Solar project developer SunPower Corp. (NASDAQ: SPWR) on Dec. 7 announced a broad restructuring program to position the company for long term, sustainable growth.
“As we announced in our third quarter 2016 earnings release, given the current market dislocation, we have made the strategic decision to implement a broad restructuring program to position the company for sustained, long term profitability,” said Tom Werner, SunPower president and CEO. “We believe that our restructuring initiatives will enable us to successfully navigate through the current market transition and maximize cash flow while successfully positioning the company for the next phase of industry growth.”
The company will implement the following initiatives:
- Rationalize capacity to balance production with near-term profitable demand through the closure of its ~700-megawatt (MW) nameplate capacity Fab 2 facility;
- Implement a global workforce reduction of approximately 25% or 2,500 employees;
- Reduce 2017 annual operating expenses to less than $350 million;
- Substantially decrease 2016 inventory to improve working capital and de-lever its balance sheet;
- Reduce annual 2017 capital expenditure by more than 50% to approximately $100 million; and
- Continue to invest in next generation cell and module technology as well as complete solutions.
As a result of these initiatives, SunPower expects to incur total restructuring charges of $225 million to $275 million through the end of 2017 of which approximately 30% will be in cash.
“We believe these actions, which are fully supported by our board of directors, are important to position the company for sustained profitability through the current industry transition. We are committed to our diversified go to market strategy, continuing to invest in our industry leading technology and product solutions, reducing our operational and manufacturing cost structure and continuing to allocate resources to those areas that will improve our global competitive position. With solar at grid parity in many markets, we believe the long-term industry opportunity has never been greater,” concluded Werner.
“This comprehensive restructuring program will enable us to successfully navigate the current challenging industry conditions while positioning us for success over the long term,” said Chuck Boynton, SunPower chief financial officer. “In the short term, we remain focused on improving working capital and maximizing cash flow which will strengthen our balance sheet while providing the resources necessary to fund our strategic growth plans.”
As a result of its announced and previous initiatives, the company will record restructuring charges of at least $150 million on a GAAP basis in the fourth quarter of 2016. Also, consistent with its focus on increasing cash flow, the company will record a fourth quarter GAAP and non-GAAP charge in the range of $50 million to $55 million as a result of the anticipated sale of above market polysilicon. The company’s previously disclosed 2016 fiscal year guidance did not reflect the impact of these two fourth quarter charges.
Also, the company is providing these key financial metrics for 2017:
- Revenue of $1.8 billion to $2.3 billion on a GAAP basis and $2.1 billion to $2.6 billion on a non-GAAP basis, non-GAAP operational expenses of less than $350 million, capital expenditures of approximately $100 million, gigawatts (GW) deployed in the range of 1.3 GW to 1.6 GW. Also, the company expects to record GAAP restructuring charges totaling $75 million to $125 million in fiscal year 2017.
- The company expects to generate positive cash flow from operations through the end of fiscal year 2017 and exit the year with approximately $300 million in cash. The company believes that cash flow and liquidity are the key evaluation metrics for its investors.
SunPower provides a diverse group of customers with complete solar solutions and services. Residential customers, businesses, governments, schools and utilities around the globe rely on SunPower’s more than 30 years of proven experience. Headquartered in Silicon Valley, SunPower has employees in Africa, Asia, Australia, Europe, and North and South America.