SUNPOWER CORPORATION SAN JOSE, Calif., Oct. 29, 2014 /PRNewswire/ -- SunPower Corp. (NASDAQ: SPWR) today announced financial results for its fiscal 2014 third quarter.
($ Millions,
except
percentages
and per-
share data) 3rd Quarter 2nd Quarter 3rd Quarter
2014 2014 2013
--- ---- ---- ----
GAAP revenue $662.7 $507.9 $657.1
------------ ------ ------ ------
GAAP gross
margin 16.4% 18.5% 29.4%
---------- ---- ---- ----
GAAP net
income $32.0 $14.1 $108.4
-------- ----- ----- ------
GAAP net
income per
diluted
share $0.20 $0.09 $0.73
----------- ----- ----- -----
Non-GAAP
revenue(1) $704.2 $621.1 $619.5
----------- ------ ------ ------
Non-GAAP
gross
margin(1) 16.7% 19.5% 19.1%
---------- ---- ---- ----
Non-GAAP net
income(1) $46.4 $43.9 $58.8
------------ ----- ----- -----
Non-GAAP net
income per
diluted
share(1) $0.30 $0.28 $0.44
------------ ----- ----- -----
(1)Information about SunPower's use of non-GAAP financial information is provided under "Use of Non-GAAP Financial Measures" below.
"Our third-quarter results reflect another strong quarter of execution, driven by significant demand for both distributed generation and power plant systems," said Tom Werner, SunPower president and CEO. "Solar power is increasingly competitive with traditional energy sources in a number of markets, and we are well positioned to capitalize on this large opportunity by virtue of our industry-leading technology, competitive cost structure, substantial project pipeline, and ongoing manufacturing capacity expansion.
"Regionally, North America was once again the biggest contributor. Construction of the 579-megawatt (MW) ac Solar Star Projects for MidAmerican Solar is on plan with 309-MW now connected to the grid. Construction of our 135-MW Quinto project is proceeding and we recently closed financing for the project, consistent with our holdco strategy. We also continue to see strong demand in the commercial sector as we booked more than 20-MW of power purchase agreements (PPA); including a 16-MW ground mounted solar project for the University of California at Davis. When complete, our UC Davis system will be the largest solar power plant on any U.S. university or college campus. These commercial system PPAs are also structured in a way that is consistent with our holdco strategy. We also added both new and repeat cash customers to our commercial backlog including a 10-MW expansion agreement with Verizon. In the residential channel, third quarter bookings were up more than 50 percent sequentially as customers continued to choose SunPower for their solutions to take advantage of our quality, performance and flexible financing options.
"In EMEA, we saw stable pricing against the backdrop of an evolving distributed generation market environment and continue to adapt our go-to-market plans accordingly. In the power plant channel, we were awarded a four project, 41-MW supply agreement for Compagnie du Vent, a subsidiary of French utility GDF SUEZ in connection with the recent French national tender program. With this supply agreement and our booked power plant projects, including the construction start of our 85-MW project in South Africa this quarter, we are confident in achieving our goals for this region," continued Werner.
"Japan remained the key driver of our Asia Pacific business, accounting for 28 percent of total shipments in the third quarter. The very strong demand we see from Japan is a testament to the competitive advantage of our high efficiency technology in area-constrained sites and rooftops. In China, we continued to expand our activities through our SunPower® C7 Tracker (C7) joint venture and expect to install more than 30-MW of C7 power plant systems by the end of the year. With strong positions in both Japan and China, we expect Asia Pacific to continue to be a major market for SunPower going forward.
"Finally, on the operations side, we achieved a major milestone during the quarter as we produced our one billionth solar cell, representing a cumulative output of more than three gigawatts. We also continued to improve and scale our industry-leading solar panel technology. With the ramp of our next generation solar cell technology in Fab 4 starting next year, we expect to further reduce our competitive cost structure while adding capacity to meet the increasing demand for our high efficiency solar systems," Werner concluded.
"Strong execution enabled us to meet or exceed our financial targets for the quarter as we continued to see increased demand for our technology across all markets," said Chuck Boynton, SunPower CFO. "We exited the third quarter with total liquidity of $1.2 billion while successfully managing our working capital as inventory declined 15 percent sequentially. With our strong balance sheet, we have the resources needed to continue to strategically develop our holdco project portfolio while funding the ramp of Fab 4. We remain committed to optimizing our cash flow and further investing in our next generation research and development."
