SUNPOWER CORPORATION SAN JOSE, Calif., July 31, 2014 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWR) today announced financial results for its fiscal 2014 second quarter.
($ Millions,
except
percentages
and per-
share data) 2nd Quarter 1st Quarter 2nd Quarter
2014 2014 2013
--- ---- ---- ----
GAAP revenue $507.9 $692.4 $576.5
------------ ------ ------ ------
GAAP gross
margin 18.5% 23.5% 18.7%
---------- ---- ---- ----
GAAP net
income $14.1 $65.0 $19.6
-------- ----- ----- -----
GAAP net
income per
diluted
share $0.09 $0.42 $0.15
----------- ----- ----- -----
Non-GAAP
revenue(1) $621.1 $683.7 $650.0
----------- ------ ------ ------
Non-GAAP
gross
margin(1) 19.5% 22.0% 19.5%
---------- ---- ---- ----
Non-GAAP net
income(1) $43.9 $75.3 $62.8
------------ ----- ----- -----
Non-GAAP net
income per
diluted
share(1) $0.28 $0.49 $0.48
------------ ----- ----- -----
(1)Information about SunPower's
use of non-GAAP financial
information is provided under
"Use of Non-GAAP Financial
Measures" below.
"SunPower's second-quarter financial performance reflected solid execution as well as strong demand for our industry leading, high efficiency solar systems across all channels and geographic segments. By leveraging our vertically integrated value chain from upstream to customer, we are competitive with traditional generation in many markets," said Tom Werner, SunPower president and CEO. "We are continuing to reduce our costs and with the ramp of our next generation technology and processes in Fab 4 starting in early 2015, we will further expand our cell efficiency leadership, lower manufacturing costs and increase capacity to meet the robust demand for our solutions.
"Regionally, our North America business continued to be a key driver of SunPower's performance. Construction of the 579-megawatt (MW) ac Solar Star Projects for MidAmerican Solar is proceeding with more than one million panels installed to date, and 228 MW are connected to the grid. We also added to our power plant bookings and potential assets for our holdco strategy during the quarter, as we signed an agreement with Xcel Energy for a 60-MW project while expanding our public sector business with a 19-MW project at Nellis Air Force Base, our second project at this location. Demand for our high efficiency solutions in the commercial business remains strong; we added a number of new and repeat customers to our backlog during the quarter. We also saw significant strength in our residential lease and cash business as customers continue to choose SunPower for our high quality, superior performance and flexible financing options. With our recently announced $200 million solar loan funding agreement with Admirals Bank and available lease capacity through our Google and Bank of America agreements, we have sufficient committed finance capacity to grow our residential business.
"Our EMEA distributed generation business performed well. Pricing is stable and demand for our products, including our next generation SunPower® X-Series Solar Panels with efficiencies of 21.5 percent, remains robust. We also connected 33 MW of power plant projects to the grid in South Africa during the quarter. With a strong backlog and a favorable pricing trend expected for the balance of the year, we are confident in our ability to meet our 2014 goals in EMEA.
"Demand in Asia Pacific remained strong and we recorded our best revenue quarter in this region to date. Japan remains a key market for us and accounted for more than 26 percent of our shipments in the second quarter. In China, we shipped 15 MW of our SunPower® C7 Tracker cell packages in the second quarter against our recent 70-MW cell order announced last quarter. Additionally, we are expanding our joint venture relationship with the TZ Group to other regions in China.
"With our vertically integrated strategy, more than 8-gigawatts pipeline and industry leading technology, we are well-positioned to capitalize on the further development of the global solar market," concluded Werner.
"We met our revenue and profit goals for the quarter as we saw strong demand in all of our key markets," said Chuck Boynton, SunPower CFO. "Additionally, we strengthened our balance sheet during the quarter by retiring our 4.75 percent convertible bonds and successfully closing our $400 million, seven- year 0.875 percent convertible offering. The result of these transactions is that we now have $1 billion in cash on the balance sheet, giving us the financial flexibility to support our holdco strategy and build Fab 4. In addition, we continued to monetize our assets to drive cash flow, recently closing our second financing with Hannon Armstrong. This financing gives us additional flexibility through a non-recourse debt structure that minimizes interest rate risk and maximizes the value of our existing lease assets. Finally, we continue to add projects to our backlog and pipeline for inclusion in our holdco strategy with potential assets now totaling more than 600 megawatts."
Second-quarter fiscal 2014 non-GAAP results include net adjustments that increase net income by $29.8 million, including a $22.6 million gross margin adjustment related to the timing of revenue recognition from utility and power plant projects, $13.3 million in stock-based compensation expense, $5.3 million in non-cash interest expense, ($0.6) million of other adjustments and ($10.8) million in tax effect.
