The Company also has agreements with several suppliers, including joint ventures, for the procurement of polysilicon, ingots, wafers, solar cells and solar panels which specify future quantities and pricing of products to be supplied by the vendors for periods up to 12 years and provide for certain consequences, such as forfeiture of advanced deposits and liquidated damages relating to previous purchases, in the event that the Company terminates the arrangements (see Note 7).

As of March 29, 2009, total obligations related to non-cancelable purchase orders totaled approximately $115.6 million and long-term supply agreements totaled approximately $3,992.2 million. Future purchase obligations under non-cancelable purchase orders and long-term supply agreements as of March 29, 2009 are as follows (in thousands):

2009 (remaining nine months)		$	376,790
2010			519,550
2011			546,438
2012			359,223
2013			277,531
Thereafter			2,028,257
		$	4,107,789

Total future purchase commitments of $4,107.8 million as of March 29, 2009 include tolling agreements with suppliers in which the Company provides polysilicon required for silicon ingot manufacturing and procures the manufactured silicon ingots from the supplier. Annual future purchase commitments in the table above are calculated using the gross price paid by the Company for silicon ingots and are not reduced by the price paid by suppliers for polysilicon. Total future purchase commitments as of March 29, 2009 would be reduced by $614.9 million to $3,492.9 million had the Company’s obligations under such tolling agreements been disclosed using net cash outflows.

Product Warranties

The Company warrants or guarantees the performance of the solar panels that the Company manufactures at certain levels of power output for extended periods, usually 25 years. It also warrants that the solar cells will be free from defects for at least 10 years. In addition, it passes through to customers long-term warranties from the original equipment manufacturers (“OEMs”) of certain system components. Warranties of 25 years from solar panels suppliers are standard, while inverters typically carry a 2-, 5- or 10-year warranty. The Company generally warrants at the time of sale or guarantees systems installed for a period of 1, 2, 5 or 10 years. The Company maintains warranty reserves to cover potential liability that could result from these guarantees. The Company’s potential liability is generally in the form of prod uct replacement or repair. Warranty reserves are based on the Company’s best estimate of such liabilities and are recognized as a cost of revenue. The Company continuously monitors product returns for warranty failures and maintains a reserve for the related warranty expenses based on various factors including, historical warranty claims, results of accelerated testing, field monitoring and vendor reliability estimates, and data on industry average for similar products. Historically, warranty costs have been within management’s expectations.

 

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Provisions for warranty reserves charged to cost of revenue were $3.7 million and $4.9 million during the three months ended March 29, 2009 and March 30, 2008, respectively. Activity within accrued warranty for the three months ended March 29, 2009 and March 30, 2008 is summarized as follows:

(In thousands)		March 29, 2009				March 30, 2008
Balance at the beginning of the period		$	28,062			$	17,194
Accruals for warranties issued during the period			3,677				4,899
Settlements made during the period			(1,173	)			(2,576	)
Balance at the end of the period		$	30,566			$	19,517

 

The accrued warranty balance at March 29, 2009 and December 28, 2008 includes $25.5 million and $24.4 million, respectively, of accrued costs included in “Other long-term liabilities” in the Condensed Consolidated Balance Sheets.

 

System Put-Rights

EPC projects often require the Systems Segment to undertake customer obligations including: (i) system output performance guarantees; (ii) system maintenance; (iii) penalty payments or customer termination rights if the system the Company is constructing is not commissioned within specified timeframes or other construction milestones are not achieved; (iv) guarantees of certain minimum residual value of the system at specified future dates; and (v) system put-rights whereby the Company could be required to buy-back a customer’s system at fair value on specified future dates if certain minimum performance thresholds are not met. To date, no such repurchase obligations have been required.

Uncertain Tax Positions

Total liabilities associated with uncertain tax positions under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, and Related Implementation Issues” (“FIN 48”), were $14.0 million as of both March 29, 2009 and December 28, 2008 and are included in "Other long-term liabilities" in the Company’s Condensed Consolidated Balance Sheets as they are not expected to be paid within the next twelve months. Due to the complexity and uncertainty associated with its tax positions, the Company cannot make a reasonably reliable estimate of the period in which cash settlement will be made for its liabilities associated with uncertain tax positions in other long-term liabilities.

Indemnifications

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of warranties, representations and covenants related to such matters as title to assets sold, negligent acts, damage to property, validity of certain intellectual property rights, non-infringement of third-party rights and certain tax related matters. In each of these circumstances, payment by the Company is typically subject to the other party making a claim to the Company pursuant to the procedures specified in the particular contract. These procedures usually allow the Company to challenge the other party’s claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, the Company’s obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration and/or amounts. In some instances, the Company may have recourse against third-parties and/or insurance covering certain payments made by the Company.

For up to two years (or possibly longer) after the date of Cypress’s distribution of the Company’s class B common stock on September 29, 2008, the Company cannot issue 85.8 million or more shares of its class A common stock or participate in one or more transactions (excluding the distribution itself) in which 42 million or more shares of its then-existing class A common stock were acquired, if any such transaction(s) are in connection with a plan or series of related transactions that includes the distribution. If the Company were to participate in such a transaction, and thereby triggered tax to Cypress on the distribution, then assuming that Cypress distributed 42 million shares, Cypress’s top marginal income tax rate was 40% for federal and state income tax purposes, the fair market value of the class B common stock was $25.00 per share, and Cypress’s tax basis in such stock was $5.00 per share on the date of the distribution, the Company’s liability under its indemnification obligation to Cypress would be approximately $336.0 million.

 

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Legal Matters

From time to time the Company is a party to litigation matters and claims that are normal in the course of its operations. While the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company, the outcome of these matters is not determinable and negative outcomes may adversely affect its financial position, liquidity or results of operations.

Note 10. JOINT VENTURES

Woongjin Energy Co., Ltd (“Woongjin Energy”)

The Company and Woongjin Holdings Co., Ltd. (“Woongjin”), a provider of environmental products located in Korea, formed Woongjin Energy in fiscal 2006, a joint venture to manufacture monocrystalline silicon ingots. The Company and Woongjin have funded the joint venture through capital investments. In January 2008, the Company invested an additional $5.4 million in the joint venture. Until Woongjin Energy engages in an IPO, Woongjin Energy will refrain from declaring or making any distributions, including dividends, unless its debt-to-equity ratio immediately following such distribution would not be greater than 200%. The Company supplies polysilicon, services and technical support required for silicon ingot manufacturing to the joint venture, and the Company procures the manufactured silicon ingots from the joint venture unde r a five-year agreement. For the three months ended March 29, 2009 and March 30, 2008, the Company paid $32.3 million and $5.8 million, respectively, to Woongjin Energy for manufacturing silicon ingots. As of March 29, 2009 and December 28, 2008, $29.9 million and $22.5 million, respectively, remained due and payable to Woongjin Energy.

As of March 29, 2009 and December 28, 2008, the Company had a $25.3 million and $24.0 million, respectively, investment in the joint venture in its Condensed Consolidated Balance Sheets which consisted of a 42.1% equity investment. The Company periodically evaluates the qualitative and quantitative attributes of its relationship with Woongjin Energy to determine whether the Company is the primary beneficiary of the joint venture and needs to consolidate Woongjin Energy’s results into the Company’s financial statements in accordance with FSP FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FSP FIN 46(R)”). The Company has concluded it is not the primary beneficiary of the joint venture because Woongjin Energy supplies only a portion of the Company’s future estimated tota l ingot requirement through 2012 and the existing supply agreement is shorter than the estimated economic life of the joint venture. In addition, the Company believes that Woongjin is the primary beneficiary of the joint venture because Woongjin guarantees the initial $33.0 million loan for Woongjin Energy and exercises significant control over Woongjin Energy’s board of directors, management, and daily operations.

The Company accounts for its investment in Woongjin Energy under APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock” (the “equity method”), in which the investment is classified as “Other long-term assets” in the Condensed Consolidated Balance Sheets and the Company’s share of Woongjin Energy’s income totaling $1.3 million and $0.6 million for the three months ended March 29, 2009 and March 30, 2008, respectively, is included in “Equity in earnings of unconsolidated investees” in the Condensed Consolidated Statements of Operations. The amount of equity earnings increased due to 1) increases in production since Woongjin Energy began manufacturing in the third quarter of fiscal 2007; and 2) the Company’s equity investment increased from 28.8 % as of March 30, 2008 to 42.1% as of March 29, 2009. Neither party has contractual obligations to provide any additional funding to the joint venture. The Company’s maximum exposure to loss as a result of its involvement with Woongjin Energy is limited to its carrying value.

The Company conducted other related-party transactions with Woongjin Energy during fiscal 2008. The Company recognized $0.6 million in components revenue during the three months ended March 30, 2008 related to the sale of solar panels to Woongjin Energy. As of March 29, 2009 and December 28, 2008, zero and $0.8 million, respectively, remained due and receivable from Woongjin Energy related to the sale of solar panels.

First Philec Solar Corporation (“First Philec Solar”)

The Company and First Philippine Electric Corporation (“First Philec”) formed First Philec Solar in fiscal 2007, a joint venture to provide wafer slicing services of silicon ingots to the Company. The Company and First Philec have funded the joint venture through capital investments. In fiscal 2008, the Company invested an additional $4.2 million in the joint venture. The Company supplies to the joint venture silicon ingots and technology required for slicing silicon, and the Company procures the silicon wafers from the joint venture under a five-year wafering supply and sales agreement. This joint venture is located in the Philippines and became operational in the second quarter of fiscal 2008. In the three months ended March 29, 2009, the Company paid $6.8 million to First Philec Solar for wafer slicing services of silicon ingots. As of March 29, 2009 and December 28, 2008, $2.1 million and $1.9 million, respectively, remained due and payable to First Philec Solar.

 

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As of March 29, 2009 and December 28, 2008, the Company had a $4.9 million and $5.0 million, respectively, investment in the joint venture in its Condensed Consolidated Balance Sheets which consisted of a 19% equity investment. The Company periodically evaluates the qualitative and quantitative attributes of its relationship with First Philec Solar to determine whether the Company is the primary beneficiary of the joint venture and needs to consolidate First Philec Solar’s results into the Company’s financial statements in accordance with FSP FIN 46(R). The Company has concluded it is not the primary beneficiary of the joint venture because the existing five-year agreement named above is considered a short period compared against the estimated economic life of the joint venture. In addition, the Company believes that First Ph ilec is the primary beneficiary of the joint venture because First Philec exercises significant control over First Philec Solar’s board of directors, management, and daily operations.

The Company accounts for this investment using the equity method of accounting since the Company is able to exercise significant influence over First Philec Solar due to its board positions. The Company’s investment is classified as “Other long-term assets” in the Condensed Consolidated Balance Sheets and the Company’s share of First Philec Solar’s losses totaling $0.1 million in the three months ended March 29, 2009 are included in “Equity in earnings of unconsolidated investees” in the Condensed Consolidated Statement of Operations. The Company’s maximum exposure to loss as a result of its involvement with First Philec Solar is limited to its carrying value.