Third-quarter fiscal 2014 non-GAAP results include net adjustments that, in the aggregate, increase net income by $14.4 million, including a ($0.7) million gross margin adjustment related to the timing of revenue recognition from utility and power plant projects, $13.7 million in stock-based compensation expense, $5.5 million in non-cash interest expense, $6.1 million of other adjustments and ($10.2) million in tax effect.
Fourth Quarter 2014 Financial Outlook
The company's fourth quarter 2014 consolidated non-GAAP guidance is as follows: revenue of $575 million to $625 million, gross margin of 19 percent to 21 percent, net income per diluted share of $0.15 to $0.30 and megawatts recognized in the range of 300 megawatts to 340 megawatts. On a GAAP basis, the company expects revenue of $675 million to $725 million, gross margin of 22 percent to 24 percent and net income per diluted share of $0.20 to $0.35.
For fiscal year 2014, the company's expectations are as follows: non-GAAP revenue of $2.58 billion to $2.63 billion, gross margin of 19 percent to 20 percent, net income per diluted share of $1.25 to $1.40, capital expenditures of $150 million to $170 million and gigawatts recognized in the range of 1.26 gigawatts to 1.3 gigawatts. On a GAAP basis, the company expects revenue of $2.535 billion to $2.585 billion, gross margin of 20 percent to 21 percent and net income per diluted share of $0.95 to $1.10.
Fourth quarter and fiscal year 2014 GAAP guidance excludes a potential timing benefit of approximately $450 million in revenue and $0.90 in earnings per share related to the real estate accounting treatment of our 579-MW Solar Star projects. This benefit may occur in the fourth quarter but was not included in the company's current fourth quarter GAAP guidance due to the timing uncertainty of this benefit.
SunPower will provide the company's fiscal year 2015 outlook at its Analyst Day to be held on November 13, 2014 in New York City starting at 10:00 a.m. Eastern Time. Please note that the entire event will be webcast and relevant materials will be posted to the company's website prior to the commencement of the event. To listen to the webcast, investors are encouraged to visit the company's Events and Presentations section of the SunPower Investor Relations page at http://investors.sunpower.com/events.cfm to register.
The company will host a conference call for investors this morning to discuss its third-quarter 2014 performance at 5:30 a.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 third-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, including our Fab 4 ramp up; (b) anticipated construction timelines and milestones for our major projects; (c) growing demand in our North America commercial business as well as 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 Asia, particularly in Japan; (f) our growing international project pipeline; (g) expansion of our joint venture initiatives in China; (h) our efforts to reduce panel manufacturing costs and improve our competitive cost structure; (i) our positioning for long-term profitability; (j) strategically managing cash; (k) guidance for the fourth 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 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) maintaining or increasing our manufacturing capacity, containing manufacturing costs, and other 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)
Sep. 28, Dec. 29,
2014 2013
---- ----
Assets
Current assets:
Cash and cash equivalents $922,729 $762,511
Restricted cash and cash
equivalents, current portion 17,156 13,926
Accounts receivable, net 520,166 360,594
Costs and estimated earnings
in excess of billings 46,256 31,787
Inventories 195,342 245,575
Advances to suppliers,
current portion 87,837 58,619
Project assets -plants and
land, current portion 25,244 69,196
Prepaid expenses and other
current assets 795,119 646,270
------- -------
Total current assets 2,609,849 2,188,478
Restricted cash and cash
equivalents, net of current
portion 23,894 17,573
Restricted long-term
marketable securities 7,182 8,892
Property, plant and
equipment, net 538,321 533,387
Solar power systems leased
and to be leased, net 361,727 345,504
Project assets -plants and
land, net of current portion 67,152 6,411
Advances to suppliers, net of
current portion 314,054 324,695
Long-term financing
receivables, net 252,382 175,273
Other long-term assets 233,977 298,477
