UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
___________________
FORM
8-K
___________________
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of report (Date of earliest event reported): April 17, 2008
___________________
|
SunPower
Corporation
|
|
(Exact
Name of Registrant as Specified in
Charter)
|
___________________
|
Delaware
|
000-51593
|
94-3008969
|
|
(State
or Other Jurisdiction
|
(Commission
|
(IRS
Employer
|
|
of
Incorporation)
|
File
No.)
|
Identification
No.)
|
|
3939
North First Street, San Jose, California 95134
|
|
(Address
of Principal Executive Offices) (Zip
Code)
|
Registrant’s
telephone number, including area code: (408) 240-5500
|
N/A
|
|
(Former
Name or Former Address, if Changed Since Last
Report)
|
___________________
|
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction
A.2. below):
|
|
|
r
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
r
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
r
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
r
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item 2.02. Results
of Operations and Financial Condition.
On April
17, 2008, SunPower Corporation (the "Registrant") issued the press release
attached as Exhibit 99.1 hereto announcing its results of operations for the
first quarter of 2008.
The
information contained in this report on Form 8-K and Exhibit 99.1 hereto shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Exchange Act, except as expressly set forth by
specific reference in such filing.
Item 9.01. Financial
Statements and Exhibits.
(d)
Exhibits
|
Exhibit No.
|
Description
|
|
|
99.1
|
Press
Release dated April 17, 2008
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
SUNPOWER
CORPORATION
|
|
|
Date:
April 17, 2008
|
By:
/s/ Emmanuel Hernandez
|
|
Name:
Emmanuel Hernandez
|
|
|
Title: Chief
Financial Officer
|
|
Exhibit No.
|
Description
|
|
|
99.1
|
Press
Release dated April 17, 2008
|
FOR
IMMEDIATE RELEASE
Contacts:
Bob
Okunski
SunPower
Corporation
408-240-5447
Manny
Hernandez
SunPower
Corporation
408-240-5560
SunPower
Reports First-Quarter 2008 Results
Company
Raises FY 2008 Guidance
|
●
|
Generated first quarter 2008 revenue of $274 million, up 92% year-on-year |
| ● | Achieved $0.15 GAAP net income share, $0.39 Non-GAAP |
| ● | Extended VAR dealer network by more than 50 dealers in Germany, Italy and Spain |
| ● | Expanded relationships to further penetrate both the Japanese and Korean markets |
| ● | Received silicon from M.Setek and DC Chemical on target |
SAN JOSE, Calif., April 17,
2008 – SunPower Corporation (NASDAQ: SPWR) today announced financial
results for the first quarter 2008, which ended March 30, 2008. This
press release contains both GAAP and non-GAAP financial
information. Non-GAAP figures are reconciled to the closest GAAP
equivalent figures on the final page of this press release. Please
note that the company has posted additional, supplemental information related to
its first quarter 2008 performance on the Events and Presentations section of
the Investor Relations page on the SunPower website.
Revenue
for the 2008 first quarter was $273.7 million, up 22% from prior-quarter revenue
of $224.3 million and up 92% from year-ago first-quarter revenue of $142.3
million. The Components and Systems segments accounted for 35% and
65% of first-quarter revenue, respectively.
For
reporting purposes, the Systems segment generally represents products and
services sold directly to the system owner, while the Components segment
primarily represents products sold to installers and
resellers. Additionally, both SunPower and third-party solar panels
sold through the Systems segment channels are recorded as Systems segment
revenue.
On a GAAP
basis, SunPower reported gross margin of 19.5%, total operating income of $14.8
million and diluted net income per share of $0.15. These figures
include non-cash operating expenses for amortization of purchase accounting
intangible assets of $4.3 million and non-cash, stock-based compensation of
$14.5 million. Additionally, for the three months ended March 30,
2008, GAAP cost of revenue includes $2.2 million of one-time asset impairment
charges relating to the discontinuation of our imaging detector product line and
$3.2 million for write-offs of certain solar manufacturing equipment which
became obsolete due to new processes.
On a
non-GAAP basis, adjusted to exclude non-cash charges for amortization of
intangible assets, stock-based compensation, asset impairments and equipment
write-offs, SunPower reported total gross margin of 24.0%, operating income of
$39.1 million and diluted net income per share of $0.39. This
compares with prior-quarter non-GAAP gross margin of 25.3%, total operating
income of $32.4 million and $0.39 diluted net income per share. The
first quarter’s non-GAAP gross margin was influenced by a higher mix of revenue
from our Systems segment which posted a gross margin of 23.3% for that quarter
and our Component segment’s 200 basis points sequential improvement over the
2007 fourth quarter gross margin to 25.4%. Our Component segment’s gross
margin benefitted from higher volume and modestly higher average selling
prices. The increase in Components gross margin was tempered by stable
silicon costs, rather than expected slightly declining silicon costs, as we
secured incremental silicon supply to improve factory linearity in the first and
second quarters of 2008. Looking forward to the second quarter, we expect
our first meaningful reduction in average silicon cost which will contribute to
our estimated 510 to 610 basis point improvement in our Component segment’s
gross margin.
