced financial results for its 2013 second quarter ended June 30, 2013.  

($ Millions except per-share data)

2nd Quarter

2013

1st Quarter

2013

2nd Quarter

2012

GAAP revenue(1)

$576.5

$635.4

$595.9

GAAP gross margin

18.7%

9.3%

12.3%

GAAP net income (loss)(2)

$19.6

($54.7)

($84.2)

GAAP net income (loss) per diluted share(2)

$0.15

($0.46)

($0.71)

Non-GAAP gross margin(3)

19.5%

22.7%

15.1%

Non-GAAP net income per diluted share(3)

$0.48

$0.22

$0.08

Megawatts produced

296

208

257

(1) GAAP revenue excludes $73.5 million and $54.8 million for the second quarters of fiscal 2013 and 2012, respectively, and includes $60.8 million for the first quarter of fiscal 2013, in revenue primarily related to utility and power plant projects. See details in the non-GAAP measures disclosure included in this press release.

(2) GAAP results include approximately $39.7 million, $90.4 million and $90.6 million for the second quarter of fiscal 2013, first quarter of fiscal 2013, and the second quarter of fiscal 2012, respectively, in net, pre-tax charges and adjustments excluded from non-GAAP results.  See details in the non-GAAP measures disclosure included in this press release.

(3) A reconciliation of GAAP to non-GAAP results is included at the end of this press release.

"SunPower's strong results in the second quarter reflect solid operational execution, as well as continued demand for our high efficiency systems in both the power plant and distributed generation channels across all major geographies," said Tom Werner, SunPower president and CEO.  "Our North American business continues to be the cornerstone of our success as we completed panel installation at the California Valley Solar Ranch (CVSR) with full project completion expected by year end.  Construction of the 579-megawatt (MW) Solar Star Projects for MidAmerican Solar continues.  Additionally, we strengthened our position as the leader in the commercial market booking $100 million in commercial projects in the second quarter. In the residential business, demand continues to be solid with $150 million in new lease capacity financing, SunPower is well positioned for success in the second half of the year.

"In APAC, demand in the Japanese market continued to be strong as evidenced by our fourth quarter of record shipments.  Our success in Japan reflects that our industry leading technology, reliability and quality remain distinct competitive advantages in this market.  Finally, we are seeing a turnaround in our European business as we recorded our third straight quarter of financial improvement.  With demand trends improving and stabilization in both industry conditions and pricing, we remain confident in our ability to achieve profitability in the EMEA region by the end of 2013," concluded Werner.

Key milestones achieved by the company since the first quarter of 2013 include:

  • Completed panel installation for the 250-MW CVSR project – full project completion by end of 2013
  • Continued construction of 579-MW Solar Star projects for MidAmerican Solar
  • Booked $100 million in North American commercial projects
  • Signed more than 25-MW supply agreement for a power plant in Japan
  • Booked approximately 60-MWdc in residential systems in Europe
  • Residential lease program – 18,400 customers with approximately 147-MW booked to date
  • Reached full capacity in all manufacturing facilities
  • $150 million in new residential lease financing capacity with two partners
  • Completed $300 million offering of senior convertible debentures to strengthen balance sheet
  • Secured a new three-year $250 million revolving line of credit facility

"We significantly exceeded our financial targets for the second quarter," said Chuck Boynton, SunPower CFO.  "We also strengthened our balance sheet with our successful convertible bond offering, securing a new three-year $250 million revolver and are prudently managing our working capital as we reduced inventory by more than 15 percent.  For the balance of the year, our focus remains on managing our cash, strategically investing in our technology and positioning the company for long-term profitability."

Second quarter fiscal 2013 GAAP results include pre-tax charges, expenses and adjustments totaling approximately $39.7 million, including a $16.1 million gross margin reduction related to the timing of revenue recognition from utility and power plant projects; $10.5 million in stock-based compensation expense; $12.2 million in non-cash interest expense; a benefit of $0.3 million in restructuring related to the October 2012 restructuring plan, and $1.2 million of other adjustments.  These adjustments and charges are excluded from the company's non-GAAP results.  Additionally, second-quarter GAAP results exclude an adjustment of approximately $73.5 million in revenue primarily related to utility and power plant projects.

Third Quarter 2013 Financial Outlook The company's third quarter 2013 consolidated non-GAAP guidance is as follows: revenue of $550 million to $600 million, gross margin of 17 percent to 19 percent, net income per diluted share of $0.15 to $0.35 and megawatts (MW) recognized in the range of 240 MW to 260 MW.  On a GAAP basis, the company expects revenue of $575 million to $625 million, gross margin of 20 percent to 22 percent and net income per diluted share of $0.10 to $0.30.

For fiscal year 2013, the company expects non-GAAP revenue of $2.5 billion to $2.6 billion, gross margin of 18 percent to 20 percent, net income per diluted share of $1.00 to $1.30, capital expenditures of $60 million to $80 million and gigawatts (GW) recognized in the range of 1.0 GW to 1.1 GW.  On a GAAP basis, the company expects revenue of $2.45 billion to $2.55 billion, gross margin of 17 percent to 19 percent and net income (loss) per diluted share of ($0.05) to $0.20.  SunPower remains on track to reduce its operational expenses by 10 percent compared to 2012 and expects to generate free cash flow, including lease financings, in the range of $100 million to $200 million while continuing to invest in its technology roadmap and manufacturing cost reduction initiatives.

