Document



	June 30, 2019			December 30, 2018
Assets
Current assets:
Cash and cash equivalents	$	167,253		$	309,407
Restricted cash and cash equivalents, current portion	13,139			41,762
Accounts receivable, net¹	211,921			175,605
Contract assets¹	53,701			58,994
Inventories	350,575			308,146
Advances to suppliers, current portion	83,884			37,878
Project assets - plants and land, current portion	17,219			10,796
Prepaid expenses and other current assets	113,748			131,183
Total current assets	1,011,440			1,073,771

Restricted cash and cash equivalents, net of current portion	19,360			12,594
Restricted long-term marketable securities	6,126			5,955
Property, plant and equipment, net	434,011			839,871
Operating lease right-of-use assets	41,329			—
Solar power systems leased and to be leased, net	72,317			92,557
Advances to suppliers, net of current portion	62,914			133,694
Long-term financing receivables, net - held for sale	18,388			19,592
Other intangible assets, net	11,698			12,582
Other long-term assets	261,344			162,033
Total assets	$	1,938,927		$	2,352,649

Liabilities and Equity
Current liabilities:
Accounts payable¹	$	398,071		$	325,550
Accrued liabilities¹	192,412			235,252
Operating lease liabilities, current portion	8,321			—
Contract liabilities, current portion¹	109,118			104,130
Short-term debt	62,874			40,074
Total current liabilities	770,796			705,006

Long-term debt	102,347			40,528
Convertible debt¹	819,308			818,356
Operating lease liabilities, net of current portion	38,938			—
Contract liabilities, net of current portion¹	75,934			99,509
Other long-term liabilities	228,249			839,136
Total liabilities	2,035,572			2,502,535
Commitments and contingencies (Note 9)
Equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of June 30, 2019 and December 30, 2018	—			—
Common stock, $0.001 par value, 367,500 shares authorized; 154,105 shares issued, and 142,515 shares outstanding as of June 30, 2019; 152,085 shares issued, and 141,180 shares outstanding as of December 30, 2018	143			141
Additional paid-in capital	2,476,788			2,463,370
Accumulated deficit	(2,440,102		)	(2,480,988		)
Accumulated other comprehensive loss	(3,885		)	(4,150		)
Treasury stock, at cost: 11,590 shares of common stock as of June 30, 2019; 10,905 shares of common stock as of December 30, 2018	(191,434		)	(187,069		)
Total stockholders' deficit	(158,490		)	(208,696		)
Noncontrolling interests in subsidiaries	61,845			58,810
Total deficit	(96,645		)	(149,886		)
Total liabilities and equity	$	1,938,927		$	2,352,649



	Three Months Ended						Six Months Ended
	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Revenue:
Solar power systems, components, and other¹	$	426,841		$	353,780		$	768,283		$	682,640
Residential leasing	1,676			95,317			5,560			158,345
Solar services	7,764			—			10,663			—
	436,281			449,097			784,506			840,985
Cost of revenue:
Solar power systems, components, and other¹	412,383			692,640			793,289			1,031,063
Residential leasing	1,350			66,418			4,372			109,309
Solar services	2,748			—			4,330			—
	416,481			759,058			801,991			1,140,372
Gross profit (loss)	19,800			(309,961		)	(17,485		)	(299,387		)
Operating expenses:
Research and development¹	18,159			31,275			33,152			50,327
Sales, general and administrative	61,978			64,908			124,835			130,203
Restructuring charges	2,453			3,504			1,788			14,681
Gain on sale and impairment of residential lease assets	8,301			68,269			17,527			117,361
Gain on business divestiture	(137,286		)	—			(143,400		)	—
Total operating expenses	(46,395		)	167,956			33,902			312,572
Operating income (loss)	66,195			(477,917		)	(51,387		)	(611,959		)
Other income (expense), net:
Interest income	566			664			1,418			1,193
Interest expense¹	(16,424		)	(26,718		)	(33,215		)	(51,824		)
Other, net	67,768			36,624			100,841			52,418
Other income (expense), net	51,910			10,570			69,044			1,787
Income (loss) before income taxes and equity in losses of unconsolidated investees	118,105			(467,347		)	17,657			(610,172		)
Provision for income taxes	(6,068		)	(3,081		)	(11,865		)	(5,709		)
Equity in losses of unconsolidated investees	(1,963		)	(13,415		)	(283		)	(15,559		)
Net income (loss)	110,074			(483,843		)	5,509			(631,440		)
Net income attributable to noncontrolling interests and redeemable noncontrolling interests	11,385			36,726			26,226			68,349
Net income (loss) attributable to stockholders	$	121,459		$	(447,117	)	$	31,735		$	(563,091	)