Third Quarter and Fiscal Year 2014 Financial Outlook
The company's third quarter 2014 consolidated non-GAAP guidance is as follows: revenue of $600 million to $650 million, gross margin of 17 percent to 19 percent, net income per diluted share of $0.15 to $0.35 and megawatts recognized in the range of 325 megawatts to 360 megawatts. On a GAAP basis, the company expects revenue of $575 million to $625 million, gross margin of 18 percent to 20 percent and net income per diluted share of $0.00 to $0.20.
For fiscal year 2014, the company's expectations are unchanged and are as follows: non-GAAP revenue of $2.50 billion to $2.65 billion, gross margin of 19 percent to 21 percent, net income per diluted share of $1.10 to $1.40, capital expenditures of $150 million to $170 million and gigawatts recognized in the range of 1.225 gigawatts to 1.3 gigawatts. On a GAAP basis, the company expects revenue of $2.55 billion to $2.70 billion, gross margin of 20 percent to 22 percent and net income per diluted share of $0.75 to $1.05.
The company will host a conference call for investors this afternoon to discuss its second-quarter 2014 performance at 1:30 p.m. Pacific Time. The call will be webcast and can be accessed from SunPower's website at http://investors.sunpower.com/events.cfm.
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 second-quarter 2014 performance on the Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpower.com/events.cfm. The capacity of power plants in this release is described in approximate megawatts on a direct current (dc) basis unless otherwise noted.
About SunPower Corp.
SunPower Corp. (NASDAQ: SPWR) designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems available today. Residential, business, government and utility customers rely on the company's quarter century of experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system. Headquartered in San Jose, Calif., SunPower has offices in North America, Europe, Australia, Africa and Asia. For more information, visit www.SunPower.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: (a) expanding our manufacturing capacity; (b) anticipated construction timelines and milestones for our major projects; (c) growing demand in residential leasing and financing arrangements and capacity relating to our residential lease program; (d) financing strategies for our solar power systems, including any Holdco strategies; (e) growing demand in EMEA and Asia; (f) our growing international project pipeline; (g) our joint venture initiatives in China; (h) our efforts to reduce panel manufacturing costs; (i) our positioning for long-term profitability; (j) strategically managing cash; (k) guidance for the third fiscal quarter of 2014, including non-GAAP revenue, gross margin, net income per diluted share and MW recognized and GAAP revenue, gross margin and net income (loss) per diluted share; (l) guidance for fiscal year 2014, including non-GAAP revenue, gross margin, net income per diluted share and GW recognized and GAAP revenue, gross margin and net income per diluted share; (m) reducing operating expenses; (n) generating free cash flow; (o) additional leasing capacity; and (p) optimization of our cost and capital structure. These forward-looking statements are based on our current assumptions, expectations and beliefs and involve substantial risks and uncertainties that may cause results, performance or achievement to materially differ from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: (1) competition in the industry and downward pressure on average selling prices; (2) our liquidity, substantial indebtedness, and our ability to obtain additional financing for our projects and our customers; (3) risks relating to our residential lease business, including risks of customer default, challenges securing lease financing, and declining conventional electricity prices; (4) our ability to meet our cost reduction targets; (5) regulatory changes and the availability of economic incentives promoting use of solar energy; (6) challenges inherent in constructing and maintaining certain of our large projects, such as the Solar Star projects; (7) the success of our ongoing research and development efforts and commercialization of new products and services; (8) fluctuations in our operating results; (9) manufacturing difficulties that could arise; and (10) challenges managing our joint ventures. A detailed discussion of these factors and other risks that affect our business is included in filings we make with the Securities and Exchange Commission (SEC) from time to time, including our most recent reports on Form 10-K and Form 10-Q, particularly under the heading "Risk Factors." Copies of these filings are available online from the SEC or on the SEC Filings section of our Investor Relations website at investors.sunpower.com. All forward-looking statements in this press release are based on information currently available to us, and we assume no obligation to update these forward-looking statements in light of new information or future events
SunPower is a registered trademark of SunPower Corp. All other trademarks are the property of their respective owners.
