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MarketScreener Homepage  >  Equities  >  Nasdaq  >  SunPower Corporation    SPWR

SUNPOWER CORPORATION

(SPWR)
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SUNPOWER CORP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/30/2020 | 05:14am EST

Cautionary Statement Regarding Forward-Looking Statements


You should read the following discussion of our financial condition and results
of operations in conjunction with the condensed consolidated financial
statements and the notes thereto included elsewhere in this Quarterly Report on
Form 10-Q and the consolidated financial statements and the notes thereto
included in our Annual Report on Form 10-K for the fiscal year ended December
29, 2019 filed with the Securities and Exchange Commission ("SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act").

This Quarterly Report on Form 10-Q 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
or the assumptions underlying such statements. We use words such as
"anticipate," "believe," "continue," "could," "estimate," "expect," "intend,"
"may," "plan," "predict," "project," "potential," "seek," "should," "will,"
"would," and similar expressions to identify forward-looking statements.
Forward-looking statements in this Quarterly Report on Form 10-Q include, but
are not limited to, our plans and expectations regarding future financial
results, expected operating results, business strategies, the sufficiency of our
cash and our liquidity, projected costs and cost reduction measures, development
of new products and improvements to our existing products, the impact of
recently adopted accounting pronouncements, our manufacturing capacity and
manufacturing costs, the adequacy of our agreements with our suppliers, our
ability to monetize our solar projects, legislative actions and regulatory
compliance, competitive positions, management's plans and objectives for future
operations, our ability to obtain financing, our ability to comply with debt
covenants or cure any defaults, our ability to repay our obligations as they
come due, our ability to continue as a going concern, trends in average selling
prices, the success of our joint ventures and acquisitions, warranty matters,
outcomes of litigation, our exposure to foreign exchange, interest and credit
risk, general business and economic conditions in our markets, industry trends,
the impact of changes in government incentives, expected restructuring charges,
risks related to privacy and data security, statements regarding the anticipated
impact on our business of the COVID-19 pandemic and related public health
measures, macroeconomic trends and uncertainties, and the likelihood of any
impairment of project assets, long-lived assets, and investments. These
forward-looking statements are based on information available to us as of the
date of this Quarterly Report on Form 10-Q and current expectations, forecasts
and assumptions and involve a number of risks and uncertainties that could cause
actual results to differ materially from those anticipated by these
forward-looking statements. Such risks and uncertainties include a variety of
factors, some of which are beyond our control. Factors that could cause or
contribute to such differences include, but are not limited to, those identified
above, those discussed in the section titled "Risk Factors" included in this
Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal
year ended December 29, 2019, and our other filings with the SEC. These
forward-looking statements should not be relied upon as representing our views
as of any subsequent date, and we are under no obligation to, and expressly
disclaim any responsibility to, update or alter our forward-looking statements,
whether as a result of new information, future events or otherwise.

Our fiscal year ends on the Sunday closest to the end of the applicable calendar
year. All references to fiscal periods apply to our fiscal quarter or year,
which end on the Sunday closest to the calendar month end. Unless the context
otherwise requires, all references to "SunPower," "we," "us," or "our" refer to
SunPower Corporation and its subsidiaries.

Overview


SunPower Corporation (together with its subsidiaries, "SunPower," ""the
Company," we," "us," or "our") is a leading solar energy company that delivers
complete solar solutions to customers primarily in United States and Canada
through an array of hardware, software, and financing options, and "Smart
Energy" solutions. Our Smart Energy initiative is designed to add layers of
intelligent control to homes, buildings and grids-all personalized through
easy-to-use customer interfaces. We are a leader in the U.S. downstream
Distributed Generation ("DG") market, providing an affordable and sustainable
source of electricity compared to traditional utility energy to residential
homeowners and commercial customers through multiple financial offerings. Our
sales channel includes a strong network of dealers and resellers that operate in
both, residential and commercial markets.

Maxeon Solar Spin-Off Transaction


On August 26, 2020, the Company completed the previously announced spin-off (the
"Spin-Off") of Maxeon Solar Technologies, Ltd., a Singapore public company
limited by shares ("Maxeon Solar"), consisting of certain non-U.S. operations
and assets of our former SunPower Technologies business unit. The Spin-Off was
completed by way of a pro rata distribution
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of all of the then-issued and outstanding ordinary shares, no par value, of Maxeon Solar to holders of record of the Company's common stock (the "Distribution") as of the close of business on August 17, 2020.


In connection with the Spin-Off, and as contemplated by the Separation and
Distribution Agreement entered into by us and Maxeon Solar, we and Maxeon Solar
entered into certain ancillary agreements that govern the relationships between
the Company and Maxeon Solar following the Distribution, including: a tax
matters agreement, employee matters agreement, transition services agreement,
back-to-back agreement, brand framework agreement, cross license agreement,
collaboration agreement and supply agreement (collectively, the "Ancillary
Agreements"), each as previously described in our announcement of the
contemplated transaction.

Segments Overview


In the third quarter of fiscal 2020, and concurrent with the Spin-Off of the
majority of our former SunPower Technologies segment, we reorganized our
business into new segments to align our focus on the U.S. downstream DG market
and new business model driven by financial offerings, solar energy storage,
solutions and software services. Previously, we operated under two end-customer
segments, comprised of our (i) SunPower Energy Services, and (ii) SunPower
Technologies. The SunPower Energy Services segment referred to our downstream
business consisting of sales of solar energy solutions to residential and
commercial end-customers, and the SunPower Technologies segment referred to
global manufacturing and our large-scale solar products and systems and
international component sales.

Under the new segmentation, Residential, Light Commercial ("RLC") refers to
sales of solar energy solutions previously included in the legacy SunPower
Energy Services segment, including sales to our third-party dealer network and
resellers, storage solutions, cash sales and long-term leases directly to end
customers. The Commercial and Industrial Solutions segment ("C&I Solutions")
refers to direct sales of turn-key engineering, procurement and construction
("EPC") services, and sales of energy under power purchase agreements ("PPAs").
Certain legacy businesses consisting of worldwide power plant project
development and project sales, as well as U.S. manufacturing, are not
significant to overall operations, and are deemed non-core to our other
businesses and classified as 'Others'. Certain key cross-functional support
functions and responsibilities including corporate strategy, treasury, tax and
accounting support and services, among others, continue to be centrally managed
within the Corporate function .

Each segment is managed by a business general manager that reports to our Chief
Executive Officer, as the chief operating decision maker ("CODM"), who reviews
our business, manages resource allocations and measures performance of our
activities between the RLC, C&I Solutions and Other segment. The CODM further
views the business performance of each segment under two key sources of revenue
- Dev Co and Power Co. Dev Co refers to our solar origination and installation
revenue stream within each segment such as sale of solar power systems with our
dealers and resellers network as well as installation and EPC revenues, while
Power Co refers to our post-system sale services revenues, mainly from O&M
services for residential and commercial projects. The risk profile of each
revenue stream is different and therefore, the segregation of Dev Co and Power
Co provides the CODM with appropriate information to review business performance
and allocate resources to each segment.

Impact of COVID-19 on our Business


In December 2019, a novel strain of coronavirus ("COVID-19"), was reported to
have surfaced in Wuhan, China, resulting in shutdowns of manufacturing and
commerce in the months that followed. Since then, the COVID-19 pandemic has
spread to multiple countries worldwide, including the United States and has
resulted in authorities implementing numerous measures to try to contain the
disease or slow its spread, such as travel bans and restrictions, quarantines,
shelter-in-place orders and shutdowns. The pandemic has driven organizations
across the globe to operate most functions virtually, and support remote
workforce at a faster speed and greater scale than ever before. Following the
first shelter-in-place orders, we expanded our internal virtual salesforce and
helped enable our dealers to complete sales consultations in a virtual setting.
We have seen leads through our online and virtual sales channels at attractive
customer acquisition costs. We believe that a virtual sales model will position
us and our dealers to reduce customer acquisition costs in the future.

The health and safety of our employees, contractors, and customers are a top
priority for us. In an effort to protect our employees and contractors, we took
and continue to take proactive and aggressive actions, starting with the
earliest signs of the outbreak to adopt social distancing policies at our
locations around the world, including working from home and suspending employee
travel. We have seamlessly transitioned to work from home with flexible work
policies, and most of our non-installation workforce is working from home and is
expected to continue to do so until July 2021.