	Common Stock
	Shares		Value			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity (Deficit)			Noncontrolling Interests			Total Equity (Deficit)
Balances at December 30, 2018	141,178		$	141		$	2,463,370	$	(187,069	)	$	(4,150	)	$	(2,480,988	)	$	(208,696	)	$	58,810		$	(149,886	)
Net loss	—		—			—		—			—			(89,724		)	(89,724		)	(14,841		)	(104,565		)
Cumulative-effect upon adoption of ASC 842	—		—			—		—			—			9,151			9,151			—			9,151
Other comprehensive income	—		—			—		—			99			—			99			—			99
Issuance of restricted stock to employees, net of cancellations	1,848		2			—		—			—			—			2			—			2
Stock-based compensation expense	—		—			6,628		—			—			—			6,628			—			6,628
Contributions from noncontrolling interests	—		—			—		—			—			—			—			20,987			20,987
Purchases of treasury stock	(633	)	(1		)	—		(3,871		)	—			—			(3,872		)	—			(3,872		)
Balances at March 31, 2019	142,393		142			2,469,998		(190,940		)	(4,051		)	(2,561,561		)	(286,412		)	64,956			(221,456		)
Net income (loss)	—		—			—		—			—			121,459			121,459			(11,385		)	110,074
Cumulative-effect upon adoption of ASC 842	—		—			—		—			—			—			—			—			—
Other comprehensive income	—		—			—		—			166			—			166			—			166
Issuance of restricted stock to employees, net of cancellations	173		1			—		—			—			—			1			—			1
Stock-based compensation expense	—		—			6,790		—			—			—			6,790			—			6,790
Contributions from noncontrolling interests	—		—			—		—			—			—			—			8,590			8,590
Distributions to noncontrolling interests	—		—			—		—			—			—			—			(316		)	(316		)
Purchases of treasury stock	(51	)				—		(494		)	—			—			(494		)	—			(494		)
Balances at June 30, 2019	142,515		$	143		$	2,476,788	$	(191,434	)	$	(3,885	)	$	(2,440,102	)	$	(158,490	)	$	61,845		$	(96,645	)



				Common Stock
	Redeemable Noncontrolling Interests			Shares		Value			Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity (Deficit)			Noncontrolling Interests			Total Equity (Deficit)
Balances at December 31, 2017	$	15,236		139,658		$	140		$	2,442,513	$	(181,539	)	$	(3,008	)	$	(1,669,897	)	$	588,209		$	104,179		$	692,388
Net loss	(10,500		)	—		—			—		—			—			(115,974		)	(115,974		)	(21,123		)	(137,097		)
Other comprehensive income	—			—		—			—		—			2,112			—			2,112			—			2,112
Issuance of restricted stock to employees, net of cancellations	—			1,799		2			—		—			—			—			2			—			2
Stock-based compensation expense	—			—		—			7,394		—			—			—			7,394			—			7,394
Contributions from noncontrolling interests	11,685			—		—			—		—			—			—			—			25,042			25,042
Distributions to noncontrolling interests	(2,316		)	—		—			—		—			—			—			—			(4,005		)	(4,005		)
Purchases of treasury stock	—			(611	)	(1		)	—		(4,526		)	—			—			(4,527		)	—			(4,527		)
Balances at April 1, 2018	$	14,105		140,846		$	141		$	2,449,907	$	(186,065	)	$	(896	)	$	(1,785,871	)	$	477,216		$	104,093		$	581,309
Net loss	(11,115		)	—		—			—		—			—			(447,117		)	(447,117		)	(25,611		)	(472,728		)
Other comprehensive income	—			—		—			—		—			(780		)	—			(780		)	—			(780		)
Issuance of restricted stock to employees, net of cancellations	—			213		—			—		—			—			—			—			—			—
Stock-based compensation expense	—			—		—			5,906		—			—			—			5,906			—			5,906
Contributions from noncontrolling interests	13,947			—		—			—		—			—			—			—			22,615			22,615
Distributions to noncontrolling interests	(2,602		)	—		—			—		—			—			—			—			(5,307		)	(5,307		)
Purchases of treasury stock	—			(74	)	—			—		(374		)	—			—			(374		)	—			(374		)
Balances at July 1, 2018	$	14,335		140,985		$	141		$	2,455,813	$	(186,439	)	$	(1,676	)	$	(2,232,988	)	$	34,851		$	95,790		$	130,641