Total assets $4,408,538 $3,898,690
========== ==========
Liabilities and Equity
Current liabilities:
Accounts payable $440,613 $443,969
Accrued liabilities 352,724 358,157
Billings in excess of costs
and estimated earnings 349,090 308,650
Short-term debt 17,728 56,912
Convertible debt, current
portion 240,213 455,889
Customer advances, current
portion 37,274 36,883
------ ------
Total current liabilities 1,437,642 1,660,460
Long-term debt 149,848 93,095
Convertible debt, net of
current portion 700,079 300,079
Customer advances, net of
current portion 153,493 167,282
Other long-term liabilities 520,116 523,991
Total liabilities 2,961,178 2,744,907
--------- ---------
Redeemable noncontrolling
interests in subsidiaries 28,588 -
Equity:
Preferred stock - -
Common stock 131 122
Additional paid-in capital 2,197,790 1,980,778
Accumulated deficit (695,313) (806,492)
Accumulated other
comprehensive loss (5,752) (4,318)
Treasury stock, at cost (109,937) (53,937)
-------- -------
Total stockholders' equity 1,386,919 1,116,153
Noncontrolling interests in
subsidiaries 31,853 37,630
Total equity 1,418,772 1,153,783
--------- ---------
Total liabilities and equity $4,408,538 $3,898,690
========== ==========
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Revenue:
AMERICAS $517,799 $333,048 $442,091 $1,321,870 $1,293,822
EMEA 44,633 64,709 120,712 235,600 296,374
APAC 100,302 110,114 94,317 305,557 278,873
------- ------- ------ ------- -------
Total revenue 662,734 507,871 657,120 1,863,027 1,869,069
Cost of revenue:
AMERICAS 414,615 257,781 306,024 1,022,709 1,008,044
EMEA 46,029 54,653 100,605 200,123 289,495
APAC 93,576 101,292 57,261 274,547 211,126
------ ------- ------ ------- -------
Total cost of revenue 554,220 413,726 463,890 1,497,379 1,508,665
Gross margin 108,514 94,145 193,230 365,648 360,404
Operating expenses:
Research and development 17,291 16,581 14,903 50,618 41,108
Selling, general and
administrative 68,394 71,499 63,229 213,821 195,356
Restructuring charges 188 (717) 1,114 (990) 1,705
--- ---- ----- ---- -----
Total operating expenses 85,873 87,363 79,246 263,449 238,169
------ ------ ------ ------- -------
Operating income 22,641 6,782 113,984 102,199 122,235
Other expense, net (15,366) (15,718) (32,762) (48,989) (91,898)
------- ------- ------- ------- -------
Income (loss) before income
taxes and equity in earnings
of unconsolidated investees 7,275 (8,936) 81,222 53,210 30,337
Benefit from (provision for)
income taxes 8,320 8,168 4,575 2,868 (2,920)
Equity in earnings of
unconsolidated investees 1,689 1,936 1,585 5,408 2,261
----- ----- ----- ----- -----
Net income 17,284 1,168 87,382 61,486 29,678
Net loss attributable to
noncontrolling interests and
redeemable noncontrolling
interests 14,749 12,934 21,004 49,693 43,577
------ ------ ------
Net income attributable to
stockholders $32,033 $14,102 $108,386 $111,179 $73,255
======= ======= ======== ======== =======
Net income per share
attributable to stockholders:
- Basic $0.24 $0.11 $0.89 $0.87 $0.61
- Diluted $0.20 $0.09 $0.73 $0.72 $0.55
Weighted-average shares:
- Basic 131,204 129,747 121,314 127,716 120,604
- Diluted 167,117 156,333 153,876 158,962 134,859
SUNPOWER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Cash flows from operating activities:
Net income $17,284 $1,168 $87,382 $61,486 $29,678
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization expense 25,727 24,026 24,764 75,124 73,124
Stock-based compensation 13,725 13,348 12,082 41,940 31,103
Non-cash interest expense 5,499 5,322 12,311 15,991 36,382
Equity in earnings of unconsolidated investees (1,689) (1,936) (1,585) (5,408) (2,261)
Gain on contract termination - - (51,988) - (51,988)
Deferred income taxes and other tax liabilities (5,327) (14,551) (4,830) (1,893) 2,317
Other, net (23) 39 1,050 25 3,212
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable (56,025) (83,483) 61,063 (45,934) (46,391)
Costs and estimated earnings in excess of billings (14,393) (14,085) (1,246) (14,469) (6,168)
Inventories 21,884 (2,067) (65,253) 23,860 (38,543)
Project assets (31,670) (24,159) (10,820) (33,338) (42,113)
Prepaid expenses and other assets (90,153) (45,204) 15,628 (147,351) 119,790
Long-term financing receivables, net (22,263) (22,513) (21,943) (77,109) (71,435)
Advances to suppliers (6,097) (5,218) (5,930) (18,578) (13,735)
Accounts payable and other accrued liabilities 16,837 (15,241) 65,077 (15,376) 106,769
