SunPower Updates Its Manufacturing Cost Reduction Initiatives

Manufacturing Step Reduction Program on Track

Company to Consolidate Philippines Manufacturing Operations

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Apr 16, 2012, 03:05 ET

SAN JOSE, Calif., April 16, 2012 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWR) today announced an update to its manufacturing cost reduction initiatives.

"Reducing our manufacturing costs and extending our technology advantage with our industry leading Maxeon Gen E cells remains a top priority for the company," said Tom Werner, SunPower president and CEO. "Operationally, our step reduction program is on plan as we now have 2 lines running under our new process and expect to have all 12 lines at our cell fabrication plant 2 (Fab 2) converted by the end of 2012.

"Additionally, as a result of our continued cost reduction progress at our Fab 2 and Fab 3 manufacturing facilities, we have made the strategic decision to consolidate our Philippine manufacturing operations into Fab 2 and begin repurposing Fab 1 this quarter. This decision will enable us to rationalize our operating expenses, improve supply chain efficiency and lower our manufacturing cost per watt through scale advantages. The reduction of approximately 125 megawatts of nameplate capacity at Fab 1 will be partially offset by further improvement in yields and equipment efficiency in Fab 2 and Fab 3," concluded Werner.

The company's manufacturing cost reduction initiatives remain on track, including its step reduction program which will reduce the number of steps in the manufacturing process by 15 percent by the end of 2012. Combined with additional yield and equipment efficiency improvements, the company expects to achieve its cost goal of approximately $0.86 per Watt, on an efficiency adjusted basis, exiting 2012.

As a component of repurposing, SunPower is working with Deca Technologies and others on the use of the Fab 1 facility. SunPower is a minority shareholder in Deca Technologies, an electronic interconnect solutions provider that initially offers wafer level chip scale packaging services to the semiconductor industry.

Employees at Fab 1 will be transferred to Fab 2 or have the opportunity to work for potential Fab 1 tenants. SunPower will transfer some equipment from Fab 1 to Fab 2 to reduce manufacturing constraints.

SunPower expects to record pre-tax GAAP charges in restructuring totaling $51 million to $69 million, primarily non-cash asset impairment charges of $40 million to $54 million, and other cash-based associated costs of $11 million to $15 million, for the closure of Fab 1. Of the pre-tax GAAP charges totaling $51 million to $69 million, $47 million to $63 million will likely be recorded in the second quarter of fiscal 2012 and the remainder in ensuing quarters.

"We expect to reduce both our cost per watt peak of panels and our capital expenditures as a result of this change," Werner said.

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 "on track," "on plan," "expect," "will" and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) cost reduction initiatives and step reduction program being on track, converting all 12 cell fabrication lines and reducing the number of manufacturing steps by 15% by the end of 2012; (b) reducing cost per watt, improving yields and equipment efficiencies, and reducing capital expenditures; (c) achieving cost goal of $0.86 per watt on an efficiency adjusted basis exiting 2012; (d) repurposing plans for Fab 1; (e) Fab 1 employees transferred to Fab 2 or working for potential Fab 1 tenants; and (f) expected pre-tax GAAP restructuring charges, amount of such charges that is cash and the amount of such charges in Q2 2012. Such forward-looking statements are based on information available to the company as of the date of this release and involve a number of risks and uncertainties, some beyond the company's control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including risks and uncertainties such as: (i) the company's ability to meet its cost reduction plans and meet its cost per watt target; (ii) the company's ability to obtain and maintain an adequate supply of raw materials and components as well as the price it pays for such items; (iii) general business and economic conditions, including seasonality of the solar industry and growth trends in the solar industry; (iv) potential difficulties associated with improving manufacturing efficiency and operating the joint venture Fab 3; (v) manufacturing difficulties that could arise; (vi) the success of the company's ongoing research and development efforts in manufacturing processes; (vii) the company's ability to repurpose the Fab 1 facility; (viii) the company's ability to locate positions for all Fab 1 employees; (ix) the amount and timing of pre-tax charges and other depreciation charges, and possible impairment or write off of goodwill, intangible assets, long-lived assets and project assets; and (x) other risks described in the company's Annual Report on Form 10-K for the year ended January 1, 2012 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.

SOURCE SunPower Corp.