SunPower Reports First Quarter 2012 Results

SunPower Corp. (NASDAQ: SPWR) announced financial results for its 2012 first quarter ended April 1, 2012. 

1. GAAP revenue excludes $86.2 million and $186.4 million for the first quarter of fiscal 2012 and the fourth quarter of fiscal 2011, respectively, in revenue related to the construction of a utility power plant project and construction activities. See details in the non-GAAP Measure disclosure included in this press release.
2. GAAP results include approximately $54.0 million and $93.0 million for the first quarter of fiscal 2012 and the fourth quarter of fiscal 2011, respectively, in net, pre-tax charges and adjustments excluded from non-GAAP results.  Q1 2011 GAAP results include pre-tax charges and adjustments, net of approximately $33.6 million excluded from non-GAAP results.
3. A reconciliation of GAAP to non-GAAP results is included at the end of this press release.
4. As adjusted to reflect the financial results of Tenesol S.A. beginning October 10, 2011, as required under the accounting guidelines for a transfer of an entity under common control.

"SunPower's first quarter 2012 results benefitted from our long-term strategic positioning as we leveraged our industry-leading technology and significant customer reach through our downstream channel strategy to achieve our financial goals," said Tom Werner, SunPower president and CEO.  "Our North American Utility and Power Plants group outperformed as we continued to execute on our 250-megawatt (MW) California Valley Solar Ranch (CVSR) project for NRG Energy.  Also, the company's residential leasing program continued to gain momentum as our high efficiency, high reliability solar systems continue to be a competitive advantage in this growing market segment.  Operationally, we met our manufacturing cost targets for the quarter as we further implemented our step reduction program in our Fab 2 cell fabrication plant and started full commercial production of our Maxeon® Gen 3 cell technology with efficiencies of up to 24 percent.  With the continued execution of our downstream strategy, growing partnership with Total and focus on reducing our operating expenses, we remain confident in our ability to successfully manage through the current industry transition while structuring the company for long-term growth and industry leadership.

"Additionally, as we announced last month, we have made the strategic decision to consolidate our Philippine manufacturing operations into our Fab 2 facility as of this quarter.  This initiative will enable us to rationalize our operating expenses, improve supply chain efficiency and lower our cost per watt through scale advantages.  We expect to reduce both our cost per watt of panels and our future capital expenditures as a result of this change.  The impact on our overall capacity will be minimal as a result of this transition, as the reduction of approximately 125 MW of nameplate capacity at Fab 1 will be substantially offset by further improvement in yields and equipment efficiency in Fab 2 and Fab 3," concluded Werner. 

Key milestones achieved by the company since the fourth quarter of 2011 include:

• Installed more than 35-MW at the 250-MW CVSR power plant for NRG Energy; SunPower remains on track for phase one, 21-MW grid connection milestone completion in September
• Received final Federal Environmental Assessment with a finding of no significant impact, and Conditional Use Permit, for 601 MW of power plant projects under power purchase agreements with Southern California Edison
• Sold 25-MW McHenry Solar Project to K Road Power, 25-year power purchase agreement with Modesto Irrigation District
• Began commercial production of the company's Maxeon Gen 3 solar cell and 21 percent efficiency solar panels
• Initiated consolidation of Philippine's manufacturing footprint to drive scale improvements and reduce manufacturing cost per watt
• Closed the acquisition of Tenesol S.A. – a global leader in the commercial and off-grid market segments with a strong presence in South Africa
• Expanded our residential lease program to 200 dealers – more than 4,500 leases signed since program inception in Q3 2011
• Retired $199 million of convertible debt

"We prudently managed our balance sheet during the quarter as we retired $199 million in convertible debt while successfully reducing our operating expenses," said Chuck Boynton, SunPower CFO. "During this continued market transition, our focus remains on managing our cash, strategically investing in our industry leading technology and positioning the company for long-term profitability. 

"Additionally, as a result of our restructuring last year, we realigned our segment reporting to a regional basis starting this quarter.  We believe this new structure better supports the needs of our customers, improves the speed of our decision-making processes and enables us to have a more coordinated approach across multiple product lines.  Looking forward, SunPower is well positioned for future success due to our technology leadership, quality, reliability and bankability," concluded Boynton. 

First quarter of fiscal 2012 GAAP results include pre-tax charges, expenses and adjustments totaling approximately $54.0 million, including a $15.8 million gross margin adjustment related to the timing of revenue recognition from a utility power plant project and construction activities, $22.4 million in stock-based compensation, non-cash interest expense and amortization of intangible expenses, $9.0 million related to the write-down of third-party inventory, $3.0 million of previously announced restructuring expenses, and $2.7 million adjustment resulting from the sale of stock in the company's former Woongjin joint venture and $1.1 million related to acquisition and integration costs.  These charges are excluded from the company's non-GAAP results.  Additionally, first quarter GAAP results exclude an adjustment of approximately $86.2 million in revenue related to GAAP real estate accounting requirements.   

2012 Financial Outlook

The company's second quarter 2012 consolidated non-GAAP guidance is as follows: revenue of $575 million to $650 million, gross margin of 12% to 14%, net loss per diluted share of ($0.20) to ($0.05), capital expenditures of $35 million to $40 million, and MW recognized in the range of 250 MW to 275 MW.  On a GAAP basis, the company expects revenue of $560 million to $635 million, gross margin of 11% to 13% and net loss per diluted share of ($0.95) to ($0.80).

SunPower also re-affirmed its guidance for fiscal year 2012.  The company expects both GAAP and non-GAAP revenue of $2.6 billion to $3.0 billion and MW recognized to be in the range of 900 MW to 1,200 MW.  SunPower remains committed to achieving break even or better non-GAAP profitability and a year-end unrestricted cash balance of more than $300 million, while investing in cost reduction initiatives.  

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 first quarter 2012 performance on the Events and Presentations section of the SunPower Investor Relations page at //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.