The company will host a conference call for investors this afternoon to discuss its second quarter 2013 performance at 1:30 p.m. Pacific Time.  The call will be webcast and can be accessed from SunPower's website at http://investors.sunpowercorp.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 2013 performance on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpowercorp.com/events.cfm.  The capacity of power plants in this release is described in approximate megawatts on an alternating current (ac) basis unless otherwise noted.

About SunPower 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.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 "expect," "plan," "will," estimate," "believe," and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) guidance for the third fiscal quarter, including non-GAAP revenue, gross margin, net income per diluted share and MW recognized and GAAP revenue, gross margin and net loss per diluted share; (b) guidance for fiscal year 2013, including non-GAAP revenue, gross margin, net income per diluted share, capital expenditures and MW recognized and GAAP revenue, gross margin and net income/loss per diluted share; (c) reducing costs and expenses; (d) generating free cash flow; (e) managing working capital; (f) residential leasing; (g) project development and construction; and (h) research and development activities. 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:  (1) competition in the industry and downward pressure on average selling prices; (2) the company's liquidity, substantial indebtedness, and its ability to obtain additional financing for its projects and its customers; (3) the company's ability to meet its cost reduction plans; (4) regulatory changes and availability of economic incentives promoting use of solar energy; (5) completing the design, construction, interconnection and maintenance of California Valley Solar Ranch and Antelope Valley Solar Ranch; (6) the success of the company's ongoing research and development efforts and commercialization of new products and services; (7) fluctuations in the company's operating results; (8) manufacturing difficulties that could arise; (9) challenges of managing joint ventures; and (10) other risks described in the company's Annual Report on Form 10-K for the year ended December 30, 2012, the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, 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.

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

 

 

 SUNPOWER CORPORATION 

 CONDENSED CONSOLIDATED BALANCE SHEETS 

 (In thousands) 

 (Unaudited) 

Jun. 30,

Dec. 30,

2013

2012

ASSETS

Cash and cash equivalents

$     580,560

$     457,487

Restricted cash and cash equivalents

29,138

46,964

Investments

110,152

10,885

Accounts receivable, net

459,373

398,150

Costs and estimated earnings in excess of billings

41,317

36,395

Inventories

235,156

291,386

Advances to suppliers

359,210

351,405

Prepaid expenses and other assets

929,254

889,116

Property, plant and equipment, net

838,174

774,909

Project assets - plants and land

90,665

83,507

Other intangible assets, net

556

744

Total assets

$  3,673,555

$  3,340,948

LIABILITIES AND EQUITY 

Accounts payable

$     433,123

$     414,335

Accrued and other liabilities

740,460

582,991

Billings in excess of costs and estimated earnings

334,929

225,550

Bank loans and other debt

165,124

390,361

Convertible debt

747,017

438,629

Customer advances

273,056

295,730

Total liabilities

2,693,709

2,347,596

Stockholders' equity 

958,553

993,352

Noncontrolling interests in subsidiaries

21,293

-

Total equity

979,846

993,352

Total liabilities and equity

$  3,673,555

$  3,340,948

 

 

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012

2013

2012

Revenue:

AMERICAS

$  367,609

$  484,122

$  392,282

$   851,731

$   673,775

EMEA

107,010

68,652

155,417

175,662

311,527

APAC

101,897

82,659

48,198

184,556

104,726

Total revenue

576,516

635,433

595,897

1,211,949

1,090,028

Cost of revenue:

AMERICAS

285,939

416,081

326,511

702,020

568,630

EMEA

97,396

91,494

154,455

188,890

311,300

APAC

85,320

68,545

41,431

153,865

91,350

Total cost of revenue

468,655

576,120

522,397

1,044,775

971,280

Gross margin

107,861

59,313

73,500

167,174

118,748

Operating expenses:

Research and development

13,035

13,170

14,104

26,205

30,830

Selling, general and administrative

62,035

70,092

62,480

132,127

138,674

Restructuring charges

928

(337)

47,599

591

50,645

Total operating expenses

75,998

82,925

124,183

158,923

220,149

Operating income (loss)

31,863

(23,612)

(50,683)

8,251

(101,401)

  Other expense, net

(24,101)

(35,035)

(23,980)

(59,136)

(43,011)

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

7,762

(58,647)

(74,663)

(50,885)

(144,412)

Provision for income taxes

(4,506)

(2,989)

(10,593)

(7,495)

(11,949)

Equity in earnings (loss) of unconsolidated investees

1,009

(333)

1,075

676

(2,350)

Net income (loss)

4,265

(61,969)

(84,181)

(57,704)

(158,711)

  Net loss attributable to noncontrolling interests

15,300

7,273

-

22,573

-

Net income (loss) attributable to stockholders

$    19,565

$  (54,696)

$  (84,181)

$    (35,131)

$  (158,711)

Net income (loss) per share attributable to stockholders:

Net income (loss) per share – basic

$        0.16

$      (0.46)

$      (0.71)

$        (0.29)

$        (1.38)

Net income (loss) per share – diluted 

$        0.15

$      (0.46)

$      (0.71)

$        (0.29)

$        (1.38)

Weighted-average shares:

- Basic

120,943

119,553

118,486

120,248

115,136

- Diluted

133,973

119,553

118,486

120,248

115,136

 

 

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012

2013

2012

Net income (loss)

$    4,265

$  (61,969)

$  (84,181)

$  (57,704)

$  (158,711)

Components of comprehensive income (loss):

Translation adjustment

(2,583)

(1,343)

(7,948)

(3,926)

(1,950)

Net unrealized gain (loss) on derivatives

(1,354)

2,835

(2,377)

1,481

(8,127)

Unrealized loss on investments

(7)

-

-

(7)

-

Income taxes

254

(533)

446

(279)

1,526

Net change in accumulated other comprehensive income (loss)

(3,690)

959

(9,879)

(2,731)

(8,551)

Total comprehensive income (loss)

575

(61,010)

(94,060)

(60,435)

(167,262)

Comprehensive loss attributable to noncontrolling interests

15,300

7,273

-

22,573

-

Comprehensive income (loss) attributable to stockholders

$  15,875

$  (53,737)

$  (94,060)

$  (37,862)

$  (167,262)

 

SUNPOWER CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30

Jul. 1,

2013

2013

2012

2013

2012

(1)

(1)

Cash flows from operating activities:

Net income (loss)

$      4,265

$  (61,969)

$  (84,181)

$  (57,704)

$  (158,711)

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

Stock-based compensation

10,505

8,516

11,367

19,021

23,908

Depreciation

24,551

23,620

29,291

48,171

58,362

Loss on retirement of property, plant and equipment

-

-

45,409

-

45,409

Amortization of other intangible assets

42

147

2,695

189

5,477

Gain (loss) on mark-to-market derivatives

27

-

9

27

(4)

Non-cash interest expense

12,181

11,890

8,247

24,071

15,346

Amortization of debt issuance costs

1,041

1,094

861

2,135

1,880

Third-party inventories write-down

-

-

(176)

-

8,869

Equity in (earnings) loss of unconsolidated investees

(1,009)

333

(1,075)

(676)

2,350

Deferred income taxes and other tax liabilities

2,423

4,724

4,969

7,147

2,663

Changes in operating assets and liabilities:

Accounts receivable

(167,794)

60,340

69,301

(107,454)

156,973

Costs and estimated earnings in excess of billings

(4,073)

(849)

(16,520)

(4,922)

(13,736)

Inventories

32,316

(5,606)

31,972

26,710

(54,567)

Project assets

3,957

(35,250)

(219)

(31,293)

(39,246)

Prepaid expenses and other assets

(142,819)

197,489

(14,179)

54,670

(81,677)

Advances to suppliers

(3,486)

(4,319)

(2,596)

(7,805)

(18,320)

Accounts payable and other accrued liabilities

70,517

(28,825)

(72,866)

41,692

(63,726)

Billings in excess of costs and estimated earnings

112,076

(2,697)

(24,502)

109,379

(25,167)

Customer advances

(20,899)

(1,775)

3,079

(22,674)

4,095

Net cash provided by (used in) operating activities

(66,179)

166,863

(9,114)

100,684

(129,822)

Cash flows from investing activities:

Decrease in restricted cash and cash equivalents

29

17,797

7,677

17,826

51,621

Purchases of property, plant and equipment

(7,839)

(12,042)

(29,862)

(19,881)

(62,644)

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

(23,387)

(41,688)

(35,485)

(65,075)

(51,406)

Purchases of marketable securities

(99,928)

-

-

(99,928)

-

Proceeds from sale of equipment to third-party

6

11

3

17

419

Cash received for sale of investment in unconsolidated investee

-

-

-

-

17,403

Cash paid for investments in unconsolidated investees

(1,411)

-

(10,000)

(1,411)

(10,000)

Net cash used in investing activities

(132,530)

(35,922)

(67,667)

(168,452)

(54,607)

Cash flows from financing activities:

Proceeds from issuance of convertible debt, net of issuance costs

296,283

-

-

296,283

-

Proceeds from issuance of bank loans, net of issuance costs

-

-

125,000

-

125,000

Proceeds from issuance of project loans, net of issuance costs

32,554

24,061

13,787

56,615

13,787

Proceeds from residential lease financing

17,458

39,090

8,247

56,548

8,247

Proceeds from sale-leaseback financing

6,907

33,850

-

40,757

-

Contributions from noncontrolling interests

31,551

12,315

-

43,866

-

Repayment of bank loans, project loans and other debt

(101,211)

(180,501)

(540)

(281,712)

(101,132)

Repayment of sale-leaseback financing

(5,124)

-

-

(5,124)

-

Cash paid for repurchased convertible debt

-

-

-

-

(198,608)

Proceeds from private offering of common stock, net of issuance costs

-

-

-

-

163,681

Cash distributions to Parent in connection with the transfer of entities under common control

