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Amendment No. 5 to Schedule 14D-9

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14D-9

 

 

Solicitation/Recommendation Statement

Under Section 14(d)(4) of the Securities Exchange Act of 1934

(Amendment No. 5)

 

 

SUNPOWER CORPORATION

(Name of Subject Company)

SUNPOWER CORPORATION

(Name of Person Filing Statement)

 

 

Class A Common Stock, $0.001 par value

Class B Common Stock, $0.001 par value

(Title of Class of Securities)

867652109

867652307

(CUSIP Number of Class of Securities)

Thomas H. Werner

Chief Executive Officer and President

77 Rio Robles

San Jose, California 95134

(408) 240-5500

(Name, address and telephone number of person authorized to receive

notices and communications on behalf of the persons filing statement)

 

 

With copies to:

 

Bruce R. Ledesma

Executive Vice President,

General Counsel

and Corporate Secretary

77 Rio Robles

San Jose, California 95134

(408) 240-5500

  

R. Todd Johnson

Stephen E. Gillette

Jones Day

1755 Embarcadero Road

Palo Alto, California 94303

(650) 739-3939

  

Jonn R. Beeson

Jones Day

3161 Michelson Drive, Suite 800

Irvine, California 92612

(949) 851-3939

 

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

 

 

 

This Amendment No. 5 (this “Amendment No. 5”) amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9 initially filed with the Securities and Exchange Commission on May 3, 2011 (as the same may further be amended or supplemented from time to time, the “Schedule 14D-9”) by SunPower Corporation, a Delaware corporation (the “Company” or “SunPower”), relating to the tender offer disclosed in the Schedule TO, dated May 3, 2011 (the “Schedule TO”), filed by Total S.A., a société anonyme organized under the laws of the Republic of France (“Total”) and its indirect wholly owned subsidiary, Total Gas & Power USA, SAS, a société par actions simplifiée organized under the laws of the Republic of France (“Purchaser”), to purchase up to 34,144,400 Class A Shares and up to 25,220,000 Class B Shares (or such greater number of Class A Shares and Class B Shares as Purchaser may elect to purchase as expressly permitted by the Tender Offer Agreement) at a purchase price of $23.25 per Share for each class, net to the seller thereof in cash (the “Offer Price”), without interest and less applicable withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated May 3, 2011 (as amended, supplemented or otherwise modified from time to time, the “Offer to Purchase”) and the related Letter of Transmittal (as amended, supplemented or otherwise modified from time to time, the “Letter of Transmittal”) (which collectively constitute the “Offer”). The Offer to Purchase and the related Letter of Transmittal are filed as Exhibits (a)(1)(A) and (a)(1)(B) to the Schedule TO, respectively. Any capitalized term used and not otherwise defined herein shall have the meaning ascribed to such term in the Schedule 14D-9.

All information in the Schedule 14D-9 is incorporated into this Amendment No. 5 by reference, except that such information is hereby amended, supplemented and modified to the extent specifically provided herein. Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Schedule 14D-9.

This Amendment No. 5 is being filed to reflect certain updates as reflected below.

 

Item 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS

(a) Arrangements between SunPower, Purchaser and Total.

Item 3 of the Schedule 14D-9 is hereby amended and supplemented to include the following paragraphs after the section entitled “ – Specific Performance” under the heading “Arrangements between SunPower, Purchaser and Total – The Tender Offer Agreement”. To the extent that Items 1 through 8 of the Schedule 14D-9 incorporate by reference the information contained in Section 3(a), such Items are amended, supplemented and modified as follows:

“Tender Offer Amendment Agreement. On June 7, 2011, SunPower and Purchaser entered into an amendment to the Tender Offer Agreement (the “Tender Offer Agreement Amendment”) pursuant to which, among other things, the parties agreed to waive the portion of the Antitrust Condition to the completion of the Offer relating to (i) the Commission having taken a decision under Article 6(1)(b) of the EC Merger Regulation (or having been deemed to have taken a decision pursuant to Article 10(6) of the EC Merger Regulation) declaring that the transactions contemplated by the Tender Offer Agreement are compatible with the common market or (ii) if the Commission has taken a decision to refer the whole or part of the transactions contemplated by the Tender Offer Agreement to the competent authorities of a Member State in accordance with Article 9(3) of the EC Merger Regulation, any such authority having taken a decision with equivalent effect to the decisions in clause (i) above with respect to those parts of the transactions referred to such authority and where applicable, the Commission having taken a decision as contemplated under (i) above with respect to those parts of the transactions that have not been referred to the competent authorities of a Member State (the “EU Condition”).

