Unaudited Pro Forma Condensed Consolidated Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Information
On March 26, 2019, SunPower Corporation (the “Company”) and its wholly-owned subsidiary, SunPower AssetCo, LLC (“SunPower AssetCo”), entered into a Membership Interest Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Xxxxxxxxx Xxxx Lessee Holdco LLC (“Buyer”), an indirect wholly-owned subsidiary of Xxxxxxx Xxxxx Renewable Power LLC. Pursuant to the Purchase and Sale Agreement, SunPower AssetCo agreed to sell to Buyer membership interests owned by SunPower AssetCo in certain holding company subsidiaries (the “HoldCos”) that, in turn, own, directly or indirectly, the membership interests in one or more limited liability companies (together with other related subsidiaries, the “Related Subsidiaries”) that own leasehold interests in operating solar photovoltaic electric generating projects (the “Projects”) subject to sale-leaseback financing arrangements with one or more financiers (each a “Lessor”).The Projects are located at approximately 200 sites across the United States, and represent in aggregate, approximately 233 MW of generating capacity. The portfolio of Projects financed by each Lessor represents a separate asset (“Portfolio”) for which the price is separately agreed and stated in the Purchase and Sale Agreement. Upon the sale of the applicable membership interests, the related assets are deconsolidated from the Company’s balance sheet.
The consummation of the sale and purchase of each Portfolio, pursuant to the Purchase and Sale Agreement, which occurred in multiple closings, was subject to a number of customary conditions precedent, including receipt of certain third-party consents and approvals, including those of the applicable Lessor, absence of material adverse changes, and expiration or early termination of the applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (collectively, the “Transactions”).
On June 24, 2019 and on June 26, 2019, SunPower AssetCo completed the sale to Buyer of membership interests in certain HoldCos and Related Subsidiaries pursuant to the Purchase and Sale Agreement. The June 24, 2019 and June 26, 2019 sales, together with sales previously completed on March 29, 2019, April 30, 2019 and May 3, 2019, constituted the disposition of a "significant" portion of the Company's assets within the meaning of, and in accordance with, the standards set forth in Item 2.01 of Form 8-K. As such, the Company prepared the accompanying unaudited pro forma condensed consolidated financial statements in accordance with Article 11 of Regulation S-X. The aggregate amount of consideration received for the sale of all of the membership interests pursuant to the Purchase and Sale Agreement was $79.8 million in cash, net of fees, expenses, and $5.4 million in holdbacks pertaining to certain retained obligations. Prior to consummation of the sale on June 24, 2019, the aggregate amount of assets sold did not constitute a significant disposition for purposes of Item 2.01 of Form 8-K.
The following unaudited pro forma condensed consolidated financial information of the Company is derived from the Company's historical consolidated financial statements and should be read in conjunction with the audited financial statements and notes thereto appearing in the Company's Annual Report on Form 10-K for the year ended December 30, 2018 and the unaudited financial statements and notes thereto appearing in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2019. The accompanying unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2019 and the fiscal year ended December 30, 2018 are presented as if the Transactions had been completed as of January 1, 2019 and January 1, 2018, respectively. The unaudited pro forma condensed consolidated balance sheet is presented after giving effect as if the Transactions had occurred on March 31, 2019.
The unaudited pro forma condensed consolidated financial information has been presented for informational purposes only and is not indicative of any future results of operations or the results that might have occurred if the disposition had actually been completed on the indicated dates. The unaudited pro forma condensed consolidated financial statements are based on management's estimate of the effects on the financial statements of the Transactions. Pro forma adjustments are based on currently available information, historical results and certain assumptions that management believes are reasonable and described in the accompanying notes.