Billings in excess of costs and estimated earnings 100,020 57,429 (81,600) 40,440 27,779
Customer advances (5,754) (4,918) (5,293) (13,399) (27,967)
------ ------- -------
Net cash provided by (used in) operating activities (32,418) (132,043) 28,869 (113,989) 129,553
------- -------- ------ -------- -------
Cash flows from investing activities:
Decrease (increase) in restricted cash and cash equivalents (203) (7,054) (2,882) (9,550) 14,944
Purchases of property, plant and equipment (25,190) (11,518) (5,579) (45,508) (25,460)
Cash paid for solar power systems, leased and to be leased (10,622) (9,948) (18,544) (35,559) (83,619)
Cash paid for solar power systems (4,917) - - (4,917) -
Proceeds from sales or maturities of marketable securities - 1,380 100,947 1,380 100,947
Proceeds from sale of equipment to third-party - - 628 - 645
Purchases of marketable securities - (30) - (30) (99,928)
Cash paid for acquisitions, net of cash acquired (1,000) (5,894) - (6,894) -
Cash paid for investments in unconsolidated investees - - - (5,013) (1,411)
--- ------
Net cash provided by (used in) investing activities (41,932) (33,064) 74,570 (106,091) (93,882)
------- ------- ------ -------- -------
Cash flows from financing activities:
Proceeds from issuance of convertible debt, net of issuance costs - 395,275 - 395,275 296,283
Cash paid for repurchase of convertible debt (51) (42,101) - (42,153) -
Proceeds from settlement of 4.75% Bond Hedge - - - 68,842 -
Payments to settle 4.75% Warrants - - - (81,077) -
Proceeds from settlement of 4.50% Bond Hedge 4 110 - 114 -
Proceeds from issuance of non-recourse debt financing, net of issuance costs 1,426 34,306 - 74,840 -
Proceeds from issuance of project loans, net of issuance costs - - 11,610 - 68,225
Assumption of project loan by customer - - - (40,672) -
Proceeds from residential lease financing - - 26,817 - 83,365
Repayment of residential lease financing - (8,473) - (15,686) -
Proceeds from sale-leaseback financing 6,893 - - 23,578 40,757
Repayment of sale-leaseback financing (581) - - (1,360) (5,124)
Contributions from noncontrolling interests and 22,534 22,226 29,535 75,312 73,401
redeemable noncontrolling interests
Distributions to noncontrolling interests and (1,172) (519) - (2,808) -
redeemable noncontrolling interests
Proceeds from exercise of stock options 309 562 49 939 98
Purchases of stock for tax withholding obligations on vested restricted stock (3,196) (9,298) (1,401) (56,000) (17,584)
Repayment of bank loans, project loans and other debt (7,972) (718) (8,386) (16,540) (290,098)
Net cash provided by financing activities 18,194 391,370 58,224 382,604 249,323
------ ------- ------ ------- -------
Effect of exchange rate changes on cash and cash equivalents (1,973) (146) 1,352 (2,306) 1,094
------ ---- ----- ------ -----
Net increase (decrease) in cash and cash equivalents (58,129) 226,117 163,015 160,218 286,088
Cash and cash equivalents, beginning of period 980,858 754,741 580,560 762,511 457,487
------- ------- ------- ------- -------
Cash and cash equivalents, end of period $922,729 $980,858 $743,575 $922,729 $743,575
======== ======== ======== ======== ========
Non-cash transactions:
Assignment of financing receivables to a third party financial institution $2,163 $2,760 $22,166 $6,419 $67,400
Costs of solar power systems, leased and to be leased, sourced from existing inventory 11,905 6,783 13,627 25,808 43,341
Costs of solar power systems, leased and to be leased, funded by liabilities 2,389 1,867 2,315 2,389 2,315
Costs of solar power systems under sale-leaseback financing arrangements sourced from project assets 2,064 - - 17,333 24,399
Property, plant and equipment acquisitions funded by liabilities 12,146 9,326 5,628 12,146 5,628
Issuance of common stock upon conversion of convertible debt - 188,229 - 188,263 -
SUNPOWER CORPORATION
REVENUE BY SIGNIFICANT CATEGORY
(In thousands)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Revenue:
Solar power products(1) $209,864 $237,212 $223,952 $685,654 $648,235
Solar power systems(2) 402,244 224,852 378,477 1,030,851 1,083,002
Residential leases(3) 30,941 32,679 31,575 102,352 95,498
Other revenue4 19,685 13,128 23,116 44,170 42,334
------ ------ ------ ------ ------
$662,734 $507,871 $657,120 $1,863,027 $1,869,069
======== ======== ======== ========== ==========
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, gain on contract termination, 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.