In connection with the Tender Offer Agreement Amendment, the parties agreed that until (i) the Commission shall have taken a decision under Article 6(1)(b), 8(1) or 8(2) of the EC Merger Regulation (or has been deemed to have taken a decision pursuant to Article 10(6) of the EC Merger Regulation) declaring that the transactions contemplated by the Tender Offer Agreement are compatible with the common market or (ii) if the Commission has taken a decision to refer the whole or part of the transactions contemplated by this Agreement to the competent authorities of a Member State in accordance with Article 9(3) of the EC Merger Regulation, any such authority shall have taken a decision with equivalent effect to the decisions in clause (i) above with respect to those parts of the transactions referred to such authority and, where applicable, the Commission has taken a decision as contemplated under (i) above with respect to those parts of the transactions that have not been thus referred (the

 

occurrence of the foregoing in each of clause (i) and (ii) above, the “EU Clearance”), each of Purchaser and SunPower will, among other things, continue to be obligated to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party or parties in doing, all things reasonably necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by the Tender Offer Agreement, including by:

 

  •  

making all necessary registrations, declarations and filings with governmental authorities in connection with the Tender Offer Agreement and the consummation of the transactions contemplated thereby, and obtaining all necessary actions or non-actions, waivers, clearances, consents, approvals, orders and authorizations from governmental authorities (including any necessary antitrust approvals) in connection with the Tender Offer Agreement and the consummation of the transactions contemplated thereby; and

 

  •  

assisting the other parties in (A) making all necessary registrations, declarations and filings with governmental authorities in connection with the Tender Offer Agreement and the consummation of the transactions contemplated thereby, including by providing such information regarding itself, its affiliates and their respective operations as may be requested in connection with a filing by it or any of its subsidiaries, and (B) obtaining all necessary actions or non-actions, waivers, clearances, consents, approvals, orders and authorizations from governmental authorities (including any necessary antitrust approvals) in connection with the Tender Offer Agreement and the consummation of the transactions contemplated thereby.

As a result, Sunpower and the Purchaser have agreed to proceed with the closing of the Offer on June 14, 2011. The parties anticipate making any additional filings necessary to obtain the EU Clearance following the closing of the Offer and anticipate making a voluntary filing with the Committee on Foreign Investment in the United States (CFIUS).

The Tender Offer Agreement Amendment provides that the meeting of SunPower’s stockholders to consider the Reclassification Proposal must be held as promptly as practicable following the later to occur of (i) the acceptance for payment of Shares in the Offer and (ii) the EU Clearance, but such SunPower stockholder meeting must be held in no event later than the six month anniversary of the later to occur of (i) the acceptance for payment of Shares in the Offer and (ii) the EU Clearance. Subject to SunPower’s compliance with the foregoing obligation, Purchaser will vote all Shares acquired in the Offer (or otherwise owned by it or any of its respective wholly owned subsidiaries as of the applicable record date) in favor of (x) the Reclassification Proposal in accordance with the DGCL, and (y) an increase in the number of shares available for issuance under SunPower’s equity incentive plans by 2,500,000, in each case at such SunPower stockholder meeting or otherwise.

The Tender Offer Agreement Amendment also provides that subject to certain exceptions, until the later to occur of (i) the acceptance for payment of Shares in the Offer and (ii) the EU Clearance, SunPower will not, and will not permit any of its subsidiaries to, take any of the following actions without the prior written consent of Purchaser:

 

  •  

any amendment to SunPower’s bylaws or certificate of incorporation, except as expressly contemplated by the Affiliation Agreement;

 

  •  

any amendment or redemption of the Rights Agreement, except as expressly contemplated by the Tender Offer Agreement or the Affiliation Agreement;

 

  •  

any transaction pursuant to which SunPower or a company that it controls acquires or otherwise obtains the ownership or exclusive use of any business, property or assets of a person that is not SunPower or a company that it controls (including by merger, amalgamation, consolidation, tender offer, asset or stock purchase), if as of the date of the consummation of such transaction the aggregate net present value of the consideration paid or to be paid exceeds $25 million;