As the installation of solar systems is considered an essential business in many
jurisdictions, employees and contractors who are working onsite are required to
adhere to strict safety measures, including the use of masks and sanitizer,
wellness screenings prior to accessing work sites, staggered break times to
prevent congregation, prohibitions on physical contact with
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co-workers or customers, restrictions on access through only a single point of
entry and exit, eliminating carpooling, and utilizing video conferencing, where
possible. We have also incorporated other rules such as restricting visitors to
any of our facilities that remain open and proactively providing employees with
hand sanitizer and disinfectant wipes. Also, we developed a COVID-19 Response
Team that meets regularly to develop tailored action plans and protocols to
protect our employees and publishes these actions, guidelines, and rules on our
intranet available to all employees.

At the onset of the pandemic, across the organization, we have taken specific
measures to sustain our business and operations as well as protect our
employees. These measures included temporary reductions in the salaries of
certain of our executive officers and the fees payable to our independent
directors, as well as temporary reductions in salaries and reduced work week
schedules for certain of our employees to address reduced demand and workloads,
with exceptions for certain groups, including those supporting customer and
asset services. In June 2020, most of our employees resumed a full work week and
returned to full salary during the last week of July. In September 2020, our
executive officers and independent directors returned to full salary.

As of October 2020, COVID-19 cases are rebounding and increasing in certain
areas of the U.S. and worldwide, and as a result, many jurisdictions are
restricting or planning to restrict businesses and economic activities again. It
is not clear what the potential effects any such future developments, including
any new government restrictions, may have on our business, including the effects
on our customers, employees, and prospects, or on our financial results for the
remainder of fiscal 2020 and beyond. We will continue to actively monitor the
situation and may take further actions altering our business operations that we
determine are in the best interests of our employees, customers, partners,
suppliers, and stakeholders, and as required by federal, state, or local
authorities.


Regulatory Changes related to COVID-19


On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the
"CARES Act") was enacted in response to the COVID-19 pandemic. The CARES Act
permits Net Operating Losses ("NOLs") carryovers and carrybacks to offset 100%
of taxable income for taxable years beginning before 2021. In addition, the
CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to
each of the five preceding taxable years to generate a refund of previously paid
income taxes. Furthermore, the CARES Act contains modifications on the
limitation of business interest for tax years beginning in 2019 and 2020. The
modifications to Section 163(j) increase the allowable business interest
deduction from 30% of adjusted taxable income to 50% of adjusted taxable income.
We are currently evaluating the impact of the CARES Act, but at present do not
expect that the NOL carryback provision and Section 163(j) modification of the
CARES Act would result in a material cash benefit to us. As per the new
provisions of the CARES Act, we have deferred payment of payroll taxes that
allows payments of share of Social Security payroll taxes that would otherwise
be due from the date of enactment through December 31, 2020, to be paid over the
following two years. We are currently exploring the availability of the employee
retention credit provided for under the CARES Act.

Outlook


We believe the execution of our strategy will provide attractive opportunities
for profitable growth over the long term. We believe the most significant
elements of uncertainty are the intensity and duration of the impact of the
COVID-19 pandemic on project installation and commercial and consumer spending
as well as the ability of our sales channels, supply chain, and distribution to
operate with minimal disruption for the remainder of fiscal 2020 and beyond,
especially if local governments impose new measures and restrictions in
jurisdictions in which we operate. The disruptions noted above could negatively
impact our financial position, results of operations, cash flows, and outlook.

Solutions


We are focused on delivering complete solar power generation solutions to our
customers. As part of our solutions-based approach, we focus on SunPower Helix
products for our commercial business customers and our SunPower Equinox product
for our residential business customers. The Equinox and Helix systems are
pre-engineered modular solutions for residential and commercial applications,
respectively, that combine our high-efficiency solar module technology with
integrated plug-and-play power stations, cable management systems, and mounting
hardware that enable our customers to quickly and easily complete system
installations and manage their energy production. Our Equinox systems utilize
our latest A-Series cell and ACPV technology for residential applications, where
we are also expanding our initiatives on storage and Smart Energy solutions. Our
Helix products are available for carport, ground and roof installations and
provides seamless solar solutions at lowest cost. Additionally, we continue to
focus on installing our lower cost, high efficiency Performance Line and our
A-Series product line, which will enhance our ability to rapidly expand our
global footprint with minimal capital cost.

We continue to see significant and increasing opportunities in technologies and
capabilities adjacent to our core product offerings that can significantly
reduce our customers' CCOE, including the integration of energy storage and
energy management functionality into our systems, and have made investments to
realize those opportunities, enabling our customers
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to make intelligent energy choices by addressing how they buy energy, how they
use energy, and when they use it. We have added advanced module-level control
electronics to our portfolio of technology designed to enable longer series
strings and significant balance of system components cost reductions in large
arrays. We currently offer solar panels that use micro-inverters designed to
eliminate the need to mount or assemble additional components on the roof or the
side of a building and enable optimization and monitoring at the solar panel
level to ensure maximum energy production by the solar system.

Our all-in-one solutions include a full suite of solar power systems including
storage, software and services. Our RLC segment offers its solutions in three
distinct categories to Residential, Light Commercial and New Homes. Our
comprehensive platform drives partner success, loyalty and gross margin growth.
This Power of One® platform is a key element of our strategy to attack the
"long-tail" of the market. Our complete, all-in-one solutions generate the
highest customer reviews.

OneRoof™


Our latest roofing system, OneRoof™, is a Class A fire-rated, UL-certified
roofing system that replaces concrete roofing tiles for a fully integrated
roof-plus-solar solution. With flexible design configurations, integrated panel
clips and built-in grounding, installation is simple and designed specifically
for new homes. With direct-to-deck attachments, self-aligning modules and
snap-in-place module attachments, OneRoof™ installs two to three times faster
than conventional mounting. Kynar-coated metal components add a rugged layer of
roof protection that lasts longer than typical composite shingles and are
covered by our 25-year Complete Confidence Warranty. OneRoof™ sits seamlessly
with the rest of the roof for a sleek, low-profile look with virtually no
visible parts. Interlocking flashings and pans with individually sealed screws
create a watertight barrier against harsh conditions- including wind-driven
rain. Our OneRoof™? system is watertight, Class A fire-rated and built to last.
And for extra peace of mind, our Complete Confidence Warranty covers products,
parts and service for 25 years, monitoring hardware for 10 years and the
Kynar-coated-steel finish for 5 years. OneRoof™ is the only roof-integrated
solar system; paired with the world's best solar. The solution is designed
specifically for new construction, installs much faster than conventional solar
and is cost efficient by replacing roof materials.

SunVault™ Storage


Our new SunVault™ storage solution is primarily designed for residential
customers and its 2-box solution fits in indoor or outdoor areas. Homeowners get
seamless backup power during an outage and the system provides the flexibility
to manage energy as they deem fit. SunVault™ storage integrates seamlessly with
SunPower solar systems creating the only home solar + storage solution designed,
installed and warranted by one company. Its intelligent software shifts when
drawing power from the grid, maximizing the use of solar, as well as provides
real-time updates as to home solar usage and storage, through customized
settings. With only 0.1% of homes in the U.S. having storage and power outages
continue to rise, our storage solutions provides the optimum way to use solar.

Financial Products, flexible financing options

We have a long track record of attracting low-cost capital from diverse sources, including tax equity and debt investors. Since inception we have raised tax equity investment funds to finance the installation of solar energy systems.


Advances in financing are playing a big part in driving increased profits and
dealer loyalty. We sell our residential solar energy solutions to end customers
through a variety of means, including cash sales directly to end customers, and
sales to resellers, including our third-party dealer network.

We offer financing programs that are designed to offer customers a variety of
options to obtain high efficiency solar products and systems, including loans
arranged through our third-party lending partners, in some cases for no money
down, or leases at competitive energy rates. Since its launch in 2011, our
residential lease program, in partnership with third-party investors, provides
U.S. customers SunPower systems under 20-year lease agreements that include
system maintenance and warranty coverage, including warranties on system
performance. SunPower residential lease customers have the option to purchase
their leased solar systems upon the sale or transfer of their home. These
financing options enhance our ability to provide individually-tailored solar
solutions to a broad range of residential customers.

Commercial Roof, Carport, and Ground Mounted Systems


As part of our complete solution product approach, we offer our Helix commercial
market product. The Helix system is a pre-engineered, modular solution that
combines our industry-leading solar module technology with integrated
plug-and-play power stations, cable management systems, and mounting hardware
that is built to last and fast to install, enabling
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customers to scale their solar programs quickly with minimal business disruption. The Helix platform is standardized across rooftop, carport, and ground installations and designed to lower system cost while improving performance. The Helix platform is also bundled with our Smart Energy software analytics, which provides our customers with information about their energy consumption and production, enabling them to further reduce their energy costs.