Note 11. DEBT AND CREDIT SOURCES

Line of Credit

On July 13, 2007, the Company entered into a credit agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) and has entered into amendments to the credit agreement from time to time. As of March 29, 2009, the credit agreement provides for a $50.0 million uncollateralized revolving credit line, with a $50.0 million uncollateralized letter of credit subfeature, and a separate $150.0 million collateralized letter of credit facility. The Company may borrow up to $50.0 million and request that Wells Fargo issue up to $50.0 million in letters of credit under the uncollateralized letter of credit subfeature through March 27, 2010. Letters of credit issued under the subfeature reduce the Company’s borrowing capacity under the revolving credit line. Additionally, the Company may request that Wells Fargo issue up to $150.0 million in letters of credit under the collateralized letter of credit facility through March 27, 2014. As detailed in the agreement, the Company pays interest of LIBOR plus 2% on outstanding borrowings under the uncollateralized revolving credit line, and a fee of 2% and 0.2% to 0.4% depending on maturity for outstanding letters of credit under the uncollateralized letter of credit subfeature and collateralized letter of credit facility, respectively. At any time, the Company can prepay outstanding loans. All borrowings under the uncollateralized revolving credit line must be repaid by March 27, 2010, and all letters of credit issued under the uncollateralized letter of credit subfeature expire on or before March 27, 2010 unless the Company provides by such date collateral in the form of cash or cash equivalents in the aggregate amount available to be drawn under letters of credit outstanding at such time. All letters of credit issued under the collateralized letter of credit facility expire no later than March 27, 2014.

In connection with the credit agreement, the Company entered into a security agreement with Wells Fargo, granting a security interest in a securities account and deposit account to secure its obligations in connection with any letters of credit that might be issued under the credit agreement. SunPower North America, LLC and SunPower Corporation, Systems (“SP Systems”), both wholly-owned subsidiaries of the Company, also entered into an associated continuing guaranty with Wells Fargo. In addition, SP Systems will pledge 60% of its equity interest in SunPower Systems SA to Wells Fargo in the second quarter of fiscal 2009 to collateralize up to $50.0 million of the Company’s obligations under the credit agreement. The terms of the credit agreement include certain conditions to borrowings, representations and covenants, and events of default customary for financing transactions of this type. Covenants contained in the credit agreement include, but are not limited to, restrictions on the incurrence of additional indebtedness, pledging of assets, payment of dividends or distribution on the Company’s common stock, and purchases of property, plant and equipment and financial covenants with respect to certain liquidity, net worth and profitability metrics. If the Company fails to comply with the financial and other restrictive covenants contained in the credit agreement resulting in an event of default, all debt to Wells Fargo could become immediately due and payable and the Company’s other debt may become due and payable in the event there are cross-default provisions in the agreements governing such other debt.

As of March 29, 2009 and December 28, 2008, letters of credit totaling $49.7 million and $29.9 million, respectively, were issued by Wells Fargo under the uncollateralized letter of credit subfeature. In addition, letters of credit totaling $74.5 million and $76.5 million were issued by Wells Fargo under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008, respectively. As of March 29, 2009 and December 28, 2008, cash available to be borrowed under the uncollateralized revolving credit line was $0.3 million and $20.1 million, respectively, and includes letter of credit capacities available to be issued by Wells Fargo under the uncollateralized letter of credit subfeature. Letters of credit available under the collateralized letter of credit facility at March 29, 2009 and December 28, 2008 totaled $75.5 million and $73.5 million, respectively.

Debt Facility Agreement with the Malaysian Government

On December 18, 2008, the Company entered into a facility agreement with the Malaysian Government. In connection with the facility agreement, the Company executed a debenture and deed of assignment in favor of the Malaysian Government, granting a security interest in a deposit account and all assets of SunPower Malaysia Manufacturing Sdn. Bhd., a wholly-owned subsidiary of the Company, to secure its obligations under the facility agreement.

 

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Under the terms of the facility agreement, the Company may borrow up to Malaysian Ringgit 1.0 billion (approximately $276.9 million) to finance the construction of its planned third solar cell manufacturing facility (“FAB3”) in Malaysia. The loans within the facility agreement are divided into two tranches that may be drawn through June 2010. Principal is to be repaid in six quarterly payments starting in July 2015, and a non-weighted average interest rate of approximately 4.4% per annum accrues and is payable starting in July 2015. The Company has the ability to prepay outstanding loans and all borrowings must be repaid by October 30, 2016. The terms of the facility agreement include certain conditions to borrowings, representations and covenants, and events of default customary for financing transactions of this type. As of March 29, 2009 and December 28, 2008, the Company had borrowed Malaysian Ringgit 375.0 million (approximately $103.9 million) and Malaysian Ringgit 190.0 million (approximately $54.6 million), respectively, under the facility agreement.

1.25% and 0.75% Convertible Debenture Issuances

In February 2007, the Company issued $200.0 million in principal amount of its 1.25% senior convertible debentures. Interest on the 1.25% debentures is payable on February 15 and August 15 of each year, which commenced August 15, 2007. The 1.25% debentures mature on February 15, 2027. Holders may require the Company to repurchase all or a portion of their 1.25% debentures on each of February 15, 2012, February 15, 2017 and February 15, 2022, or if the Company experiences certain types of corporate transactions constituting a fundamental change. In addition, the Company may redeem some or all of the 1.25% debentures on or after February 15, 2012. The 1.25% debentures are initially convertible, subject to certain conditions, into cash up to the lesser of the principal amount or the conversion value. If the conversion value is greater than $1,000, then the excess conversion value will be convertible into the Company’s class A common stock. The initial effective conversion price of the 1.25% debentures is approximately $56.75 per share, which represented a premium of 27.5% over the closing price of the Company's class A common stock on the date of issuance. The applicable conversion rate will be subject to customary adjustments in certain circumstances.

In July 2007, the Company issued $225.0 million in principal amount of its 0.75% senior convertible debentures. Interest on the 0.75% debentures is payable on February 1 and August 1 of each year, which commenced February 1, 2008. The 0.75% debentures mature on August 1, 2027. Holders may require the Company to repurchase all or a portion of their 0.75% debentures on each of August 1, 2010, August 1, 2015, August 1, 2020, and August 1, 2025, or if the Company is involved in certain types of corporate transactions constituting a fundamental change. In addition, the Company may redeem some or all of the 0.75% debentures on or after August 1, 2010. The 0.75% debentures will be classified as short-term debt in the Company’s Condensed Consolidated Balance Sheet beginning on August 1, 2009. The 0.75% debentures are initially convertible, subject to certain conditions, into cash up to the lesser of the principal amount or the conversion value. If the conversion value is greater than $1,000, then the excess conversion value will be convertible into cash, class A common stock or a combination of cash and class A common stock, at the Company’s election. The initial effective conversion price of the 0.75% debentures is approximately $82.24 per share, which represented a premium of 27.5% over the closing price of the Company's class A common stock on the date of issuance. The applicable conversion rate will be subject to customary adjustments in certain circumstances.

The 1.25% debentures and 0.75% debentures are senior, unsecured obligations of the Company, ranking equally with all existing and future senior unsecured indebtedness of the Company. The 1.25% debentures and 0.75% debentures are effectively subordinated to the Company’s secured indebtedness to the extent of the value of the related collateral and structurally subordinated to indebtedness and other liabilities of the Company’s subsidiaries. The 1.25% debentures and 0.75% debentures do not contain any covenants or sinking fund requirements.

For the quarter ended September 28, 2008, the closing price of the Company’s class A common stock equaled or exceeded 125% of the $56.75 per share initial effective conversion price governing the 1.25% debentures for 20 out of 30 consecutive trading days ending on September 28, 2008, thus satisfying the market price conversion trigger pursuant to the terms of the 1.25% debentures. During the fourth quarter in fiscal 2008, holders of the 1.25% debentures were able to exercise their right to convert the debentures any day in that fiscal quarter. As of December 28, 2008, the Company received notices for the conversion of approximately $1.4 million of the 1.25% debentures which the Company settled for approximately $1.2 million in cash and 1,000 shares of class A common stock.

Because the closing price of the Company’s class A common stock on at least 20 of the last 30 trading days during the fiscal quarters ending March 29, 2009 and December 28, 2008 did not equal or exceed $70.94, or 125% of the applicable conversion price for its 1.25% debentures, and $102.80, or 125% of the applicable conversion price governing its 0.75% debentures, holders of the 1.25% debentures and 0.75% debentures are unable to exercise their right to convert the debentures, based on the market price conversion trigger, any day in the first and second quarters of fiscal 2009. Accordingly, the Company classified the convertible debt as long-term debt in its Condensed Consolidated Balance Sheets as of March 29, 2009 and December 28, 2008. This test is repeated each fiscal quarter, therefore, if the market price conversion trigger i s satisfied in a subsequent quarter, the debentures may again be re-classified as short-term debt.

The 1.25% debentures and 0.75% debentures are subject to the provisions of FSP APB 14-1, adopted by the Company on December 29, 2008, since the debentures can be settled in cash upon conversion. The Company estimated that the effective interest rate for similar debt without the conversion feature was 9.25% and 8.125% on the 1.25% debentures and 0.75% debentures, respectively. The principal amount of the outstanding debentures, the unamortized discount and the net carrying value as of March 29, 2009 was $423.6 million, $59.8 million and $363.8 million, respectively, and as of December 28, 2008 was $423.6 million, $66.4 million and $357.2 million, respectively. The Company recognized $5.0 million and $4.4 million in non-cash interest expense in the three months ended March 29, 2009 and March 30, 2008, respectively, related to the adoption of FSP APB 14-1 (see Note 1). As of March 29, 2009, the remaining weighted average period over which the unamortized discount will be recognized is as follows (in thousands):

 

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2009 (remaining nine months)		$	20,589
2010		22,667
2011		14,686
2012		1,898
		$	59,840

The following table summarizes the Company’s outstanding convertible debt:

		As of
		March 29, 2009								December 28, 2008
(In thousands)		Face Value				Fair Value*				Face Value				Fair Value*
1.25% debentures		$	198,608			$	151,190			$	198,608			$	143,991
0.75% debentures			225,000				187,875				225,000				166,747
Total convertible debt		$	423,608			$	339,065			$	423,608			$	310,738

*	The fair value of the convertible debt was determined based on quoted market prices as reported by an independent pricing source.

Note 12. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes unrealized gains and losses on the Company’s available-for-sale investments, foreign currency derivatives designated as cash flow hedges and translation adjustments. The components of comprehensive income (loss) were as follows:

		Three Months Ended
(In thousands)		March 29, 2009				March 30, 2008
			(As Restated)
Net income (loss)		$	(9,702	)		$	11,143
Other comprehensive income (loss):
Translation adjustment			(16,608	)			10,405
Unrealized gain (loss) on investments, net of tax		8				(1,471		)
Unrealized gain (loss) on derivatives, net of tax			22,534				(1,456	)
Total comprehensive income (loss)		$	(3,768	)		$	18,621

Note 13. FOREIGN CURRENCY DERIVATIVES

The Company has non-U.S. subsidiaries that operate and sell the Company’s products in various global markets, primarily in Europe. As a result, the Company is exposed to risks associated with changes in foreign currency exchange rates. It is the Company’s policy to use various hedge instruments to manage the exposures associated with purchases of foreign sourced equipment, net asset or liability positions of its subsidiaries and forecasted revenues and expenses. In connection with its global tax planning, the Company changed the flow of transactions to European subsidiaries that have Euro functional currency, resulting in greater exposure to changes in the value of the Euro beginning in the second quarter of fiscal 2008. Implementation of this tax strategy had, and will continue to have, the ancillary effect of limiting the C ompany’s ability to fully hedge certain Euro-denominated revenue. The Company currently does not enter into foreign currency derivative financial instruments for speculative or trading purposes.

On December 29, 2008, the Company adopted SFAS No. 161 which had no financial impact on the Company’s condensed consolidated financial statements and only required additional financial statement disclosures (see Note 1). The Company has applied the requirements of SFAS No. 161 on a prospective basis. Accordingly, disclosures related to interim periods prior to the date of adoption have not been presented.