SUNPOWER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Jun. 29, Dec. 29,
2014 2013
---- ----
Assets
Current assets:
Cash and cash
equivalents $980,858 $762,511
Restricted cash
and cash
equivalents,
current portion 17,085 13,926
Accounts
receivable, net 345,873 360,594
Costs and
estimated
earnings in
excess of
billings 31,863 31,787
Inventories 229,721 245,575
Advances to
suppliers,
current portion 78,767 58,619
Project assets -
plants and land,
current portion 10,622 69,196
Prepaid expenses
and other
current assets 830,611 646,270
------- -------
Total current
assets 2,525,400 2,188,478
Restricted cash
and cash
equivalents, net
of current
portion 23,761 17,573
Restricted long-
term marketable
securities 7,566 8,892
Property, plant
and equipment,
net 526,494 533,387
Solar power
systems leased
and to be
leased, net 346,774 345,504
Project assets -
plants and land,
net of current
portion 51,918 6,411
Advances to
suppliers, net
of current
portion 317,028 324,695
Long-term
financing
receivables, net 230,119 175,273
Other long-term
assets 292,912 298,477
Total assets $4,321,972 $3,898,690
========== ==========
Liabilities and Equity
Current liabilities:
Accounts payable $428,874 $443,969
Accrued
liabilities 406,348 358,157
Billings in
excess of costs
and estimated
earnings 249,070 308,650
Short-term debt 17,433 56,912
Convertible debt,
current portion 235,222 455,889
Customer
advances,
current portion 38,431 36,883
------ ------
Total current
liabilities 1,375,378 1,660,460
Long-term debt 156,975 93,095
Convertible debt,
net of current
portion 700,079 300,079
Customer
advances, net of
current portion 158,089 167,282
Other long-term
liabilities 529,170 523,991
Total liabilities 2,919,691 2,744,907
--------- ---------
Redeemable
noncontrolling
interests in
subsidiaries 27,841 -
Equity:
Preferred stock - -
Common stock 131 122
Additional paid-
in capital 2,186,107 1,980,778
Accumulated
deficit (727,346) (806,492)
Accumulated other
comprehensive
loss (3,698) (4,318)
Treasury stock,
at cost (106,741) (53,937)
-------- -------
Total
stockholders'
equity 1,348,453 1,116,153
Noncontrolling
interests in
subsidiaries 25,987 37,630
Total equity 1,374,440 1,153,783
--------- ---------
Total liabilities
and equity $4,321,972 $3,898,690
========== ==========
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Revenue:
AMERICAS $333,048 $471,023 $367,609 $804,071 $851,731
EMEA 64,709 126,258 107,010 190,967 175,662
APAC 110,114 95,141 101,897 205,255 184,556
------- ------ ------- ------- -------
Total revenue 507,871 692,422 576,516 1,200,293 1,211,949
Cost of revenue:
AMERICAS 257,781 350,313 285,939 608,094 702,020
EMEA 54,653 99,441 97,396 154,094 188,890
APAC 101,292 79,679 85,320 180,971 153,865
------- ------ ------ ------- -------
Total cost of revenue 413,726 529,433 468,655 943,159 1,044,775
Gross margin 94,145 162,989 107,861 257,134 167,174
Operating expenses:
Research and
development 16,581 16,746 13,035 33,327 26,205
Selling, general and
administrative 71,499 73,928 62,035 145,427 132,127
Restructuring charges (717) (461) 928 (1,178) 591
---- ---- --- ------ ---
Total operating
expenses 87,363 90,213 75,998 177,576 158,923
------ ------ ------ ------- -------
Operating income 6,782 72,776 31,863 79,558 8,251
Other expense, net (15,718) (17,905) (24,101) (33,623) (59,136)
------- ------- ------- ------- -------
Income (loss) before
income taxes and
equity in earnings of
unconsolidated
investees (8,936) 54,871 7,762 45,935 (50,885)
Benefit from
(provision for) for
income taxes 8,168 (13,620) (4,506) (5,452) (7,495)
Equity in earnings of
unconsolidated
investees 1,936 1,783 1,009 3,719 676
----- ----- ----- ----- ---
Net income (loss) 1,168 43,034 4,265 44,202 (57,704)
Net loss attributable
to noncontrolling
interests and
redeemable
noncontrolling
interests 12,934 22,010 15,300 34,944 22,573
Net income (loss)
attributable to
stockholders $14,102 $65,044 $19,565 $79,146 $(35,131)
======= ======= ======= ======= ========
Net income (loss) per share attributable to
stockholders:
- Basic $0.11 $0.53 $0.16 $0.63 $(0.29)
- Diluted $0.09 $0.42 $0.15 $0.52 $(0.29)
Weighted-average shares:
- Basic 129,747 122,196 120,943 125,972 120,248
- Diluted 156,333 160,434 133,973 154,886 120,248
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income (loss) $1,168 $43,034 $4,265 $44,202 $(57,704)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization expense 24,026 25,371 24,593 49,397 48,360
Stock-based compensation 13,348 14,867 10,505 28,215 19,021
Non-cash interest expense 5,322 5,170 12,181 10,492 24,071
Equity in earnings of unconsolidated
investees (1,936) (1,783) (1,009) (3,719) (676)
Deferred income taxes and other tax
liabilities (14,551) 17,985 2,423 3,434 7,147
Other, net 39 9 1,068 48 2,162
Changes in operating assets and
liabilities, net of effect of acquisition:
Accounts receivable (83,483) 93,574 (167,794) 10,091 (107,454)
Costs and estimated earnings in excess of