We also offer a variety of commercial solutions designed to address a wide range
of site requirements for commercial rooftop, parking lot, and open space
applications, including a portfolio of solutions utilizing framed panels and a
variety of internally or externally developed mounting methods for flat roof and
high tilt roof applications. Our commercial flat rooftop systems are designed to
be lightweight and to interlock, enhancing wind resistance and providing for
secure, rapid installations.

We offer parking lot structures designed specifically for SunPower panels,
balance of system components, and inverters and in 2015 expanded our capability
to design and install innovative solar structures and systems for carport
applications. These systems are typically custom design-build projects that
utilize standard templates and design best practices to create a solution
tailored to unique site conditions. SunPower's highest efficiency panels are
especially well suited to stand-alone structures, such as those found in parking
lot applications, because our systems require less steel and other materials per
unit of power or energy produced as compared with our competitors.

Community Solar


SunPower's Community Solar is a way for customers to obtain the benefits of
solar without having any panels installed on their roofs. This enables people
who live in apartments, condominiums and other residences to go solar. These
customers are all part of a "community" of solar energy supporters who obtain
their power from large solar projects built within their utility district rather
than from panels on their respective rooftops.

SunPower has a large commercial customer base to leverage opportunities to expand its community solar footprint. We believe our community solar market policy fits well into long term growth strategy, and provides a significant opportunity for growth by leveraging the existing installation base.

Supply


The solar power panels used in our systems and solutions are entirely sourced
from Maxeon Solar during the exclusivity period under the terms of the supply
agreement that we entered into with Maxeon Solar in connection with the
Spin-Off.

We also work with our suppliers and partners to ensure the reliability of our
supply chain. We have contracted with some of our suppliers for multi-year
supply agreements, under which we have annual minimum purchase obligations. For
more information about our purchase commitments and obligations, see "Liquidity
and Capital Resources-Contractual Obligations" and "Note 9. Commitments and
Contingencies" in the Notes to the condensed consolidated financial statements
in this Quarterly Report on Form 10-Q.


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Results of Operations

Results of operations in dollars and as a percentage of net revenue were as
follows:

                                                                                         Three Months Ended
                                                                    September 27, 2020                        September 29, 2019
                                                            in thousands         % of Revenue         in thousands         % of Revenue
Total revenue                                               $  274,806                100             $  286,042                100
Total cost of revenue                                          237,666                 86                240,547                 84
Gross profit                                                    37,140                 14                 45,495                 16
Research and development                                         5,344                  2                  8,837                  3
Sales, general and administrative                               35,462                 13                 41,428                 14
Restructuring charges                                              (97)                 -                  4,252                  1
Gain on sale and impairment of residential lease
assets                                                             386                  -                 10,756                  4
Income from Transition Services Agreement, Net                  (1,889)                (1)                     -                  -
Gain on business divestitures                                        -                  -                      -                  -
Operating income (loss)                                         (2,066)                 -                (19,778)                (6)
Other income, net                                              148,471                 54                 37,132                 13

Income before income taxes and equity in losses of unconsolidated investees

                                       146,405                 54                 17,354                  7
Provision for income taxes                                     (36,725)               (13)                (2,928)                (1)
Equity in losses of unconsolidated investees                         -                  -                   (960)                 -
Income from continuing operations                              109,680                 41                 13,466                  6
Loss from discontinued operations                              (64,566)               (23)               (32,674)               (11)
Net income (loss)                                               45,114                 16                (19,208)                (7)
Net income (loss) attributable to noncontrolling
interests and redeemable noncontrolling interests                 (230)                 -                  5,178                  2

Net loss from discontinued operations attributable to noncontrolling interests and redeemable noncontrolling interests

                                          (258)                 -                   (987)                 -
Net income (loss) attributable to non-controlling
interests and redeemable non-controlling interest           $     (488)                 -             $    4,191                  1

Net income from continuing operations attributable to stockholders

                                                $  109,450                 40             $   18,644                  7

Net loss from discontinued operations attributable to stockholders

                                                $  (64,824)               (24)            $  (33,661)               (12)
Net income (loss) attributable to stockholders              $   44,626                 16             $  (15,017)                (5)



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                                                                                          Nine Months Ended
                                                                    September 27, 2020                        September 29, 2019
                                                            in thousands         % of Revenue         in thousands         % of Revenue
Total revenue                                               $  783,019                100             $  690,608                100
Total cost of revenue                                          691,043                 88                613,205                 89
Gross profit                                                    91,976                 12                 77,403                 11
Research and development                                        19,106                  2                 26,494                  4
Sales, general and administrative                              112,193                 14                129,582                 19
Restructuring charges                                            2,738                  -                  6,626                  1
(Gain) loss on sale and impairment of residential
lease assets                                                       253                  -                 28,283                  4
Income from Transition Services Agreement, Net                  (1,889)                 -                      -                  -
Gain on business divestitures                                  (10,458)                (1)              (143,400)               (21)
Operating income (loss)                                        (29,967)                (3)                29,818                  4
Other income, net                                              253,051                 32                106,957                 15

Income before income taxes and equity in losses of unconsolidated investees

                                       223,084                 29                136,775                 19
Provision for income taxes                                     (38,716)                (5)               (10,074)                (1)
Equity in losses of unconsolidated investees                         -                  -                   (716)                 -
Income from continuing operations                              184,368                 24                125,985                 18
Loss from discontinued operations                             (122,994)               (16)              (139,684)               (20)
Net income (loss)                                               61,374                  8                (13,699)                (2)

Net income attributable to noncontrolling interests and redeemable noncontrolling interests

                          2,512                  -                 33,474                  5

Net loss from discontinued operations attributable to noncontrolling interests and redeemable noncontrolling interests

                                        (1,313)                 -                 (3,057)                 -

Net loss attributable to non-controlling interests and redeemable non-controlling interest

                          1,199                  -                 30,417                  4

Net income from continuing operations attributable to stockholders

                                                   186,880                 24                159,459                 23

Net loss from discontinued operations attributable to stockholders

                                                  (124,307)               (16)              (142,741)               (21)
Net income attributable to stockholders                     $   62,573                  8             $   16,718                  2



Total Revenue:

Our total revenue during the three months ended September 27, 2020 decreased by
4%, as compared to the three months ended on September 29, 2019, primarily due
to decreases in revenue of our Residential, Light Commercial segment. Our total
revenue during the nine months ended September 27, 2020 increased by 13%, as
compared to the nine months ended on September 29, 2019, primarily due to
increases in revenue of our Commercial and Industrial Solutions segment. Our
commercial backlog in Commercial and Industrial Solutions Segment is less
susceptible to the adverse impact as a result of the COVID-19 pandemic since the
commercial backlog is booked months in advance.

We did not have significant customers that accounted for greater than 10% of
total revenue in the three months and nine months ended September 27, 2020 and
September 29, 2019.

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There is significant uncertainty with respect to the impact of the COVID-19
pandemic on our business. The impact of the COVID-19 pandemic to our revenue
during the three months and nine months ended September 27, 2020 is discussed
below and in our overview.

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Revenue - by Segment

A description of our segments, along with other required information can be found in Note 17, "Segment and Geographical Information" of the consolidated financial statements in Item 1 Financial Statements. Below, we have further discussed changes in revenue for each segment.

                                                     Three Months Ended                                                  Nine Months Ended
(In thousands, except              September 27,       September 29,                             September 27,
percentages)                           2020                2019               % Change                2020              September 29, 2019            % Change
Residential, Light
Commercial                         $  197,710             219,880                   (10) %       $   590,141                 606,994                         (3) %
Commercial and Industrial
Solutions                              74,334              63,524                    17  %           175,264                 155,773                         13  %
Other                                  10,056              33,975                   (70) %            55,615                  78,728                        (29) %
Intersegment and GAAP
adjustments1                           (7,294)            (31,337)                  (77) %           (38,001)               (150,887)                       (75) %
Total revenue                      $  274,806$  286,042                    (4) %       $   783,019                 690,608                         13  %


1 Represents intersegment eliminations and adjustments to segment revenue to
determine consolidated GAAP revenue. Refer details of reconciling items in Note
17. Segment and Geographical Information of the consolidated financial
statements.

Residential, Light Commercial


Revenue for the segment decreased by 10% and 3% during the three and nine months
ended September 27, 2020, respectively, as compared to the three and nine months
ended September 29, 2019, primarily as a result of adverse impacts from the
COVID-19 pandemic on our residential customers, and all our sales channels.

Commercial and Industrial Solutions


Revenue for the segment increased by 17% and 13% during the three and nine
months ended September 27, 2020, respectively, as compared to the three and nine
months ended September 29, 2019, primarily due to increased cash deal and
development sale projects, as well as increased volume of construction revenue
on EPC arrangements.