Under SFAS No. 133, the Company is required to recognize derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company calculates the fair value of its option and forward contracts based on market volatilities, spot rates and interest differentials from published sources. The following table presents information about the Company’s hedge instruments measured at fair value on a recurring basis as of March 29, 2009 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value in accordance with the provisions of SFAS No. 157:

 

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(In thousands)		Balance Sheet Location		Significant Other Observable Inputs (Level 2)
Asset
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts		Prepaid expenses and other current assets		$	2,173
Liability
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts		Accrued liabilities		$	9,940
Derivatives designated as hedging instruments under SFAS No. 133
Cash flow hedges
Foreign currency forward exchange contracts		Accrued liabilities		$	7,856
Foreign currency option contracts		Accrued liabilities			485
				$	8,341

The following table summarizes the amount of unrealized loss recognized in “Accumulated other comprehensive loss” (“OCI”) in “Stockholders’ equity” in the Condensed Consolidated Balance Sheet:

		Unrealized Loss Recognized in OCI (Effective Portion)				Loss Reclassified from OCI to Cost of Revenue (Effective Portion)				Loss Recognized in Other, Net on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
		As of				Three Months Ended				Three Months Ended
(In thousands)		March 29, 2009				March 29, 2009				March 29, 2009
Cash flow hedges
Foreign currency forward exchange contracts			$	(3,551	)		$	(125	)		$	(1,478	)
Foreign currency option contracts				—				—				(485	)
			$	(3,551	)		$	(125	)		$	(1,963	)

The following table summarizes the amount of loss recognized in “Other, net” in the Condensed Consolidated Statement of Operations in the three months ended March 29, 2009:

(In thousands)
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts		$	(1,838	)

Foreign Currency Exchange Risk

Cash Flow Exposure

The Company’s subsidiaries have had and will continue to have material future cash flows, including revenues and expenses, that are denominated in currencies other than their functional currencies. The Company’s cash flow exposure primarily relates to trade accounts receivable and accounts payable. Changes in exchange rates between the Company’s subsidiaries’ functional currencies and other currencies in which they transact will cause fluctuations in cash flows expectations and cash flows realized or settled. Accordingly, the Company enters into option and forward contracts to hedge the value of a portion of these forecasted cash flows.

 

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In accordance with SFAS No. 133, the Company accounts for its hedges of forecasted foreign currency purchases as cash flow hedges. As of March 29, 2009, the Company has outstanding cash flow hedge forward contracts and option contracts with an aggregate notional value of $397.9 million and $76.3 million, respectively. As of December 28, 2008, the Company had outstanding cash flow hedge forward contracts and option contracts with an aggregate notional value of $364.5 million and $147.5 million, respectively. The maturity dates of the outstanding contracts as of March 29, 2009 range from April 2009 to December 2009. Changes in fair value of the effective portion of hedge contracts are recorded in “Accumulated other comprehensive loss” in “Stockholders’ equity” in the Condensed Consolidated Balance Sheets. Amou nts deferred in accumulated other comprehensive loss are reclassified to “Cost of revenue” in the Condensed Consolidated Statements of Operations in the periods in which the hedged exposure impacts earnings. The Company expects to reclassify $3.6 million of net losses related to these option and forward contracts that are included in accumulated other comprehensive loss at March 29, 2009 to “Cost of revenue” in the following nine months as the Company realizes the cost effects of the related forecasted foreign currency cost of revenue transactions. The amounts ultimately recorded in the Condensed Consolidated Statements of Operations will be contingent upon the actual exchange rates when the related forecasted foreign currency cost of revenue transactions are realized, and therefore, unrealized losses at March 29, 2009 could change.

Cash flow hedges are tested for effectiveness each period on an average to average rate basis using regression analysis. The change in the time value of the options as well as the cost of forward points (the difference between forward and spot rates at inception) on forward exchange contracts are excluded from the Company’s assessment of hedge effectiveness. The premium paid or time value of an option whose strike price is equal to or greater than the market price on the date of purchase is recorded as an asset in the Condensed Consolidated Balance Sheets. Thereafter, any change to this time value and the cost of forward points is included in “Other, net” in the Condensed Consolidated Statements of Operations. Amounts recorded in “Other, net” were losses of $2.0 million and none during the three months ended March 29, 2009 and March 30, 2008, respectively, due to loss in time value and cost of forward points.

Transaction Exposure

Other derivatives not designated as hedging instruments under SFAS No. 133 consist of forward contracts used to hedge the net balance sheet effect of foreign currency denominated assets and liabilities primarily for intercompany transactions, receivables from customers, prepayments to suppliers and advances received from customers. Changes in exchange rates between the Company’s subsidiaries’ functional currencies and the currencies in which these assets and liabilities are denominated can create fluctuations in the Company’s reported consolidated financial position, results of operations and cash flows. The Company enters into forward contracts to hedge foreign currency denominated monetary assets and liabilities against the short-term effects of currency exchange rate fluctuations. The Company records its derivative c ontracts at fair value with the related gains or losses recorded in “Other, net.” The gains or losses on these contracts are substantially offset by transaction gains or losses on the underlying balances being hedged. As of March 29, 2009 and December 28, 2008, the Company held forward contracts with an aggregate notional value of $248.9 million and $66.6 million, respectively, to hedge balance sheet exposure related to transactions with third-parties. These forward contracts have maturities of one month or less.

Credit Risk

The Company’s option and forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its option and forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts are limited to a time period of less than one year and the Company continuously evaluates the credit standing of its counter-party financial institutions.

Note 14. INCOME TAXES

In the three months ended March 29, 2009, the Company’s effective rate of income tax benefit of 63.7% was primarily attributable to domestic and foreign income losses in certain jurisdictions, nondeductible amortization of purchased intangible assets and discrete stock option deductions. The Company’s tax provision for the three months ended March 30, 2008 of 10.8% was primarily attributable to domestic and foreign income taxes in certain jurisdictions where the Company’s operations were profitable, net of the consumption of non-stock net operating loss carryforwards. As a result of the Company’s adoption of FSP APB 14-1, the tax provision during the first quarter of fiscal 2008 was retroactively adjusted from 28.5% to 10.8% (see Note 1). The Company’s interim period tax provision is estimated based on the e xpected annual worldwide tax rate and takes into account the tax effect of discrete items.

 

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Note 15. NET INCOME (LOSS) PER SHARE OF CLASS A AND CLASS B COMMON STOCK

Effective December 29, 2008, the Company adopted FSP EITF 03-6-1, which requires it to use the two-class method to calculate net income (loss) per share. Under the two-class method, net income (loss) per share is computed by dividing earnings allocated to common stockholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, earnings are allocated to both common stock and other participating securities based on their respective weighted-average shares outstanding during the period. No allocation is generally made to other participating securities in the case of a loss per share. In accordance with the implementation provisions of FSP EITF 03-6-1, prior period share data and net income (loss) per share has been retrospectively adjusted (see Note 1).

Basic weighted-average shares is computed using the weighted-average of the combined class A and class B common stock outstanding. Class A and class B common stock are considered equivalent securities for purposes of the earnings per share calculation because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. The Company's outstanding unvested restricted stock awards are considered participating securities as they may participate in dividends, if declared, even though the awards are not vested. As participating securities, the unvested restricted stock awards are allocated a proportionate share of net income, but excluded from the basic weighted-average shares. Diluted weighted-average shares is computed using the basic weighted-average shares plus any potentially dilutive securities outstanding during the period using the treasury stock method, except when their effect is anti-dilutive. Potentially dilutive securities include stock options, restricted stock units and senior convertible debentures.

Holders of the Company’s 1.25% debentures and 0.75% debentures may, under certain circumstances at their option, convert the debentures into cash and, if applicable, shares of the Company’s class A common stock at the applicable conversion rate, at any time on or prior to maturity (see Note 10). Pursuant to EITF 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion” (“EITF 90-19”), the 1.25% debentures and 0.75% debentures are included in the calculation of diluted net income (loss) per share if their inclusion is dilutive under the treasury-stock-type method.

The following is a summary of other outstanding anti-dilutive potential common stock:

		As of
(In thousands)		March 29, 2009				March 30, 2008
Stock options			2,089				17
Restricted stock units			332				412

The following table presents the calculation of basic and diluted net income (loss) per share:

		Three Months Ended
(In thousands, except per share amounts)		March 29, 2009				March 30, 2008
			(As Restated)
Basic net income (loss) per share
Net income (loss)		$	(9,702	)		$	11,143
Less:  Undistributed earnings allocated to unvested restricted stock awards(1)			—				(173	)
Net income (loss) available to common stockholders		$	(9,702	)		$	10,970
Basic weighted-average common shares			83,749				78,965
Net income (loss) per share		$	(0.12	)		$	0.14
Diluted net income (loss) per share
Net income (loss)		$	(9,702	)		$	11,143
Less:  Undistributed earnings allocated to unvested restricted stock awards(1)			—				(165	)
Net income (loss) available to common stockholders		$	(9,702	)		$	10,978
Basic weighted-average common shares			83,749				78,965
Effect of dilutive securities:
Stock options			—				3,038
Restricted stock units			—				39
1.25% debentures			—				960
Diluted weighted-average common shares			83,749				83,002
Net income (loss) per share		$	(0.12	)		$	0.13

(1) Losses are not allocated to unvested restricted stock awards because such awards do not contain an obligation to participate in losses.

 

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Beginning on September 15, 2008, the date on which Lehman Brothers International (Europe) Limited (“LBIE”) commenced administrative proceedings regarding the Lehman bankruptcy, approximately 2.9 million shares of class A common stock lent to LBIE in connection with the 1.25% debentures are included in basic weighted-average common shares. Basic weighted-average common shares exclude approximately 1.8 million shares of class A common stock lent to Credit Suisse International (“CSI”) in connection with the 0.75% debentures. If Credit Suisse Securities (USA) LLC (“Credit Suisse”) or its affiliates, including CSI, were to file bankruptcy or commence similar administrative, liquidating, restructuring or other proceedings, the Company may have to include approximately 1.8 million shares lent to CSI in basic weighted-average common shares.

For the three months ended March 29, 2009, the Company’s average stock price for the period did not exceed the conversion price for the senior convertible debentures. For the three months ended March 30, 2008, dilutive potential common shares includes approximately 1.0 million shares for the impact of the 1.25% debentures as the Company experienced a substantial increase in its common stock price during the first quarter of fiscal 2008 as compared to the conversion price pursuant to the terms of the 1.25% debentures. For the three months ended March 30, 2008, the Company’s average stock price for the period did not exceed the conversion price for the 0.75% debentures. Under the treasury-stock-type method, the Company’s senior convertible debentures will generally have a dilutive impact on net income per share if the Com pany’s average stock price for the period exceeds the conversion price for the senior convertible debentures.

Note 16. STOCK-BASED COMPENSATION

The following table summarizes the consolidated stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations:

		Three Months Ended
(In thousands)		March 29, 2009				March 30, 2008
			(As Restated)
Cost of systems revenue		$	298			$	2,511
Cost of components revenue			598				1,203
Research and development			1,347				811
Sales, general and administrative			6,811				9,983
Total stock-based compensation expense		$	9,054			$	14,508

The following table summarizes the consolidated stock-based compensation expense, by type of awards:

		Three Months Ended
(In thousands)		March 29, 2009				March 30, 2008
			(As Restated)
Employee stock options		$	1,028			$	1,187
Restricted stock awards and units			10,084				7,901
Shares and options released from re-vesting restrictions			168				6,006
Change in stock-based compensation capitalized in inventory			(2,226	)			(586	)
Total stock-based compensation expense		$	9,054			$	14,508

In connection with its acquisition of PowerLight Corporation (now known as SP Systems) on January 10, 2007, the Company issued 1.1 million shares of its class A common stock and 0.5 million stock options to employees of SP Systems. The class A common stock and stock options were valued at $60.4 million and were subject to certain transfer restrictions and a repurchase option held by the Company. The Company recognized the expense as the re-vesting restrictions of these shares lapsed over the two-year period beginning on the date of acquisition. The value of shares released from such re-vesting restrictions is included in stock-based compensation expense in the table above.