“Our
first quarter performance reflects the value our customers attribute to
SunPower’s high-performance solar solutions,” said Tom Werner, SunPower’s
CEO. “SunPower’s market leadership will continue to be driven through
our focus on brand, technology, cost and people. We are building a
strong brand based on sound fundamentals: the world’s highest performance solar
technology, deployed aggressively across the leading global markets
using scalable, responsive channel platforms.
”During
the first quarter of 2008, SunPower demonstrated the strength of its channel
diversification. Our dealer network continued to expand, not only in
the United States, but also in three key European markets as well: Germany,
Italy and Spain. We now have more than 200 dealers serving
residential and commercial rooftop markets globally with a rapidly increasing
presence in Europe. In Asia, we expanded our customer footprint
with our first volume shipments into Japan and shipment of components to Samsung
in Korea. Our vertical integration strategy provides us with the visibility
and flexibility to serve a variety of end-markets, responding quickly to both
new market opportunities as well as risks.
“SunPower
is positioned to meet the needs of the market with industry-leading solar
technology across the entire customer spectrum – from large-scale systems
designed for utilities and large commercial clients to
homeowners. Our proprietary technology delivers the highest output
per unit area of any commercially available solar system and we intend to
leverage this technology by aggressively expanding our solar cell production
by more than 150% in 2008 compared to 2007. This scale,
combined with lower silicon costs, higher efficiencies, thinner wafers and
on-going quality and cost improvements in our factories, will drive unit cost
reduction. During the first quarter of 2008, we continued to meet or
exceed our manufacturing targets across both of our fabs and our panel
manufacturing facility. First quarter accomplishments
include:
| ● | The capacity ramp at Fab 2 remains on schedule and is expected to be completed by the end of 2009; |
| ● | Almost half of cell production was Gen2 solar cell technology with a minimum conversion efficiency of 22%; |
| ● | Conversion from 165 micron to 145 micron wafers remains on schedule with 100% of solar cell lines expected to be using thinner wafers by year-end 2008; |
| ● | Silicon utilization improved to 6.3 grams per watt due to higher average solar cell efficiency and thinner wafers; |
| ● | The fourth solar panel manufacturing line completed its production ramp allowing the company to produce more than half of its panels in-house; |
| ● | The SunPower® T20 Tracker manufacturing facility in Spain entered volume production, supporting more than 45 MW of power plant projects currently under construction. The T20 Tracker generates up to 30% more energy than fixed-tilt systems and has been customized for the European market; |
| ● | The first European commercial market installation was completed using our non-roof penetrating, rapid assembly SunPower® T10 Solar Roof Tile product. |
“SunPower
has pursued a portfolio strategy for silicon procurement, using a combination of
short, intermediate and long-term supply agreements and a variety of incumbent
suppliers as well as new entrants. We have not assumed technology
risk for new polysilicon refining techniques. Our solar cell and
panel manufacturing expansion plans are predicated on risk-adjusted, contracted
silicon. We believe that 100% of our projected solar cell production
is secured with contracted silicon through 2010.”
SunPower’s
Silicon Supply Agreement Position and Capacity Expansion Plan
| 2008 | 2009 | 2010 | |
| Beginning of Year, Nameplate Capacity (megawatts) | 214 | 414 | 574 |
| Annual Production Capacity Supported by Silicon Agreements to Date (megawatts) | 255 | 450+ | 650+ |
“We
expect SunPower’s silicon supply costs to decline by approximately 10% during
2008 compared to 2007,” continued Werner. “This cost improvement will
amplify our silicon utilization benefits achieved through higher cell efficiency
and thinner wafers. We are on track to achieve our planned
improvements in our cost structure, and therefore we expect to reach our target
financial model of 30% gross margin, 10% operating expenses and 20% operating
margin, on a non-GAAP basis, no later than the first quarter of
2009. We are also on track to realize our mission of reducing
installed systems cost by 50% by 2012.