 

  •  

any transaction pursuant to which a person that is not SunPower or a company that it controls obtains ownership or exclusive use of any business, property or assets of SunPower or a company that it controls (including any sale, lease, license, transfer or other disposition), if as of the date of the consummation of such transaction the aggregate net present value of the consideration received or to be received exceeds $25 million, except for sales, leases, transfers or other dispositions of Solar SPEs in the ordinary course of business;

 

  •  

the incurrence of additional indebtedness in excess of the difference, if any, of 3.5 times SunPower’s LTM EBITDA (as defined in the Affiliation Agreement) less SunPower’s then

 

 

Outstanding Gross Debt (as defined in the Affiliation Agreement), except for (i) an Excluded Debt Incurrence (as defined in the Affiliation Agreement) and (ii) in connection with refinancing or replacing any of SunPower’s 1.25% convertible debentures, the issuance of a new convertible debenture issued on or after July 1, 2011 on no less favorable terms than the 1.25% convertible debentures being refinanced or replaced with respect to ranking (senior/senior sub/subordinated), financial covenants, operational covenants, and events of default, and whether issued prior to or after the replacement of such 1.25% convertible debentures;

 

  •  

subject to certain exceptions, any voluntary dissolution or liquidation of SunPower or any company that it controls;

 

  •  

any voluntary bankruptcy filing by SunPower or any company that it controls or the failure to oppose any other person’s bankruptcy filing or action to appoint a receiver of SunPower or any company that it controls;

 

  •  

any issuance, sale, pledge, disposition, granting or encumbrance of any shares of any class of capital stock of SunPower, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including any phantom interest and including any stock awards or voting securities), of SunPower, except for (i) the grant of stock awards or voting securities under SunPower’s equity incentive plans in the ordinary course of business consistent with past practice, (ii) the issuance of shares of SunPower’s common stock upon the exercise of SunPower options or the vesting or settlement of SunPower’s restricted stock or restricted stock unit awards outstanding on the date of the Tender Offer Agreement or granted in accordance with the foregoing, and (iii) upon the conversion or exercise of convertible debentures outstanding on the date of the Tender Offer Agreement;

 

  •  

any declaration, setting aside, making or payment of any dividend or other distribution (payable in cash, stock, property or otherwise) with respect to, or any reclassification, combination, split or subdivision of, any shares of any class of capital stock of SunPower;

 

  •  

any redemption, purchase or other acquisition, directly or indirectly, of any shares of any class of capital stock of SunPower, except for (i) tax withholdings and exercise price settlements upon exercise of options or with respect to restricted stock restricted stock unit awards, in each case in the ordinary course of business and in compliance with applicable law, and (ii) purchases of shares of SunPower common stock or convertible debentures from the holders thereof in one or more privately negotiated transactions which are not effected in the open market and would not constitute a tender offer in accordance with applicable laws;

 

  •  

any capital expenditure not reflected in SunPower’s 2011 annual operating plan that exceeds $25 million;

 

  •  

any adoption or material amendment of an equity compensation plan;

 

  •  

any entry into a Utility & Power Plant segment of SunPower sales agreement for contracted revenue greater than 15% of SunPower’s then current fiscal year’s forecasted revenue, or for any project (or series of projects located within 500 meters of one another) with a nameplate capacity rating in excess of 50 megawatts (ac – alternating current); or

 

  •  

any announcement of an intention to enter into, or entry into, any formal or informal contract or any commitment to do any of the foregoing.

In addition, until the later to occur of (i) the acceptance for payment of Shares in the Offer and (ii) the EU Clearance, SunPower must consult with Purchaser reasonably in advance of taking any action that would be outside SunPower’s or any of its subsidiaries’ ordinary course of business consistent with past practice.

As part of the Tender Offer Amendment Agreement, the parties agreed that, upon the acceptance for payment of Shares in the Offer, the Tender Offer Agreement shall become irrevocable and may not be terminated by either party. In addition, the parties agreed that (i) if acceptance for payment of Shares in the Offer occurs before the EU Clearance and (ii) SunPower notifies Parent that it has determined in good faith to give notice of, and call, an annual or special meeting of SunPower’s stockholders within 60 days of such notification, Purchaser must seek to obtain, as

 

promptly as practicable, a derogation from the Commission that would allow Purchaser to exercise the voting rights attached to the Shares then held by Purchaser.