 

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The following table summarizes the Company’s stock option activities:

		Shares (in thousands)				Weighted- Average Exercise Price Per Share
Outstanding as of December 28, 2008			2,545			$	8.96
Exercised			(118	)			3.36
Forfeited			(24	)			28.83
Outstanding as of March 29, 2009			2,403				9.03
Exercisable as of March 29, 2009			1,625				4.26

The following table summarizes the Company’s non-vested stock options and restricted stock activities thereafter:

		Stock Options								Restricted Stock Awards and Units
		Shares (in thousands)				Weighted- Average Exercise Price Per Share				Shares (in thousands)				Weighted- Average Grant Date Fair Value Per Share
Outstanding as of December 28, 2008			1,113			$	14.82				1,604			$	69.71
Granted			—				—				1,156				27.94
Vested(1)			(311	)			3.28				(211	)			63.40
Forfeited			(24	)			28.83				(151	)			70.83
Outstanding as of March 29, 2009			778				19.00				2,398				49.90

(1)	Restricted stock awards and units vested include shares withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements.

Note 17. SEGMENT AND GEOGRAPHICAL INFORMATION

The Chief Operating Decision Maker (“CODM”), as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”), is the Company’s Chief Executive Officer. The CODM assesses the performance of the Systems Segment and Components Segment using information about their revenue and gross margin. The following tables present revenue by geography and segment, gross margin by segment and revenue by significant customer. Revenue is based on the destination of the shipments.

		Three Months Ended
		March 29, 2009				March 30, 2008
		(As Restated)
Revenue by geography:
United States			61	%			21	%
Europe:
Spain			4				52
Italy			15				3
Germany			11				8
Other			5				4
Rest of world			4				12
			100	%			100	%
Revenue by segment:
Systems			49	%			65	%
Components			51				35
			100	%			100	%
Gross margin by segment:
Systems			8	%			20	%
Components			22	%			17	%

			Three Months Ended
			March 29, 2009				March 30, 2008
Significant Customers	Business Segment
Florida Power & Light Company (“FPL”)	Systems			26%				*
Sedwick Corporate, S.L.	Systems			*				30%
Naturener Group	Systems			*				13%

*         denotes less than 10% during the period

 

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Note 18. SUBSEQUENT EVENTS

Acquisition of Tilt Solar, LLC (“Tilt Solar”)

On April 14, 2009, the Company completed the acquisition of Tilt Solar, a California limited liability company, pursuant to a Membership Interest Purchase Agreement, dated as of April 14, 2009, by and among the selling stockholders and the Company. The acquisition of Tilt Solar was not material to the Company’s financial position or results of operations.

Term Loan with the Union Bank, N.A. (“Union Bank”)

On April 17, 2009, the Company entered into a loan agreement with Union Bank under which the Company borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. The loan is to be repaid in eight equal quarterly installments commencing June 30, 2010. Unless and until the Company has granted to Union Bank a security interest in cash collateral not less than 105% of the outstanding principal amount of the loan, the Company will maintain a depository account with Union Bank holding a predetermined amount of funds. During the first year of the loan, such account is required to hold at all times a balance equal to the aggregate sum of $10.0 million plus interest due and payable during the following 12 months, calculated monthly on a rolling basis. During the second and third years of the loan, such account is required to hold at all times a balance equal to the aggregate payments due and payable with respect to principal and interest during the following 12 months, calculated monthly on a rolling basis. In connection with the loan agreement, the Company entered into a security agreement with Union Bank, which will grant a security interest in the deposit account in favor of Union Bank on April 1, 2010 if, prior to then, all of the Company’s 0.75% debentures have not been converted or exchanged in a manner satisfactory to Union Bank. SunPower North America, LLC and SP Systems, both wholly-owned subsidiaries of the Company, have each guaranteed up to $30.0 million of the Company’s obligations under the loan agreement. The agreements include certain representations, covenants, and events of default customary for financing transactions of this type.

Supply Agreement with FPL Group Inc. ("FPL Group")

On April 21, 2009, SP Systems, a wholly-owned subsidiary of the Company, entered into a Photovoltaic Equipment Master Supply Agreement with FPL Group, an affiliate of FPL. The supply agreement sets forth the material terms and conditions pursuant to which SP Systems may sell to FPL Group solar panels and photovoltaic tracking and support structure equipment from 2010 through 2012 for use in solar projects of FPL Group or its affiliates.

Pursuant to the supply agreement, SP Systems guarantees delivery over such three year period of up to 100 megawatts (“MWAC ”) annually as a base commitment, and up to an additional 100 MWAC annually to the extent FPL Group exercises options to acquire such additional quantities. The parties may elect to satisfy SP Systems' quantity commitments as part of its provision of engineering, procurement and construction services in future FPL Group solar projects.

The supply agreement provides FPL Group the right to reduce or terminate its obligations with respect to the base commitment, which under certain, but not all, circumstances will result in an early termination payment. In addition, FPL Group’s purchase obligations are conditioned upon the State of Florida promulgating laws and the State of Florida Public Service Commission promulgating regulations, by no later than September 30, 2009 (or such later date as agreed by FPL Group and SP Systems), that allow FPL Group’s utility affiliate to build, own and operate, and receive cost recovery for, photovoltaic solar electric generation facilities that would enable FPL Group to satisfy the base commitment for each year. If such condition is not satisfied by the purchase condition date, then FPL Group shall have the right to reduce or eliminate the base commitment.

4.75% Convertible Debenture Issuance

On April 28, 2009, the Company entered into an underwriting agreement (the “Debenture Underwriting Agreement”) with Deutsche Bank Securities Inc. (“Deutsche Bank”) and Credit Suisse, as representatives of several underwriters (collectively, the “Debenture Underwriters”), providing for the offer and sale by the Company of $200.0 million principal amount of 4.75% senior convertible debentures due 2014 (the “4.75% debentures”), with an option in favor of the Debenture Underwriters for the purchase of up to an additional $30.0 million principal amount of the 4.75% debentures in certain circumstances, which option was exercised by the Debenture Underwriters in full on April 29, 2009. The 4.75% debentures were issued under an indenture, dated February 7, 2007 (the “Base Indenture”), b etween the Company and Wells Fargo, as trustee (the “Trustee”), as supplemented by a third supplemental indenture (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), which was executed by the Company and the Trustee on May 4, 2009. The Indenture provides, among other things, that the 4.75% debentures are senior unsecured obligations of the Company, ranking equally with all existing and future senior unsecured indebtedness of the Company. The 4.75% debentures are effectively subordinated to the Company’s secured indebtedness to the extent of the value of the related collateral and structurally subordinated to indebtedness and other liabilities of the Company’s subsidiaries. The 4.75% debentures do not contain any covenants or sinking fund requirements. Net proceeds received from the issuance of $230.0 million principal amount of the 4.75% debentures, before payment of the cost of the convertible debenture hedge transactions des cribed below, were $225.0 million which closed on May 4, 2009.

 

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Interest is payable on the 4.75% debentures on April 15 and October 15 of each year, beginning on October 15, 2009. The 4.75% debentures are initially convertible into shares of the Company’s class A common stock at a conversion price equal to $26.40 per share, which represents a premium of 20% over the price of the Company’s class A common stock in the concurrent equity offering. The applicable conversion rate may adjust in certain circumstances, including upon a fundamental change (defined in the Supplemental Indenture). If not earlier converted, the 4.75% debentures mature on April 15, 2014. Holders may also require the Company to repurchase all or a portion of their 4.75% debentures upon a fundamental change at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default (defined in the Indenture), such as the Company’s failure to make certain payments or perform or observe certain obligations thereunder, the Trustee or holders of a specified amount of then-outstanding 4.75% debentures will have the right to declare all amounts then outstanding due and payable.

Common Stock Issuance

Also on April 28, 2009, the Company entered into an underwriting agreement (the “Equity Underwriting Agreement”) with Credit Suisse and Deutsche Bank, as representatives of several underwriters (collectively, the “Equity Underwriters”), providing for the offer and sale by the Company of 9.0 million shares of its class A common stock at a price of $22.00 per share. The Company also granted to the Equity Underwriters an option to purchase up to an additional 1.35 million shares of its class A common stock in certain circumstances, which such option was exercised by the Equity Underwriters in full on April 29, 2009. The sale of 10.35 million shares of the Company’s class A common stock pursuant to the Equity Underwriting Agreement closed on May 4, 2009 and generated net proceeds of $218.9 million.

Option and Warrant Issuance

Concurrently with entering into the Debenture Underwriting Agreement, the Company entered into certain convertible debenture hedge transactions with respect to the Company’s class A common stock (the “purchased options”), with affiliates of certain of the Debenture Underwriters referred to above. The purchased options cover, subject to antidilution adjustments substantially identical to those in the 4.75% debentures, up to approximately 8.7 million shares of the Company’s class A common stock. The purchased options are intended to reduce the potential dilution upon conversion of the 4.75% debentures in the event that the market price per share of the Company’s class A common stock, as measured under the 4.75% debentures, at the time of exercise is greater than the conversion price of the 4.75% debentures. Th e purchased options will be settled on a net share basis. Each convertible debenture hedge transaction is a separate transaction, entered into by the Company with each option counter-party, and is not part of the terms of the 4.75% debentures. The Company paid aggregate consideration of $97.3 million for the purchased options upon the closing of the purchased option transaction on May 4, 2009. The exercise price of the purchased options is $26.40 per share of the Company’s class A common stock, subject to adjustment for customary anti-dilution and other events.

Separately and concurrently with entering into the Debenture Underwriting Agreement, on April 28, 2009 the Company also entered into certain warrant transactions whereby the Company agreed to sell to affiliates of certain of the Debenture Underwriters warrants (the “Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 8.7 million shares of the Company’s class A common stock. The Warrants will expire in 2014. If the market price per share of the Company’s class A common stock, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on the Company’s earnings per share. Each warrant transaction is a separate transaction, entered into by the Company with each option counter-party, and is not part of the terms of the 4.75% debe ntures. Holders of the 4.75% debentures will not have any rights with respect to the Warrants. The Warrants were sold for aggregate cash consideration of approximately $71.0 million upon the closing of the sale of the Warrants on May 4, 2009. The exercise price of the Warrants is $38.50 per share of the Company’s class A common stock, subject to adjustment for customary anti-dilution and other events.

The purchase options and Warrants transactions described above create a call spread overlay with respect to the 4.75% debentures. Assuming full performance by the counter-parties, the transactions effectively increase the conversion premium of the 4.75% debentures from 20% over the price of the Company’s class A common stock in the concurrent equity offering to 75%, or from $26.40 to $38.50. The net cost of the purchase options and Warrants transactions for the call spread overlay was $26.3 million.

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q/A 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. We use words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue” to identify forward-looking statements in this Quarterly Report on Form 10-Q/A including our plans and expectations regarding future financial results, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, our ability to obtain financing and industry trends. Such forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q/A and involve a number of risks and uncertainties, some beyond our control, that could cause actual results to differ materially from those anticipated by these forward-looking statements. Please see “PART II. OTHER INFORMATION, Item 1A: Risk Factors” of the March 2009 Form 10-Q and our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 28, 2008, for additional information on risks and uncertainties that could cause actual results to differ. These forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we are under no obligation to, and expressly disclaim any responsibility to, update or alter our forward-looking statements, wheth er as a result of new information, future events or otherwise.