billings (14,085) 14,009 (4,073) (76) (4,922)
Inventories (2,067) 4,043 32,316 1,976 26,710
Project assets (24,159) 22,491 3,957 (1,668) (31,293)
Prepaid expenses and other assets (45,204) (11,994) (119,125) (57,198) 104,162
Long-term financing receivables, net (22,513) (32,333) (23,694) (54,846) (49,492)
Advances to suppliers (5,218) (7,263) (3,486) (12,481) (7,805)
Accounts payable and other accrued
liabilities (15,241) (16,972) 70,517 (32,213) 41,692
Billings in excess of costs and estimated
earnings 57,429 (117,009) 112,076 (59,580) 109,379
Customer advances (4,918) (2,727) (20,899) (7,645) (22,674)
------- ------ -------
Net cash provided by (used in) operating
activities (132,043) 50,472 (66,179) (81,571) 100,684
-------- ------ ------- ------- -------
Cash flows from investing activities:
Decrease (increase) in restricted cash and
cash equivalents (7,054) (2,293) 29 (9,347) 17,826
Purchases of property, plant and equipment (11,518) (8,800) (7,839) (20,318) (19,881)
Cash paid for solar power systems, leased
and to be leased (9,948) (14,989) (23,387) (24,937) (65,075)
Proceeds from sales or maturities of
marketable securities 1,380 - - 1,380 -
Proceeds from sale of equipment to third-
party - - 6 - 17
Purchases of marketable securities (30) - (99,928) (30) (99,928)
Cash paid for acquisitions, net of cash
acquired (5,894) - - (5,894) -
Cash paid for investments in unconsolidated
investees - (5,013) (1,411) (5,013) (1,411)
------ ------ ------
Net cash used in investing activities (33,064) (31,095) (132,530) (64,159) (168,452)
------- ------- -------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of convertible debt,
net of issuance costs 395,275 - 296,283 395,275 296,283
Cash paid for repurchase of convertible
debt (42,101) (1) - (42,102) -
Proceeds from settlement of 4.75% Bond
Hedge - 68,842 - 68,842 -
Payments to settle 4.75% Warrants - (81,077) - (81,077) -
Proceeds from settlement of 4.50% Bond
Hedge 110 - - 110 -
Proceeds from issuance of non-recourse
debt financing, net of issuance costs 34,306 39,108 - 73,414 -
Proceeds from issuance of project loans,
net of issuance costs - - 32,554 - 56,615
Assumption of project loan by customer - (40,672) - (40,672) -
Proceeds from residential lease financing - - 17,458 - 56,548
Repayment of residential lease financing (8,473) (7,213) - (15,686) -
Proceeds from sale-leaseback financing - 16,685 6,907 16,685 40,757
Repayment of sale-leaseback financing - (779) (5,124) (779) (5,124)
Contributions from noncontrolling interests
and redeemable noncontrolling interests 22,226 30,552 31,551 52,778 43,866
Distributions to noncontrolling interests
and redeemable noncontrolling interests (519) (1,117) - (1,636) -
Proceeds from exercise of stock options 562 68 24 630 49
Purchases of stock for tax withholding
obligations on vested restricted stock (9,298) (43,506) (5,444) (52,804) (16,183)
Repayment of bank loans, project loans and
other debt (718) (7,850) (101,211) (8,568) (281,712)
Net cash provided by (used in) financing
activities 391,370 (26,960) 272,998 364,410 191,099
------- ------- ------- ------- -------
Effect of exchange rate changes on cash and
cash equivalents (146) (187) 684 (333) (258)
---- ---- --- ---- ----
Net increase (decrease) in cash and cash
equivalents 226,117 (7,770) 74,973 218,347 123,073
Cash and cash equivalents, beginning of
period 754,741 762,511 505,587 762,511 457,487
------- ------- ------- ------- -------
Cash and cash equivalents, end of period $980,858 $754,741 $580,560 $980,858 $580,560
======== ======== ======== ======== ========
Non-cash transactions:
Assignment of financing receivables to a
third party financial institution $2,760 $1,496 $11,265 $4,256 $45,234
Costs of solar power systems, leased and to
be leased, sourced from existing inventory 6,783 7,120 14,178 13,903 29,714
Costs of solar power systems, leased and to
be leased, funded by liabilities 1,867 1,634 1,708 1,867 1,708
Costs of solar power systems under sale-
leaseback financing arrangements sourced
from project assets - 15,269 4,333 15,269 24,399
Property, plant and equipment acquisitions
funded by liabilities 9,326 5,544 6,356 9,326 6,356
Issuance of common stock upon conversion of
convertible debt 188,229 34 - 188,263 -
SUNPOWER CORPORATION
REVENUE BY SIGNIFICANT CATEGORY
(In thousands)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Revenue:
Solar power products(1) $237,212 $238,578 $238,403 $475,790 $424,283
Solar power systems(2) 224,852 403,755 299,610 628,607 704,525
Residential leases(3) 32,679 38,732 28,673 71,411 63,923
Other revenue4 13,128 11,357 9,830 24,485 19,218
------ ------ ----- ------ ------
$507,871 $692,422 $576,516 $1,200,293 $1,211,949
======== ======== ======== ========== ==========
1 Solar power products
represents direct sales of
panels, balance of system
components, and inverters to
dealers, systems integrators,
and residential, commercial,
and utility customers in all
regions.
