Contacts:
Investors
Bob Okunski
408-240-5447
Bob.Okunski@sunpowercorp.com
Media
Helen Kendrick
408-240-5585
Helen.Kendrick@sunpowercorp.com
SunPower Reports Third-Quarter 2011 Results
SAN JOSE, Calif., November 3, 2011 – SunPower Corp. (NASDAQ: SPWRA, SPWRB) today announced financial results for its 2011 third quarter ended October 2, 2011.
| ($ Millions except per-share data) | | 3rd Quarter 2011 | | | 2nd Quarter 2011 | | | 3rd Quarter 2010 | |
| Revenue | | $ | 705.4 | | | $ | 592.3 | | | $ | 550.6 | |
| GAAP gross margin | | | 10.8 | % | | | 3.3 | % (2) | | | 20.4 | % |
| GAAP net income (loss) | | $ | (370.8 | )(1) | | $ | (147.9 | ) | | $ | 20.1 | |
| GAAP net income (loss) per share | | $ | (3.77 | )(1) | | $ | (1.51 | )(2)(3) | | $ | 0.21 | |
Non-GAAP gross margin(4) | | | 11.4 | % | | | 12.5 | % | | | 22.3 | % |
Non-GAAP net income (loss) per diluted share(4) | | $ | 0.16 | | | $ | (0.19 | ) | | $ | 0.26 | |
(1) Includes pre-tax non-cash charges totaling approximately $349.8 million related to the impairment of goodwill and intangible assets.
(2) Includes pre-tax charges totaling approximately $48.5 million, including $16.0 million related to the company’s panel reallocation strategy and $32.5 million related to the write-down of third-party inventory and costs associated with the termination of third-party cell supply contracts
(3) Includes pre-tax charges totaling approximately $26.4 million, including $13.3 million related to the company’s panel reallocation strategy and $13.1 million in expenses related to the Total tender offer
(4) A reconciliation of Non-GAAP to GAAP results is included at the end of this press release
“We executed well in the quarter as we met our third quarter plan despite a period of rapidly changing market conditions,” said Tom Werner, SunPower president and CEO. “Our diversified channels provided us with the flexibility to reallocate product between business segments and regions. During Q3, we maintained our premium position in our Residential and Commercial (R&C) business while substantially gaining share in Germany and the United States. In our Utility and Power Plants (UPP) business, we completed the construction of both of our Italian power plants by the August 31 deadline and advanced a set of North American power plants through permitting and approvals. We remain focused on our 2011 panel cost reduction roadmap and have commenced production on the first line using our step-reduced cell manufacturing process.
“Our GAAP financial results for the quarter include a pre-tax, non-cash charge totaling approximately $349.8 million related to the impairment of goodwill and intangible assets primarily attributable to the company’s public market valuation on September 30.”
“We were pleased to complete the sale of the 250 megawatt (MW) California Valley Solar Ranch (CVSR) to NRG immediately prior to the project’s financial closing of a $1.2 billion Department of Energy loan guarantee in September,” continued Werner. “We began construction of the power plant in the third quarter and expect to recognize non-GAAP revenue from CVSR in the fourth quarter. The project will create approximately 350 jobs during the 2-year construction period and infuse $315 million into the San Luis Obispo County economy.
“Looking forward, our UPP pipeline of global projects continues to mature as customers benefit from our industry-leading technology’s high-efficiency, quality, reliability and bankability. In R&C, we have seen stronger order flow recently due to the rapid acceptance of our new residential leasing product as well as our plan to continue to offer competitive pricing at the beginning of the fourth quarter in order to gain market share. While our R&C business will show substantial year over year growth, our fourth quarter performance will reflect slower than anticipated demand growth.”
Key milestones achieved by the company since the second quarter of 2011 include:
| | · | Announced $275 million revolving credit facility and $200 million letter of credit facility |
| | · | Started construction of the 250 MW California Valley Solar Ranch power plant which was sold to NRG and settled all outstanding litigation related to the project |
| | · | Signed 15 MW supply agreement with Mahindra EPC Services for power plants in India for delivery by the end of 2011 |
| | · | Completed permitting and commenced sale process for 25 MW power plant for Modesto Irrigation District in California which is expected to commence construction in 2011 |
| | · | Launched new C7 concentrator tracking system for power plants and AC solar panels for the residential market |
| | · | Partnered with Ford Motor Company to offer Ford Focus Electric car owners high efficiency SunPower systems to offset the energy used in charging the vehicle |
| | · | Expanded #1 market share position in US residential market |
“We further improved our balance sheet flexibility during the quarter while continuing to successfully manage our inventory and working capital needs,” said Dennis Arriola, SunPower CFO. “Our new $275 million revolving credit and $200 million letter of credit facilities helped to reduce our overall cost of capital, improve our liquidity, and further demonstrate the value of our relationship with Total. These facilities, coupled with our existing $771 million letter of credit facility, provide further support to our strong and growing large commercial and UPP businesses in North America. In order to better
position SunPower for the future, we expect to implement a company-wide restructuring program in the fourth quarter to accelerate operating cost reduction and improve our overall operating efficiency. We currently expect this program to reduce operating expenses by as much as 10% in 2012, while growing the company. In addition, we have reprioritized our capital expenditure and research and development projects to support our focus on accelerated cost reduction while optimizing cash flow in 2012.”