The following information has been amended to reflect the impact of the restatements described elsewhere in this Quarterly Report on Form 10-Q/A. The following information has been revised to reflect our restated results of operations and cash flows and should be read in conjunction with the Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included in this Amendment. Our fiscal quarters end on the Sunday closest to the end of the applicable calendar quarter. All references to fiscal periods apply to our fiscal quarters or year which ends on the Sunday closest to the calendar month end.

Restatement of Previously Issued Condensed Consolidated Financial Statements

Background and Scope of Investigation

On November 16, 2009, our Company announced that its Audit Committee commenced an independent investigation into certain accounting and financial reporting matters at our Philippines operations (“SPML”). The Audit Committee retained independent counsel, forensic accountants and other experts to assist it in conducting the investigation.

As a result of the investigation, the Audit Committee concluded that certain unsubstantiated accounting entries were made at the direction of the Philippines-based finance personnel in order to report results for manufacturing operations that would be consistent with internal expense projections. The entries generally resulted in an understatement of our Company’s cost of goods sold (referred to as “cost of revenue” in our Condensed Consolidated Statements of Operations). The Audit Committee concluded that the efforts were not directed at achieving our Company’s overall financial results or financial analysts’ projections of our Company’s financial results. The Audit Committee also determined that these accounting issues were confined to the accounting function in the Philippines. Finally, the Audit Co mmittee concluded that executive management neither directed nor encouraged, nor was aware of, these activities and was not provided with accurate information concerning the unsubstantiated entries. In addition to the unsubstantiated entries, during the Audit Committee investigation various accounting errors were discovered by the investigation and by management. See Part I — “Item 4: Controls and Procedures” of this report.

Business

We are a vertically integrated solar products and services company that designs, manufactures and markets high-performance solar electric power technologies. Our solar cells and solar panels are manufactured using proprietary processes, and our technologies are based on more than 15 years of research and development. Of all the solar cells available for the mass market, we believe our solar cells have the highest conversion efficiency, a measurement of the amount of sunlight converted by the solar cell into electricity. Our solar power products are sold through our components and systems business segments.

Business Segments Overview

Components Segment: Our Components Segment sells solar power products, including solar cells, solar panels and inverters, which convert sunlight to electricity compatible with the utility network. We believe our solar cells provide the following benefits compared with conventional solar cells:

•	superior performance, including the ability to generate up to 50% more power per unit area;

•	superior aesthetics, with our uniformly black surface design that eliminates highly visible reflective grid lines and metal interconnect ribbons; and

 

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•	more efficient use of silicon, a key raw material used in the manufacture of solar cells.

We sell our solar components products to installers and resellers, including our global dealer network, for use in residential and commercial applications where the high efficiency and superior aesthetics of our solar power products provide compelling customer benefits. We also sell products for use in multi-megawatt solar power plant applications. In many situations, we offer a materially lower area-related cost structure for our customers because our solar panels require a substantially smaller roof or land area than conventional solar technology and half or less of the roof or land area of commercial solar thin film technologies. We sell our products primarily in North America, Europe and Asia, principally in regions where public policy has accelerated solar power adoption.

We manufacture our solar cells at our two facilities in the Philippines, and are developing a third solar cell manufacturing facility in Malaysia. Almost all of our solar cells are then combined into solar panels at our solar panel assembly facility located in the Philippines. Our solar panels are also manufactured for us by third-party subcontractors.

Systems Segment: Our Systems Segment generally sells solar power systems directly to system owners and developers. When we sell a solar power system, it may include services such as development, engineering, procurement of permits and equipment, construction management, access to financing, monitoring and maintenance. We believe our solar systems provide the following benefits compared with competitors’ systems:

•	superior performance delivered by maximizing energy delivery and financial return through systems technology design;

•	superior systems design to meet customer needs and reduce cost, including non-penetrating, fast roof installation technologies; and

•	superior channel breadth and delivery capability including turnkey systems.

Our customers include commercial and governmental entities, investors, utilities, production home builders and home owners. We work with development, construction, system integration and financing companies to deliver our solar power systems to customers. Our solar power systems are designed to generate electricity over a system life typically exceeding 25 years and are principally designed to be used in large-scale applications with system ratings of typically more than 500 kilowatts. Worldwide, more than 500 SunPower solar power systems have been constructed or are under contract, rated in the aggregate at more than 400 megawatts of peak capacity.

We have solar power system projects completed or in the process of being completed in various countries including Germany, Italy, Portugal, South Korea, Spain and the United States of America (the “United States” or “U.S”). We sell distributed rooftop and ground-mounted solar power systems as well as central-station power plants. In the United States, distributed solar power systems are typically rated at more than 500 kilowatts of capacity to provide a supplemental, distributed source of electricity for a customer’s facility . Many customers choose to purchase solar electricity under a power purchase agreement with a financing company which buys the system from us. In Europe, our products and systems are typically purchased by a financing company and operated as a central-station solar power plant. These po wer plants are rated with capacities of approximately one to thirty megawatts, and generate electricity for sale under tariff to private and public utilities.

In 2008, we began serving the utility market in the United States, as regulated utilities began seeking cost-effective renewable energy to meet governmental renewable portfolio standard requirements. We believe we are well positioned for long-term success, despite difficult near-term economic conditions, with our substantial order pipeline for utility scale projects. Examples include an agreement with Pacific Gas and Electric Company (“PG&E”) to build a 210 megawatt (“MWAC”) solar power plant in California from 2010 to 2012, an agreement with FPL Group Inc. (“FPL Group”) to supply solar panels and photovoltaic tracking and support structure equipment of 300 to 600 MWAC from 2010 to 2012, an a greement with Florida Power & Light Company (“FPL”) to build two solar photovoltaic power plants totaling 35 MWAC in Florida from 2009 to 2010, an agreement with Xcel Energy Inc (“Xcel”) to build a 17 MWAC solar power plant in Colorado in 2010, and another agreement with Exelon Corporation (“Exelon”) to build a 8 MWAC solar power plant in Chicago in 2009. While we have contracts for these projects, there are substantial additional events, including obtaining financing and proper governmental permits, which must occur in order for the projects to move forward.

We manufacture certain of our solar power system products at our manufacturing facilities in Richmond, California and at other facilities located close to our customers. Some of our solar power system products are also manufactured for us by third-party suppliers.

Restructuring Costs

In response to deteriorating economic conditions, we reduced our global workforce of regular employees by approximately 60 positions in the first quarter of fiscal 2009 in order to reduce our annual operating expenses. The restructuring actions included charges of $1.2 million incurred in the first quarter of fiscal 2009 for other severance, benefits and related costs. Restructuring accruals totaled $0.2 million as of March 29, 2009 and is recorded in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and represents estimated future cash outlays primarily related to severance expected to be paid within the second quarter of fiscal 2009. The restructuring, along with other cost-reduction strategies, is expected to reduce the Company’s 2009 operating budget by approximately $50 million. See Note 8 of Notes to our Condensed Consolidated Financial Statements.

 

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Accounting Changes and Recent Accounting Pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, in our Condensed Consolidated Financial Statements, see Note 1 of Notes to our Condensed Consolidated Financial Statements.

Results of Operations for the Three Months Ended March 29, 2009 (Restated) and March 30, 2008 (Restated)

Revenue

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)		(As Restated)				(As Restated)
Systems revenue		$	103,953			$	179,423
Components revenue			107,690				94,850
Total revenue		$	211,643			$	274,273

Total Revenue:  During the three months ended March 29, 2009 and March 30, 2008, our total revenue was $211.6 million and $274.3 million, respectively, a decrease of 23%. The decrease in our total revenue during the three months ended March 29, 2009 compared to the same period in fiscal 2008 is attributable to prolonged winter conditions in Europe, the difficult economic and credit environment domestically, and delayed purchasing decisions by many of our customers. Revenue earned in the three months ended March 30, 2008 resulted from ongoing construction of several large-scale solar power plants in Spain and high demand for our solar panels.

Sales outside the United States represented approximately 39% and 79% of our total revenue for the three months ended March 29, 2009 and March 30, 2008, respectively, representing a shift in the geography of the construction of system projects from Europe to the United States, particularly with the ongoing construction of a 25 MWAC solar power plant for FPL in Desoto County, Florida.

Concentrations: We have three customers that each accounted for 10 percent or more of our total revenue in one of the three months ended March 29, 2009 and March 30, 2008 as follows:

			Three Months Ended
			March 29,				March 28,
(As a percentage of total revenue)			2009				2008
Significant Customers:	Business Segment
FPL	Systems			26	%			*
Naturener Group	Systems			*				13	%
Sedwick Corporate, S.L.	Systems			*				30	%

*

denotes less than 10% during the period

We generate revenue from two business segments, as follows:

Systems Segment Revenue: Our systems revenue for the three months ended March 29, 2009 and March 30, 2008 was $104.0 million and $179.4 million, respectively, which accounted for 49% and 65%, respectively, of our total revenue. During the three months ended March 29, 2009, our systems revenue decreased 42% as compared to revenue earned in the three months ended March 30, 2008, due to the difficult economic conditions resulting in near-term challenges in financing system projects. In the three months ended March 30, 2008, our Systems Segment benefited from strong power plant scale demand in Europe, primarily in Spain, before the expiration of a pre-existing feed-in tariff in September 2008.

FPL was a significant customer to the Systems Segment during the three months ended March 29, 2009 due to the ongoing construction of a 25 MWAC solar power plant in Desoto County, Florida. Sedwick Corporate, S.L. and Naturener Group were significant customers to the Systems Segment during the three months ended March 30, 2008 due to the ongoing construction of several large-scale solar power plants in Spain.

 

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Components Segment Revenue:  Components revenue for the three months ended March 29, 2009 and March 30, 2008 was $107.7 million and $94.9 million, respectively, or 51% and 35%, respectively, of our total revenue. During the three months ended March 29, 2009, our components revenue increased 14% as compared to revenue earned in the three months ended March 30, 2008, primarily due to growing demand for our solar power products in Italy. However, components revenue in the three months ended March 29, 2009 was lower than our internal forecast due to a long winter season in Europe, primarily in Germany, and challenging business conditions due to the uncertain economic environment and tight credit conditions which negatively influenced overall demand and timing of customers’ buying decisions. In the three months ended March 30, 2008, our Components Segment benefited from strong demand in the residential and small commercial roof-top markets through our dealer network in both Europe and the United States.