-

-

-

-

(178,290)

Proceeds from exercise of stock options

24

25

26

49

34

Purchases of stock for tax withholding obligations on vested restricted stock

(5,444)

(10,739)

(1,319)

(16,183)

(5,204)

Net cash provided by (used in) financing activities

272,998

(81,899)

145,201

191,099

(172,485)

Effect of exchange rate changes on cash and cash equivalents

684

(942)

(4,307)

(258)

(2,454)

Net increase (decrease) in cash and cash equivalents

74,973

48,100

64,113

123,073

(359,368)

Cash and cash equivalents, beginning of period

505,587

457,487

302,137

457,487

725,618

Cash and cash equivalents, end of period

$  580,560

$  505,587

$  366,250

$  580,560

$   366,250

Non-cash transactions:

Assignment of financing receivables to a third party financial institution

$    11,265

$    33,969

$      2,523

$    45,234

$       2,523

Property, plant and equipment acquisitions funded by liabilities

6,356

5,042

12,124

6,356

12,124

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

14,178

15,536

29,114

29,714

41,477

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

1,708

4,070

5,064

1,708

5,064

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

4,333

20,066

-

24,399

-

Non-cash interest expense capitalized and added to the cost of qualified assets

162

159

386

321

750

Issuance of warrants in connection with the Liquidity Support Agreement

-

-

-

-

50,327

(1) As adjusted to conform to the current period presentation for solar power systems leased and to be leased.

 

(In thousands, except per share data)

THREE MONTHS ENDED

SIX MONTHS ENDED

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1,

Jun. 31,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012

2013

2012

2013

2013

2012

2012

2012

 (Presented on a GAAP Basis) 

 (Presented on a non-GAAP Basis) 

Gross margin

$  107,861

$    59,313

$    73,500

$  167,174

$   118,748

$  126,483

$  130,492

$    98,041

$   256,975

$  171,570

Operating income (loss)

$    31,863

$  (23,612)

$  (50,683)

$      8,251

$  (101,401)

$    59,943

$    55,430

$    32,093

$   115,373

$    25,991

Net income (loss) per share attributable to stockholders:

- Basic

$        0.16

$      (0.46)

$      (0.71)

$       (0.29)

$        (1.38)

$        0.52

$        0.23

$        0.08

$         0.75

$       (0.03)

- Diluted

$        0.15

$      (0.46)

$      (0.71)

$       (0.29)

$        (1.38)

$        0.48

$        0.22

$        0.08

$         0.71

$       (0.03)

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 for certain items, as described below. Management does not consider these items in evaluating the core operational activities of SunPower. The specific non-GAAP measures listed below are gross margin, operating income (loss), net income (loss) per share, earnings before interest, taxes, depreciation and amortization (EBITDA) and free cash flow. Management believes that each of these non-GAAP measures (gross margin, operating income (loss), net income (loss) per share, EBITDA and free cash flow) 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 certain items as described below. 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 these items. 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. 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. These non-GAAP measures are not in accordance with or an alternative 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 gross margin. The use of this non-GAAP financial measure allows management to evaluate the gross margin of SunPower's core businesses and trends across different reporting periods on a consistent basis, independent of charges including stock-based compensation, non-cash interest expense and other items as described below. In addition, the presentation of non-GAAP gross margin includes the revenue recognition of utility and power plant projects on a non-GAAP basis. 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.
  • Non-GAAP operating income (loss). The use of this non-GAAP financial measure allows management to evaluate the operating results of SunPower's core businesses and trends across different reporting periods on a consistent basis, independent of charges including stock-based compensation, non-cash interest expense, restructuring charges, and other items as described below. In addition, the presentation of non-GAAP operating income (loss) includes the revenue recognition of utility and power plant projects on a non-GAAP basis. Non-GAAP operating income (loss) 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 SunPower's core businesses and to compare results of operations on a more consistent basis against that of other companies in the industry.
  • Non-GAAP net income (loss) per share. Management presents this non-GAAP financial measure to enable investors and analysts to assess SunPower's operating results and trends across different reporting periods on a consistent basis, independent of items including stock-based compensation, non-cash interest expense, restructuring charges, other items as described below, and the tax effects of these non-GAAP adjustments. In addition, the presentation of non-GAAP net income (loss) includes the revenue recognition of utility and power plant projects on a non-GAAP basis. Management presents this non-GAAP financial measure to enable investors and analysts to compare SunPower's operating results on a more consistent basis against that of other companies in the industry.
  • EBITDA. Management presents this non-GAAP financial measure to enable investors and analysts to assess SunPower's operating results and trends across different reporting periods on a consistent basis, independent of items including stock-based compensation, non-cash interest expense, restructuring charges, cash interest expense, net of interest income, provision for income taxes, depreciation, and other items as described below. In addition, the presentation of EBITDA includes the revenue recognition of utility and power plant projects on a non-GAAP basis. Management presents this non-GAAP financial measure to enable investors and analysts to compare SunPower's operating results on a more consistent basis against that of other companies in the industry.
  • Free cash flow. Management presents this non-GAAP financial measure to enable investors and analysts to assess SunPower's operating results and trends across different reporting periods on a consistent basis, inclusive of lease financing as described below. Management presents this non-GAAP financial measure to enable investors and analysts to compare SunPower's operating results on a more consistent basis against that of other companies in the industry.