2011 Financial Outlook
The company updated its fiscal year 2011 consolidated non-GAAP guidance as follows: total revenue of $2.40 billion to $2.45 billion, gross margin of 12% to 14%, net income per diluted share of ($0.05) to $0.20, capital expenditures of $125 million to $135 million, and MW recognized in the range of 800 to 825 MW.
For fiscal year 2011, the company expects the following consolidated GAAP results: revenue of $2.30 billion to $2.35 billion, gross margin of 9% to 11%, net loss per share of ($5.90) to ($5.65) and MW recognized in the range of 790 to 815 MW. GAAP loss per share guidance for 2011 includes a $349.8 million one-time, pre-tax charges related to the impairment of goodwill and intangibles, pre-tax charges totaling approximately $65.7 million related to the company’s panel reallocation strategy and write-down of third-party inventory and costs associated with the termination of third-party cell supply contracts. 2011 GAAP earnings per share guidance includes pre-tax charges totaling approximately $14.7 million for expenses related to the Total tender offer. Additionally, as a result of the expected restructuring program under consideration, the company believes it may incur a one-time, pre-tax charge of approximately $10 million which is not included in current 2011 GAAP guidance.
The company will provide its outlook for 2012 at its fourth quarter earnings call in February 2012.
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 third quarter 2011 performance on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpowercorp.com/events.cfm. The capacity of power plants in this release is described in approximate megawatts on an alternating current (ac) basis unless otherwise noted.
About SunPower
SunPower Corp. (NASDAQ: 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 “remain focused,”“roadmap,” “expect,” “will,” “looking forward,” “continues to,” “order flow,” “plan,” “agreement,” “growing,” “implementing,” “outlook,” “guidance,” “believes” and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) focus on cost reduction roadmap for 2011; (b) construction and revenue recognition with respect to the CVSR project; (c) ability to execute and monetize the UPP pipeline; (d) increased order flow from R&C and continued competitive pricing, and growth in R&C business; (e) agreement to supply to Mahindra; (f) beginning construction on the Modesto Irrigation District project; (g) growing business in commercial and UPP in North America; (h) improving liquidity, balance sheet and cash flows; (i) value in our relationship with Total; (j) expected operating expense savings from the expected restructuring program while growing the company; (k) forecasted GAAP and non-GAAP Q4 2011 and FY 2011 revenues, GAAP and non-GAAP gross margins, GAAP and non-GAAP net income/loss per diluted share, capital expenditures and MW as a result of decreasing ASP or reduced demand; (ii) the impact of regulatory changes and the continuation of governmental and related economic incentives promoting the use of solar power, and the impact of such changes on our revenues, financial results, and any potential impairments to our intangible assets, project assets, and goodwill; (iii) the company’s ability to meet its cost reduction plans and reduce it operating expenses; (iv) 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 and third parties’ willingness to renegotiate or cancel above market contracts; (v) general business and economic conditions, including seasonality of the solar industry and growth trends in the solar industry; (vi) the company’s ability to revise its portfolio allocation geographically and across downstream channels to respond to regulatory changes; (vii) the company’s ability to increase or sustain its growth rate; (viii) 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; (ix) timeline for revenue recognition and impact on the company’s operating results; (x) the significant investment required to construct power plants and the company’s ability to sell or otherwise monetize power plants, including the company's success in completing the design, construction and maintenance of CVSR; (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 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 company’s ability to achieve the expected benefits from its relationship with Total; (xviii) the success of the company’s ongoing research and development efforts and the acceptance of the company’s new products and services; (xix) the company’s ability to protect its intellectual property; (xx) the company’s exposure to foreign exchange, credit and interest rate risk; (xxi) possible impairment of goodwill. intangible assets, and project assets; (xxii) possible consolidation of the joint venture AUO SunPower; and (xxiii) other risks described in the company’s Annual Report on Form 10-K for the year ended January 2, 2011, Quarterly Reports on Form 10-Q for the quarters ended April 3, 2011 and July 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.
In addition, SunPower separately accounted for the fair value liabilities of the embedded cash conversion option and the over-allotment option on its 4.5% senior cash convertible debentures issued in 2010 as an original issue discount and a corresponding derivative conversion liability. As a result, SunPower incurs interest expense that is substantially higher than interest payable on its 4.5% senior cash convertible debentures. SunPower excludes non-cash interest expense because the expense is not reflective of its ongoing financial results in the period incurred. Excluding this data provides investors with a basis to compare the company’s performance against the performance of other companies without non-cash interest expense.
For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of GAAP Measures to Non-GAAP Measures" set forth at the end of this release and which should be read together with the preceding financial statements prepared in accordance with GAAP.
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.