Cost of Revenue

Details to cost of revenue by segment:

		Three Months Ended
		Systems								Components								Consolidated
		March 29,				March 30,				March 29,				March 30,				March 29,				March 30,
		2009				2008				2009				2008				2009				2008
(Dollars in thousands)		(As Restated)				(As Restated)				(As Restated)				(As Restated)				(As Restated)				(As Restated)
Amortization of other intangible assets		$	1,841			$	2,168			$	952			$	1,044			$	2,793			$	3,212
Stock-based compensation			298				2,511				598				1,203				896				3,714
Non-cash interest expense			230				36				270				52				500				88
Impairment of long-lived assets			-				1,343				-				4,146				-				5,489
Materials and other cost of revenue			92,955				137,870				82,264				72,404				175,219				210,274
Total cost of revenue		$	95,324			$	143,928			$	84,084			$	78,849			$	179,408			$	222,777
Total cost of systems revenue as a percentage of revenue			92	%			80	%			78	%			83	%			85	%			81	%
Total gross margin percentage			8	%			20	%			22	%			17	%			15	%			19	%

Total Cost of Revenue:  We had 12 and 7 solar cell manufacturing lines in our two facilities as of March 29, 2009 and March 30, 2008, respectively, with a total rated annual solar cell manufacturing capacity of 414 megawatts and 214 megawatts, respectively. During the three months ended March 29, 2009 and March 30, 2008, our two solar cell manufacturing facilities operated at approximately 73% and 68% capacity, respectively, producing 93.7 megawatts and 38.5 megawatts, respectively. During the three months ended March 29, 2009 and March 30, 2008, our total cost of revenue was $179.4 million and $222.8 million, respectively, which represents a decrease of 19%. The decrease in total cost of revenue corresponds with the decrease of 23% in total revenue during the three months ended March 29, 2009 compared to the same period i n fiscal 2008. As a percentage of total revenue, our total cost of revenue increased to 85% in the three months ended March 29, 2009 compared to 81% in the three months ended March 30, 2008. This increase in total cost of revenue as a percentage of total revenue is reflective of (i) Systems Segment overhead costs incurred that are fixed in nature when systems revenue decreased 42% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008; (ii) restructuring charges of $0.2 million in the first quarter of fiscal 2009; and (iii) higher amortization of capitalized interest expense in the first quarter of fiscal 2009 compared to the same period in 2008. This increase in total cost of revenue as a percentage of total revenue was partially offset by (i) decreased costs of polysilicon beginning in the second quarter of fiscal 2008; (ii) improved manufacturing economies of scale associated with markedly higher production volume; (iii) reduced expenses associated with the amortization of intangible assets and stock-based compensation; and (iv) one-time asset impairment charges of $5.5 million in the first quarter of fiscal 2008 relating to the wind down of our imaging detector product line and for the write-down of certain solar product manufacturing equipment which became obsolete due to new processes (the costs associated with the $3.3 million write-down of certain solar product manufacturing equipment was recovered from the vendor in the third quarter of fiscal 2008).

Systems Segment Gross Margin: Gross margin was $8.6 million and $35.5 million for the three months ended March 29, 2009 and March 30, 2008, respectively, or 8% and 20%, respectively, of systems revenue. Gross margin decreased due to lower average selling prices for our solar power systems and Systems Segment overhead costs incurred that are fixed in nature when systems revenue decreased 42% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008.

 Components Segment Gross Margin: Gross margin was $23.6 million and $16.0 million for the three months ended March 29, 2009 and March 30, 2008, respectively, or 22% and 17%, respectively, of components revenue. Gross margin increased due to higher average solar cell conversion efficiency and better silicon utilization, continued reduction in silicon costs and higher volume, partially offset by lower average selling prices for our solar power products.

 

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Research and Development

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)		(As Restated)
Stock-based compensation		$	1,347			$	811
Other research and development			6,533				3,831
Total research and development		$	7,880			$	4,642
Total research and development as a percentage of revenue			4	%			2	%

During the three months ended March 29, 2009 and March 30, 2008, our research and development expense was $7.9 million and $4.6 million, respectively, which represents an increase of 70%. The increase in spending during the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted primarily from: (i) increases in salaries, benefits and stock-based compensation costs as a result of increased headcount; and (ii) costs related to the improvement of our current generation solar cell manufacturing technology, development of our third generation of solar cells, development of next generation solar panels, development of next generation trackers and rooftop systems, and development of systems performance monitoring products. These increases were partially offset by grants and cost reimbursements received from vari ous government entities in the United States of approximately $1.8 million and $1.7 million in the three months ended March 29, 2009 and March 30, 2008, respectively.

Sales, General and Administrative

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)		(As Restated)
Amortization of other intangible assets		$	1,259			$	1,105
Stock-based compensation			6,811				9,983
Other sales, general and administrative			34,334				22,770
Total sales, general and administrative		$	42,404			$	33,858
Total sales, general and administrative as a percentage of revenue			20	%			12	%

During the three months ended March 29, 2009 and March 30, 2008, our sales, general and administrative (“SG&A”) expense was $42.4 million and $33.9 million, respectively, which represents an increase of 25%. The increase in our SG&A expense during the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted primarily from higher spending in all areas of sales, marketing, finance and information technology to support the growth of our business, particularly: (i) sales and marketing spending to expand our dealer network with nearly 500 dealers worldwide; (ii) outside professional fees for legal and accounting services; (iii) increased headcount and payroll related expenses; and (iv) restructuring charges of $0.9 million.

Other Income (Expense), Net

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)						(As Restated)
Interest income		$	1,184			$	4,147
Total interest income as a percentage of revenue			1	%			2	%
Non-cash interest expense		$	(4,521	)		$	(4,296	)
Other interest expense			(1,600	)			(1,721	)
Total interest expense		$	(6,121	)		$	(6,017	)
Total interest expense as a percentage of revenue			3	%			2	%
Other, net		$	(7,157	)		$	715
Total other, net as a percentage of revenue			3	%			0	%

Interest income represents interest income earned on our cash, cash equivalents, restricted cash, restricted cash equivalents, available-for-sale securities and a notes receivable. The decrease in interest income of 71% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted from lower cash holdings related to capital expenditures for our manufacturing capacity expansion.

Interest expense during the three months ended March 29, 2009 relates to borrowings under our senior convertible debentures, the facility agreement with the Malaysian Government, fees for our outstanding letters of credit with Wells Fargo Bank, N.A. (“Wells Fargo”) and customer advance payments. Interest expense during the three months ended March 30, 2008 relates to borrowings under our senior convertible debentures, fees for our outstanding letters of credit with Wells Fargo and customer advance payments. The increase in interest expense of 2% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008 is due to interest on borrowings totaling Malaysian Ringgit 375.0 million (approximately $103.9 million based on the exchange rate as of March 29, 2009) under the facility agreement with the Malaysi an Government, partially offset by higher capitalized interest of $2.5 million in the three months ended March 29, 2009, as compared to $1.8 million in the same period of 2008. Our debt was used to fund our capital expenditures for our manufacturing capacity expansion.

 

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The following table summarizes the components of other, net:

		Three Months Ended
		March 29,				March 30,
(Dollars in thousands)		2009				2008
Gain (loss) on derivatives and foreign exchange		$	(5,778	)		$	756
Impairment of investments			(1,318	)			-
Other income (expense), net			(61	)			(41	)
Total other, net		$	(7,157	)		$	715

Other, net expenses during the three months ended March 29, 2009 consists primarily of losses totaling $2.0 million from expensing the time value of option contracts and forward points on forward exchange contracts, losses totaling $3.8 million on derivatives and foreign exchange largely due to the volatility in the current markets and impairment charges for certain money market funds and auction rate securities. Other, net income during the three months ended March 30, 2008 consists primarily of gains on derivatives and foreign exchange.

Income Taxes

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)		(As Restated)				(As Restated)
Provision for (benefit from) income taxes		$	(19,196	)		$	1,280
As a percentage of revenue			9	%			0	%

In the three months ended March 29, 2009, our effective rate of income tax benefit of 63.7% was primarily due to domestic and foreign income losses in certain jurisdictions, nondeductible amortization of purchased intangible assets and discrete stock option deductions. Our effective tax rate for the three months ended March 30, 2008 of 10.8% was primarily attributable to domestic and foreign income taxes in certain jurisdictions where our operations are profitable, net of the consumption of non-stock net operating loss carryforwards. Our interim period tax provision is estimated based on the expected annual worldwide tax rate and takes into account the tax effect of discrete items.

Equity in earnings of unconsolidated investees

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)						(As Restated)
Equity in earnings of unconsolidated investees		$	1,245			$	582
As a percentage of revenue			1	%			0	%

During the three months ended March 29, 2009 and March 30, 2008, our equity in earnings of unconsolidated investees were gains of $1.2 million and $0.6 million, respectively. Our share of Woongjin Energy Co. Ltd’s (“Woongjin Energy”) income totaled $1.3 million in the three months ended March 29, 2009 as compared to $0.6 million in the three months ended March 30, 2008 due to: (i) increases in production since Woongjin Energy began manufacturing in the third quarter of fiscal 2007; and (ii) our equity investment increased from 28.8% as of March 30, 2008 to 42.1% as of March 29, 2009. First Philec Solar Corporation (“First Philec Solar”) became operational in the second quarter of fiscal 2008 and our share of the joint venture’s loss totaled $0.1 million and zero in the three months ended March 29, 2009 and March 30, 2008, respectively.

 

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Liquidity and Capital Resources

 Cash Flows

A summary of the sources and uses of cash and cash equivalents is as follows:

		Three Months Ended
		March 29,				March 30,
		2009				2008
(Dollars in thousands)		(As Restated)				(As Restated)
Net cash used in operating activities		$	(53,125	)		$	(68,714	)
Net cash used in investing activities			(43,109	)			(92,593	)
Net cash provided by financing activities			49,269				1,798

Operating Activities

Net cash used in operating activities of $53.1 million in the three months ended March 29, 2009 was primarily the result of an increase in inventory of $86.0 million because demand was lower than our internal forecast due to a long winter season in Europe, primarily in Germany, and challenging business conditions due to the uncertain economic environment and tight credit conditions which negatively influenced overall demand and timing of customers’ buying decisions. In addition, net cash used represents a decrease in accounts payable and other accrued liabilities of $24.8 million due to the elimination or delay of costs from our internal expenditure plan until the business climate and overall demand for our solar power products improves, other changes in operating assets and liabilities of $10.6 million and a net loss of $9.7 milli on, offset by non-cash charges totaling $38.3 million for depreciation, amortization, impairment of investments, stock-based compensation and non-cash interest expense, less non-cash income of $1.2 million related to our equity share in earnings of joint ventures, and a decrease in accounts receivable of $40.9 million.

Net cash used in operating activities of $68.7 million for the three months ended March 30, 2008 was primarily the result of decreases in billings in excess of costs and estimated earnings of $43.7 million related to contractual timing of system project billings, as well as increases in costs and estimated earnings in excess of billings of $20.7 million, inventory of $43.1 million, accounts receivable of $17.2 million and other changes in operating assets and liabilities totaling $19.5 million. These items were partially offset by net income of $11.1 million, plus non-cash charges totaling $39.4 million for depreciation, amortization, impairment of long-lived assets, stock-based compensation and non-cash interest expense, less non-cash income of $0.6 million for our equity share in earnings of Woongjin Energy. In addition, these items we re offset by increases in accounts payable and other accrued liabilities of $25.5 million. The significant increases in substantially all of our operating assets and liabilities resulted from our substantial revenue increase in the three months ended March 30, 2008 compared to previous quarters which impacted net income and working capital.

Investing Activities

Net cash used in investing activities during the three months ended March 29, 2009 was $43.1 million, of which $52.1 million relates to capital expenditures primarily associated with manufacturing capacity expansion in the Philippines and Malaysia, $9.2 million relates to increases in restricted cash and cash equivalents for the second drawdown under the facility agreement with the Malaysian government, partially offset by $18.2 million in proceeds received from the sales or maturities of available-for-sale securities.

Net cash used in investing activities during the three months ended March 30, 2008 was $92.6 million, of which $51.1 million relates to capital expenditures primarily associated with manufacturing capacity expansion in the Philippines. Also during the three months ended March 30, 2008: (i) restricted cash and cash equivalents increased by $55.5 million for advanced payments received from customers that we provided security in the form of cash collateralized bank standby letters of credit; (ii) we paid $13.5 million in cash for the acquisition of Solar Solutions, net of cash acquired; and (iii) we invested an additional $5.6 million in joint ventures. Cash used in investing activities was partially offset by $33.1 million in proceeds received from the sales or maturities of available-for-sale securities, net of available-for-sale securiti es purchased during the period.