2 Solar power systems represents
revenue recognized in
connection with our
construction and development
contracts.
3 Residential leases represents
revenue recognized on solar
power systems leased to
customers under our solar lease
program.
4 Other revenue includes revenue
related to our solar power
services and solutions, such as
post-installation systems
monitoring and maintenance and
commercial power purchase
agreements.
Use of Non-GAAP Financial Measures
To supplement its consolidated financial results presented in accordance with GAAP, the company uses non-GAAP measures that are adjusted for certain items from the most directly comparable GAAP measures, as described below. Management adjusts for these items because it does not consider such items when evaluating the core operational activities of the company. The specific non-GAAP measures listed below are revenue, gross margin, net income, net income per diluted share, earnings before interest, taxes, depreciation and amortization (EBITDA), and free cash flow. Management believes that each of these non-GAAP measures is useful to investors, enabling them to better assess changes in each of these key elements of the company's results of operations across different reporting periods on a consistent basis, independent of certain items as described below. Thus, each of these non-GAAP financial measures provides investors with another method to assess the company's operating results in a manner that is focused on its ongoing, core operating performance, absent the effects of these items. Management uses these non-GAAP measures internally to assess the business, its financial performance, current and historical results, as well as for strategic decision-making and forecasting future results. Many of the analysts covering the company also use these non-GAAP measures in their analyses. Given management's use of these non-GAAP measures, the company believes these measures are important to investors in understanding the company's operating results as seen through the eyes of management. These non-GAAP measures are not prepared in accordance with GAAP or intended to be a replacement 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.
Non-GAAP revenue includes adjustments relating to utility and power plant projects as described below. Non-GAAP gross margin includes adjustments relating to utility and power plant projects, stock-based compensation, non-cash interest expense, and other items as described below. In addition to those same adjustments, non-GAAP net income and non-GAAP net income per diluted share are adjusted for the tax effect of these non-GAAP adjustments as described below. In addition to the same adjustments as non-GAAP gross margin, EBITDA includes adjustments relating to cash interest expense (net of interest income), provision for (benefit from) income taxes, and depreciation. Free cash flow includes adjustments relating to investing cash flows and lease financings as described below.
Non-GAAP Adjustments
-- Utility and power plant projects. The company includes adjustments
related to the revenue recognition of utility and power plant projects
based on the separately-identifiable components of transactions in order
to reflect the substance of the transactions. This treatment is
consistent with accounting rules relating to such projects under
International Financial Reporting Standards (IFRS). On a GAAP basis,
such projects are accounted for under U.S. GAAP real estate accounting
guidance. Management calculates separate revenue and cost of revenue
amounts each fiscal period in accordance with the two treatments above
and the aggregate difference for the company's affected projects is
included in the relevant reconciliation tables below. Over the life of
each project, cumulative revenue and gross margin will be equivalent
under the two treatments; however, revenue and gross margin will
generally be recognized earlier under the company's non-GAAP treatment
than under the company's GAAP treatment. Among other factors, this is
due to the attribution of non-GAAP revenue and margin to the company's
project development efforts at the time of initial project sale as
required under IFRS accounting rules, whereas no separate attribution to
this element occurs under U.S. GAAP real estate accounting guidance.
Within each project, the relationship between the adjustments to revenue
and gross margins is generally consistent. However, as the company may
have multiple utility and power plant projects in progress at any given
time, the relationship in the aggregate will occasionally appear
otherwise. Management believes that this adjustment for utility and
power plant projects enables investors to evaluate the company's revenue
generation performance relative to the direct costs of revenue of its
core businesses.
-- Stock-based compensation. Stock-based compensation relates primarily to
the company's equity incentive awards. Stock-based compensation is a
non-cash expense that varies from period to period and is dependent on
market forces that are difficult to predict. Due to this
unpredictability, management excludes this item from its internal
operating forecasts and models. Management believes that this adjustment
for stock-based compensation provides investors with a basis to measure
the company's core performance, including compared with the performance
of other companies, without the period-to-period variability created by
stock-based compensation.
-- Non-cash interest expense. The company 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, the company incurs
interest expense that is substantially higher than interest payable on
its 4.5% senior cash convertible debentures. The company excludes
non-cash interest expense because the expense does not reflect its
financial results in the period incurred. In addition, in connection
with the Liquidity Support Agreement with Total executed on February 28,
2012, the company issued warrants to Total to acquire 9,531,677 shares
of its common stock. The fair value of the warrants was recorded as debt
issuance costs and amortized over the expected life of the agreement. As
a result, the Company incurred non-cash interest expense associated with
the amortization of the warrants. Management believes that this
adjustment for non-cash interest expense provides investors with a basis
to evaluate the company's performance, including compared with the
performance of other companies, without non-cash interest expense.