Other

Revenue for the segment decreased by 70% and 29% during the three and nine
months ended September 27, 2020, respectively as compared to the three and nine
months ended September 29, 2019 primarily due to lower O&M revenue due to the
sale of our O&M services contracts and related assets and liabilities to
NovaSource Power Services (NovaSource") in the second quarter of fiscal 2020, as
well as due to lower revenue from international power plant development projects
due to sales of projects in Chile and Japan in the prior year.

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Total Cost of Revenue

Our total cost of revenue remained relatively consistent during the three months
ended September 27, 2020 and increased by 13% during the nine months ended
September 27, 2020 as compared to the three months and nine months ended
September 29, 2019, primarily due to increases in volumes for Commercial and
Industrial Solutions as well as gain relating to a sale-leaseback of our
manufacturing facility in Hillsboro, Oregon in the quarter ended September 29,
2019, that did not recur. Changes by segments are discussed below in detail.

                                                     Three Months Ended                                             Nine Months Ended
(In thousands, except              September 27,       September 29,       
                     September 27,       September 29,
percentages)                           2020                2019               % Change               2020                2019               % Change
Residential, Light
Commercial                         $  162,931$  191,271                   (15) %       $  495,640$  542,566                    (9) %
Commercial and Industrial
Solutions                              69,214              61,452                    13  %          160,731             147,742                     9  %
Other                                  13,224              17,115                   (23) %           74,521              72,977                     2  %
Intersegment elimination and
other                                  (7,703)            (29,291)                  (74) %          (39,849)           (150,080)                  (73) %
Total cost of revenue              $  237,666$  240,547                    (1) %       $  691,043$  613,205                    13  %
Total cost of revenue as a
percentage of total revenue                86  %               84  %                                     88  %               89  %
Total gross margin
percentage                                 14  %               16  %                                     12  %               11  %


Below, we have further discussed changes in cost of revenue for each segment.

Residential, Light Commercial


Cost of revenue for the segment decreased by 15% and 9% during the three months
and nine months ended September 27, 2020, respectively as compared to the three
months and nine months ended September 29, 2019, primarily due to lower sales as
a result of adverse impacts from the COVID-19 pandemic.

Commercial and Industrial Solutions


Cost of revenue for the segment increased by 13% and 9% during the three and
nine months ended September 27, 2020, respectively as compared to the three and
nine months ended September 29, 2019, primarily due to increased cash deal and
development sale projects, as well as increased volume of construction revenue
on EPC arrangements.

Other

Cost of revenue for the segment decreased by 23% during the three months ended
September 27, 2020 as compared to the three months September 29, 2019, primarily
due to lower O&M cost of revenue due to the sale of our O&M services contracts
for utility, commercial, and industrial scale photovoltaic power projects and
related assets and liabilities to NovaSource in the second quarter of fiscal
2020, partially offset by a gain of $21.3 million on the sale and leaseback of
our Oregon manufacturing facility in the third quarter of fiscal 2019.

Cost of revenue for the segment increased by 2% during the nine months ended
September 27, 2020 as compared to the three months ended September 29, 2019,
primarily due to a gain of $21.3 million on the sale and leaseback of our Oregon
manufacturing facility in the third quarter of fiscal 2019, partially offset by
a reduction in O&M revenue due to the sale of our O&M services contracts and
related assets and liabilities to NovaSource in the second quarter of fiscal
2020.



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Gross Margin
                                                               Three Months Ended                                   Nine Months Ended
                                                  September 27, 2020

September 29, 2019September 27, 2020September 29, 2019 Residential, Light Commercial

                                   18  %                     13  %                     16  %                      11  %
Commercial and Industrial Solutions                              7  %                      3  %                      8  %                       5  %
Other                                                          (32) %                     50  %                    (34) %                       7  %



Residential, Light Commercial

Gross margin for the segment increased by 5% for both the three months and nine
months ended September 27, 2020, as compared to the three months and nine months
ended September 29, 2019, primarily as a result of better product mix with
higher volume in cash and loan channel sales.

Commercial and Industrial Solutions

Gross margin for the segment increased by 4% and 3%, during the three months and nine months ended September 27, 2020, respectively as compared to the three months and nine months ended September 29, 2019, primarily as a result of product mix with higher cash sales and commercial EPC projects.

Other


Gross margin for the segment decreased by 82% and 41%, during the three months
and nine months ended September 27, 2020, respectively, as compared to the three
months and nine months ended September 29, 2019, primarily due to lower O&M
revenue due to the sale of our O&M service contracts and related assets and
liabilities to NovaSource during the second quarter of fiscal 2020, and also due
to the sale of development projects in Chile and Japan in fiscal 2019, as well
as the sale and leaseback of our Oregon manufacturing facility in the third
quarter of fiscal 2019.


Research and Development ("R&D")

                                                      Three Months Ended                                                       Nine Months Ended
(In thousands, except
percentages)                  September 27, 2020       September 29, 2019           % Change           September 27, 2020       September 29, 2019           % Change
R&D                                     5,344                     8,837                   (40) %                19,106                    26,494                   (28) %
As a percentage of
revenue                                     2  %                      3  %                                           2  %                      4  %



R&D expense decreased by $3.5 million and $7.4 million during the three months
and nine months ended September 27, 2020, respectively, as compared to the three
months and nine months ended September 29, 2019, primarily due to reimbursement
of $3.6 million by Maxeon Solar during the third quarter of fiscal 2020, post
Spin-Off under the product collaboration agreement entered into with Maxeon
Solar in connection with the Spin-Off, as well as lower labor expense, and lower
travel expenditures following the implementation of travel restrictions as a
result of the COVID-19 pandemic.

Sales, General and Administrative ("SG&A")

                                                         Three Months Ended                                                      Nine Months Ended
(In thousands, except               September 27,                                                          September 27,
percentages)                            2020              September 29, 2019          % Change                 2020              September 29, 2019           % Change
SG&A                                      35,462                   41,428                   (14) %              112,193                  129,582                    (13) %
As a percentage of revenue                    13  %                    14  %                                         14  %                    19  %



SG&A expenses decreased by $6.0 million and $17.4 million during the three and
nine months ended September 27, 2020, respectively, as compared to the three and
nine months ended September 29, 2019, primarily due to a decrease in labor costs
due to restructuring, as well as lower office related expenses given that the
majority of our workforce is working remotely, partially offset by higher
litigation claims settlement payments.
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Restructuring Charges
                                                            Three Months Ended                                                       Nine Months Ended
(In thousands, except
percentages)                        September 27, 2020       September 29, 2019           % Change           September 27, 2020       September 29, 2019           % Change
Restructuring charges                           (97)                    4,252                  (102) %                 2,738                     6,626                   (59) %
As a percentage of revenue                        -  %                      1  %                                           -  %                      1  %


Restructuring charges decreased by $4.3 million and $3.9 million during the
three and nine months ended September 27, 2020, respectively, as compared to the
three months ended September 29, 2019, primarily due to the non-cash
restructuring charges we incurred during the three months ended September 29,
2019 associated with lease termination, which did not reoccur during the three
months ended September 27, 2020.

See "Item 1. Financial Statements-Note 9. Restructuring" in the Notes to the
condensed consolidated financial statements in this Quarterly Report on Form
10-Q for further information regarding our restructuring plans.

Loss on sale and impairment of residential lease assets

                                                           Three Months Ended                                                       Nine Months Ended
(In thousands, except
percentages)                       September 27, 2020       September 29, 2019           % Change           September 27, 2020       September 29, 2019           % Change
(Gain) loss on sale and
impairment of residential
lease assets                                   386                    10,756                   (96) %                   253                    28,283                   (99) %
As a percentage of revenue                       -  %                      4  %                                           -  %                      4  %



Loss on sale and impairment of residential lease assets decreased by
$10.4 million and $28.0 million during the three months and nine months ended
September 27, 2020, respectively as compared to the three months and nine months
ended September 29, 2019, primarily due to non-cash impairment charges for the
remaining assets in the residential lease portfolio that have yet to be sold.
During the three months ended September 29, 2019, we sold the majority of the
remaining portion of the portfolio of residential lease assets that was still
retained by us to SunStrong Capital Holdings, LLC, and recorded a loss on sale
of $10.5 million on such sale.