Included items

  • Utility and power plant projects. The company includes adjustments to non-GAAP revenue and non-GAAP cost of revenue related to the utility and power plant projects based on the separately identifiable components of the transactions in order to reflect the substance of the transactions. Such treatment is consistent with accounting rules under International Financial Reporting Standards (IFRS). On a GAAP basis, such revenue and costs of revenue 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 between 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 are 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 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.
  • Free cash flow adjustments. Specifically to calculate free cash flow, the company includes the impact during the period of the following items:
    • Net cash used in investing activities
    • Proceeds from residential lease financing
    • Proceeds from sale-leaseback financing
    • Contributions from noncontrolling interests
    • Repayment of sale-leaseback financing

Excluded Items

  • Stock-based compensation. Stock-based compensation relates primarily to SunPower stock awards such as 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.
  • Non-cash interest expense. 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 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. 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 is recorded as debt issuance costs and amortized over the expected life of the agreement.  As a result, SunPower incurs non-cash interest expense associated with the amortization of the warrants. 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.
  • Restructuring charges. In October 2012, the company's Board of Directors approved a reorganization to accelerate operating cost reduction and improve overall operating efficiency (the October 2012 Restructuring Plan). Restructuring charges are excluded from non-GAAP financial measures because they are not considered core operating activities and such costs have historically occurred infrequently. Although SunPower has engaged in restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. As such, management believes that it is appropriate to exclude restructuring charges from SunPower's non-GAAP financial measures as they are not reflective of ongoing operating results or contribute to a meaningful evaluation of a company's past operating performance.
  • Other. Beginning with the first quarter of fiscal 2013 the company has combined amounts previously disclosed under separate captions. These amounts were previously disclosed under one of the following captions:
    • Goodwill and other intangible asset impairment
    • Amortization of intangible assets
    • Restructuring charges (related to actions prior to the October 2012 Restructuring Plan)
    • Charges on manufacturing step reduction plan
    • Non-recurring idle equipment impairment
    • Class action settlement
    • Acquisition and integration costs
    • Change in European government incentives
    • Gain (loss) on mark-to-market derivative instruments
    • Gain on share lending arrangement
    • Gain on sale of equity interest in unconsolidated investee

The adjustments recorded in "Other" for the second quarter of fiscal 2013 are primarily driven by adjustments which would have previously been disclosed under "Restructuring charges" and "Change in European government incentives."

  • 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 (loss) per share. The company's non-GAAP tax amount is based on estimated cash tax expense and reserves.  This approach is designed to enhance the ability of investors to understand 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. The company forecasts its annual cash tax liability and allocates the tax to each quarter in proportion to earnings for that period.
  • EBITDA adjustments. Specifically to calculate EBITDA, in addition to adjustments previously described above, the company excludes the impact during the period of the following items:
    • Cash interest expense, net of interest income
    • Provision for income taxes
    • Depreciation

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

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012

2013

2012

GAAP AMERICAS revenue

$   367,609

$  484,122

$  392,282

$     851,731

$     673,775

Utility and power plant projects

74,200

(60,801)

54,824

13,399

141,027

Non-GAAP AMERICAS revenue

$   441,809

$  423,321

$  447,106

$     865,130

$     814,802

GAAP EMEA revenue

$   107,010

$    68,652

$  155,417

$     175,662

$     311,527

Other

-

-

-

-

(193)

Non-GAAP EMEA revenue

$   107,010

$    68,652

$  155,417

$     175,662

$     311,334

GAAP APAC revenue

$   101,897

$    82,659

$    48,198

$     184,556

$     104,726

Other

(672)

-

-

(672)

-

Non-GAAP APAC revenue

$   101,225

$    82,659

$    48,198

$     183,884

$     104,726

GAAP total revenue

$   576,516

$  635,433

$  595,897

$  1,211,949

$  1,090,028

Utility and power plant projects

74,200

(60,801)

54,824

13,399

141,027

Other

(672)

-

-

(672)

(193)

Non-GAAP total revenue

$   650,044

$  574,632

$  650,721

$  1,224,676

$  1,230,862

GAAP AMERICAS gross margin

$     81,670

22.2%

$    68,041

14.1%

$    65,771

16.8%

$     149,711

17.6%

$     105,145

15.6%

Utility and power plant projects

16,142

68,138

14,926

84,280

30,684

Stock-based compensation expense

1,136

778

2,025

1,914

3,154

Non-cash interest expense

291

220

205

511

423

Other

42

359

2,256

401

6,593

Non-GAAP AMERICAS gross margin

$     99,281

22.5%

$  137,536

32.5%

$    85,183

19.1%

$     236,817

27.4%

$     145,999

17.9%

GAAP EMEA gross margin

$       9,614

9.0%

$  (22,842)

-33.3%

$         962

0.6%

$      (13,228)