-- Gain on contract termination. During the third quarter of fiscal 2013,
the company agreed to terminate a contract with one of its suppliers. As
a result, the company recorded a gain associated with the non-cash
forfeiture of a previously recorded advance from the supplier. As this
gain is nonrecurring in nature, excluding this data provides investors
with a basis to evaluate the company's performance, including compared
with the performance of other companies, without similar impacts.
-- 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 third
quarter of fiscal 2014 are primarily driven by adjustments which would
have previously been disclosed under "Restructuring charges" and "Change
in European government incentives."
-- 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 provided by (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 NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP revenue $662,734 $507,871 $657,120 $1,863,027 $1,869,069
Utility and power plant projects 41,475 113,195 (37,669) 145,961 (24,270)
Other - - - - (672)
Non-GAAP revenue $704,209 $621,066 $619,451 $2,008,988 $1,844,127
======== ======== ======== ========== ==========
Adjustments to Gross margin:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP gross margin $108,514 $94,145 $193,230 $365,648 $360,404
Utility and power plant projects (721) 22,614 (26,323) 5,285 57,957
Gain on contract termination - - (51,987) - (51,987)
Stock-based compensation expense 3,972 3,350 2,925 10,878 7,152
Non-cash interest expense 699 699 591 2,098 1,712
Other 5,220 24 42 5,244 215
Non-GAAP gross margin $117,684 $120,832 $118,478 $389,153 $375,453
======== ======== ======== ======== ========
GAAP gross margin (%) 16.4% 18.5% 29.4% 19.6% 19.3%
Non-GAAP gross margin (%) 16.7% 19.5% 19.1% 19.4% 20.4%
Adjustments to Net income:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net income attributable to stockholders $32,033 $14,102 $108,386 $111,179 $73,255
Utility and power plant projects (721) 22,614 (26,323) 5,285 57,957
Gain on contract termination - - (51,987) - (51,987)
Stock-based compensation expense 13,725 13,348 12,082 41,940 31,103
Non-cash interest expense 5,499 5,323 12,311 15,992 36,382
Other 6,106 (654) 835 5,007 3,480
Tax effect (10,199) (10,824) 3,477 (13,706) (1,377)
Non-GAAP net income attributable to stockholders $46,443 $43,909 $58,781 $165,697 $148,813
======= ======= ======= ======== ========
Adjustments to Net income per diluted share:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net income per diluted share
Numerator:
GAAP net income available to common stockholders(1) $33,442 $14,653 $111,614 $113,770 $73,999
======= ======= ======== ======== =======
Non-GAAP net income available to common stockholders(1) $46,994 $44,460 $58,781 $169,879 $148,813
======= ======= ======= ======== ========
Denominator:
GAAP weighted-average shares 167,117 156,333 153,876 158,962 134,859
Effect of dilutive securities:
0.75% debentures due 2018 - - (12,026) - (5,418)
0.875% debentures due 2021 (8,203) - - (3,305) -
4.75% debentures due 2014 - - (8,712) 3,347 -
Non-GAAP weighted-average shares(1) 158,914 156,333 133,138 159,004 129,441
======= ======= ======= ======= =======
GAAP net income per diluted share $0.20 $0.09 $0.73 $0.72 $0.55
===== ===== ===== ===== =====
Non-GAAP net income per diluted share $0.30 $0.28 $0.44 $1.07 $1.15
===== ===== ===== ===== =====
1 In accordance with the if-converted method, net income 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 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 per diluted share.