Gain on business divestiture
                                                           Three Months Ended                                                        Nine Months Ended
(In thousands, except
percentages)                       September 27, 2020       September 29, 2019           % Change           September 27, 2020        September 29, 2019           % Change
Gain on business divestiture                     -                         -                   100  %               (10,458)                  (143,400)                  (93) %
As a percentage of revenue                       -  %                      -  %                                           -  %                     (21) %



During the nine months ended September 27, 2020, we recorded a gain on sale of
our O&M business of $10.5 million. During the nine months ended September 29,
2019, we recorded a gain of $143.4 million on sale of the commercial
sale-leaseback portfolio.

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Income from Transition Services Agreement, net

                                                           Three Months Ended                                                       Nine Months Ended
(In thousands, except
percentages)                       September 27, 2020       September 29, 2019           % Change           September 27, 2020       September 29, 2019           % Change
Income from transaction
service agreement                           (1,889)                        -                   100  %                (1,889)                        -                   100  %
As a percentage of revenue                      (1) %                      -  %                                           -  %                      -  %



In connection with the Spin-Off, we and Maxeon Solar entered into a transition
services agreement, under which, we are providing certain labor and non-labor
services to Maxeon Solar, and also receiving certain limited services with
respect to certain shared processes post Spin-Off. The term of the transition
services agreement is 12 months, extendable by 6 months, and the services are
billed at cost plus a fixed mark-up. During the three and nine months ended
September 27, 2020, we recorded $2.1 million of income for services provided
under the agreement. This was offset by $0.2 million of services provided by
Maxeon Solar to us, resulting in net reduction of $1.9 million to operating
expenses on the condensed consolidated statement of operations.

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Other Income (Expense), Net
                                                 Three Months Ended                                             Nine Months Ended
(In thousands, except         September 27,       September 29,                              September 27,       September 29,
percentages)                      2020                 2019               % Change               2020                2019               % Change
Interest income               $      104$      951                    (89) %       $      682$    2,184                   (69) %
Interest expense                  (7,090)             (8,930)                   (21) %          (24,731)            (40,570)                  (39) %
Other Income:
Other, net                       155,457              45,111                    245  %          277,100             145,343                    91  %
Other income, net             $  148,471$   37,132                    300  %       $  253,051$  106,957                   137  %
As a percentage of
revenue                               54  %               13   %                                     32  %               15  %



Interest expense decreased $1.8 million and $15.8 million during the three
months and nine months ended September 27, 2020, respectively as compared to the
three months and nine months ended September 29, 2019 primarily due to sale of
the sale-leaseback financing obligations in connection with the sale of the
commercial sale-leaseback portfolio during the first quarter of fiscal 2019 as
well as the repurchase of our convertible debentures during the first and third
quarters of fiscal 2020.

Other income increased by $110.3 million and $131.8 million in the three months
and nine months ended September 27, 2020, respectively, as compared to the three
months and nine months ended September 29, 2019, primarily due to a $155.4
million and $274.4 million gain on an equity investment with a readily
determinable fair value in the three months and nine months ended September 27,
2020, as compared to a gain of $28.5 million and $129.0 million in the three
months and nine months ended September 29, 2019, respectively. Additionally, we
recorded a gain of $0.1 million and $3.1 million as a result of the early
repurchase of a portion of our 0.875% debentures due 2021 in the three months
and nine months ended September 27, 2020, respectively.

Income Taxes

                                                      Three Months Ended                                             Nine Months Ended
(In thousands, except              September 27,       September 29,                              September 27,       September 29,
percentages)                           2020                 2019               % Change               2020                2019               % Change

Provision for income taxes $ (36,725)$ (2,928)

        1,154  %       $  (38,716)$  (10,074)                  284  %
As a percentage of revenue                (13) %               (1)  %                                     (5) %               (1) %



In the three months ended September 27, 2020, our income tax provision of $36.7
million on profit from continuing operations before income taxes and equity in
earnings of unconsolidated investees of $146.4 million was primarily due to
associated domestic tax expenses arising from the taxable gain related to the
Spin-Off, and foreign withholding taxes relating to foreign dividend
distributions. Our income tax provision of $2.9 million in the three months
ended September 29, 2019 on a profit from continuing operations before income
taxes and equity in earnings of unconsolidated investees of $17.4 million was
primarily due to tax expense in foreign jurisdictions that were profitable.

In the nine months ended September 27, 2020, our income tax provision of
$38.7 million on a profit from continuing operations before income taxes and
equity in earnings of unconsolidated investees of $223.1 million was primarily
due to domestic tax expense arising from the taxable gain related to the
Spin-Off, and foreign withholding taxes relating to foreign dividend
distributions. Our income tax provision of $10.1 million in the nine months
ended September 29, 2019 on a profit from continuing operations before income
taxes and equity in earnings of unconsolidated investees of $136.8 million was
primarily due to the projected tax expense in foreign jurisdictions that were
profitable, and a net change in valuation allowance from a foreign jurisdiction.

In the first half of fiscal 2020, we distributed earnings from certain foreign
jurisdictions because of business and cash needs, and accrued withholding tax of
$0.5 million. In addition, as part of the reorganization steps to execute the
Spin-Off on August 26, 2020, non-U.S. subsidiaries' earnings were distributed
during the first two months of the third quarter of fiscal 2020, which resulted
in $4.8 million withholding tax liabilities. After the Spin-Off, our operations
are predominantly located in the United States with limited earnings generated
in foreign jurisdictions. It is our intention to indefinitely reinvest any
non-U.S. earnings outside the United States.
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We record a valuation allowance to reduce our deferred tax assets in the U.S to
the amount that is more likely than not to be realized. In assessing the need
for a valuation allowance, we consider historical levels of income, expectations
and risks associated with the estimates of future taxable income and ongoing
prudent and feasible tax planning strategies. In the event we determine that we
would be able to realize additional deferred tax assets in the future in excess
of the net recorded amount, or if we subsequently determine that realization of
an amount previously recorded is unlikely, we would record an adjustment to the
deferred tax asset valuation allowance, which would change income tax in the
period of adjustment.

In June 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the
2015 U.S. tax court decision in Altera Co v. Commissioner, regarding the
inclusion of stock-based compensation costs under cost sharing agreements.
SunPower previously quantified and recorded the impact of including such
compensation costs, as described in the Ninth Circuit decision, of $5.8 million
in the fourth quarter of fiscal 2019, as a reduction to deferred tax asset,
fully offset by a reduction to a valuation allowance of the same amount, without
any income tax expense impact. We will reevaluate the deferred tax disclosure at
the end of the fiscal year 2020.

Equity in Losses of Unconsolidated Investees

                                                                  Three Months Ended                                                                  Nine Months Ended
(In thousands, except
percentages)                           September 27, 2020               September 29, 2019            % Change             September 27, 2020              September 29, 2019            % Change
Equity in losses of
unconsolidated investees             $            -                    $           (960)                   (100) %       $            -                   $           (716)                   (100) %
As a percentage of revenue                        -       %                           -    %                                          -       %                          -    %


Our equity in losses of unconsolidated investees increased by $1.0 million and
$0.7 million in the three months and nine ended September 27, 2020 as compared
to the three months and nine months ended September 29, 2019, which was driven
by a decrease in our share of losses of unconsolidated investees.
Net (Income) Loss Attributable to Noncontrolling Interests and Redeemable
Noncontrolling Interests
                                                               Three Months Ended                                                             Nine Months Ended
(In thousands, except
percentages)                          September 27, 2020          September 29, 2019            % Change            September 27, 2020          September 29, 2019            % Change
Net income (loss) attributable
to noncontrolling interests
and redeemable noncontrolling
interests                                         (230)                  5,178                       (104) %                   2,512                  33,474                        (92) %



We have entered into facilities with third-party tax equity investors under
which the investors invest in a structure known as a partnership flip. We
determined that we hold controlling interests in these less-than-wholly-owned
entities and therefore we have fully consolidated these entities. We apply the
hypothetical liquidation at book value method in allocating recorded net income
(loss) to each investor based on the change in the reporting period, of the
amount of net assets of the entity to which each investor would be entitled to
under the governing contractual arrangements in a liquidation scenario.

The decrease in net loss attributable to noncontrolling interests and redeemable
noncontrolling interests of $(0.2) million and $2.5 million during the three
months and nine months ended September 27, 2020, respectively as compared to the
three months and nine months ended September 29, 2019, was primarily due to the
deconsolidation of a majority of our residential lease assets during the quarter
ended September 29, 2019.

Critical Accounting Estimates


We prepare our condensed consolidated financial statements in conformity with
U.S. generally accepted accounting principles, which requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
revenues, and expenses recorded in our financial statements. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.

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Due to the COVID-19 pandemic, there has been uncertainty and disruption in the
global economy and financial markets. We are not aware of any specific event or
circumstance that would require updates to our estimates or judgments or require
us to revise the carrying value of our assets and liabilities as of October 28,
2020, the date of issuance of this Quarterly Report on Form 10-Q. These
estimates may change as new events occur and additional information is obtained.
Actual results may differ from these estimates under different assumptions and
conditions.