-7.5%

$            227

0.1%

Stock-based compensation expense

618

441

1,398

1,059

2,363

Non-cash interest expense

132

129

137

261

313

Other

-

186

2,326

186

6,414

Non-GAAP EMEA gross margin

$     10,364

9.7%

$  (22,086)

-32.2%

$      4,823

3.1%

$      (11,722)

-6.7%

$         9,317

3.0%

GAAP APAC gross margin

$     16,577

16.3%

$    14,114

17.1%

$      6,767

14.0%

$       30,691

16.6%

$       13,376

12.8%

Stock-based compensation expense

763

491

492

1,254

757

Non-cash interest expense

170

179

44

349

109

Other

(672)

258

732

(414)

2,012

Non-GAAP APAC gross margin

$     16,838

16.6%

$    15,042

18.2%

$      8,035

16.7%

$       31,880

17.3%

$       16,254

15.5%

GAAP total gross margin

$   107,861

18.7%

$    59,313

9.3%

$    73,500

12.3%

$     167,174

13.8%

$     118,748

10.9%

Utility and power plant projects

16,142

68,138

14,926

84,280

30,684

Stock-based compensation expense

2,517

1,710

3,915

4,227

6,274

Non-cash interest expense

593

528

386

1,121

845

Other

(630)

803

5,314

173

15,019

Non-GAAP total gross margin

$   126,483

19.5%

$  130,492

22.7%

$    98,041

15.1%

$     256,975

21.0%

$     171,570

13.9%

GAAP operating expenses

$     75,998

$    82,925

$  124,183

$     158,923

$     220,149

Stock-based compensation expense

(7,988)

(6,806)

(7,452)

(14,794)

(17,634)

Non-cash interest expense

(42)

(40)

(25)

(82)

(51)

October 2012 Restructuring Plan 

255

578

-

833

-

Other

(1,683)

(1,595)

(50,758)

(3,278)

(56,885)

Non-GAAP operating expenses

$     66,540

$    75,062

$    65,948

$     141,602

$     145,579

GAAP operating income (loss)

$     31,863

$  (23,612)

$  (50,683)

$         8,251

$    (101,401)

Utility and power plant projects

16,142

68,138

14,926

84,280

30,684

Stock-based compensation expense

10,505

8,516

11,367

19,021

23,908

Non-cash interest expense

635

568

411

1,203

896

October 2012 Restructuring Plan 

(255)

(578)

-

(833)

-

Other

1,053

2,398

56,072

3,451

71,904

Non-GAAP operating income

$     59,943

$    55,430

$    32,093

$     115,373

$       25,991

 

NET INCOME (LOSS) PER SHARE ATTRIBUTABLE TO STOCKHOLDERS:

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Jul. 1,

Jun. 30,

Jul. 1

2013

2013

2012

2013

2012

Basic:

GAAP net income (loss) per share attributable to stockholders

$    0.16

$  (0.46)

$  (0.71)

$     (0.29)

$     (1.38)

Utility and power plant projects

0.13

0.57

0.12

0.70

0.27

Stock-based compensation expense

0.09

0.07

0.10

0.16

0.21

Non-cash interest expense

0.10

0.10

0.07

0.20

0.13

October 2012 Restructuring Plan 

-

-

-

(0.01)

-

Other

0.01

0.02

0.47

0.03

0.65

Tax effect

0.03

(0.07)

0.03

(0.04)

0.09

Non-GAAP net income (loss) per share attributable to stockholders

$    0.52

$    0.23

$    0.08

$      0.75

$     (0.03)

Diluted:

GAAP net income (loss) per share attributable to stockholders

$    0.15

$  (0.46)

$  (0.71)

$     (0.29)

$     (1.38)

Utility and power plant projects

0.12

0.56

0.12

0.68

0.27

Stock-based compensation expense

0.08

0.07

0.10

0.15

0.21

Non-cash interest expense

0.09

0.10

0.07

0.19

0.13

October 2012 Restructuring Plan 

-

-

-

(0.01)

-

Other

0.01

0.02

0.47

0.03

0.65

Tax effect

0.03

(0.07)

0.03

(0.04)

0.09

Non-GAAP net income (loss) per share attributable to stockholders

$    0.48

$    0.22

$     0.08

$      0.71

$     (0.03)

Weighted-average shares:

GAAP net income (loss) per share attributable to stockholders:

- Basic

120,943

119,553

118,486

120,248

115,136

- Diluted

133,973

119,553

118,486

120,248

115,136

Non-GAAP net income (loss) per share attributable to stockholders:

- Basic

120,943

119,553

118,486

120,248

115,136

- Diluted*

129,697

125,487

118,915

127,592

115,136

*Non-GAAP diluted weighted-average shares exclude the potential impact of the company's convertible bonds under the if-converted method when the relevant conversion option is not in the money for the relevant period. For the three months ended June 30, 2013, 4.3 million and 8.7 million weighted-average shares relating to the company's 0.75% convertible bonds due 2018 and the company's 4.75% convertible bonds due 2014, respectively, were excluded. For the six months ended June 30, 2013, 2.1 million and 8.7 million weighted-average shares relating to the company's 0.75% convertible bonds due 2018 and the company's 4.75% convertible bonds due 2014, respectively, were excluded. 