-- Other. Beginning in the first quarter of fiscal 2013, the company
combined amounts previously disclosed under separate captions into
"Other" when such amounts no longer have a significant impact on the
current fiscal period. Management believes that these adjustments
provide investors with a basis to evaluate the company's performance,
including compared with the performance of other companies, without
similar impacts. The adjustments recorded in "Other" for the second
quarter of fiscal 2014 are primarily driven by adjustments which would
have previously been disclosed under "Restructuring charges."
-- Tax effect. This amount is used to present each of the adjustments
described above on an after-tax basis in connection with the
presentation of non-GAAP net income and non-GAAP net income per diluted
share. The company's non-GAAP tax amount is based on estimated cash tax
expense and reserves. The company forecasts its annual cash tax
liability and allocates the tax to each quarter in proportion to
earnings for that period. This approach is designed to enhance
investors' ability to understand the impact of the company's tax expense
on its current operations, provide improved modeling accuracy, and
substantially reduce fluctuations caused by GAAP to non-GAAP
adjustments, which may not reflect actual cash tax expense.
-- EBITDA adjustments. When calculating EBITDA, in addition to adjustments
described above, the company excludes the impact during the period of
the following items:
-- Cash interest expense, net of interest income
-- Provision for (benefit from) income taxes
-- Depreciation
Management presents this non-GAAP financial measure to enable investors with a basis to evaluate the company's performance, including compared with the performance of other companies.
-- Free cash flow adjustments. When calculating free cash flow, the company
includes the impact during the period of the following items:
-- Net cash used in investing activities
-- Proceeds from issuance of non-recourse debt financing, net of
issuance costs
-- Proceeds from residential lease financing
-- Repayment of residential lease financing
-- Proceeds from sale-leaseback financing
-- Repayment of sale-leaseback financing
-- Contributions from noncontrolling interests and redeemable
noncontrolling interests
-- Distributions to noncontrolling interests and redeemable
noncontrolling interests
Management presents this non-GAAP financial measure to enable investors with a basis to evaluate the company's performance, including compared with the performance of other companies.
For more information about 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, 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
(In thousands, except percentages and per share data)
(Unaudited)
Adjustments to Revenue:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP revenue $507,871 $692,422 $576,516 $1,200,293 $1,211,949
Utility and power plant projects 113,195 (8,709) 74,200 104,486 13,399
Other - - (672) - (672)
Non-GAAP revenue $621,066 $683,713 $650,044 $1,304,779 $1,224,676
======== ======== ======== ========== ==========
Adjustments to Gross margin:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP gross margin $94,145 $162,989 $107,861 $257,134 $167,174
Utility and power plant projects 22,614 (16,608) 16,142 6,006 84,280
Stock-based compensation expense 3,350 3,556 2,517 6,906 4,227
Non-cash interest expense 699 700 593 1,399 1,121
Other 24 - (630) 24 173
Non-GAAP gross margin $120,832 $150,637 $126,483 $271,469 $256,975
======== ======== ======== ======== ========
GAAP gross margin (%) 18.5% 23.5% 18.7% 21.4% 13.8%
Non-GAAP gross margin (%) 19.5% 22.0% 19.5% 20.8% 21.0%
Adjustments to Net income (loss):
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net income (loss) attributable to stockholders $14,102 $65,044 $19,565 $79,146 $(35,131)
Utility and power plant projects 22,614 (16,608) 16,142 6,006 84,280
Stock-based compensation expense 13,348 14,867 10,505 28,215 19,021
Non-cash interest expense 5,323 5,170 12,181 10,493 24,071
Other (654) (445) 825 (1,099) 2,645
Tax effect (10,824) 7,317 3,594 (3,507) (4,854)
Non-GAAP net income attributable to stockholders $43,909 $75,345 $62,812 $119,254 $90,032
======= ======= ======= ======== =======
Adjustments to Net income (loss) per diluted share:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net income (loss) per diluted share
Numerator:
GAAP net income (loss) available to common stockholders(1) $14,653 $67,679 $19,758 $80,328 $(35,131)
======= ======= ======= ======= ========
Non-GAAP net income available to common stockholders(1) $44,460 $77,980 $62,812 $122,885 $90,032
======= ======= ======= ======== =======
Denominator:
GAAP weighted-average shares 156,333 160,434 133,973 154,886 120,248
Effect of dilutive securities:
Stock options - - - - 100
Restricted stock units - - - - 3,789
Upfront Warrants (held by Total) - - - - 3,455
0.75% debentures due 2018 - - (4,276) - -
0.875% debentures due 2021 - - - (857) -
4.75% debentures due 2014 - - - 5,021 -
Non-GAAP weighted-average shares(1) 156,333 160,434 129,697 159,050 127,592
======= ======= ======= ======= =======
GAAP net income (loss) per diluted share $0.09 $0.42 $0.15 $0.52 $(0.29)
===== ===== ===== ===== ======
Non-GAAP net income per diluted share $0.28 $0.49 $0.48 $0.77 $0.71
===== ===== ===== ===== =====
1 In accordance with the if-
converted method, net income
(loss) available to common
stockholders excludes interest
expense related to the 0.75%,
0.875%, and 4.75% debentures if
the debentures are considered
converted in the calculation of
net income (loss) per diluted
share. If the conversion
option for a debenture is not
in the money for the relevant
period, the potential
conversion of the debenture
under the if-converted method
is excluded from the
calculation of non-GAAP net
income (loss) per diluted
share.