There were no other significant changes in our critical accounting estimates
during the fiscal quarter ended September 27, 2020 compared to those previously
disclosed in "Critical Accounting Estimates" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
the 2019 Annual Report on Form 10-K.
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Liquidity and Capital Resources

Cash Flows

A summary of the sources and uses of cash, cash equivalents, restricted cash and restricted cash equivalents is as follows:

Nine Months Ended

                                                                      September 27,        September 29,
(In thousands)                                                             2020                 2019
Net cash provided by (used in) operating activities                   $  (202,513)$  (266,162)
Net cash provided by (used in) investing activities                   $   (10,869)$     7,695
Net cash (used in) provided by financing activities                   $   104,268$   106,686



Operating Activities

Net cash used in operating activities for the nine months ended September 27,
2020 was $202.5 million and was primarily the result of: (i) $275.6 million
mark-to-market gain on equity investments with readily determinable fair value;
(ii) a $75.1 million decrease in accounts payable and accrued liabilities,
primarily attributable to payments of accrued expenses; (iii) a $53.8 million
decrease in contract liabilities primarily due to the attainment of milestones
billings for a variety of projects; (iv) a $22.8 million increase in contract
assets; (v) a $12.1 million increase in inventories to support the construction
of our solar energy projects; (vi) a $11.2 million increase in project assets
driven by construction activities; (vii) $10.5 million gain on sale of our O&M
business; (viii) $8.6 million decrease in operating lease liabilities; (ix) $4.3
increase in prepaid expenses and other assets, primarily related to movements in
prepaid inventory; and (x) $3.1 million gain on retirement of our convertible
debentures. This was partially offset by (i) $113.0 million decrease in accounts
receivable due to timing of billings and payments; (ii) net non-cash charges of
$71.0 million related to depreciation, stock-based compensation and other
non-cash charges; (iii) net income of $61.4 million; (iv) a $16.3 million
decrease in advances to suppliers; and (v) a $9.9 million decrease in operating
lease right-of-use assets.

Net cash used in operating activities for the nine months ended September 29,
2019 was $266.2 million and was primarily the result of: (i) net loss of $13.7
million; (ii) $143.4 million gain on business divestiture; (iii) $129.0 million
mark-to-market gain on equity investments with readily determinable fair value;
(iv) $108.1 million increase in inventories to support the construction of our
solar energy projects; (v) $47.0 million increase in accounts receivable,
primarily driven by increases billings; (vi) $21.4 million gain on sale of
assets; (vii) $18.1 million increase in contract assets driven by construction
activities; (viii) $17.3 million gain on sale of equity investments without
readily determinable fair value; (ix) $9.2 million increase in project assets,
primarily related to the construction of our Commercial solar energy projects;
(x) $7.2 million decrease in operating lease liabilities; and (xi) $0.5 million
increase in long-term financing receivables. This was offset by (i) $62.0
million of depreciation and amortization; (ii) $64.0 million increase in
accounts payable and other accrued liabilities; (iii) $36.7 million loss on sale
and impairment of residential lease assets; (iv) $33.3 million increase in
advances to suppliers; (v) stock-based compensation of $18.9 million; (vi) $8.1
million increase in contract liabilities driven by construction activities;
(vii) $1.5 million decrease in prepaid expenses and other assets, primarily
related to movements in prepaid inventory (viii) $7.5 million non-cash interest
expense; (ix) $6.2 million decrease in operating lease right-of-use assets; (x)
$5.9 million non-cash restructuring charges; (xi) $2.1 million loss in equity in
earnings of unconsolidated investees; (xii) bad debt expense of $1.3 million;
(xiii) impairment of long-lived assets of $0.8 million; and (ix) $0.5 million
net change in deferred income taxes.

Investing Activities


Net cash used in investing activities in the nine months ended September 27,
2020 was $10.9 million, which included (i) cash outflow of $140.1 million upon
the Spin-Off; (ii) $13.2 million purchase of property, plant and equipment;
(iii) $5.4 million in capital expenditures primarily related to the expansion of
our solar cell manufacturing capacity and costs associated with solar power
systems before the Spin-Off and (iv) $1.3 million of purchases of marketable
securities.. This was partially offset by (i) $119.4 million proceeds from sale
of equity investment; (ii) $15.4 million cash received from the sale of our O&M
business, net of de-consolidated cash; (iii) $7.7 million proceeds from return
of capital of equity investments, and (iv) $6.6 million proceeds from maturities
of marketable securities.

Net cash provided by investing activities in the nine months ended September 29,
2019 was $7.7 million, which included (i) $42.9 million proceeds from sale of
investments; (ii) net proceeds of $40.5 million from business divestiture; and
(iii) proceeds of $40.0 million from sale of property, plant, and equipment.
This was offset by (i) cash paid for solar power systems
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of $51.8 million; (ii) $35.1 million purchases of property, plant and equipment;
(iii) $16.4 million cash de-consolidated from sale of residential lease assets;
and (iv) cash paid for investments in unconsolidated investees of $12.4 million.

Financing Activities


Net cash provided by financing activities in the nine months ended September 27,
2020 was $104.3 million, which included: (i) $200 million proceeds from issuance
by Maxeon Solar of its green convertible debt which was derecognized upon
Spin-Off; (ii) $183.7 million cash received from a bank loan and other debt;
(iii) $13.4 million proceeds from non-recourse residential financing debt, net
of issuance costs; and (iv) $2.2 million settlement of contingent consideration
arrangement. This was partially offset by: (i) $183.1 million repayment of bank
loans and other debt; (ii) $95.2 million cash paid for repurchase of our
convertible debentures; (iii) $8.5 million in purchases of treasury stock for
tax withholding obligations on vested restricted stock; and (iv). $7.2 million
repayment of non-recourse residential financing debt.

Net cash provided by financing activities in the nine months ended September 29,
2019 was $106.7 million, which included: (i) $69.3 million net proceeds from the
issuance of non-recourse residential financing debt, net of incurrence costs;
(ii) $31.1 million of net contributions from noncontrolling interests and
redeemable noncontrolling interests related to residential lease projects; and
(iii) $22.4 million in net proceeds of 0.75% debentures due 2018, bank loans and
other debt. This was partially offset by (i) $9.0 million of payment for prior
business combination; (ii) $4.7 million in purchases of treasury stock for tax
withholding obligations on vested restricted stock; and (iii) $2.4 million
settlement of a contingent consideration arrangement

Debt and Credit Sources

Convertible Debentures


As of September 27, 2020, an aggregate principal amount of $425.0 million of the
4.00% senior convertible debentures due 2023 (the "4.00% debentures due 2023")
remained issued and outstanding. The 4.00% debentures due 2023 were issued on
December 15, 2015. Interest on the 4.00% debentures due 2023 is payable on
January 15 and July 15 of each year, beginning on July 15, 2016. Holders are
able to exercise their right to convert the debentures at any time into shares
of our common stock at an initial conversion price approximately equal to $30.53
per share, subject to adjustment in certain circumstances. If not earlier
repurchased or converted, the 4.00% debentures due 2023 mature on January 15,
2023. Holders may require us to repurchase all or a portion of their 4.00%
debentures due 2023 upon a fundamental change, as described in the related
indenture, at a cash repurchase price equal to 100% of the principal amount plus
accrued and unpaid interest. If we undergo a non-stock change of control, as
described in the related indenture, the 4.00% debentures due 2023 will be
subject to redemption at our option, in whole but not in part, for a period of
30 calendar days following a repurchase date relating to the non-stock change of
control, at a cash redemption price equal to 100% of the principal amount plus
accrued and unpaid interest. Otherwise, the 4.00% debentures due 2023 are not
redeemable at our option prior to the maturity date. In the event of certain
events of default, Wells Fargo Bank, National Association ("Wells Fargo"), the
trustee, or the holders of a specified amount of then-outstanding 4.00%
debentures due 2023 will have the right to declare all amounts then outstanding
due and payable.

In June 2014, we issued $400.0 million in principal amount of our 0.875%
debentures due June 1, 2021. Interest is payable semi-annually, beginning on
December 1, 2014. An aggregate principal amount of $250.0 million of the 0.875%
debentures due 2021 were initially acquired by Total. The 0.875% debentures due
2021 are convertible into shares of our common stock at any time based on an
initial conversion rate of 20.5071 shares of common stock per $1,000 principal
amount of 0.875% senior convertible debentures (which is equivalent to an
initial conversion price of approximately $48.76 per share, which provides Total
the right to acquire up to 3,969,375 shares of our common stock following the
purchase noted below). The applicable conversion rate may adjust in certain
circumstances, including a fundamental change, as described in the indenture
governing the 0.875% debentures due 2021.