Financing Activities

Net cash provided by financing activities during the three months ended March 29, 2009 reflects proceeds received of Malaysian Ringgit 185.0 million (approximately $51.2 million based on the exchange rate as of March 29, 2009) from the Malaysian Government under our facility agreement, $0.4 million from stock option exercises, partially offset by cash paid of $2.4 million for treasury stock purchases that were used to pay withholding taxes on vested restricted stock. Net cash provided by financing activities during the three months ended March 30, 2008 reflects $1.1 million from stock option exercises and $4.0 million in excess tax benefits from stock-based award activity, partially offset by cash paid of $3.3 million for treasury stock purchases that were used to pay withholding taxes on vested restricted stock.

Debt and Credit Sources

Line of Credit

We have a credit agreement with Wells Fargo providing for a $50.0 million uncollateralized revolving credit line, with a $50.0 million uncollateralized letter of credit subfeature, and a separate $150.0 million collateralized letter of credit facility as of March 29, 2009. We may borrow up to $50.0 million and request that Wells Fargo issue up to $50.0 million in letters of credit under the uncollateralized letter of credit subfeature through March 27, 2010. Letters of credit issued under the subfeature reduce our borrowing capacity under the revolving credit line. Additionally, we may request that Wells Fargo issue up to $150.0 million in letters of credit under the collateralized letter of credit facility through March 27, 2014. As detailed in the agreement, we pay interest of LIBOR plus 2% on outstanding borrowings under the uncollate ralized revolving credit line, and a fee of 2% and 0.2% to 0.4% depending on maturity for outstanding letters of credit under the uncollateralized letter of credit subfeature and collateralized letter of credit facility, respectively. At any time, we can prepay outstanding loans. All borrowings under the uncollateralized revolving credit line must be repaid by March 27, 2010, and all letters of credit issued under the uncollateralized letter of credit subfeature expire on or before March 27, 2010 unless we provide by such date collateral in the form of cash or cash equivalents in the aggregate amount available to be drawn under letters of credit outstanding at such time. All letters of credit issued under the collateralized letter of credit facility expire no later than March 27, 2014.

 

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As of March 29, 2009 and December 28, 2008, letters of credit totaling $49.7 million and $29.9 million, respectively, were issued by Wells Fargo under the uncollateralized letter of credit subfeature. In addition, letters of credit totaling $74.5 million and $76.5 million were issued by Wells Fargo under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008, respectively. As of March 29, 2009 and December 28, 2008, cash available to be borrowed under the uncollateralized revolving credit line was $0.3 million and $20.1 million, respectively, and includes letter of credit capacities available to be issued by Wells Fargo under the uncollateralized letter of credit subfeature. Letters of credit available under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008 totaled $7 5.5 million and $73.5 million, respectively. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

Term Loan

On April 17, 2009, we entered into a loan agreement with Union Bank, N.A. (“Union Bank”) under which we borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. The loan is to be repaid in eight equal quarterly installments commencing June 30, 2010. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

Debt Facility Agreement with the Malaysian Government

On December 18, 2008, we entered into a facility agreement with the Malaysian Government in which we may borrow up to Malaysian Ringgit 1.0 billion, or approximately $276.9 million, to finance the construction of FAB3 in Malaysia. The loans within the facility agreement are divided into two tranches that may be drawn through June 2010. Principal is to be repaid in six quarterly payments starting in July 2015, and a non-weighted average interest rate of approximately 4.4% per annum accrues and is payable starting in July 2015. We have the ability to prepay outstanding loans and all borrowings must be repaid by October 30, 2016. As of March 29, 2009 and December 28, 2008, we borrowed Malaysian Ringgit 375.0 million, approximately $103.9 million, and Malaysian Ringgit 190.0 million, approximately $54.6 million, respectively, under the facil ity agreement. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

1.25%, 0.75% and 4.75% Convertible Debenture Issuances

In February 2007, we issued $200.0 million in principal amount of our 1.25% senior convertible debentures (“1.25% debentures”) and received net proceeds of $194.0 million. In the fourth quarter of fiscal 2008, we received notices for the conversion of approximately $1.4 million of the 1.25% debentures. Interest on the 1.25% debentures is payable on February 15 and August 15 of each year, which commenced August 15, 2007. The 1.25% debentures mature on February 15, 2027. Holders may require us to repurchase all or a portion of their 1.25% debentures on each of February 15, 2012, February 15, 2017 and February 15, 2022, or if we experience certain types of corporate transactions constituting a fundamental change. Any repurchase of the 1.25% debentures pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the 1.25% debentures to be repurchased plus accrued and unpaid interest. In addition, we may redeem some or all of the 1.25% debentures on or after February 15, 2012 for cash at a redemption price equal to 100% of the principal amount of the 1.25% debentures to be redeemed plus accrued and unpaid interest. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

In July 2007, we issued $225.0 million in principal amount of our 0.75% senior convertible debentures (“0.75% debentures”) and received net proceeds of $220.1 million. Interest on the 0.75% debentures is payable on February 1 and August 1 of each year, which commenced February 1, 2008. The 0.75% debentures mature on August 1, 2027. Holders may require us to repurchase all or a portion of their 0.75% debentures on each of August 1, 2010, August 1, 2015, August 1, 2020 and August 1, 2025, or if we experience certain types of corporate transactions constituting a fundamental change. Therefore, the 0.75% debentures will be classified as short-term debt in our Condensed Consolidated Balance Sheets beginning on August 1, 2009. Any repurchase of the 0.75% debentures pursuant to these provisions will be for cash at a price equal to 1 00% of the principal amount of the 0.75% debentures to be repurchased plus accrued and unpaid interest. In addition, we may redeem some or all of the 0.75% debentures on or after August 1, 2010 for cash at a redemption price equal to 100% of the principal amount of the 0.75% debentures to be redeemed plus accrued and unpaid interest. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

 

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On May 4, 2009, we issued $230.0 million in principal amount of our 4.75% senior convertible debentures (“4.75% debentures”) and received net proceeds of $225.0 million, before payment of the net cost of the convertible debenture hedge transactions of $26.3 million. Interest on the 4.75% debentures is payable on April 15 and October 15 of each year, beginning on October 15, 2009. The 4.75% debentures mature on April 15, 2014. The 4.75% debentures are initially convertible into shares of our class A common stock at a conversion price equal to $26.40 per share, which represents a premium of 20% over the price of our class A common stock in the concurrent equity offering described below. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

Liquidity

As of March 29, 2009, we had cash and cash equivalents of $149.1 million as compared to $202.3 million as of December 28, 2008. Our cash balances are held in numerous locations throughout the world, including substantial amounts held outside of the U.S. Most of the amounts held outside of the U.S. could be repatriated to the U.S. but, under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. We have accrued U.S. federal taxes on the earnings of our foreign subsidiaries except when the earnings are considered indefinitely reinvested outside of the U.S. Repatriation could result in additional U.S. federal income tax payments in future years.

In addition, we had short-term investments and long-term investments of $2.3 million and $19.0 million as of March 29, 2009, respectively, as compared to $17.2 million and $23.6 million as of December 28, 2008, respectively. The decrease in the balance of our cash and cash equivalents, short-term investments and long-term investments as of March 29, 2009 compared to the balance as of December 28, 2008 was due primarily to the liquidation of our investment portfolio to fund our capital expenditures for our manufacturing capacity expansion.

We estimated that auction rate securities held with a stated par value of $21.1 million and $26.1 million at March 29, 2009 and December 28, 2008, respectively, would be valued at approximately 90% and 91%, respectively, of their stated par value, or $19.0 million and $23.6 million, respectively, representing a decline in value of approximately $2.1 million and $2.5 million, respectively. Due to the length of time that has passed since the auction rate securities failed to clear at auctions and the ongoing uncertainties regarding future access to liquidity, we have determined the impairment is other-than-temporary and recorded impairment losses of $0.1 million and $2.5 million in the first quarter of fiscal 2009 and fourth quarter of fiscal 2008, respectively, in “Other, net” in our Condensed Consolidated Statements of Operat ions. If market conditions were to deteriorate even further such that the current fair value were not achievable, we could realize additional impairment losses related to our auction rate securities. All our auction rate securities as of March 29, 2009 and December 28, 2008 have failed to clear at auctions in subsequent periods. Accordingly, auction rate securities at March 29, 2009 and December 28, 2008 totaling $19.0 million and $23.6 million, respectively, are classified as “Long-term investments” in our Condensed Consolidated Balance Sheets, because they are not expected to be used to fund current operations and consistent with their stated contractual maturities between 20 to 30 years. On February 4, 2009, we sold an auction rate security with a carrying value of $4.5 million as of December 28, 2008 for $4.6 million to a third-party outside of the auction process. See Note 6 of Notes to our Condensed Consolidated Financial Statements.

Because the closing price of our class A common stock on at least 20 of the last 30 trading days during the fiscal quarters ending March 29, 2009 and December 28, 2008 did not equal or exceed $70.94, or 125% of the applicable conversion price for our 1.25% debentures, and $102.80, or 125% of the applicable conversion price governing our 0.75% debentures, holders of the 1.25% debentures and 0.75% debentures are unable to exercise their right to convert the debentures, based on the market price conversion trigger, any day in the first and second quarters of fiscal 2009. Accordingly, the convertible debt is classified as long-term debt in our Condensed Consolidated Balance Sheets as of March 29, 2009 and December 28, 2008. This test is repeated each fiscal quarter, therefore, if the market price conversion trigger is satisfied in a subseque nt quarter, the debentures may again be re-classified as short-term debt. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

In addition, the holders of our 1.25% debentures and 0.75% debentures would be able to exercise their right to convert the debentures during the five consecutive business days immediately following any five consecutive trading days in which the trading price of our senior convertible debentures is less than 98% of the average of the closing sale price of a share of class A common stock during the five consecutive trading days, multiplied by the applicable conversion rate. As of March 29, 2009 and December 28, 2008, our 1.25% debentures and 0.75% debentures traded significantly below their historic trading prices. If the trading prices of our debentures continue to decline, holders of the debentures may have the right to convert the debentures in the future.

On May 4, 2009, we received aggregate net proceeds of $417.6 million from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of $230.0 million in principal amount of our 4.75% debentures named above, after deducting the underwriters’ discounts and commissions and estimated offering expenses payable by us (including approximately $26.3 million paid as the net cost of convertible debenture hedge transactions entered into in connection with the 4.75% debenture offering). See Note 18 of Notes to our Condensed Consolidated Financial Statements.

We intend to use the net proceeds from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of the 4.75% debentures for general corporate purposes, including working capital and capital expenditures as well as for the purposes described below. From time to time, we will evaluate potential acquisitions and strategic transactions of business, technologies, or products, and may use a portion of the net proceeds for such acquisitions or transactions. Currently, however, we do not have any agreements with respect to any such material acquisitions or strategic transactions.

 

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We may use a portion of the net proceeds from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of the 4.75% debentures  to repurchase some of our outstanding 1.25% debentures or 0.75% debentures. We expect that holders of our outstanding 1.25% debentures or 0.75% debentures from whom we may repurchase such debentures (which holders may include one or more of the underwriters) may have outstanding short hedge positions in our class A common stock relating to such debentures. Upon repurchase, we expect that such holders will unwind or offset those hedge positions by purchasing class A common stock in secondary market transactions, including purchases in the open market, and/or entering into various derivative transactions with respect to our class A common stock. These activities could have the effect of increasing, or preventing a decline in, the market price of our class A common stock. The effect, if any, of any of these transactions and activities on the market price of our class A common stock or the debentures will depend in part on market conditions and cannot be ascertained at this time, but may be material.