“Based
on the strong demand trends we saw in the first quarter of 2008, we are raising
our guidance for the fiscal year 2008 and expect the following non-GAAP
results: Total revenue of $1.3 billion to $1.375 billion, diluted net
income per share of $2.10 to $2.20. We are also reconfirming our 2009
forecast for total revenue to increase at least 40% from 2008
levels. Consistent with our practice of offering guidance for the
current quarter, we expect second quarter of 2008 non-GAAP total revenue of $330
million to $350 million, company non-GAAP gross margin of 23% to 24% and
non-GAAP diluted net income per share of $0.48 to $0.52, reflecting a higher
non-GAAP average tax rate of 24% to 25% in 2008 as compared to the tax rate in
2007 which ended at 11.0%.1
“On a
business segment basis, we expect the following non-GAAP results for the second
quarter 2008: Components segment revenue of $95 million to $100 million, driven
by a planned increase in allocation of SunPower panels to the Systems segment,
and gross margin of 30.5% to 31.5%; Systems segment revenue of $235 million to
$250 million and gross margin of 20% to 21%,” said Werner. “We expect
the Components segment to benefit from the continued manufacturing ramp of our
next-generation technology and lower silicon cost and the Systems segment to
benefit from an increase in allocation of SunPower panels to the segment during
the quarter.”2
About
SunPower
SunPower
Corporation (Nasdaq: SPWR) designs, manufactures and delivers high-performance
solar- electric systems worldwide for residential, commercial and utility-scale
power plant customers. SunPower high-efficiency solar cells and solar
panels generate up to 50 percent more power than conventional solar technologies
and have a uniquely attractive, all-black appearance. With headquarters in San
Jose, Calif., SunPower has offices in North America, Europe and Asia. For more
information, visit www.sunpowercorp.com. SunPower is a majority-owned
subsidiary of Cypress Semiconductor Corp. (NYSE: CY).
1
For the full year 2008, we expect the following total company GAAP
results: Revenue of $1.3 billion to $1.375 billion and diluted net income per
share of $1.10 to $1.20. For the second quarter of 2008, we expect the following
total company GAAP results: Revenue of $330 million to $350 million; gross
margin of approximately 21 percent to 22 percent and diluted net income per
share of $0.24 to $0.28, reflecting a higher GAAP average tax rate of 33% to 34%
in 2008.
2
For the second quarter of 2008, we expect the Components business segment
to generate GAAP revenue of $95 million to $100 million and gross margin of
approximately 28 percent to 29 percent and the Systems business segment to
generate GAAP revenue of $235 million to $250 million and gross margin of
approximately 18.5 percent to 19.5 percent.
Forward-Looking
Statements
This
press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements are statements that do not represent
historical facts. The company uses words and phrases such as “will,” “to serve,”
“to meet,” intend,” “expected,” “believe,” “plan,” “expect,” “to achieve,” “to
realize,” “to increase,” and similar expressions to identify forward-looking
statements. Forward-looking statements in this press release include, but are
not limited to, the company's plans and expectations regarding (a) the company’s
first meaningful reduction in average silicon cost, during the second fiscal
quarter of 2008, contributing to the company’s estimated 510 to 610 basis point
improvement in Component segment’s gross margin; (b) SunPower’s market
leadership continuing to be driven through the company’s focus on brand,
technology, cost and people; (c) the company’s vertical integration strategy
providing visibility and flexibility to serve a variety of end-markets,
responding quickly to both new market opportunities as well as risks; (d) the
company meeting the needs of the market with industry-leading solar technology
across the entire customer spectrum; (e) the company leveraging its proprietary
technology by aggressively expanding its solar cell production by more than 150%
in 2008 compared to 2007; (f) unit cost reduction being driven by scale,
combined with lower silicon costs, higher efficiencies, thinner wafers and
on-going quality and cost improvements in the company’s factories; (g) capacity
ramp at Fab 2 completing by the end of 2009; (h) 100% of solar cell lines
using thinner wafers by year-end 2008; (i) 100% of the company’s
solar cell production being secured with contracted silicon through 2010; (j)
the company’s future silicon supply expectations and capacity expansion plans,
(k) the company’s silicon supply costs declining by approximately 10% during
2008 compared to 2007; (l) cost improvements amplifying the company’s silicon
utilization benefits achieved through higher cell efficiency and thinner wafers;
(m) the company’s achieving its planned improvements in its cost structure; (n)
the company reaching its target financial model of 30% gross margin, 10%
operating expenses and 20% operating margin, on a non-GAAP basis, no later than
the first quarter of 2009; (o) the company realizing its mission of reducing
installed systems costs by 50% by 2012; (p) the company achieving certain GAAP
and non-GAAP results, including (1) total revenue and diluted net income per
share for fiscal year 2008, (2) total revenue for fiscal year 2009, (3) total
revenue, gross margin, and diluted net income per share for the second quarter
of fiscal year 2008, (4) the average tax rate for 2008, and (5) Components
segment and Systems segment revenue and gross margin for the second quarter of