During the three and nine months ended September 27, 2020, we purchased $8.1
million and $98.4 million respectively, of aggregated principal amount of the
above convertible debt due 2021 for approximately $95.1 million, net. Total held
a principal amount of $56.4 million of the total convertible debt repurchased
and the remaining was held by other third-party investors. The purchases and
early retirements resulted in a gain from extinguishment of debt of
approximately $0.1 million and $3.1 million in the three and nine months ended
September 27, 2020 respectively, which represented the difference between the
book value of the convertible notes, net of the remaining unamortized discount
prior to repurchase and the reacquisition price of the convertible notes upon
repurchase. The gain was recorded within "Other, net" on the condensed
consolidated statement of operations. If not earlier repurchased or converted,
the 0.875% debentures due 2021 mature on June 1, 2021.

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During the third quarter fiscal 2020, we updated our conversion rates for our
convertible debentures. Specifically, effective September 11, 2020, the new
conversion rates are 25.1388 shares of SunPower's common stock per $1,000
principal amount of 2021 Debentures (equivalent to a conversion price of $39.78
per share) and 40.1552 shares of SunPower's common stock per $1,000 principal
amount of 2023 Debentures (equivalent to a conversion price of $24.90 per
share).

The conversion rates were previously 20.5071 shares of SunPower's common stock
per $1,000 principal amount of 2021 Debentures and 32.7568 shares of SunPower's
common stock per $1,000 principal amount of 2023 Debentures. Notice of the
conversion rate adjustment was delivered to Wells Fargo Bank, National
Association, the trustee, in accordance with the terms of the Indentures.
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Financing for Safe Harbor Panels Inventory
On September 27, 2019, we entered into a joint venture with Hannon Armstrong
Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong"), to finance up to
200 MWs of panels inventory, preserving the 30% federal Investment Tax Credit
("ITC") for third-party owned commercial and residential systems and meeting
safe harbor guidelines.
The loan carries an interest rate of 7.5% per annum payable quarterly. Principal
amount on the loan is expected to be repaid quarterly from the financing
proceeds of the underlying projects. The ultimate maturity date for the loan is
June 30, 2022. As of September 27, 2020, we had drawn $96.8 million under this
facility. During the three and nine months ended September 27, 2020, we repaid
$2.6 million and $4.2 million, respectively and did not have any additional
drawdowns.
Loan Agreement with California Enterprise Development Authority ("CEDA")

  On December 29, 2010, we borrowed from CEDA the proceeds of the $30.0 million
aggregate principal amount of CEDA's tax-exempt Recovery Zone Facility Revenue
Bonds (SunPower Corporation - Headquarters Project) Series 2010 (the "Bonds")
maturing April 1, 2031, under a loan agreement with CEDA. Certain of our
obligations under the loan agreement were contained in a promissory note dated
December 29, 2010 issued by us to CEDA, which assigned the promissory note,
along with all right, title and interest in the loan agreement, to Wells Fargo,
as trustee, with respect to the Bonds for the benefit of the holders of the
Bonds. The Bonds bear interest at a fixed-rate of 8.50% per annum. As of
September 27, 2020, the fair value of the Bonds was $30.6 million, determined by
using Level 2 inputs based on quarterly market prices as reported by an
independent pricing source.

As of September 27, 2020, the $30.0 million aggregate principal amount of the
Bonds was classified as "Long-term debt" in our condensed consolidated balance
sheet.

Revolving Credit Facility with Credit Agricole


On October 29, 2019, we entered into the 2019 Revolver with Credit Agricole, as
lender, with a revolving credit commitment of $55.0 million. The 2019 Revolver
contains affirmative covenants, events of default and repayment provisions
customarily applicable to similar facilities and has a per annum commitment fee
of 0.05% on the daily unutilized amount, payable quarterly. Loans under the 2019
Revolver bear either an adjusted LIBOR interest rate for the period elected for
such loan or a floating interest rate of the higher of prime rate, federal funds
effective rate, or LIBOR for an interest period of one month, plus an applicable
margin, ranging from 0.25% to 0.60%, depending on the base interest rate
applied, and each matures on the earlier of April 29, 2021, or the termination
of commitments thereunder. Our payment obligations under the 2019 Revolver are
guaranteed by Total SE up to the maximum aggregate principal amount of $55.0
million. In consideration of the commitments of Total SE, we are required to pay
them a guaranty fee of 0.25% per annum on any amounts borrowed under the 2019
Revolver and to reimburse Total SE for any amounts paid by them under the parent
guaranty. We have pledged the equity of a wholly-owned subsidiary that holds our
shares of Enphase Energy, Inc. common stock to secure our reimbursement
obligation under the parent guaranty. We have also agreed to limit our ability
to draw funds under the 2019 Revolver to no more than 67% of the fair market
value of the common stock held by our subsidiary at the time of the draw.

As of September 27, 2020, we had no outstanding borrowings under the 2019 Revolver.

September 2011 Letter of Credit Facility with Deutsche Bank and Deutsche Bank Trust Company Americas (together, "Deutsche Bank Trust")


On September 27, 2011, we entered into a letter of credit facility with Deutsche
Bank Trust which provides for the issuance, upon request by us, of letters of
credit to support our obligations in an aggregate amount not to exceed $200.0
million. Each letter of credit issued under the facility is fully
cash-collateralized and we have entered into a security agreement with Deutsche
Bank Trust, granting them a security interest in a cash collateral account
established for this purpose.

As of September 27, 2020 and December 29, 2019, letters of credit issued and
outstanding under the Deutsche Bank Trust facility totaled $2.6 million and
$3.6 million, respectively, which were fully collateralized with restricted cash
on the condensed consolidated balance sheets.


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Other Facilities

Asset-Backed Loan with Bank of America


On March 29, 2019, we entered in a Loan and Security Agreement with Bank of
America, N.A, which provides a revolving credit facility secured by certain
inventory and accounts receivable in the maximum aggregate principal amount of
$60.0 million. The Loan and Security Agreement contains negative and affirmative
covenants, events of default and repayment and prepayment provisions customarily
applicable to asset-backed credit facilities. The facility bears a floating
interest rate of LIBOR plus an applicable margin, and matures on the earliest of
March 29, 2022, if the balance of the revolver at the time is not zero, March 1,
2021 (a date that is 91 days prior to the maturity of our 0.875% debentures due
2021), or the termination of the commitments thereunder. On September 8, 2020,
we signed an amendment with Bank of America, that provides that if we pay the
full outstanding balance 91 days before the maturity of our convertible debt,
and maintain the outstanding at zero during that period of 91 days, as well as
immediately after the repayment of the 0.875% debentures due 2021, then the
convert maturity does not trigger the termination of the Asset-Backed Loan.
During the three and nine months ended September 27, 2020 we repaid $28.1
million and $40.4 million, respectively. During the three and nine months ended
September 27, 2020, we drew an additional $25.3 million and $46.4 million,
respectively. We had a balance outstanding of $25.2 million as of September 27,
2020.

SunTrust Facility

On June 28, 2018, we entered in a Financing Agreement with SunTrust Bank, which
provides a revolving credit facility in the maximum aggregate principal amount
of $75.0 million. Each draw down from the facility bears either a base rate or
federal funds rate plus an applicable margin or a floating interest rate of
LIBOR plus an applicable margin, and matures no later than three years. As of
September 27, 2020, we had $75.0 million in borrowing capacity under this
limited recourse construction financing facility.

Non-recourse Financing and Other Debt


In order to facilitate the construction, sale or ongoing operation of certain
solar projects, including our residential leasing program, we regularly obtain
project-level financing. These financings are secured either by the assets of
the specific project being financed or by our equity in the relevant project
entity and the lenders do not have recourse to our general assets for repayment
of such debt obligations, and hence the financings are referred to as
non-recourse. Non-recourse financing is typically in the form of loans from
third-party financial institutions, but also takes other forms, including "flip
partnership" structures, sale-leaseback arrangements, or other forms commonly
used in the solar or similar industries. We may seek non-recourse financing
covering solely the construction period of the solar project or may also seek
financing covering part or all of the operating life of the solar project. We
classify non-recourse financings in our condensed consolidated balance sheets in
accordance with their terms; however, in certain circumstances, we may repay or
refinance these financings prior to stated maturity dates in connection with the
sale of the related project or similar such circumstances. In addition, in
certain instances, the customer may assume the loans at the time that the
project entity is sold to the customer. In these instances, subsequent debt
assumption is reflected as a financing outflow and operating inflow in the
condensed consolidated statements of cash flows to reflect the substance of the
assumption as a facilitation of customer financing from a third party.