Revenue by Significant Category:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP Solar power products $209,864 $237,212 $223,952 $685,654 $648,235
Other - - - - (672)
Non-GAAP Solar power products $209,864 $237,212 $223,952 $685,654 $647,563
======== ======== ======== ======== ========
GAAP Solar power systems $402,244 $224,852 $378,477 $1,030,851 $1,083,002
Utility and power plant projects 41,475 113,195 (37,669) 145,961 (24,270)
Non-GAAP Solar power systems $443,719 $338,047 $340,808 $1,176,812 $1,058,732
======== ======== ======== ========== ==========
EBITDA:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net income attributable to stockholders $32,033 $14,102 $108,386 $111,179 $73,255
Utility and power plant projects (721) 22,614 (26,323) 5,285 57,957
Gain on contract termination - - (51,987) - (51,987)
Stock-based compensation expense 13,725 13,348 12,082 41,940 31,103
Non-cash interest expense 5,499 5,323 12,311 15,992 36,382
Other 6,106 (654) 835 5,007 3,480
Cash interest expense, net of interest income 11,476 11,048 16,292 37,358 44,747
Provision for (benefit from) income taxes (8,320) (8,168) (4,575) (2,868) 2,920
Depreciation 25,727 24,026 24,722 75,124 72,893
EBITDA $85,525 $81,639 $91,743 $289,017 $270,750
======= ======= ======= ======== ========
Free Cash Flow:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
Sep. 28, Jun. 29, Sep. 29, Sep. 28, Sep. 29,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net cash provided by (used in) operating activities $(32,418) $(132,043) $28,869 $(113,989) $129,553
Net cash provided by (used in) investing activities (41,932) (33,064) 74,570 (106,091) (93,882)
Proceeds from issuance of non-recourse debt financing, 1,426 34,306 - 74,840 -
net of issuance costs
Proceeds from residential lease financing - - 26,817 - 83,365
Repayment of residential lease financing - (8,473) - (15,686) -
Proceeds from sale-leaseback financing 6,893 - - 23,578 40,757
Repayment of sale-leaseback financing (581) - - (1,360) (5,124)
Contributions from noncontrolling interests and 22,534 22,226 29,535 75,312 73,401
redeemable noncontrolling interests
Distributions to noncontrolling interests and (1,172) (519) - (2,808) -
redeemable noncontrolling interests
Free cash flow $(45,250) $(117,567) $159,791 $(66,204) $228,070
======== ========= ======== ======== ========
Q4 2014
GUIDANCE (in
thousands
except
percentages
and per share
data) Q4 2014 FY 2014
Revenue (GAAP) $675,000-$725,000 $2,535,000-$2,585,000
Revenue (non-
GAAP) (1) $575,000-$625,000 $2,580,000-$2,630,000
Gross margin
(GAAP) 22%-24% 20%-21%
Gross margin
(non-GAAP)
(2) 19%-21% 19%-20%
Net income per
diluted share
(GAAP) $0.20-$0.35 $0.95-$1.10
Net income per
diluted share
(non-GAAP)
(3) $0.15-$0.30 $1.25-$1.40
(1) Estimated non-GAAP amounts above
include a net increase (decrease)
of $(100) million for Q4 2014 and
$45 million for fiscal 2014 of
revenue primarily related to
utility and power plant projects.
(2) Estimated non-GAAP amounts above
for Q4 2014 include net
adjustments that increase
(decrease) gross margin by
approximately $(40) to $(45)
million related to the non-GAAP
revenue adjustments that are
discussed above, $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 $(35) to $(40)
million related to the non-GAAP
revenue adjustments that are
discussed above, $14 million
related to stock-based
compensation expense, $3 million
related to non-cash interest
expense, and $5 million related
to other items.