 

EBITDA:

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Dec. 30,

Sep. 30,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012 (1)

2012 (1)

2012

2013

2012

GAAP net income (loss) attributable to stockholders

$     19,565

$  (54,696)

$  (144,771)

$  (48,538)

$  (84,181)

$  (35,131)

$  (158,711)

Utility and power plant projects

16,142

68,138

82,294

(5,815)

14,926

84,280

30,684

Stock-based compensation expense

10,505

8,516

9,260

9,271

11,367

19,021

23,908

Non-cash interest expense

12,181

11,890

8,841

13,990

8,247

24,071

15,346

October 2012 Restructuring Plan 

(255)

(578)

30,227

-

-

(833)

-

Other

1,080

2,398

48,628

30,057

56,081

3,478

74,653

Cash interest expense, net of interest income

12,998

15,457

11,545

12,276

11,238

28,455

22,983

Provision for income taxes

4,506

2,989

9,300

593

10,593

7,495

11,949

Depreciation

24,551

23,620

25,909

24,385

29,291

48,171

58,362

EBITDA

$   101,273

$    77,734

$     81,233

$   36,219

$   57,562

$  179,007

$     79,174

(1) Additional information included for comparative period purposes as metrics were not previously disclosed in connection with the respective quarters

 

FREE CASH FLOW:

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun. 30,

Mar. 31,

Dec. 30,

Sep. 30,

Jul. 1,

Jun. 30,

Jul. 1,

2013

2013

2012 (1)

2012 (1)

2012

2013

2012

Net cash provided by (used in) operating activities

$    (66,179)

$  166,863

$   141,204

$   17,521

$    (9,114)

$  100,684

$  (129,822)

Net cash used in investing activities

(132,530)

(35,922)

(101,106)

(64,354)

(67,667)

(168,452)

(54,607)

Proceeds from residential lease financing

17,458

39,090

33,568

18,562

8,247

56,548

8,247

Proceeds from sale-leaseback financing

6,907

33,850

-

-

-

40,757

-

Contributions from noncontrolling interests

31,551

12,315

-

-

-

43,866

-

Repayment of sale-leaseback financing

(5,124)

-

-

-

-

(5,124)

-

Free cash flow

$  (147,917)

$  216,196

$     73,666

$  (28,271)

$  (68,534)

$    68,279

$  (176,182)

(1) Additional information included for comparative period purposes as metrics were not previously disclosed in connection with the respective quarters

 

Q3 2013 GUIDANCE (in thousands except per share data)

Q3 2013

FY 2013

Revenue (GAAP)

$575,000-$625,000

$2,450,000-$2,550,000

Revenue (non-GAAP) (a)

$550,000-$600,000

$2,500,000-$2,600,000

Gross margin (GAAP)

20%-22%

17%-19%

Gross margin (non-GAAP) (b)

17%-19%

18%-20%

Net income (loss) per diluted share (GAAP)

$0.10-$0.30

($0.05)-$0.20

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

$0.15-$0.35

$1.00-$1.30

(a)

Estimated non-GAAP amounts above include a net reduction of approximately $25 million for Q3 2013 and a net increase of approximately $50 million for fiscal 2013 of estimated revenue for utility and power plant projects.

(b)

Estimated non-GAAP amounts above for Q3 2013 reflect adjustments that include a gross margin reduction of approximately $25 million primarily related to the non-GAAP revenue adjustments that are discussed above. In addition, the estimated non-GAAP amounts exclude estimated stock-based compensation expense of approximately $3 million and estimated non-cash interest expense of approximately $1 million. Estimated non-GAAP amounts above for fiscal 2013 reflect adjustments that include a gross margin benefit of approximately $30 to $35 million primarily related to the non-GAAP revenue adjustments that are discussed above. In addition, the estimated non-GAAP amounts exclude estimated stock-based compensation expense of approximately $11 million, estimated non-cash interest expense of approximately $3 million, and estimated other items of approximately $1 million.

(c)

Estimated non-GAAP amounts above for Q3 2013 reflect adjustments that include a gross margin reduction of approximately $25 million primarily related to the non-GAAP revenue adjustments that are discussed above. In addition, the estimated non-GAAP amounts exclude estimated stock-based compensation expense of approximately $12 million, estimated non-cash interest expense of approximately $12 million, estimated restructuring charges of approximately $1 million, estimated other items of approximately $3 million and estimated tax effect of approximately $2 million. Estimated non-GAAP amounts above for fiscal 2013 reflect adjustments that include a gross margin benefit of approximately $30 to $35 million primarily related to the non-GAAP revenue adjustments that are discussed above. In addition, the estimated non-GAAP amounts exclude estimated stock-based compensation expense of approximately $43 million, estimated non-cash interest expense of approximately $49 million, estimated restructuring charges of approximately $3 million, estimated other items of approximately $8 million and estimated tax effect of approximately $3 million.

