SunPower Reports Second-Quarter 2013 Results Q2 2013 GAAP Revenue of $577 Million, Non-GAAP Revenue of $650 Million

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

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