SUNPOWER CORPORATION
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2019
(In thousands)
Historical | Pro forma Adjustments | Proforma | |||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 185,554 | $ | 73,109 | (a) | $ | 258,663 | ||||
Restricted cash and cash equivalents, current portion | 864 | — | 864 | ||||||||
Accounts receivable, net | 156,445 | 8,739 | (b) (n) | 165,184 | |||||||
Contract assets | 57,282 | — | 57,282 | ||||||||
Inventories | 334,390 | — | 334,390 | ||||||||
Advances to suppliers, current portion | 95,603 | — | 95,603 | ||||||||
Project assets - plants and land, current portion | 10,246 | — | 10,246 | ||||||||
Prepaid expenses and other current assets | 99,675 | — | 99,675 | ||||||||
Assets held for sale | 550,073 | (550,073 | ) | (b) | — | ||||||
Total current assets | 1,490,132 | (468,225 | ) | 1,021,907 | |||||||
Restricted cash and cash equivalents, net of current portion | 13,345 | — | 13,345 | ||||||||
Restricted long-term marketable securities | 5,948 | — | 5,948 | ||||||||
Property, plant and equipment, net | 413,347 | — | 413,347 | ||||||||
Operating lease right-of-use assets | 32,638 | — | 32,638 | ||||||||
Solar power systems leased and to be leased, net | 74,134 | — | 74,134 | ||||||||
Advances to suppliers, net of current portion | 62,914 | — | 62,914 | ||||||||
Long-term financing receivables, net - held for sale | 19,044 | — | 19,044 | ||||||||
Other intangible assets, net | 10,858 | 2,850 | (c) | 13,708 | |||||||
Other long-term assets | 185,371 | — | 185,371 | ||||||||
Total assets | $ | 2,307,731 | $ | (465,375 | ) | $ | 1,842,356 | ||||
Liabilities and Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 347,233 | $ | — | $ | 347,233 | |||||
Accrued liabilities | 190,095 | (19,593 | ) | (d) | 170,502 | ||||||
Operating lease liabilities, current portion | 8,502 | — | 8,502 | ||||||||
Contract liabilities, current portion | 92,621 | — | 92,621 | ||||||||
Short-term debt | 41,838 | — | 41,838 | ||||||||
Liabilities held for sale | 619,538 | (619,538 | ) | (b) | — | ||||||
Total current liabilities | 1,299,827 | (639,131 | ) | 660,696 | |||||||
Long-term debt | 71,593 | — | 71,593 | ||||||||
Convertible debt | 818,832 | — | 818,832 | ||||||||
Operating lease liabilities, net of current portion | 29,490 | — | 29,490 | ||||||||
Contract liabilities, net of current portion | 75,059 | — | 75,059 | ||||||||
Other long-term liabilities | 234,386 | 1,400 | (e) | 235,786 | |||||||
Total liabilities | 2,529,187 | (637,731 | ) | 1,891,456 | |||||||
Equity: | |||||||||||
Preferred stock | — | — | — | ||||||||
Common stock | 142 | — | 142 | ||||||||
Additional paid-in capital | 2,469,998 | — | 2,469,998 | ||||||||
Accumulated deficit | (2,561,561 | ) | 172,356 | (b), (f) | (2,389,205 | ) | |||||
Accumulated other comprehensive loss | (4,051 | ) | — | (4,051 | ) | ||||||
Treasury stock, at cost | (190,940 | ) | — | (190,940 | ) | ||||||
Total stockholders' equity | (286,412 | ) | 172,356 | (114,056 | ) | ||||||
Noncontrolling interests in subsidiaries | 64,956 | — | 64,956 | ||||||||
Total equity | (221,456 | ) | 172,356 | (49,100 | ) | ||||||
Total liabilities and equity | $ | 2,307,731 | $ | (465,375 | ) | $ | 1,842,356 | ||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
SUNPOWER CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2019
(In thousands)
Historical | Pro forma Adjustments | Pro forma | |||||||||
Revenue: | |||||||||||
Solar power systems, components, and other | $ | 341,442 | $ | (7,167 | ) | (f), (g) | $ | 334,275 | |||
Residential leasing | 3,884 | — | 3,884 | ||||||||
Solar services | 2,899 | — | 2,899 | ||||||||
Total revenue | 348,225 | (7,167 | ) | 341,058 | |||||||
Cost of revenue: | |||||||||||
Solar power systems, components, and other | 380,906 | (6,504 | ) | (g), (h) | 374,402 | ||||||
Residential leasing | 3,022 | — | 3,022 | ||||||||
Solar services | 1,582 | — | 1,582 | ||||||||
Total cost of revenue | 385,510 | (6,504 | ) | 379,006 | |||||||
Gross loss | (37,285 | ) | (663 | ) | (37,948 | ) | |||||
Operating expenses: | |||||||||||