	Six Months Ended
	June 30, 2019			July 1, 2018
Cash flows from operating activities:
Net income (loss)	$	5,509		$	(631,440	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	46,724			78,401
Non-cash restructuring charges	2,346			—
Stock-based compensation	11,936			13,697
Non-cash interest expense	4,925			8,262
Dividend from equity method investee	—			3,947
Equity in losses of unconsolidated investees	283			15,559
Unrealized gain on equity investment	(100,500		)	—
Gain on business divestiture	(143,400		)	—
Gain on sale of equity investment, net	—			(50,025		)
Deferred income taxes	2,044			1,431
Impairment of property, plant and equipment	777			369,168
Gain on sale and impairment of residential lease assets	25,954			117,361
Other, net	—			(2,443		)
Changes in operating assets and liabilities:
Accounts receivable	(48,631		)	(4,033		)
Contract assets	7,409			(35,375		)
Inventories	(62,104		)	(75,849		)
Project assets	(6,198		)	11,086
Prepaid expenses and other assets	(15,485		)	34,308
Operating lease right-of-use assets	(8,780		)	—
Long-term financing receivables, net - held for sale	(954		)	(109,156		)
Advances to suppliers	24,774			15,122
Accounts payable and other accrued liabilities	11,199			(79,444		)
Contract liabilities	3,418			(35,919		)
Operating lease liabilities	8,663			—
Net cash used in operating activities	(230,091		)	(355,342		)
Cash flows from investing activities:
Purchases of property, plant and equipment	(18,204		)	(25,362		)
Cash paid for solar power systems, leased, net	—			(38,688		)
Cash paid for solar power systems	(43,323		)	(3,436		)
Proceeds from business divestiture, net of cash sold	40,491			—
Dividend from equity method investee	—			12,952
Proceeds from sale of property, plant, and equipment	228			—
Proceeds from sale of equity method investment	—			417,766
Cash paid for investments in unconsolidated investees	(10,000		)	(14,061		)
Net cash provided by (used in) investing activities	(30,808		)	349,171
Cash flows from financing activities:
Proceeds from bank loans and other debt	143,666			116,459
Repayment of 0.75% debentures due 2018, bank loans and other debt	(125,060		)	(419,527		)
Proceeds from issuance of non-recourse residential financing, net of issuance costs	65,731			67,109
Repayment of non-recourse residential financing	(1,156		)	(9,899		)
Contributions from noncontrolling interests and redeemable noncontrolling interests attributable to residential projects	29,577			73,290
Distributions to noncontrolling interests and redeemable noncontrolling interests attributable to residential projects	(316		)	(12,582		)
Proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs	—			22,286
Repayment of non-recourse power plant and commercial financing	—			(4,678		)
Payment for prior business combination	(9,000		)	—
Settlement of contingent consideration arrangement	(2,448		)	—
Purchases of stock for tax withholding obligations on vested restricted stock	(4,365		)	(4,900		)
Net cash provided by (used in) financing activities	96,629			(172,442		)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	259			(1,124		)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	(164,011		)	(179,737		)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period¹	363,763			544,337
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period¹	$	199,752		$	364,600

