SunPower Reports Third Quarter 2012 Financial Results

Q3 2012 GAAP Revenue of $649 Million, Non-GAAP Revenue of $607 Million

SAN JOSE, Calif., Nov. 1, 2012.

SunPower Corp. (NASDAQ: SPWR) today announced financial results for its 2012 third quarter ended September 30, 2012.

(1) GAAP revenue includes $42.3 million and excludes $54.8 million for the third quarter of fiscal 2012 and the second quarter of fiscal 2012, respectively, in revenue related to the construction of utility power plant projects and construction activities. See details in the non-GAAP measure disclosure included in this press release.

(2) GAAP results include approximately $47.5 million and $90.6 million for the third quarter of fiscal 2012 and the second quarter of fiscal 2012, respectively, in net, pre-tax charges and adjustments excluded from non-GAAP results. Q3 2011 GAAP results include pre-tax charges and adjustments, net of approximately $380.1 million excluded from non-GAAP results.

(3) A reconciliation of GAAP to non-GAAP results is included at the end of this press release.

“The successful execution of our long-term business strategy and diversified end market approach enabled us to achieve profitability on a non-GAAP basis for the quarter despite difficult industry conditions,” said Tom Werner, SunPower president and CEO. “Regionally, our performance in North America remained strong as we continued to meet our project schedules on California Valley Solar Ranch (CVSR) and Antelope Valley Solar Project while further expanding our residential leasing footprint due to our high efficiency rooftop value proposition. Europe remains a very challenging market and we are implementing a number of initiatives to prudently manage our expenses and improve our long-term profitability in that region. In Asia, our focus remains on continuing to grow our market share in Japan through our successful partnership with Toshiba and we are exploring opportunities in a number of emerging markets.

“We also executed well on our cost reduction roadmap during the quarter,” continued Werner. “Our goal of reducing our panel cost by at least 25 percent year over year is on plan and we are taking steps to accelerate our 2013 roadmap as well. Combined with our success in reducing balance of systems costs through our SunPower® Oasis® Power Plant product, we are now offering customers total system costs that are competitive with traditional generation on levelized cost of energy basis in many markets. Additionally, as we previously announced, we have made the strategic decision to further restructure our manufacturing operations in the Philippines to effectively compete in an industry with significant overcapacity. This action will enable us to meaningfully reduce inventory, lower operational costs and improve efficiency.

“With our diversified go-to-market strategy, industry leading technology, accelerated cost reduction roadmap as well as a strong financial position and the continued support of Total, we remain confident that our long-term strategy positions us well for future success,” Werner concluded.

Key milestones achieved by the company since the second quarter of 2012 include:

• Completed first project milestone for 25-MW CVSR project – 22-MW grid connected
• PPA executed with PG&E for 100-MW Henrietta Solar Project for 2016 delivery
• Awarded 12 projects totaling 33 MW in recent French tender process
• Extended current supplier agreement with Toshiba for the Japanese market
• Acquired 42 percent stake in Australian Gen-tailer Diamond Energy
• Closed agreement with Citi and Credit Suisse for $325 million in lease financing capacity
• Expanded residential lease program – ~ 13,000 customers in first year of lease offering
• Completed rollout of 15 percent cell manufacturing step reduction initiative in Fab 2

“The third quarter reflected strength in a number of key areas as we exceeded our margin targets, delivered positive earnings and increased our available cash while successfully reducing inventory by more than $40 million,” said Chuck Boynton, SunPower CFO. “Looking forward, our focus remains on managing our cash flow and balance sheet, reducing inventory and rationalizing our operating expenses. We will continue to manage to today’s demand driven environment and position the company for long-term profitable growth.”

Third quarter fiscal 2012 GAAP results include pre-tax charges, expenses and adjustments totaling approximately $47.5 million, including a $5.8 million gross margin adjustment related to the timing of revenue recognition from utility power plant projects and construction activities, $59.6 million of goodwill and other intangible asset impairment, $50.6 million gain on share lending arrangement, $8.2 million in restructuring charges related to the company’s consolidation of its Philippines manufacturing operations, $25.9 million in stock-based compensation, non-cash interest expense and amortization of intangible expenses, $6.4 million related to charges on manufacturing step reduction program, $2.1 million of restructuring charges related to December 2011 Restructuring Plan and $1.5 million related to acquisition and integration costs. These adjustments and charges are excluded from the company’s non-GAAP results. Additionally, third-quarter GAAP results include an adjustment of approximately $42.3 million in revenue related to GAAP real estate accounting requirements.