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Liquidity

As of September 27, 2020, we had unrestricted cash and cash equivalents of
$324.7 million as compared to $302.0 million as of December 29, 2019. Our cash
balances are held in numerous locations throughout the world, and as of
September 27, 2020, we had approximately $2.3 million held outside of the United
States. This offshore cash is used to fund operations of our business in the
Europe and Asia Pacific regions as well as non-U.S. manufacturing operations,
which require local payment for product materials and other expenses. The
amounts held outside of the United States represent the earnings of our foreign
subsidiaries which under the enacted Tax Act, incurred a one-time transition tax
(such amounts were previously tax deferred). The incurrence, however, would did
not result in a cash payment due to our cumulative net operating loss position.
In addition, while we have begun the transition away from our project
development business, we still expect to invest capital to develop solar power
systems and plants for sale to customers. The development of solar power plants
can require long periods of time and substantial initial investments. Our
efforts in this area may consist of all stages of development, including land
acquisition, permitting, financing, construction, operation and the eventual
sale of the projects. We often choose to bear the costs of such efforts prior to
the final sale to a customer, which involves significant upfront investments of
resources (including, for example, large transmission deposits or other
payments, which may be non-refundable), land acquisition, permitting, legal and
other costs, and in some cases the actual costs of constructing a project, in
advance of the signing of PPAs and EPC contracts and the receipt of any revenue,
much of which is not recognized for several additional months or years following
contract signing. Any delays in disposition of one or more projects could have a
negative impact on our liquidity.

Certain of our customers also require performance bonds issued by a bonding
agency or letters of credit issued by financial institutions, which are returned
to us upon satisfaction of contractual requirements. If there is a contractual
dispute with the customer, the customer may withhold the security or make a draw
under such security, which could have an adverse impact on our liquidity.
Obtaining letters of credit may require adequate collateral. All letters of
credit issued under our 2016 Guaranteed LC Facilities are guaranteed by Total SE
pursuant to the Credit Support Agreement. Our September 2011 letter of credit
facility with Deutsche Bank Trust is fully collateralized by restricted cash,
which reduces the amount of cash available for operations. As of September 27,
2020, letters of credit issued under the Deutsche Bank Trust facility amounted
to $2.6 million which were fully collateralized with restricted cash on our
condensed consolidated balance sheets.

Solar power plant projects often require significant up-front investments. These
include payments for preliminary engineering, permitting, legal, and other
expenses before we can determine whether a project is feasible. We often make
arrangements with third-party financiers to acquire and build solar power
systems or to fund project construction using non-recourse project debt. As of
September 27, 2020, outstanding amounts related to our project financing totaled
$15.7 million.

There are no assurances, however, that we will have sufficient available cash to
repay our indebtedness or that we will be able to refinance such indebtedness on
similar terms to the expiring indebtedness. If our capital resources are
insufficient to satisfy our liquidity requirements, we may seek to sell
additional equity or debt securities or obtain other debt financing. The current
economic environment, however, could limit our ability to raise capital by
issuing new equity or debt securities on acceptable terms, and lenders may be
unwilling to lend funds on acceptable terms in the amounts that would be
required to supplement cash flows to support operations. The sale of additional
equity or convertible debt securities would result in additional dilution to our
stockholders (and the potential for further dilution upon the exercise of
warrants or the conversion of convertible debt) and may not be available on
favorable terms or at all, particularly in light of the current conditions in
the financial and credit markets. Additional debt would result in increased
expenses and would likely impose new restrictive covenants which may be similar
or different than those restrictions contained in the covenants under our
current loan agreements and debentures. In addition, financing arrangements,
including project financing for our solar power plants and letters of credit
facilities, may not be available to us, or may not be available in amounts or on
terms acceptable to us. We also continue to focus on improving our overall
operating performance and liquidity, including managing cash flow and working
capital.

The global COVID-19 pandemic created significant uncertainty and economic
disruptions worldwide. In our response to the COVID-19 pandemic, we instituted
several measures, including requirements to work remotely for the majority of
our workforce, travel restrictions as well as several mitigating actions to
prudently manage our business during the current industry uncertainty. These
actions included reducing management salaries, freezing hiring and merit
increases, reducing capital expenditures and discretionary spending, and
temporarily moving most of our employees to a four-day work week in recognition
of reduced demand and workloads due to the pandemic. All of our employees
reverted back to a full work week during the last week of June and returned to
full salary during the last week of July.

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Despite the challenging and volatile economic conditions, we believe that our
total cash and cash equivalents will be sufficient to meet our obligations over
the next 12 months from the date of issuance of our financial statements,
including repayment of the remaining $301.6 million principal amount outstanding
under the 0.875% debentures due 2021. In addition, we have historically been
successful in our ability to divest certain investments and non-core assets
including some of our equity investments, secure other sources of financing,
such as accessing the capital markets, and implement other cost reduction
initiatives such as restructuring, to address our liquidity needs; however, our
ability to take these steps may be adversely affected by many factors impacting
us and the markets generally, including the COVID-19 pandemic. If alternative
actions were to be necessary, we believe they could be implemented prior to the
maturity date of the 0.875% debentures due 2021.

Although we have historically been able to generate liquidity, we cannot
predict, with certainty, the outcome of our actions to generate liquidity as
planned. Additionally, we are uncertain of the full extent to which the COVID-19
pandemic will impact our business, operations and financial results over time.
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Contractual Obligations

The following table summarizes our contractual obligations as of September 27,
2020:
                                                                                               Payments Due by Fiscal Period
                                                                              2020
                                                                           (remaining
(In thousands)                                          Total            three months)         2021-2022          2023-2024           Beyond 2024
Convertible debt, including interest1               $   763,929          $  

1,319 $ 336,902$ 425,708 $ - CEDA loan, including interest2

                           58,050                1,275              5,100              5,100                46,575
Other debt, including interest3                         149,468               42,693            101,070              2,051                 3,654

Operating lease commitments4                            102,442                3,663             31,229             21,348                46,202

Non-cancellable purchase orders5                         47,879               47,879                  -                  -                     -
Supply agreement commitments6                           449,231              107,607            300,684             34,858                 6,082

Total                                               $ 1,570,999$   204,436$ 774,985$ 489,065$    102,513



1 Convertible debt, including interest, relates to the aggregate of
$726.6 million in outstanding principal amount of our senior convertible
debentures on September 27, 2020. For the purpose of the table above, we assume
that all holders of the outstanding debentures will hold the debentures through
the date of maturity, and upon conversion, the values of the senior convertible
debentures will be equal to the aggregate principal amount with no premiums.

2 CEDA loan, including interest, relates to the proceeds of the $30.0 million
aggregate principal amount of the Bonds. The Bonds mature on April 1, 2031 and
bear interest at a fixed rate of 8.50% through maturity.

3 Other debt, including interest, primarily relates to non-recourse finance projects and solar power systems and leases under our residential lease program as described in Note 12. Debt and Credit Sources.

3 Operating lease commitments primarily relate to various facility lease agreements including leases entered into that have not yet commenced.

4 Non-cancellable purchase orders relate to purchases of raw materials for inventory and manufacturing equipment from a variety of vendors.


5 Purchase commitments under agreements primarily relate to arrangements entered
into with several suppliers, including Maxeon Solar for purchase of photovoltaic
solar modules, as well as with a supplier for module-level power electronics and
alternating current cables. These agreements specify future quantities and
pricing of products to be supplied by the vendors for periods 2 years and 5
years, respectively, and there are certain consequences, such as forfeiture of
advanced deposits and liquidated damages relating to previous purchases, in the
event we terminate these arrangements.

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Liabilities Associated with Uncertain Tax Positions

Due to the complexity and uncertainty associated with our tax positions, we cannot make a reasonably reliable estimate of the period in which cash settlement will be made for our liabilities associated with uncertain tax positions in other long-term liabilities. Therefore, they have been excluded from the table above. As of September 27, 2020 and December 29, 2019, total liabilities associated with uncertain tax positions were $8.2 million and $7.2 million, respectively, and are included within "Other long-term liabilities" in our condensed consolidated balance sheets as they are not expected to be paid within the next twelve months.

Off-Balance Sheet Arrangements

As of September 27, 2020, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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© Edgar Online, source Glimpses

Stocks mentioned in the article
ChangeLast1st jan.
SUNPOWER CORPORATION 7.83% 47.21 Delayed Quote.84.13%
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