Revenue by Significant
Category:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP Solar power
products $237,212 $238,578 $238,403 $475,790 $424,283
Other - - (672) - (672)
Non-GAAP Solar power
products $237,212 $238,578 $237,731 $475,790 $423,611
======== ======== ======== ======== ========
GAAP Solar power
systems $224,852 $403,755 $299,610 $628,607 $704,525
Utility and power plant
projects 113,195 (8,709) 74,200 104,486 13,399
Non-GAAP Solar power
systems $338,047 $395,046 $373,810 $733,093 $717,924
======== ======== ======== ======== ========
EBITDA:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net income (loss)
attributable to
stockholders $14,102 $65,044 $19,565 $79,146 $(35,131)
Utility and power plant
projects 22,614 (16,608) 16,142 6,006 84,280
Stock-based
compensation expense 13,348 14,867 10,505 28,215 19,021
Non-cash interest
expense 5,323 5,170 12,181 10,493 24,071
Other (654) (445) 825 (1,099) 2,645
Cash interest expense,
net of interest income 11,048 14,834 12,998 25,882 28,455
Provision for (benefit
from) income taxes (8,168) 13,620 4,506 5,452 7,495
Depreciation 24,026 25,371 24,551 49,397 48,171
EBITDA $81,639 $121,853 $101,273 $203,492 $179,007
======= ======== ======== ======== ========
Free Cash Flow:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Jun. 29, Mar. 30, Jun. 30, Jun. 29, Jun. 30,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net cash provided by
(used in) operating
activities $(132,043) $50,472 $(66,179) $(81,571) $100,684
Net cash used in
investing activities (33,064) (31,095) (132,530) (64,159) (168,452)
Proceeds from issuance
of non-recourse debt
financing, 34,306 39,108 - 73,414 -
net of issuance costs
Proceeds from
residential lease
financing - - 17,458 - 56,548
Repayment of
residential lease
financing (8,473) (7,213) - (15,686) -
Proceeds from sale-
leaseback financing - 16,685 6,907 16,685 40,757
Repayment of sale-
leaseback financing - (779) (5,124) (779) (5,124)
Contributions from
noncontrolling
interests and 22,226 30,552 31,551 52,778 43,866
redeemable
noncontrolling
interests
Distributions to
noncontrolling
interests and (519) (1,117) - (1,636) -
redeemable
noncontrolling
interests
Free cash flow $(117,567) $96,613 $(147,917) $(20,954) $68,279
========= ======= ========= ======== =======
Q3 2014
GUIDANCE (in
thousands
except
percentages
and per share
data) Q3 2014 FY 2014
Revenue (GAAP) $575,000-$625,000 $2,550,000-$2,700,000
Revenue (non-
GAAP) (1) $600,000-$650,000 $2,500,000-$2,650,000
Gross margin
(GAAP) 18%-20% 20%-22%
Gross margin
(non-GAAP)
(2) 17%-19% 19%-21%
Net income per
diluted share
(GAAP) $0.00-$0.20 $0.75-$1.05
Net income per
diluted share
(non-GAAP)
(3) $0.15-$0.35 $1.10-$1.40
Estimated non-GAAP amounts above
include a net increase (decrease)
of $25 million for Q3 2014 and
$(50) million for fiscal 2014 of
revenue primarily related to
(1) utility and power plant projects.
Estimated non-GAAP amounts above
for Q3 2014 include net
adjustments that increase gross
margin by approximately $3
million related to stock-based
compensation expense, and $1
million related to non-cash
interest expense. Estimated non-
GAAP amounts above for fiscal
2014 include net adjustments that
increase (decrease) gross margin
by approximately $(40) million
related to the non-GAAP revenue
adjustments that are discussed
above, $12 million related to
stock-based compensation
expense, and $5 million related
(2) to non-cash interest expense.