fiscal year 2008; and (q) the Components segment benefiting from the continued
manufacturing ramp of the company’s next-generation technology and lower silicon
cost and the Systems segment benefiting from an increase in allocation of
SunPower panels to the segment during the second quarter of fiscal year
2008. These forward-looking statements are based on information
available to the company as of the date of this release and management’s current
expectations, forecasts and assumptions, and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
anticipated by these forward-looking statements. Such risks and uncertainties
include a variety of factors, some of which are beyond the company's control. In
particular, risks and uncertainties that could cause actual results to differ
include (i) the company’s ability to obtain a adequate supply of polysilicon,
ingots and wafers to manufacture its products and the price it pays for such
materials; (ii) business and economic
conditions
and growth trends in the solar power industry; (iii) the continuation of
governmental and related economic incentives promoting the use of solar power;
(iv) increases in the available supply of third party solar panels, (v) the
continued availability of third-party financing arrangements for the company’s
customers; (vi) the company’s ability to ramp new production lines and realize
expected manufacturing efficiencies; (vii) unforeseen manufacturing equipment
delays at the company’s fabrication facilities and panel factories; (viii) the
company’s ability to utilize thinner wafers, reduce kerf loss and otherwise
achieve anticipated improvements in polysilicon usage efficiency; (ix)
production difficulties that could arise; (x) the success of the company’s
ongoing research and development efforts; (xi) the company’s ability to compete
with other companies and competing technologies; (xii) the potential
renegotiation of or non-performance by parties to the company’s supply and
customer contracts; (xiii) the price and availability of third-party cells and
solar panels; (xiv) liquidated damages or customer refunds for late
installations arising on large scale solar projects (xv) unanticipated changes
in the mix of balance of systems sales; and (xvi) other risks described in the
company’s Annual Report on Form 10-K for the year ended December 30, 2007, 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.
Non-GAAP
Measures
To
supplement the consolidated financial results prepared under GAAP, SunPower uses
non-GAAP measures which are adjusted from the most directly comparable GAAP
results to exclude items related to stock-based compensation, amortization of
intangible assets, impairment of long-lived assets, fair value adjustments to
deferred revenue, purchased in-process research and development expenses,
write-off of unamortized debt issuance costs, and their related tax
effects. Management does not consider these charges in evaluating the
core operational activities of SunPower. Management uses these
non-GAAP measures internally to make strategic decisions, forecast future
results and evaluate SunPower’s current performance. Most analysts
covering SunPower use the non-GAAP measures as well. 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. In
addition, management believes these non-GAAP measures are useful to investors in
enabling them to better assess changes in SunPower’s core business across
different time periods. These non-GAAP measures are not in accordance
with or an alternative for GAAP financial data and may be different from
non-GAAP measures used by other companies.
Fiscal
Periods
SunPower
operates on a fiscal calendar comprised of four thirteen-week quarters that end
at midnight Pacific Time on the Sunday nearest the calendar
quarter-end.
# # #
SunPower
is a registered trademark of SunPower Corp. Cypress is a registered trademark of
Cypress Semiconductor Corp. All other trademarks are the property of
their respective owners.
|
SUNPOWER
CORPORATION
|
||||||||
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
|
(In
thousands)
|
||||||||
|
(Unaudited)
|
||||||||
|
Mar.
30,
|
Dec.
30,
|
|||||||
|
2008
|
2007
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and cash equivalents
|
$
|
132,522
|
$
|
285,214
|
||||
|
Restricted
cash
|
123,437
|
67,887
|
||||||
|
Investments
|
101,367
|
134,503
|
||||||
|
Accounts
receivable, net
|
159,083
|
138,250
|
||||||
|
Costs
and estimated earnings in excess of billings
|
61,675
|
39,136
|
||||||
|
Inventories
|
188,203
|
140,504
|
||||||
|
Deferred
project costs
|
7,101
|
8,316
|
||||||
|
Prepaid
expenses and other assets
|
88,570
|
65,084
|
||||||
|
Advances
to suppliers
|
164,678
|
161,220
|
||||||
|
Property,
plant and equipment, net
|
420,124
|
377,994
|
||||||
|
Goodwill
and other intangible assets, net
|
245,185
|
235,630
|
||||||
|
Total
assets
|
$
|
1,691,945
|
$
|
1,653,738
|
||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
Accounts
payable
|
$
|
152,558
|
$
|
119,869
|
||||
|
Accrued
and other liabilities
|
114,743
|
105,476
|
||||||
|
Convertible
debt
|
425,000
|
425,000
|
||||||
|
Billings
in excess of costs and estimated earnings
|
28,251
|
69,900
|
||||||
|
Customer
advances
|
69,810
|
69,403
|
||||||
|
Total
liabilities
|
790,362
|
789,648
|
||||||
|
Stockholders'
equity
|
901,583
|
864,090
|
||||||
|
Total
liabilities and stockholders' equity
|
$
|
1,691,945
|
$
|
1,653,738
|
||||
|
SUNPOWER
CORPORATION
|
||||||||||||
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||
|
(In
thousands, except per share data)
|
||||||||||||
|
(Unaudited)
|
||||||||||||
|
THREE
MONTHS ENDED
|
||||||||||||
|
Mar.