Research and development | 14,993 | — | 14,993 | ||||||||
Sales, general and administrative | 62,857 | (1,598 | ) | (i), (l) | 61,259 | ||||||
Restructuring credits | (665 | ) | — | (665 | ) | ||||||
Impairment of residential lease assets | 9,226 | — | 9,226 | ||||||||
Gain on business divestiture | (6,114 | ) | — | (6,114 | ) | ||||||
Total operating expenses | 80,297 | (1,598 | ) | 78,699 | |||||||
Operating loss | (117,582 | ) | 935 | (116,647 | ) | ||||||
Other income (expense), net: | |||||||||||
Interest income | 852 | (92 | ) | (j) | 760 | ||||||
Interest expense | (16,791 | ) | 7,825 | (k) | (8,966 | ) | |||||
Other, net | 33,073 | — | 33,073 | ||||||||
Other income (expense), net | 17,134 | 7,733 | 24,867 | ||||||||
Loss before income taxes and equity in earnings of unconsolidated investees | (100,448 | ) | 8,668 | (91,780 | ) | ||||||
Provision for income taxes | (5,797 | ) | — | (5,797 | ) | ||||||
Equity in earnings of unconsolidated investees | 1,680 | — | 1,680 | ||||||||
Net loss | (104,565 | ) | 8,668 | (95,897 | ) | ||||||
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests | 14,841 | — | 14,841 | ||||||||
Net loss attributable to stockholders | $ | (89,724 | ) | $ | 8,668 | $ | (81,056 | ) | |||
Basic and diluted net loss per share attributable to stock holders | $ | (0.63 | ) | $ | 0.06 | $ | (0.57 | ) | |||
Basic and diluted weighted-average shares | 141,720 | 141,720 | 141,720 | ||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
SUNPOWER CORPORATION
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 30, 2018
(In thousands)
Historical | Pro forma Adjustments | Pro forma | |||||||||
Revenue: | |||||||||||
Solar power systems, components, and other | $ | 1,453,876 | $ | (34,509 | ) | (f), (g) | $ | 1,419,367 | |||
Residential leasing | 272,209 | — | 272,209 | ||||||||
Total revenue | 1,726,085 | (34,509 | ) | 1,691,576 | |||||||
Cost of revenue: | |||||||||||
Solar power systems, components, and other | 1,843,150 | (25,545 | ) | (h), (g) | 1,817,605 | ||||||
Residential leasing | 180,016 | — | 180,016 | ||||||||
Total cost of revenue | 2,023,166 | (25,545 | ) | 1,997,621 | |||||||
Gross profit (loss) | (297,081 | ) | (8,964 | ) | (306,045 | ) | |||||
Operating expenses: | |||||||||||
Research and development | 81,705 | — | 81,705 | ||||||||
Sales, general and administrative | 260,111 | (1,641 | ) | (i) | 258,470 | ||||||
Restructuring charges | 17,497 | — | 17,497 | ||||||||
Impairment of residential lease assets | 251,984 | — | 251,984 | ||||||||
Gain on business divestitures | (59,347 | ) | — | (59,347 | ) | ||||||
Total operating expenses | 551,950 | (1,641 | ) | 550,309 | |||||||
Operating profit (loss) | (849,031 | ) | (7,323 | ) | (856,354 | ) | |||||
Other income (expense), net: | |||||||||||
Interest income | 3,057 | (193 | ) | (j) | 2,864 | ||||||
Interest expense | (108,011 | ) | 26,834 | (k) | (81,177 | ) | |||||
Other, net | 55,314 | — | 55,314 | ||||||||
Other expense, net | (49,640 | ) | 26,641 | (22,999 | ) | ||||||
Loss before income taxes and equity in losses of unconsolidated investees | (898,671 | ) | 19,318 | (879,353 | ) | ||||||
Provision for income taxes | (1,010 | ) | — | (1,010 | ) | ||||||
Equity in losses of unconsolidated investees | (17,815 | ) | — | (17,815 | ) | ||||||
Net loss | (917,496 | ) | 19,318 | (898,178 | ) | ||||||
Net loss attributable to noncontrolling interests and redeemable noncontrolling interests | 106,405 | — | 106,405 | ||||||||
Net loss attributable to stockholders | $ | (811,091 | ) | $ | 19,318 | $ | (791,773 | ) | |||
Basic and diluted net loss per share attributable to stock holders | $ | (5.76 | ) | $ | 0.14 | $ | (5.62 | ) | |||
Basic and diluted weighted-average shares | 140,825 | 140,825 | 140,825 | ||||||||
See accompanying notes to unaudited pro forma condensed consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The unaudited condensed consolidated financial information reflect the following adjustments:
Unaudited Pro Forma Condensed Consolidated Balance Sheet
"Historical" - represents the historical consolidated balance sheet of the Company as of March 31, 2019.