Estimated non-GAAP amounts above
for Q3 2014 include net
adjustments that increase
(decrease) net income by
approximately $15 million related
to stock-based compensation
expense, $6 million related to
non-cash interest expense, $3
million related to other items,
and $(1) million in tax effect.
Estimated non-GAAP amounts above
for fiscal 2014 include net
adjustments that increase
(decrease) net income by
approximately $(40) million
related to the non-GAAP revenue
adjustments that are discussed
above, $60 million related to
stock-based compensation
expense, $25 million related to
non-cash interest expense, $8
million related to other items,
(3) and $2 million in tax effect.
The following supplemental data represent the adjustments, individual charges and credits that are included or excluded from SunPower's non-GAAP revenue, gross margin, net income (loss) and net income (loss) per diluted share measures for each period presented in the Consolidated Statements of Operations contained herein.
SUPPLEMENTAL DATA
(In thousands, except percentages)
THREE MONTHS ENDED
June 29, 2014
-------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income (loss)
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $333,048 $64,709 $110,114 $75,267 22.6% $10,056 15.5% $8,822 8.0% $14,102
Utility and power
plant projects 113,195 - - 22,614 - - - - - - - 22,614
Stock-based
compensation
expense - - - 1,837 511 1,002 1,912 8,086 - - - 13,348
Non-cash interest
expense - - - 371 97 231 6 23 - 4,595 - 5,323
Other - - - 24 - - - 1 (717) 38 - (654)
Tax effect - - - - - - - - - - (10,824) (10,824)
Non-GAAP $446,243 $64,709 $110,114 $100,113 22.4% $10,664 16.5% $10,055 9.1% $43,909
======== ======= ======== ======== ======= ======= =======
March 30, 2014
--------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income (loss)
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $471,023 $126,258 $95,141 $120,710 25.6% $26,817 21.2% $15,462 16.3% $65,044
Utility and power
plant projects (8,709) - - (16,608) - - - - - - - (16,608)
Stock-based
compensation
expense - - - 2,071 655 830 1,797 9,514 - - - 14,867
Non-cash interest
expense - - - 421 124 155 7 23 - 4,440 - 5,170
Other - - - - - - - 7 (461) 9 - (445)
Tax effect - - - - - - - - - - 7,317 7,317
Non-GAAP $462,314 $126,258 $95,141 $106,594 23.1% $27,596 21.9% $16,447 17.3% $75,345
======== ======== ======= ======== ======= ======= =======
June 30, 2013
-------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income (loss)
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $367,609 $107,010 $101,897 $81,670 22.2% $9,614 9.0% $16,577 16.3% $19,565
Utility and power
plant projects 74,200 - - 16,142 - - - - - - - 16,142
Stock-based
compensation
expense - - - 1,136 618 763 1,225 6,763 - - - 10,505
Non-cash interest
expense - - - 291 132 170 19 23 - 11,546 - 12,181
Other - - (672) 42 - (672) - 500 928 27 - 825
Tax effect - - - - - - - - - - 3,594 3,594
Non-GAAP $441,809 $107,010 $101,225 $99,281 22.5% $10,364 9.7% $16,838 16.6% $62,812
======== ======== ======== ======= ======= ======= =======
SIX MONTHS ENDED
June 29, 2014
-------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income (loss)
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $804,071 $190,967 $205,255 $195,977 24.4% $36,873 19.3% $24,284 11.8% $79,146
Utility and power
plant projects 104,486 - - 6,006 - - - - - - - 6,006
Stock-based
compensation
expense - - - 3,908 1,166 1,832 3,709 17,600 - - - 28,215
Non-cash interest
expense - - - 792 221 386 13 46 - 9,035 - 10,493
Other - - - 24 - - - 8 (1,178) 47 - (1,099)
Tax effect - - - - - - - - - - (3,507) (3,507)
Non-GAAP $908,557 $190,967 $205,255 $206,707 22.8% $38,260 20.0% $26,502 12.9% $119,254
======== ======== ======== ======== ======= ======= ========
June 30, 2013
-------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income (loss)
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $851,731 $175,662 $184,556 $149,711 17.6% $(13,228) -7.5% $30,691 16.6% $(35,131)
Utility and power
plant projects 13,399 - - 84,280 - - - - - - - 84,280
Stock-based
compensation
expense - - - 1,914 1,059 1,254 2,347 12,447 - - - 19,021
Non-cash interest
expense - - - 511 261 349 36 46 - 22,868 - 24,071
Other - - (672) 401 186 (414) - 1,854 591 27 - 2,645
Tax effect - - - - - - - - - - (4,854) (4,854)
--- --- --- --- ------
Non-GAAP $865,130 $175,662 $183,884 $236,817 27.4% $(11,722) -6.7% $31,880 17.3% $90,032
======== ======== ======== ======== ======== ======= =======
SOURCE SunPower Corp.