30,
|
Apr.
1,
|
Dec.
30,
|
||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
Revenue
|
||||||||||||
|
Systems
|
$
|
178,851
|
$
|
78,495
|
$
|
123,912
|
||||||
|
Components
|
94,850
|
63,852
|
100,431
|
|||||||||
|
273,701
|
142,347
|
224,343
|
||||||||||
|
Cost
of systems revenue
|
143,213
|
62,443
|
97,416
|
|||||||||
|
Cost
of components revenue
|
77,168
|
47,479
|
79,745
|
|||||||||
|
220,381
|
109,922
|
177,161
|
||||||||||
|
Gross
margin
|
53,320
|
32,425
|
47,182
|
|||||||||
|
Operating
expenses:
|
||||||||||||
|
Research
and development
|
4,642
|
2,936
|
3,904
|
|||||||||
|
Selling,
general and administrative
|
33,858
|
22,371
|
32,068
|
|||||||||
|
Purchased
in-process research and development
|
—
|
9,575
|
—
|
|||||||||
|
Total
operating expenses
|
38,500
|
34,882
|
35,972
|
|||||||||
|
Operating
income (loss)
|
14,820
|
(2,457
|
)
|
11,210
|
||||||||
|
Interest
and other income (expense), net
|
2,970
|
1,139
|
(3,825
|
)
|
||||||||
|
Income
(loss) before income taxes
|
17,790
|
(1,318
|
)
|
7,385
|
||||||||
|
Income
tax provision (benefit)
|
5,033
|
(2,558
|
)
|
2,509
|
||||||||
|
Net
income
|
$
|
12,757
|
$
|
1,240
|
$
|
4,876
|
||||||
|
Net
income per share:
|
||||||||||||
|
-
Basic
|
$
|
0.16
|
$
|
0.02
|
$
|
0.06
|
||||||
|
-
Diluted
|
$
|
0.15
|
$
|
0.02
|
$
|
0.06
|
||||||
|
Shares
used in calculation of net income per share:
|
||||||||||||
|
-
Basic
|
78,965
|
73,732
|
78,164
|
|||||||||
|
-
Diluted
|
83,661
|
79,126
|
85,588
|
|||||||||
|
(In
thousands, except per share data)
|
|||||||||||||||||||||||||
|
THREE
MONTHS ENDED
|
THREE
MONTHS ENDED
|
||||||||||||||||||||||||
|
Mar.
30,
|
Apr.
1,
|
Dec.
30,
|
Mar.
30,
|
Apr.
1,
|
Dec.
30,
|
||||||||||||||||||||
|
2008
|
2007
|
2007
|
2008
|
2007
|
2007
|
||||||||||||||||||||
|
(Presented
on a GAAP Basis)
|
(Presented
on a non-GAAP Basis)*
|
||||||||||||||||||||||||
|
Gross
margin
|
$
|
53,320
|
$
|
32,425
|
$
|
47,182
|
$
|
65,735
|
$
|
41,577
|
$
|
56,731
|
|||||||||||||
|
Operating
income (loss)
|
14,820
|
(2,457
|
)
|
11,210
|
39,134
|
25,465
|
32,357
|
||||||||||||||||||
|
Net
income per share:
|
|||||||||||||||||||||||||
|
-Basic
|
0.16
|
0.02
|
0.06
|
0.41
|
0.32
|
0.43
|
|||||||||||||||||||
|
-Diluted
|
0.15
|
0.02
|
0.06
|
0.39
|
0.29
|
0.39
|
|||||||||||||||||||
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 non-cash items related to stock-based
compensation expenses, amortization of intangibles, impairment of long-lived
assets, fair value adjustments to deferred revenue, purchased in-process
research and development expenses, write-off of unamortized debt issuance costs,
and their related tax effects. The non-GAAP adjustments included
herein are primarily the result of our acquisition of SunPower Corporation,
Systems or SP Systems (formerly known as PowerLight Corporation) on January 10,
2007. The specific non-GAAP measures listed below are gross margin, operating
income and net income per share. Management believes that each of these non-GAAP
measures (gross margin, operating income and net income 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 non-cash 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 purchase accounting,
stock-based compensation charges, impairment of long-lived assets and write-off
of unamortized debt issuance costs. 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. These non-GAAP
measures are not in accordance with or an alternative for GAAP financial data,
the non-GAAP results should be reviewed together with the GAAP results 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.
o Non-GAAP
gross margin. The use of this non-GAAP financial measure allows management to
evaluate the gross margin of the company's core businesses and trends across
different reporting periods on a consistent basis, independent of non-cash items
including stock-based compensation expenses, amortization of intangibles,
impairment of long-lived assets and fair value adjustments to deferred revenue.