(a) This adjustment represents the cash received from the Transaction, net of fees, expenses and holdback amounts pertaining to certain retained obligations.
(b) This adjustment represents the elimination of historical assets and liabilities associated with the sale-leaseback entities being deconsolidated as a result of the Transaction and includes the gain on sale. A summary of the gain on sale is calculated as follows ($ in thousands):
Xxxx received from sale | $ | 73,876 | ||
Assets held for sale | ||||
Restricted cash and cash equivalents, current portion | (37,141 | ) | ||
Accounts receivable, net | (5,355 | ) | ||
Prepaid expenses and other current assets | (754 | ) | ||
Property, plant and equipment, net | (477,409 | ) | ||
Operating lease right-of-use assets | (29,414 | ) | ||
Total assets related to sale | (550,073 | ) | ||
Liabilities related to sale | ||||
Accounts payable | (181 | ) | ||
Accrued liabilities | (1,449 | ) | ||
Operating lease liabilities, current portion | (1,041 | ) | ||
Operating lease liabilities, net of current portion | (21,700 | ) | ||
Other long-term liabilities | (595,167 | ) | ||
Total liabilities related to sale | (619,538 | ) | ||
Receivables | (m) | 1,892 | ||
Other intangible assets | (c) | 2,850 | ||
Retained indemnities | (e) | 1,400 | ||
Retained warranty obligation | (d) | 1,546 | ||
Net gain on sale | 145,137 | |||
Transaction costs | 767 | |||
Net adjustment to Accumulated deficit | $ | 144,370 | ||
(c) This adjustment represents above-market pricing associated with certain Operations and Maintenance ("O&M") contracts retained by the Company relating to sold Portfolios .
(d) This adjustment represents an estimated liability associated with warranty obligations retained by the Company for defects in materials and workmanship related to underlying Projects.
(e) This adjustment represents the fair value of the Company’s obligations associated with indemnities provided by the Company as part of the sale for any future claims for investment tax credits and property taxes related to the underlying Projects.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
"Historical" - represents the historical condensed consolidated statement of operations of the Company for the three months ended March 31, 2019 and the year ended December 30, 2018.
(f) This adjustment represents elimination of historical revenues of $8.5 million and $40.1 million for the three months ended March 31, 2019 and the year ended December 30, 2018, respectively, from power purchase agreements ("PPAs") associated with the Projects sold.
(g) The adjustments represent the O&M and Asset Management revenue expected to be earned and cost of revenue expected to be incurred in the future, as the Company continues to provide O&M and Asset Management services to the Projects after completion of the sale.
($ in thousands) | Historical Adjustments | |||||||
Three months ended March 31, 2019 | Twelve months ended December 30, 2018 | Basis | ||||||
Total O&M and Asset Management revenue | $ | 1,301 | $ | 5,546 | O&M and Asset Management Revenue for services provided specifically to the Portfolio | |||
Total cost of O&M and Asset Management revenue | (201 | ) | (865 | ) | Cost of O&M and Asset Management services provided specifically to the Portfolio | |||
Gross profit | $ | 1,100 | $ | 4,681 | ||||
(h) This adjustment represents elimination of historical cost of revenues of $6.7 million and $26.4 million for the three months ended March 31, 2019 and the year ended December 30, 2018, respectively, associated with the Projects sold.
(i) This adjustment represents sales, general and administrative expenses directly attributable to the Projects.
(j) This adjustment represents interest income generated from cash reserved in accordance with the sale-leaseback financing arrangements for the Projects.
(k) This adjustment represents elimination of historical interest expense associated with financing obligations of the Projects sold.
(l) This adjustment represents elimination of transaction costs of $0.8 million incurred to-date that are directly related to this Transaction.
(m) This adjustment represents the holdback amount pertaining to certain potential tax and contractual liabilities.
(n) This adjustment represents the holdback amount in addition to the O&M and Asset Management revenue expected to be earned.