Non-cash transactions:
Costs of solar power systems, leased, sourced from existing inventory				$	21,640
Costs of solar power systems, leased, funded by liabilities				$	5,166
Costs of solar power systems sourced from existing inventory	$	21,173		$	—
Costs of solar power systems funded by liabilities	$	4,529		$	—
Costs of solar power systems under sale-leaseback financing arrangements, sourced from project assets	$	—		$	15,580
Property, plant and equipment acquisitions funded by liabilities	$	22,560		$	15,954
Transaction fees funded by liability related to the sale of equity method investment	$	—		$	3,911
Contractual obligations satisfied with inventory	$	—		$	40,881
Assumption of debt by buyer upon sale of equity interest	$	—		$	27,321
Right-of-use assets obtained in exchange of lease obligations²	$	94,805		$	—
Derecognition of financing obligations upon business divestiture³	$	590,884		$	—
Holdback related to business divestiture³	$	2,425		$	—

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 utility 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, our ability to complete certain divestiture transactions, trends in average selling prices, the success of our joint ventures and acquisitions, expected capital expenditures, 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, 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 30, 2018, 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.

SunPower Corporation (together with its subsidiaries, "SunPower," "we," "us," or "our") is a leading global energy company that delivers solar solutions to customers worldwide through an array of hardware, software, and financing options and through utility-scale solar power system construction and development capabilities, operations and maintenance ("O&M") services, 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. Of all the solar cells commercially available to the mass market, we believe our solar cells have the highest conversion efficiency, a measurement of the amount of sunlight converted by the solar cell into electricity. For more information about our business, please refer to the section titled "Part I. Item 1. Business" in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018.

On March 26, 2019, we and our wholly-owned subsidiary entered into a Membership Interest Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with a wholly-owned subsidiary of Goldman Sachs Renewable Power LLC. Pursuant to the Purchase and Sale Agreement, we agreed to sell, in exchange for cash consideration of up to $86.9 million, membership interests owned by us in certain holding company subsidiaries (the “HoldCos”) that, in turn, own, directly or indirectly, the membership interests in one or more limited liability companies (together with other related subsidiaries, the “Related Subsidiaries”) that own leasehold interests in operating solar photovoltaic electric generating projects (the “Projects”) subject to sale-leaseback financing arrangements with one or more financiers (each a "Lessor"). The Projects are located at approximately 200 sites across the United States, and represent in aggregate, approximately 233 MW of generating capacity. The portfolio of Projects financed by each Lessor represents a separate asset (a “Portfolio”) for which the price is separately agreed and stated in the Purchase and Sale Agreement. Upon the sale of the applicable membership interests, the related assets have been deconsolidated from the Company's balance sheet.

In the fourth quarter of fiscal 2018, in connection with our efforts to improve operational focus and transparency, drive overhead accountability into segment operating results, and increase strategic agility across the value chain from our upstream business' core strength in manufacturing and technology to our downstream business's core strength in offering complete solutions in residential and commercial markets, we reorganized our segment reporting to an upstream and downstream structure. Previously, we operated under three end-customer segments, comprised of our (i) Residential Segment, (ii) Commercial Segment, and (iii) Power Plant Segment. Historically, the Residential Segment referred to sales of solar energy solutions to residential end-customers, the Commercial Segment referred to sales of energy solutions to commercial and public entity end-customers, and the Power Plant Segment referred to our large-scale solar products and systems and component sales.

Under the new segmentation, SunPower Energy Services Segment ("SunPower Energy Services" or "Downstream") refers to sales of solar energy solutions in the North America region previously included in the legacy Residential Segment and Commercial Segment (collectively previously referred to as "Distributed Generation" or "DG"), including direct sales of turn-key engineering, procurement and construction ("EPC") services, sales to our third-party dealer network, sales of energy under power purchase agreements ("PPAs"), storage solutions, cash sales and long-term leases directly to end customers, and sales to resellers. The SunPower Energy Services Segment also includes sales of our global Operations and Maintenance ("O&M") services. The SunPower Technologies Segment ("SunPower Technologies" or "Upstream") refers to our technology development, worldwide solar panel manufacturing operations, equipment supply to resellers and commercial and residential end-customers outside of North America ("International DG"), and worldwide power plant project development and project sales. Upon reorganization, some support functions and responsibilities, which previously resided within the corporate function, have been shifted to each segment, including financial planning and analysis, legal, treasury, tax and accounting support and services, among others.