In addition, it is an important component of management's internal performance
measurement process as it is used to assess the current and historical financial
results of the business, for strategic decision making, preparing budgets and
forecasting future results. Management presents this non-GAAP financial measure
to enable investors and analysts to evaluate our revenue generation performance
relative to the direct costs of revenue of SunPower’s core
businesses.
o Non-GAAP
operating income. The use of this non-GAAP financial measure allows management
to evaluate the operating results of the Company's core businesses and trends
across different reporting periods on a consistent basis, independent of
non-cash items including stock-based compensation expenses, amortization of
intangibles, impairment of long-lived assets, and all other purchase accounting
charges. In addition, it is an important component of management's internal
performance measurement process as it is used to assess the current and
historical financial results of the business, for strategic decision making,
preparing budgets and forecasting future results. Management presents this
non-GAAP financial measure to enable investors and analysts to understand the
results of operations of the Company’s core businesses and to compare our
results of operations on a more consistent basis against that of other companies
in our industry.
o Non-GAAP
net income per share. Management presents this non-GAAP financial measure to
enable investors and analysts to assess the Company's operating results and
trends across different reporting periods on a consistent basis, independent of
non-cash items including stock-based compensation expenses, amortization of
intangibles, impairment of long-lived assets, write-off of unamortized debt
issuance costs, all other purchase accounting charges and the tax effects
of these non-GAAP adjustments. In addition, investors and analysts can compare
the Company's operating results on a more consistent basis against that of other
companies in our industry.
Non-Cash
Items
o Stock-based
compensation. Stock-based compensation relates primarily to SunPower stock
awards such as stock options and restricted stock. Stock-based compensation is a
non-cash expense that varies in amount from period to period and is dependent on
market forces that are difficult to predict. As a result of this
unpredictability, management excludes this item from its internal operating
forecasts and models. Management believes that non-GAAP measures adjusted for
stock-based compensation provide investors with a basis to measure the company’s
core performance against the performance of other companies without the
variability created by stock-based compensation.
o Amortization
of intangibles. SunPower incurs amortization of intangibles as a result of
Cypress acquiring the company in November 2004, in which Cypress’ cost of
purchased technology, patents, trademarks and a distribution agreement is
reflected in our financial statements. In addition, SunPower incurs amortization
of intangibles as a result of our acquisitions, which includes purchased
technology such as existing technology, patents, brand names and trademarks.
SunPower excludes these items because these expenses are not reflective of
ongoing operating results in the period incurred. These amounts arise from prior
acquisitions and have no direct correlation to the operation of SunPower’s core
businesses.
o Impairment
of long-lived assets. SunPower incurred an impairment of long-lived assets in
the first quarter of fiscal 2008, which relates to the discontinuation of our
imaging detector product line and for the write-off of certain solar
manufacturing equipment which became obsolete due to new processes. SunPower
excluded this item because the expense is not reflective of its ongoing
operating results in the period incurred. Excluding this data provides investors
with a basis to compare the company’s performance against the performance of
other companies without non-cash expenses such as impairment of long-lived
assets.
o Purchase
accounting charges. Purchase accounting charges as a result of prior
acquisitions include: (1) amortization of intangibles, which includes purchased
technology related to acquisitions such as existing technology, patents, brand
names and trademarks; (2) fair value adjustments to deferred revenue, which is
an acquisition-related adjustment that results in certain revenues never being
recognized under GAAP by either the acquiring company or the company being
acquired and (3) purchased in-process research and development expenses, which
relates to projects in process as of the acquisition date that have not reached
technological feasibility and are immediately expensed. These
acquisition-related charges are not factored into management’s evaluation of
potential acquisitions or its performance after completion of acquisitions,
because they are not related to our core operating performance, and the
frequency and amount of such charges can vary significantly based on the size
and timing of acquisitions and the maturities of the businesses being acquired.