The Tender Offer Agreement, as amended, remains in full force and effect. A copy of the Tender Offer Agreement Amendment is filed as Exhibit (e)(11) to this Schedule 14D-9 and incorporated herein by reference.”

Item 3 of the Schedule 14D-9 is hereby amended and supplemented to include the following paragraphs after the section entitled “– Assignment” under the heading “Arrangements between SunPower, Purchaser and Total – The Credit Support Agreement”. To the extent that Items 1 through 8 of the Schedule 14D-9 incorporate by reference the information contained in Section 3(a), such Items are amended, supplemented and modified as follows:

“Credit Support Agreement Amendment. On June 7, 2011, SunPower and Total entered into an amendment to the Credit Support Agreement (the “Credit Support Agreement Amendment”) pursuant to which, among other things, the parties agreed that the Credit Support Agreement will not become effective until the first date on which both (i) the acceptance for payment of Shares in the Offer and (ii) the EU Clearance have occurred.

The Credit Support Agreement, as amended, remains in full force and effect. A copy of the Credit Support Agreement Amendment is filed as Exhibit (e)(12) to this Schedule 14D-9 and incorporated herein by reference.”

Item 3 of the Schedule 14D-9 is hereby amended and supplemented to include the following paragraphs after the section entitled “Termination” under the heading “Arrangements between SunPower, Purchaser and Total – The Affiliation Agreement”. To the extent that Items 1 through 8 of the Schedule 14D-9 incorporate by reference the information contained in Section 3(a), such Items are amended, supplemented and modified as follows:

“Affiliation Agreement Amendment. On June 7, 2011, SunPower and Purchaser entered into an amendment to the Affiliation Agreement (the “Affiliation Agreement Amendment”) pursuant to which, among other things, the parties agreed to suspend the effectiveness of certain terms of the Affiliation Agreement if the acceptance for payment of Shares in the Offer occurs prior to the EU Clearance. More specifically, following the acceptance for payment of Shares in the Offer until the occurrence of the EU Clearance:

 

  •  

Purchaser shall not have any rights to representation on the SunPower Board or to designate any observers to attend meetings of the SunPower Board or any of its committees;

 

  •  

Purchaser shall not have any rights to require SunPower to obtain specified approvals of the SunPower Board before taking the actions specified in the Affiliation Agreement;

 

  •  

Purchaser shall not have any rights to require SunPower to obtain specified approvals of SunPower’s stockholders before taking the actions specified in the Affiliation Agreement; and

 

  •  

notwithstanding any amendments to SunPower’s bylaws, the Total Group shall not be entitled to call a special meeting of SunPower’s stockholders in the circumstances specified in the Affiliation Agreement.

The Affiliation Agreement, as amended, remains in full force and effect. A copy of the Affiliation Agreement Amendment is filed as Exhibit (e)(13) to this Schedule 14D-9 and incorporated herein by reference.”

Item 3 of the Schedule 14D-9 is hereby amended and supplemented to include the following paragraphs after the first paragraph under the heading “Arrangements between SunPower, Purchaser and Total – The R&C Agreement”. To the extent that Items 1 through 8 of the Schedule 14D-9 incorporate by reference the information contained in Section 3(a) , such Items are amended, supplemented and modified as follows:

“R&C Agreement Amendment. On June 7, 2011, SunPower and Purchaser entered into an amendment to the R&C Agreement (the “R&C Agreement Amendment”) pursuant to which, among other things, the parties agreed

 

that, if the acceptance for payment of Shares in the Offer occurs prior to the EU Clearance, the R&C Agreement will not become effective until immediately after the occurrence of the EU Clearance.

The R&C Agreement, as amended, remains in full force and effect. A copy of the R&C Agreement Amendment is filed as Exhibit (e)(14) to this Schedule 14D-9 and incorporated herein by reference.”

 

Item 4. THE SOLICITATION OR RECOMMENDATION

Item 4 of Schedule 14D-9 is hereby amended and supplemented by adding the following paragraph after the final paragraph of subsection (b) captioned “Background of the Offer”:

On June 7, 2011, the Company and Total issued a press release announcing that SunPower and Purchaser had waived satisfaction of the EU Condition and that the Tender Offer Agreement Amendment, the Affiliation Agreement Amendment, the Credit Support Agreement Amendment, and the R&C Agreement Amendment had been entered into.