Fourth Quarter 2012 Financial Outlook

The company’s fourth quarter 2012 consolidated non-GAAP guidance is as follows: revenue of $700 million to $900 million, gross margin of 14 percent to 16 percent, earnings per diluted share of $0.00 to $0.25, capital expenditures of $30 million to $40 million and MW recognized in the range of 200 MW to 250 MW. On a GAAP basis, the company expects revenue of $650 million to $850 million, gross margin of two percent to four percent and loss per diluted share of $0.75 to $1.00.

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 2012 performance on the Events and Presentations section of the SunPower Investor Relations page at https://investors.sunpowercorp.com/events.cfm. The capacity of power plants in this release is described in approximate megawatts on an alternating current (ac) basis unless otherwise noted.

About SunPower

SunPower Corp. (NASDAQ: 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.SunPowercorp.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and may be based on underlying assumptions. The company uses words and phrases such as “improve,” “grow,” “goal,” “roadmap,” “looking forward,” “growth,” “will,” “continue,” “position,” and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding: (a) improving our long-term profitability in Europe; (b) growing our market share in Japan; (c) reducing our panel cost; (d) accelerating our 2013 roadmap; (e) reducing inventory, lowering operational costs, and improving efficiency; (f) managing cash flow and balance sheet, and rationalizing expenses; (g) positioning the company for profitable growth; and (h) forecasted GAAP and non-GAAP Q4 2012 revenues, GAAP and non-GAAP gross margins, GAAP and non-GAAP earnings/loss per diluted share, capital expenditures and MW recognized. Such forward-looking statements are based on information available to the company as of the date of this release and involve a number of risks and uncertainties, some beyond the company’s control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including risks and uncertainties such as: (i) increasing supply and competition in the industry and lower average selling prices, impact on gross margins, and any revaluation of inventory as a result of decreasing ASP or reduced demand; (ii) the impact of regulatory changes and the continuation of governmental and related economic incentives promoting the use of solar power, and the impact of such changes on our revenues, financial results, and any potential impairments or write off to our intangible assets, project assets, long-lived assets and goodwill; (iii) the company’s ability to meet its cost reduction plans and reduce its operating expenses; (iv) the company’s ability to obtain and maintain an adequate supply of raw materials, components, and solar panels, as well as the price it pays for such items and third parties’ willingness to renegotiate or cancel above market contracts; (v) general business and economic conditions, including seasonality of the solar industry and growth trends in the solar industry; (vi) the company’s ability to revise its portfolio allocation geographically and across downstream channels to respond to regulatory changes; (vii) construction difficulties or potential delays, including obtaining land use rights, permits, license, other governmental approvals, and transmission access and upgrades, and any litigation relating thereto; (viii) timeline for revenue recognition and impact on the company’s operating results; (ix) the significant investment required to construct power plants and the company’s ability to sell or otherwise monetize power plants, including the company’s success in completing the design, construction and maintenance of CVSR and Antelope Valley Solar Ranch; (x) fluctuations in the company’s operating results and its unpredictability; (xi) the availability of financing arrangements for the company’s projects and the company’s customers; (xii) potential difficulties associated with operating the joint venture with AUO and the company’s ability to achieve the anticipated synergies from the Tenesol acquisition; (xiii) success in achieving cost reduction, and the company’s ability to remain competitive in its product offering, obtain premium pricing while continuing to reduce costs and achieve lower targeted cost per watt; (xiv) the company’s liquidity, substantial indebtedness, and its ability to obtain additional financing; (xv) manufacturing difficulties that could arise;(xvi) the company’s ability to achieve the expected benefits from its relationship with Total; (xvii) the success of the company’s ongoing research and development efforts and the acceptance of the company’s new products and services; (xviii) the company’s ability to protect its intellectual property; (xix) the company’s exposure to foreign exchange, credit and interest rate risk; (xx) possible impairment or write off of long-lived assets and project assets; (xxi) the success of our residential lease program; (xxii) the accuracy of assumptions and compliance with treasury grant guidance and timing and amount of cash grant; (xxiii) possible consolidation of the joint venture AUO SunPower; and (xxiv) other risks described in the company’s Annual Report on Form 10-K for the year ended January 1, 2012, Quarterly Reports on Form 10-Q for the quarters ended April 1, 2012 and July 1, 2012, and other filings with the Securities and Exchange Commission. These forward-looking statements should not be relied upon as representing the company’s views as of any subsequent date, and the company is under no obligation to, and expressly disclaims any responsibility to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Tags: business strategy, diluted share, third quarter ended september

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