Excluding this data provides investors with a basis to compare SunPower’s
performance against the performance of other companies without the variability
caused by purchase accounting.
o Write-off
of unamortized debt issuance costs. The market price trigger condition was
met for our senior convertible debentures in late December 2007, giving holders
of the convertible debt the right to convert the convertible debt in the first
quarter of fiscal 2008. As a result, SunPower accelerated the
amortization of deferred debt issuance costs. Excluding this non-cash charge
provides investors with a basis to compare SunPower’s period-over-period
operating results because the charge is not reflective of SunPower’s historical
results or its expected future expenses after such costs were fully amortized on
January 2, 2008.
o Tax
effect. This amount is used to present each of the amounts described above on an
after-tax basis with the presentation of non-GAAP net income per
share.
For more
information on these non-GAAP financial measures, please see the tables
captioned "Reconciliations of GAAP results of operations measures to non-GAAP
measures" set forth at the end of this release and which should be read together
with the preceding financial statements prepared in accordance with
GAAP.
|
SUNPOWER
CORPORATION
|
||||||||||||
|
RECONCILIATIONS
OF GAAP MEASURES TO NON-GAAP MEASURES
|
||||||||||||
|
(Unaudited)
|
||||||||||||
|
(In
thousands, except per share data)
|
||||||||||||
|
STATEMENT
OF OPERATIONS DATA:
|
||||||||||||
|
THREE
MONTHS ENDED
|
||||||||||||
|
Mar.
30,
|
Apr.
1,
|
Dec.
30,
|
||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
GAAP
gross margin
|
$
|
53,320
|
$
|
32,425
|
$
|
47,182
|
||||||
|
Fair
value adjustment to deferred revenue
|
—
|
833
|
—
|
|||||||||
|
Amortization
of intangible assets
|
3,212
|
6,069
|
6,185
|
|||||||||
|
Stock-based
compensation expense
|
3,714
|
2,250
|
3,364
|
|||||||||
|
Impairment
of long-lived assets
|
5,489
|
—
|
—
|
|||||||||
|
Non-GAAP
gross margin
|
$
|
65,735
|
$
|
41,577
|
$
|
56,731
|
||||||
|
GAAP
operating income (loss)
|
$
|
14,820
|
$
|
(2,457
|
)
|
$
|
11,210
|
|||||
|
Fair
value adjustment to deferred revenue
|
—
|
833
|
—
|
|||||||||
|
Amortization
of intangible assets
|
4,317
|
6,911
|
7,132
|
|||||||||
|
Stock-based
compensation expense
|
14,508
|
10,603
|
14,015
|
|||||||||
|
Impairment
of long-lived assets
|
5,489
|
—
|
—
|
|||||||||
|
Purchased
in-process research and development
|
—
|
9,575
|
—
|
|||||||||
|
Non-GAAP
operating income
|
$
|
39,134
|
$
|
25,465
|
$
|
32,357
|
||||||
|
NET
INCOME PER SHARE:
|
||||||||||||
|
THREE
MONTHS ENDED
|
||||||||||||
|
Mar.
30,
|
Apr.
1,
|
Dec.
30,
|
||||||||||
|
2008
|
2007
|
2007
|
||||||||||
|
Basic:
|
||||||||||||
|
GAAP
net income per share
|
$
|
0.16
|
$
|
0.02
|
$
|
0.06
|
||||||
|
Reconciling
items:
|
||||||||||||
|
Stock-based
compensation expense
|
0.18
|
0.15
|
0.18
|
|||||||||
|
Impairment
of long-lived assets
|
0.07
|
—
|
—
|
|||||||||
|
Purchase
accounting:
|
||||||||||||
|
Fair
value adjustment to deferred revenue
|
—
|
0.01
|
—
|
|||||||||
|
Amortization
of intangible assets
|
0.06
|
0.09
|
0.09
|
|||||||||
|
Purchased
in-process research and development
|
—
|
0.13
|
—
|
|||||||||
|
Write-off
of unamortized debt issuance costs
|
0.01
|
—
|
0.11
|
|||||||||
|
Tax
effect
|
(0.07
|
)
|
(0.08
|
)
|
(0.01
|
)
|
||||||
|
Non-GAAP
net income per share
|
$
|
0.41
|
$
|
0.32
|
$
|
0.43
|
||||||
|
Diluted:
|
||||||||||||
|
GAAP
net income per share
|
$
|
0.15
|
$
|
0.02
|
$
|
0.06
|
||||||
|
Reconciling
items:
|
||||||||||||
|
Stock-based
compensation expenses
|
0.18
|
0.12
|
0.16
|
|||||||||
|
Impairment
of long-lived assets
|
0.07
|
—
|
—
|
|||||||||
|
Purchase
accounting:
|
||||||||||||
|
Fair
value adjustment to deferred revenue
|
—
|
0.01
|
—
|
|||||||||
|
Amortization
of intangible assets
|
0.05
|
0.09
|
0.08
|
|||||||||
|
Purchased
in-process research and development
|
—
|
0.12
|
—
|
|||||||||
|
Write-off
of unamortized debt issuance costs
|
0.01
|
—
|
0.10
|
|||||||||
|
Tax
effect
|
(0.07
|
)
|
(0.07
|
)
|
(0.01
|
)
|
||||||
|
Non-GAAP
net income per share
|
$
|
0.39
|
$
|
0.29
|
$
|
0.39
|
||||||
|
Shares
used in calculation of GAAP net income per share:
|
||||||||||||
|
-
Basic
|
78,965
|
73,732
|
78,164
|
|||||||||
|
-
Diluted
|
83,661
|
79,126
|
85,588
|
|||||||||
|
Shares
used in calculation of non-GAAP net income per
share:
|
||||||||||||
|
-Basic
|
78,965
|
73,732
|
78,164
|
|||||||||
|
-Diluted
|
83,661
|
79,126
|
85,588
|
|||||||||
The
following supplemental data represents the individual charges and credits that
are excluded from SunPower’s non-GAAP financial measures for each period
presented in the Condensed Consolidated Statements of Operations contained
herein.