Purchaser further confirmed its intention to complete the Offer as scheduled at 12:00 midnight, New York City time, on June 14, 2011, unless the Offer is further extended. A copy of the press release is filed as Exhibit (a)(15) to this Schedule 14D-9.

As a result of the waiver of the EU Condition, and in the event that the Offer is completed prior to the receipt of the EU Clearance, Total has agreed to not exercise its rights to nominate members of the SunPower Board under the Affiliation Agreement and SunPower and Total have agreed that Total’s obligations to provide credit support pursuant to the Credit Support Agreement and Total’s ability to specifically approve specified corporate transactions will not commence until the EU Clearance has been obtained. In addition, if the Offer is completed prior to the receipt of EU Clearance, Total will not be permitted to exercise voting rights with respect to the Shares it acquires upon completion of the Offer until the receipt of the EU Clearance or until Total receives specific permission from the appropriate European regulators.

On June 7, 2011, the Company issued a press release revising and updating its financial guidance for second quarter 2011 and fiscal year 2011. A copy of the press release is filed as Exhibit (a)(16) to this Schedule 14D-9.

 

Item 9. EXHIBITS

Item 9 of the Schedule 14D-9 is hereby amended and supplemented by adding the following exhibits:

 

Exhibit
No.		   Description
(a)(15)   Press release, dated June 7, 2011 (incorporated herein by reference to Exhibit (a)(1)(I) to Amendment No. 3 to Schedule TO filed by Purchaser and Total on June 7, 2011).
(a)(16)   Press release, dated June 7 2011.
(e)(11)   Amendment to Tender Offer Agreement, dated as of June 7, 2011 by and between Purchaser and SunPower (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by SunPower on June 7, 2011).
(e)(12)   Amendment to Credit Support Agreement, dated as of June 7, 2011 by and between Total and SunPower (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by SunPower on June 7, 2011).
(e)(13)   Amendment to Affiliation Agreement, dated as of June 7, 2011 by and between Purchaser and SunPower (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by SunPower on June 7, 2011).
(e)(14)   Amendment to Research & Collaboration Agreement, dated as of June 7, 2011 by and between Purchaser and SunPower (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by SunPower on June 7, 2011).

 

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

  SUNPOWER CORPORATION

Date: June 7, 2011

   By:  

/s/ Dennis V. Arriola

  Name:   Dennis V. Arriola
  Title:   Executive Vice President and Chief Financial Officer

 

 

Press Release

Exhibit (a)(16)

Contacts:

Investors

Bob Okunski

408-240-5447

Bob.Okunski@sunpowercorp.com

Media

Helen Kendrick

408-240-5585

Helen.Kendrick@sunpowercorp.com

SunPower Provides Second-Quarter and Fiscal Year 2011 Outlook

SAN JOSE, Calif., June 7, 2011 – SunPower Corp. (NASDAQ: SPWRA, SPWRB) today announced its second-quarter and 2011 fiscal year financial outlook.

 

Financial Outlook

    Q2 2011    FY 2011

Revenue

    $550 -$600 million    $2.80 -$2.95 billion

Gross Margin (Non-GAAP)*

    15% - 17%    17% - 19%

Gross Margin (GAAP)

    13% - 15%    16% - 18%

GAAP net income (loss) per diluted share

    ($0.50) – ($0.30)    ($0.10) - $0.50

Non-GAAP net income (loss) per diluted share*

    ($0.05) - $0.10    $1.20 - $1.70

MW Recognized

    175 – 200 MW    875 – 920 MW

 

* A reconciliation of Non-GAAP to GAAP outlook is included at the end of this press release

“The changes to Italian solar policy this year have had a significant impact on the global solar market,” said Tom Werner, SunPower president and CEO. “In response, we rebalanced our product allocation in Italy away from power plants and toward our European residential and commercial (R&C) business where demand remains strong. The ability to reallocate our product in the face of market changes is a key feature of SunPower’s vertically integrated, geographically diversified model. However, systems sold through our R&C channel yield less profit per watt than systems deployed in self-developed power plant projects, as reflected in our Q2 outlook. In addition, we expect the current global pricing pressure to persist through 2011 and, as a result, we are planning full-year 2011 non-GAAP gross margins to be in the range of 17% to 19%.