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

 

SUPPLEMENTAL DATA

(In thousands)

THREE MONTHS ENDED

June 30, 2013

 Revenue 

 Cost of revenue 

 Operating expenses 

 Other income (expense), net 

 Benefit from (provision for) income taxes 

AMERICAS

EMEA

APAC

AMERICAS

EMEA

APAC

 Research and development 

 Selling, general and administrative 

 Restructuring charges 

Utility and power plant projects

74,200

-

-

(58,058)

-

-

-

-

-

-

-

Stock-based compensation expense

-

-

-

1,136

618

763

1,225

6,763

-

-

-

Non-cash interest expense

-

-

-

291

132

170

19

23

-

11,546

-

October 2012 Restructuring Plan

-

-

-

-

-

-

-

-

(255)

-

-

Other

-

-

(672)

42

-

-

-

500

1,183

27

-

Tax effect

-

-

-

-

-

-

-

-

-

-

3,594

$      74,200

$      -

$  (672)

$    (56,589)

$     750

$     933

$       1,244

$             7,286

$          928

$     11,573

$       3,594

March 31, 2013

 Revenue 

 Cost of revenue 

 Operating expenses 

 Other income (expense), net 

 Benefit from (provision for) income taxes 

AMERICAS

EMEA

APAC

AMERICAS

EMEA

APAC

 Research and development 

 Selling, general and administrative 

 Restructuring charges 

Utility and power plant projects

$    (60,801)

$      -

$      -

$    128,939

$       -

$       -

$             -

$                  -

$            -

$            -

$            -

Stock-based compensation expense

-

-

-

778

441

491

1,122

5,684

-

-

-

Non-cash interest expense

-

-

-

220

129

179

17

23

-

11,322

-

October 2012 Restructuring Plan

-

-

-

-

-

-

-

-

(578)

-

-

Other

-

-

-

359

186

258

-

1,354

241

-

-

Tax effect

-

-

-

-

-

-

-

-

-

-

(8,448)

$    (60,801)

$      -

$      -

$    130,296

$     756

$     928

$       1,139

$             7,061

$        (337)

$     11,322

$     (8,448)

July 1, 2012

 Revenue 

 Cost of revenue 

 Operating expenses 

 Other income (expense), net 

 Benefit from (provision for) income taxes 

AMERICAS

EMEA

APAC

AMERICAS

EMEA

APAC

 Research and development 

 Selling, general and administrative 

 Restructuring charges 

Utility and power plant projects

$      54,824

$      -

$      -

$    (39,898)

$       -

$       -

$              -

$                  -

$            -

$            -

$            -

Stock-based compensation expense

-

-

-

2,025

1,398

492

1,095

6,357

-

-

-

Non-cash interest expense

-

-

-

205

137

44

3

22

-

7,836

-

Other

-

-

-

2,256

2,326

732

-

3,159

47,599

9

-

Tax effect

-

-

-

-

-

-

-

-

-

-

3,315

$      54,824

$      -

$      -

$    (35,412)

$  3,861

$  1,268

$       1,098

$            9,538

$     47,599

$       7,845

$       3,315

SIX MONTHS ENDED

June 30, 2013

 Revenue 

 Cost of revenue 

 Operating expenses 

 Other income (expense), net 

 Benefit from (provision for) income taxes 

AMERICAS

EMEA

APAC

AMERICAS

EMEA

APAC

 Research and development 

 Selling, general and administrative 

 Restructuring charges 

Utility and power plant projects

$      13,399

$      -

$      -

$      70,881

$       -

$       -

$              -

$                  -

$            -

$             -

$            -

Stock-based compensation expense

-

-

-

1,914

1,059

1,254

2,347

12,447

-

-

-

Non-cash interest expense

-

-

-

511

261

349

36

46

-

22,868

-

October 2012 Restructuring Plan

-

-

-

-

-

-

-

-

(833)

-

-

Other

-

-

(672)

401

186

258

-

1,854

1,424

27

-

Tax effect

-

-

-

-

-

-

-

-

-

-

(4,854)

$      13,399

$      -

$  (672)

$      73,707

$  1,506

$  1,861

$       2,383

$           14,347

$          591

$     22,895

$     (4,854)

July 1, 2012

 Revenue 

 Cost of revenue 

 Operating expenses 

 Other income (expense), net 

 Benefit from (provision for) income taxes 

AMERICAS

EMEA

APAC

AMERICAS

EMEA

APAC

 Research and development 

 Selling, general and administrative 

 Restructuring charges 

Utility and power plant projects

$    141,027

$      -

$      -

$  (110,343)

$       -

$       -

$             -

$                  -

$            -

$            -

$            -

Stock-based compensation expense

-

-

-

3,154

2,363

757

2,875

14,759

-

-

-

Non-cash interest expense

-

-

-

423

313

109

6

45

-

14,450

-

October 2012 Restructuring Plan 

-

-

-

-

-

-

-

-

-

-

-

Other

-

(193)

-

6,593

6,607

2,012

-

6,240

50,645

2,749

-

Tax effect

-

-

-

-

-

-

-

-

-

-

10,423

$    141,027

$  (193)

$      -

$  (100,173)

$  9,283

$  2,878

$       2,881

$           21,044

$     50,645

$     17,199

$     10,423

 

 

SOURCE SunPower Corp.



RELATED LINKS

http://www.sunpowercorp.com