We believe that our current cash and cash equivalents, cash generated from operations, and funds available from the credit agreement with Wells Fargo, facility agreement with the Malaysian Government, the term loan with the Union Bank, and the issuance of the 4.75% debentures and 10.35 million shares of our class A common stock will be sufficient to meet our working capital and capital expenditure commitments for at least the next 12 months. However, there can be no assurance that our liquidity will be adequate over time. We expect total capital expenditures in the range of $250 million to $300 million in 2009 as we continue to increase our solar cell and solar panel manufacturing capacity in the Philippines and Malaysia. These expenditures would be greater if we decide to bring capacity on line more rapidly. If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain other debt financing. However, after the tax-free distribution of our shares by Cypress Semiconductor Corporation (“Cypress”) on September 29, 2008, our ability to sell additional equity securities to obtain additional financing is limited before triggering our obligation to indemnify Cypress for taxes relating to the distribution of our class B common stock. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders and may not be available on favorable terms or at all, particularly in light of the current crises in the financial and credit markets. Additional debt would result in increased expenses and would likely impose new restrictive covenants like the covenants under the credit agreement with Wells Fargo, the facility agreement with the Malaysian Government, the term loan with the Union Bank, the 1.25% debentures, the 0.75% debentures and the 4.75% debentures. Financing arrangements may not be available to us, or may not be available in amounts or on terms acceptable to us.

We expect to experience growth in our operating expenses, including our research and development, sales and marketing and general and administrative expenses, for the foreseeable future to execute our business strategy. We may also be required to purchase polysilicon in advance to secure our wafer supplies or purchase third-party solar panels and materials in advance to support systems projects. We intend to fund these activities with existing cash and cash equivalents, cash generated from operations, borrowings under the term loan with the Union Bank, the issuance of the 4.75% debentures and 10.35 million shares of our class A common stock and, if necessary, borrowings under our credit agreement with Wells Fargo. These anticipated increases in operating expenses may not result in an increase in our revenue and our anticipated revenue ma y not be sufficient to support these increased expenditures. We anticipate that operating expenses, working capital and capital expenditures will constitute a significant use of our cash resources.

Contractual Obligations

The following summarizes our contractual obligations at March 29, 2009:

						Payments Due by Period
(In thousands)		Total				2009 (remaining 9 months)					2010 – 2011				2012 – 2013			Beyond 2013
Customer advances, including interest		$	100,441			$	10,257			$	26,184			$	16,000			$	48,000
Convertible debt, including interest			498,922				3,128				8,340				8,340				479,114
Loan from Malaysian Government			103,850				—				—				—				103,850
Lease commitments			32,837				4,096				8,574				5,570				14,597
Utility obligations			750				—				—				—				750
Royalty obligations			154				154				—				—				—
Non-cancelable purchase orders			115,632				114,982				650				—				—
Purchase commitments under agreements			3,992,157				261,808				1,065,338				636,754				2,028,257
Total		$	4,844,743			$	394,425			$	1,109,086			$	666,664			$	2,674,568

 

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Customer advances and interest on customer advances relate to advance payments received from customers for future purchases of solar power products. Convertible debt and interest on convertible debt relate to the aggregate of $423.6 million in outstanding principal amount of our senior convertible debentures. For the purpose of the table above, we assume that all holders of the convertible debt will hold the debentures through the date of maturity in fiscal 2027 and upon conversion, the values of the convertible debt are equal to the aggregate principal amount of $423.6 million with no premiums. Loan from the Malaysian Government relates to amounts borrowed for the financing and operation of FAB3 to be constructed in Malaysia. Lease commitments primarily relate to our 5-year lease agreement with Cypress for our headquarters in San Jose, California, an 11-year lease agreement with an unaffiliated third-party for our administrative, research and development offices in Richmond, California and other leases for various office space. Utility obligations relate to our 11-year lease agreement with an unaffiliated third-party for our administrative, research and development offices in Richmond, California. Royalty obligations result from several of the Systems Segment government awards and existing agreements. Non-cancelable purchase orders relate to purchases of raw materials for inventory, services and manufacturing equipment from a variety of vendors. Purchase commitments under agreements relate to arrangements entered into with suppliers of polysilicon, ingots, wafers, solar cells and solar panels as well as agreements to purchase solar renewable energy certificates from solar installation owners in New Jersey. These agreements specify future quantities and pricing of products to be supplied by the vendors for periods up to twelve years and there are certain consequences, such as forfeiture of advanced deposits and liquidated damages relating to previous purchases, in the event that we terminate the arrangements. See Note 8 of Notes to our Condensed Consolidated Financial Statements.

 

As of both March 29, 2009 and December 28, 2008, total liabilities associated with uncertain tax positions under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, and Related Implementation Issues,” or FIN 48, were $14.0 million and are included in “Other long-term liabilities” in our Condensed Consolidated Balance Sheets as they are not expected to be paid within the next twelve months. Due to the complexity and uncertainty associated with our tax positions, we cannot make a reasonably reliable estimate of the period in which cash settlement will be made for our liabilities associated with uncertain tax positions in other long-term liabilities, therefore, they have been excluded from the table above. See Note 9 of Notes to our Condensed Consolidated Financial Statements.

On April 17, 2009, we entered into a loan agreement with the Union Bank, under which we borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. In addition, on May 4, 2009, we issued $230.0 million principal amount of our 4.75% debentures. These contractual obligations occurred subsequent to the first quarter of fiscal 2009, therefore, they have been excluded from the table above. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

 

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Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management of our Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, initially conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 29, 2009 in connection with our Quarterly Report on Form 10-Q for the period ended March 29, 2009 (the “March 2009 Form 10-Q”). The Company disclosed in the March 2009 Form 10-Q that based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 29, 2009.

In connection with the restatement described in the 2009 Form 10-K and elsewhere in this Amendment, the Company re-evaluated the effectiveness of our disclosure controls and procedures as of March 29, 2009. As a result, management identified certain control deficiencies as of March 29, 2009 that constituted three material weaknesses in our internal control over financial reporting in our Philippines operations. Because of these material weaknesses, management subsequently concluded that we did not maintain effective disclosure controls and procedures as of March 29, 2009. For additional information regarding the restatement and the material weaknesses identified by management, see Note 2 to the condensed consolidated financial statements included in this Amendment and “Item 9A. Controls and Procedures” in the 2009 Form 10-K.< /font>

No steps were taken to remediate these material weaknesses during the quarter ended March 29, 2009, as these circumstances had not yet been identified by management. However, management implemented new processes and controls prior to the end of our 2009 fiscal year to remediate one of the material weaknesses and developed a plan, based, in part, on recommendations from our Audit Committee, to remediate the two remaining material weaknesses. For additional information regarding the remedial actions taken and planned by our management, see “Item 9A. Controls and Procedures” in the 2009 Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 29, 2009 that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting. However, as described above, there have been changes in our internal control over financial reporting during the quarter ended January 3, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. For additional information regarding these changes, see “Item 9A. Controls and Procedures” in the 2009 Form 10-K.

 

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PART II. OTHER INFORMATION

Item 6.

Exhibits

Exhibit Number		Description
10.1†*		Long-Term Supply Agreement, dated January 6, 2009, by and between SunPower Corporation and Hemlock Semiconductor, LLC.
10.2*		Amendment to Long-Term Supply Agreement, dated January 6, 2009, by and among SunPower Corporation, Hemlock Semiconductor, LLC, and SunPower Philippines Manufacturing Limited.
10.3*		Amended and Restated SunPower Corporation Annual Key Employee Bonus Plan.
10.4*		Amended and Restated SunPower Corporation Key Employee Quarterly Key Initiative Bonus Plan.
10.5*		Amendment to Credit Agreement, dated February 25, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.6*		Amendment to Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan dated March 12, 2009.
10.7*†		Amended and Restated Credit Agreement, dated March 20, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.8*		Continuing Guaranty, dated March 20, 2009, by and between SunPower North America, LLC and Wells Fargo Bank, National Association.
10.9*†		Amendment Three to Turnkey Engineering, Procurement and Construction Agreement, dated March 26, 2009, by and between SunPower Corporation, Systems and Florida Power and Light Company.
31.1		Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1		Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibits marked with an asterisk (*) were filed as part of the initial filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009. On June 25, 2009, the Company filed an amendment to the Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 for the sole purpose of refiling Exhibit 10.1 in connection with a confidential treatment request.

Exhibits marked with a cross (†) are subject to a request for confidential treatment filed with the Securities and Exchange Commission.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

	SUNPOWER CORPORATION
Dated: April 30, 2010	By:	/s/    DENNIS V. ARRIOLA
		Dennis V. Arriola
		Executive Vice President and
		Chief Financial Officer

 

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Index to Exhibits

Exhibit Number		Description
10.1†*		Long-Term Supply Agreement, dated January 6, 2009, by and between SunPower Corporation and Hemlock Semiconductor, LLC.
10.2*		Amendment to Long-Term Supply Agreement, dated January 6, 2009, by and among SunPower Corporation, Hemlock Semiconductor, LLC, and SunPower Philippines Manufacturing Limited.
10.3*		Amended and Restated SunPower Corporation Annual Key Employee Bonus Plan.
10.4*		Amended and Restated SunPower Corporation Key Employee Quarterly Key Initiative Bonus Plan.
10.5*		Amendment to Credit Agreement, dated February 25, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.6*		Amendment to Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan dated March 12, 2009.
10.7*†		Amended and Restated Credit Agreement, dated March 20, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.8*		Continuing Guaranty, dated March 20, 2009, by and between SunPower North America, LLC and Wells Fargo Bank, National Association.
10.9*†		Amendment Three to Turnkey Engineering, Procurement and Construction Agreement, dated March 26, 2009, by and between SunPower Corporation, Systems and Florida Power and Light Company.
31.1		Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1		Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibits marked with an asterisk (*) were filed as part of the initial filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009. On June 25, 2009, the Company filed an amendment to the Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 for the sole purpose of refiling Exhibit 10.1 in connection with a confidential treatment request.

Exhibits marked with a cross (†) are subject to a request for confidential treatment filed with the Securities and Exchange Commission.

 

 

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EXHIBIT 31.1

 

CERTIFICATIONS

 

I, Thomas H. Werner, certify that:

 

1.	I have reviewed this Quarterly Report on Form 10-Q/A of SunPower Corporation;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:  April 30, 2010 

 

	/S/ THOMAS H. WERNER
	Thomas H. Werner
	Chief Executive Officer
	(Principal Executive Officer)

 

 

 

 

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EXHIBIT 31.2

 

CERTIFICATIONS

 

 I, Dennis V. Arriola, certify that:

 

1.	I have reviewed this Quarterly Report on Form 10-Q/A of SunPower Corporation;

 

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:  April 30, 2010

 

	/S/    DENNIS V. ARRIOLA
	Dennis V. Arriola
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

 

 

 

 

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EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of SunPower Corporation (the “Company”) on Form 10-Q/A for the period ended March 29, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Thomas H. Werner and Dennis V. Arriola certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

 

(1)                 The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)                 The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  Dated: April 30, 2010

 

	/S/ THOMAS H. WERNER
	Thomas H. Werner
	Chief Executive Officer
	(Principal Executive Officer)
	/S/    DENNIS V. ARRIOLA
	Dennis V. Arriola
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

 

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure statement.

 

 

 

 

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