|
SUPPLEMENTAL
DATA
|
||||||||||||||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||||||||||
|
THREE
MONTHS ENDED
|
||||||||||||||||||||||||||||
|
March
30, 2008
|
||||||||||||||||||||||||||||
|
Gross
Margin
|
Research
and
development
|
Selling,
general
and
administrative
|
Other
Acquisition Related Charges
|
Interest
and other income, net
|
Income
tax provision (benefit)
|
|||||||||||||||||||||||
|
Systems
|
Components
|
|||||||||||||||||||||||||||
|
Amortization
of intangible assets
|
$
|
2,168
|
$
|
1,044
|
$
|
—
|
$
|
1,105
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||
|
Stock-based
compensation expense
|
2,511
|
1,203
|
811
|
9,983
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Impairment
of long-lived assets
|
1,343
|
4,146
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Write-off
of unamortized debt issuance costs
|
—
|
—
|
—
|
—
|
—
|
972
|
—
|
|||||||||||||||||||||
|
Tax
effect
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,483
|
)
|
||||||||||||||||||||
|
$
|
6,022
|
$
|
6,393
|
$
|
811
|
$
|
11,088
|
$
|
—
|
$
|
972
|
$
|
(5,483
|
)
|
||||||||||||||
|
April
1, 2007
|
||||||||||||||||||||||||||||
|
Gross
Margin
|
Research
and
development
|
Selling,
general
and
administrative
|
Other
Acquisition Related Charges
|
Interest
and other income, net
|
Income
tax provision (benefit)
|
|||||||||||||||||||||||
|
Systems
|
Components
|
|||||||||||||||||||||||||||
|
Fair
value adjustment to deferred revenue
|
$
|
833
|
$
|
-
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||
|
Amortization
of intangible assets
|
4,946
|
1,123
|
—
|
842
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Stock-based
compensation expense
|
1,997
|
253
|
501
|
7,852
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Purchased
in-process research and development
|
—
|
—
|
—
|
—
|
9,575
|
—
|
—
|
|||||||||||||||||||||
|
Tax
effect
|
—
|
—
|
—
|
—
|
—
|
—
|
(5,884
|
)
|
||||||||||||||||||||
|
$
|
7,776
|
$
|
1,376
|
$
|
501
|
$
|
8,694
|
$
|
9,575
|
$
|
—
|
$
|
(5,884
|
)
|
||||||||||||||
|
December
30, 2007
|
||||||||||||||||||||||||||||
|
Gross
Margin
|
Research
and
development
|
Selling,
general
and
administrative
|
Other
Acquisition Related Charges
|
Interest
and other income, net
|
Income
tax provision (benefit)
|
|||||||||||||||||||||||
|
Systems
|
Components
|
|||||||||||||||||||||||||||
|
Amortization
of intangible assets
|
$
|
4,788
|
$
|
1,397
|
$
|
—
|
$
|
947
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||||
|
Stock-based
compensation expense
|
1,952
|
1,412
|
564
|
10,087
|
—
|
—
|
—
|
|||||||||||||||||||||
|
Write-off
of unamortized debt issuance costs
|
—
|
—
|
—
|
—
|
—
|
8,260
|
—
|
|||||||||||||||||||||
|
Tax
effect
|
—
|
—
|
—
|
—
|
—
|
—
|
(993
|
)
|
||||||||||||||||||||
|
$
|
6,740
|
$
|
2,809
|
$
|
564
|
$
|
11,034
|
$
|
—
|
$
|
8,260
|
$
|
(993
|
)
|
||||||||||||||