(3) Estimated non-GAAP amounts above
for Q4 2014 include net
adjustments that increase
(decrease) net income by
approximately $(40) to $(45)
million related to the non-GAAP
revenue adjustments that are
discussed above, $14 million
related to stock-based
compensation expense, $6 million
related to non-cash interest
expense, $3 million related to
other items, and $11 million in
tax effect. Estimated non-GAAP
amounts above for fiscal 2014
include net adjustments that
increase (decrease) net income by
approximately $(35) to $(40)
million related to the non-GAAP
revenue adjustments that are
discussed above, $56 million
related to stock-based
compensation expense, $22 million
related to non-cash interest
expense, $8 million related to
other items, and $(3) 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 and net income 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
September 28, 2014
------------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $517,799 $44,633 $100,302 $103,184 19.9% $(1,396) -3.1% $6,726 6.7% $32,033
Utility and power
plant projects 41,475 - - (721) - - - - - - - (721)
Stock-based
compensation
expense - - - 2,310 408 1,254 2,022 7,731 - - - 13,725
Non-cash interest
expense - - - 452 60 187 6 22 - 4,772 - 5,499
Other - - - (24) 5,244 - - 720 188 (22) - 6,106
Tax effect - - - - - - - - - - (10,199) (10,199)
Non-GAAP $559,274 $44,633 $100,302 $105,201 18.8% $4,316 9.7% $8,167 8.1% $46,443
======== ======= ======== ======== ====== ====== =======
June 29, 2014
-------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income
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
======== ======= ======== ======== ======= ======= =======
September 29, 2013
------------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $442,091 $120,712 $94,317 $136,067 30.8% $20,107 16.7% $37,056 39.3% $108,386
Utility and power
plant projects (37,669) - - (26,323) - - - - - - - (26,323)
Gain on contract
termination - - - (25,604) (9,395) (16,988) - - - - - (51,987)
Stock-based
compensation
expense - - - 1,295 803 827 1,390 7,767 - - - 12,082
Non-cash interest
expense - - - 291 107 193 19 23 - 11,678 - 12,311
Other - - - 42 - - - (324) 1,114 3 - 835
Tax effect - - - - - - - - - - 3,477 3,477
Non-GAAP $404,422 $120,712 $94,317 $85,768 21.2% $11,622 9.6% $21,088 22.4% $58,781
======== ======== ======= ======= ======= ======= =======
NINE MONTHS ENDED
September 28, 2014
------------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income
attributable
to stockholders
---------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $1,321,870 $235,600 $305,557 $299,161 22.6% $35,477 15.1% $31,010 10.1% $111,179
Utility and power
plant projects 145,961 - - 5,285 - - - - - - - 5,285
Stock-based
compensation
expense - - - 6,218 1,574 3,086 5,731 25,331 - - - 41,940
Non-cash interest
expense - - - 1,244 281 573 19 68 - 13,807 - 15,992
Other - - - - 5,244 - - 728 (990) 25 - 5,007
Tax effect - - - - - - - - - - (13,706) (13,706)
Non-GAAP $1,467,831 $235,600 $305,557 $311,908 21.2% $42,576 18.1% $34,669 11.3% $165,697
========== ======== ======== ======== ======= ======= ========
September 29, 2013
------------------
Revenue Gross margin Operating expenses Other income (expense), net Benefit from (provision
for) income taxes Net income
attributable to
stockholders
------------
AMERICAS EMEA APAC AMERICAS EMEA APAC Research and Selling, general Restructuring charges
development and administrative
----------- ------------------
GAAP $1,293,822 $296,374 $278,873 $285,778 22.1% $6,879 2.3% $67,747 24.3% $73,255
Utility and power
plant projects (24,270) - - 57,957 - - - - - - - 57,957
Gain on contract
termination - - - (25,604) (9,395) (16,988) - - - - - (51,987)
Stock-based
compensation
expense - - - 3,209 1,862 2,081 3,737 20,214 - - - 31,103
Non-cash interest
expense - - - 802 368 542 55 69 - 34,546 - 36,382
Other - - (672) 443 186 (414) - 1,530 1,705 30 - 3,480
Tax effect - - - - - - - - - - (1,377) (1,377)
--- --- --- --- ------ ------
Non-GAAP $1,269,552 $296,374 $278,201 $322,585 25.4% $(100) 0.0% $52,968 19.0% $148,813
========== ======== ======== ======== ===== ======= ========
SOURCE SunPower Corp.