“The changes in global market conditions favor SunPower as we have both the flexibility to rebalance our allocation between downstream channels as well as the technology differentiation to sustain premium pricing compared to lower efficiency systems,” continued Werner. “Italy’s decision to focus market development on residential and commercial applications instead of large power plants is in line with the trend across Europe, playing to our strengths in the rooftop and carport markets. Our world-leading, high-efficiency solar systems maximize customers’ returns, especially in area-constrained applications, positioning us to increase our share in these markets.”

“To align with the reallocation of product, we are rebalancing resources to support the growth of our residential and commercial rooftop businesses,” said Dennis Arriola, SunPower CFO. “We’re taking

aggressive steps to actively manage our manufacturing and operating expenses, including working with suppliers to modify contracts to reflect current market conditions. In addition, our 2011 outlook incorporates the efficient management of our balance sheet through production optimization and demand-driven inventory levels. These steps, along with the $1 billion credit support agreement with Total, position SunPower to gain market share profitably.”

As a result of the changes to Italian solar policy, the company anticipates that its fiscal year 2011 GAAP results will be impacted by certain one-time, pre-tax charges of $14 million to $29 million related to its reallocation strategy, including $11 million to $21 million in the second quarter. In addition, the company expects its second quarter GAAP results to reflect $13 million to $15 million in pre-tax expenses related to the outstanding Total tender offer.

This press release contains both GAAP and non-GAAP financial information. Non-GAAP historical figures are reconciled to the closest GAAP equivalent categories in the financial attachment of this press release. Please note that the company has posted supplemental information and slides related to its 2011 outlook on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpowercorp.com/events.cfm.

SunPower will discuss this release in a conference call on Tuesday, June 7, 2011 at 1:30 p.m. PDT. The call-in number is 517-623-4618, passcode SunPower. The call will be webcast and can be accessed from SunPower’s website at http://investors.SunPowercorp.com/events.cfm.

About SunPower

SunPower Corp. (Nasdaq: SPWRA, SPWRB) designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems available today. Residential, business, government and utility customers rely on the company’s quarter century of experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system. Headquartered in San Jose, Calif., SunPower has offices in North America, Europe, Australia and Asia. For more information, visit www.SunPowercorp.com.

Forward-Looking Statements - This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and may be based on underlying assumptions. The company uses words and phrases such as “outlook,” “remain,” “expect,” “planning,” “sustain,” “positioning,” “guidance,” “position,” “anticipate,” “will,” and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) Q2 2011 and FY 2011 guidance on revenues, GAAP and non-GAAP gross margins, GAAP and non-GAAP net income/loss per diluted share, and MW recognized; (b) demand remaining strong in the R&C business; (c) global pricing pressure to persist; (d) SunPower’s ability to sustain premium pricing; (e) SunPower’s ability to increase its market share in area-constrained applications; (f) the expected completion of the Total tender offer and the expected benefits of Total’s investment in SunPower, including improving market share profitably; (g) SunPower obtaining board approval for certain restructuring initiatives; and (h) SunPower’s ability to successfully execute its reallocation strategy, support growth in its residential and commercial rooftop businesses, and manage balance sheet through production optimization and inventory. Such forward-looking statements are based on

information available to the company as of the date of this release and involve a number of risks and uncertainties, some beyond the company’s control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including risks and uncertainties such as: (i) our ability to achieve the expected timing and our ability to satisfy the closing conditions of the proposed tender offer from Total; (ii) our ability to achieve the expected benefits from the Total investment, including through the credit support agreement; (iii) the impact of regulatory changes and the continuation of governmental and related economic incentives promoting the use of solar power, for example the recent changes to the Italian feed-in tariff, and the impact of such changes on our revenues, financial results, and any potential impairments to our intangible assets, project assets, and goodwill; (iv) increasing competition in the industry and lower average selling prices, and any revaluation of inventory as a result of decreasing ASP or reduced demand; (v) the company’s ability to obtain and maintain an adequate supply of raw materials, components, and solar panels, as well as the price it pays for such items; (vi) general business and economic conditions, including seasonality of the solar industry and growth trends in the solar industry; (vii) the company’s ability to revise its portfolio allocation geographically and across downstream channels to respond to regulatory changes; (viii) the company’s ability to increase or sustain its growth rate; (ix) construction difficulties or potential delays, including obtaining land use rights, permits, license, other governmental approvals, and transmission access and upgrades, and any litigation relating thereto, for example any environmental litigation relating to the CVSR project; (x) the significant investment required to construct power plants and the company’s ability to sell or otherwise monetize power plants; (xi) fluctuations in the company’s operating results and its unpredictability, especially revenues from the UPP segment or in response to regulatory changes; (xii) the improved availability of financing arrangements for the company’s utilities projects and the company’s customers; (xiii) potential difficulties associated with operating the joint venture with AUO and the company’s ability to achieve the anticipated synergies and manufacturing benefits, including ramping Fab 3 according to plan; (xiv) the company’s ability to remain competitive in its product offering, obtain premium pricing while continuing to reduce costs and achieve lower targeted cost per watt; (xv) the company’s liquidity, substantial indebtedness, and its ability to obtain additional financing; (xvi) manufacturing difficulties that could arise; (xvii) the success of the company’s ongoing research and development efforts and the acceptance of the company’s new products and services; (xviii) the company’s ability to protect its intellectual property;(xix) company’s exposure to foreign exchange, credit and interest rate risk; (xx) possible impairment of goodwill; (xxi) possible consolidation of the joint venture AUO SunPower; and (xxii) other risks described in the company’s Annual Report on Form 10-K for the year ended January 2, 2011, Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and other filings with the Securities and Exchange Commission. These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent date, and the company is under no obligation to, and expressly disclaims any responsibility to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Additional Information

This press release is neither an offer to purchase nor a solicitation of an offer to sell securities. The tender offer for the outstanding shares of SunPower’s Class A and Class B common stock described in this press release is only made pursuant to the Tender Offer Statement on Schedule TO (including an offer to purchase, a related letter of transmittal and other offer documents) filed by Total S.A. and a subsidiary of Total S.A., Total Gas & Power USA, SAS (“Purchaser”) with the U.S. Securities and Exchange Commission (“SEC”) on May 3, 2011, and the Solicitation/Recommendation Statement on Schedule 14D-9 filed with the SEC by SunPower on May 3, 2011. Purchaser and SunPower have mailed these documents to the stockholders of SunPower. The Tender Offer Statement (including an offer to purchase, a related letter of transmittal and other offer documents) and the Solicitation/Recommendation Statement contain important information relating to the tender offer and SunPower stockholders are urged to read those documents, and any amendments to those documents, carefully before making any decision with respect to the tender offer. Those materials and all other documents filed by Total S.A., Purchaser or SunPower with the SEC are available at no charge on the SEC’s web site at www.sec.gov. The Tender Offer Statement and related materials may be obtained for free by directing such requests to MacKenzie Partners, Inc., the Information Agent for the tender offer, at (800) 322-2885. The Schedule 14D-9 Solicitation/Recommendation Statement and such other documents may be obtained for free by directing such requests to SunPower Corp., 77 Rio Robles, San Jose, California 95134 or at http://investors.sunpowercorp.com/.

Segment Reporting Information

The UPP Segment refers to both our large-scale solar products and systems business including power plant project development and project sales, turn-key power plant EPC and O&M services, as well as components sales which includes large volume sales of solar panels and mounting systems to third parties. The R&C Segment refers to our solar equipment sales into the residential and small commercial market through our third-party global dealer network, as well as direct sales and EPC and O&M services installing rooftop and ground-mounted solar systems for the new homes, commercial and public sectors.

About SunPower’s Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, SunPower uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude certain items, as described below. Management does not consider these non-cash items in evaluating the core operational activities of SunPower. The specific non-GAAP measures listed below are gross margin and net income (loss) per share. Management believes that each of these non-GAAP measures (gross margin and net income (loss) per share) are useful to investors by enabling them to better assess changes in each of these key elements of SunPower’s results of operations across different reporting periods on a consistent basis, independent of these items. Thus, each of these non-GAAP financial measures provides investors with another method for assessing SunPower’s operating results in a manner that is focused on its ongoing core operating performance, absent the effects of these items. Management also uses these non-GAAP measures internally to assess the business and financial performance of current and historical results, for strategic decision making, forecasting future results and evaluating the company’s current performance. Many of the analysts covering SunPower also use these non-GAAP measures in their analyses. Given management’s use of these non-GAAP measures, SunPower believes these measures are important to investors in understanding SunPower’s current and future operating results as seen through the eyes of management. These non-GAAP measures are not in accordance with or an alternative for GAAP financial data, the non-GAAP measures should be reviewed together with the GAAP measures and are not intended to serve as a substitute for results under GAAP, and may be different from non-GAAP measures used by other companies. As presented in the “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” table below, each of the non-GAAP financial measures excludes one or more of the following items.

As described in detail within SunPower’s historical communications regarding non-GAAP financial measures, such financial measures exclude the following recurring non-cash items: (i) amortization of intangible assets, (ii) stock based compensation, (iii) non-cash interest expense and (iv) amortization of promissory notes, as management believes they do not accurately reflect SunPower’s ongoing operating results. In addition to the above items, SunPower’s non-GAAP financial measures, presented herein, further exclude one or more of the following items:

 

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Restructuring charges. These charges relate to anticipated cost reduction activities, including costs associated with employee severance and lease termination. Restructuring charges are excluded from non-GAAP financial measures as they are related to a discrete event and are not reflective of ongoing operating results.

 

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Write-down of Project Assets. These charges relate to anticipated write-downs of certain capitalized costs relating to solar power system projects in various stages of development that we incur prior to the sale of the solar power system. Such charges are excluded from non-GAAP financial measures as they are related to a discrete event and are not reflective of ongoing operating results.

 

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Non-recurring costs. Management excludes the estimated transaction expenses incurred in connection with the April 28, 2011 Tender Offer Agreement with Total Gas & Power USA, SAS, as it enhances the ability of investors to compare SunPower’s operating results over different reporting periods because they are the result of infrequent events and arise outside the ordinary course of operations.

Finally, management excludes the tax effects of the items noted above in order to present a more meaningful measure of non-GAAP net income (loss) per share.

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures

 

2011 GUIDANCE:    Q2 2011    FY2011

Revenue (in $000’s):

    $550,000-$600,000    $2,800,000-$2,950,000

Gross margin (non-GAAP)

    15%-17% (a)    17%-19% (b)

Gross margin (GAAP)

    13%-15%    16%-18%

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

    $ (0.05)-$0.10 (c)    $ 1.20-$1.70 (d)

Net income (loss) per diluted share (GAAP)

    $ (0.50)-($0.30)    $ (0.10)-$0.50

 

(a) Estimated non-GAAP amounts above for Q2 2011 reflect adjustments that exclude the estimated amortization of intangible assets of approximately $0.1-$0.2 million, estimated stock-based compensation expense of approximately $4.3-$4.5 million, estimated non-cash interest expense of approximately $0.7-$0.8 million and anticipated charges associated with the write-down of project assets of approximately $4.0-$6.5 million.

 

(b) Estimated non-GAAP amounts above for 2011 reflect adjustments that exclude the estimated amortization of intangible assets of approximately $0.3-$0.5 million, estimated stock-based compensation expense of approximately $17.2-$18.0 million, estimated non-cash interest expense of approximately $2.7-$3.0 million and anticipated charges associated with the write-down of project assets of approximately $4.0-$6.5 million.

 

(c) Estimated non-GAAP amounts above for Q2 2011 reflect adjustments that exclude the estimated amortization of intangible assets of approximately $6.9-$7.0 million, estimated stock-based compensation expense of approximately $15.5 million, estimated non-cash interest expense of approximately $7.7-$7.8 million, amortization of promissory notes of approximately $0.8 million, anticipated charges associated with the write-down of project assets of approximately $4.0-$6.5 million, estimated restructuring charges of approximately $7.0-$14.0 million, and estimated transaction expenses related to the April 28, 2011 Tender Offer Agreement of approximately $13.0-$15.0 million.

 

(d) Estimated non-GAAP amounts above for 2011 reflect adjustments that exclude the estimated amortization of intangible assets of approximately $27.2-$27.7 million, estimated stock-based compensation expense of approximately $61.2-$62.8 million, estimated non-cash interest expense of approximately $23.7-$24.0 million, amortization of promissory notes of approximately $3.0 million, anticipated charges associated with the write-down of project assets of approximately $4.0-$6.5 million, estimated restructuring charges of approximately $10.0-$22.0 million, and estimated transaction expenses related to the April 28, 2011 Tender Offer Agreement of approximately $13.0-$15.0 million.