During fiscal 2018, we faced market challenges, including competitive solar product pricing pressure and the impact of tariffs imposed pursuant to Section 201 and Section 301 of the Trade Act of 1974. On January 23, 2018, the President of the United States issued Proclamation 9693, which approved recommendations to provide relief to U.S. manufacturers and imposed safeguard tariffs on imported solar cells and modules, based on the investigations, findings, and recommendations of the International Trade Commission. The tariffs went into effect on February 7, 2018. While solar cells and modules based on interdigitated back contact ("IBC") technology, like our Maxeon 3, Maxeon 2 and related products, were granted exclusion from these safeguard tariffs on September 19, 2018, our solar products based on other technologies continue to be subject to the safeguard tariffs. On June 13, 2019, the Office of the United States Trade Representative (“USTR”) published a notice describing its grant of exclusion requests for three additional categories of solar products. Beginning on June 13, 2019, the following categories of solar products are not subject to the Section 201 safeguard tariffs: (i) bifacial solar panels that absorb light and generate electricity on each side of the panel and that consist of only bifacial solar cells that absorb light and generate electricity on each side of the cells; (ii) flexible fiberglass solar panels without glass components other than fiberglass, such panels having power outputs ranging from 250 to 900 watts; and (iii) solar panels consisting of solar cells arranged in rows that are laminated in the panel and that are separated by more than 10 mm, with an optical film spanning the gaps between all rows that is designed to direct sunlight onto the solar cells, and not including panels that lack said optical film or only have a white or other backing layer that absorbs or scatters sunlight. We are working to understand the opportunities and challenges created by the exclusion of these products, as well as the impact of the exclusions on the demand and availability of competing products. However, the excluded technologies currently represent a small percentage of the global solar market.

Additionally, the USTR initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The USTR imposed additional import duties of up to 25% on certain Chinese products covered by the Section 301 remedy. These tariffs include certain solar power system components and finished products, including those purchased from our suppliers for use in our products and used in our business. In the near term, imposition of these tariffs - on top of anti-dumping and countervailing duties on Chinese solar cells and modules, imposed under the prior administration - is likely to result in a wide range of impacts to the U.S. solar industry, global manufacturing market and our business. Such tariffs could cause market volatility, price fluctuations, and demand reduction. Uncertainties associated with the Section 201 and Section 301 trade cases prompted us to adopt a restructuring plan and implement initiatives to reduce operating expenses and cost of revenue overhead and improve cash flow. During fiscal 2018, we incurred total tariffs charges of approximately $42.5 million.

In late fiscal 2015, the U.S. government enacted a budget bill that extended the solar commercial investment tax credit (the "Commercial ITC") under Section 48(c) of the Internal Revenue Code of 1986, as amended (the "Code"), and the individual solar investment tax credit under Section 25D of the Code (together with the Commercial ITC, the "ITC") for five years, at rates gradually decreasing from 30% through 2019 to 22% in 2021. After 2021, the Commercial ITC is retained at 10%. We are currently exploring opportunities to [safe-harbor] solar equipment in accordance with IRS guidance, allowing us to preserve the current ITC rates for solar projects that are completed after the scheduled reduction in rates. During December 2017, the current administration and Congress passed comprehensive reform of the Code which resulted in the reduction or elimination of various industry-specific tax incentives in return for an overall reduction in corporate tax rates. These changes are likely to result in a wide range of impacts to the U.S. solar industry and our business. For more information about the ITC and other policy mechanisms, please refer to the section titled "Item 1. Business—Regulations—Public Policy Considerations" of our Annual Report on Form 10-K for the fiscal year ended December 30, 2018. For more information about how we avail ourselves of the benefits of public policies and the risks related to public policies, please see the risk factors set forth under the caption "Part I. Item 1A. Risk Factors—Risks Related to Our Sales Channels," including "—The reduction, modification or elimination of government incentives could cause our revenue to decline and harm our financial results" and "—Existing regulations and policies and changes to these regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and services" of our Annual Report on Form 10-K for the fiscal year ended December 30, 2018.

We are focused on delivering complete solar power generation solutions to our customers. As part of our solutions-focused approach, we launched our SunPower Helix product for our commercial business customers during fiscal 2015 and our SunPower Equinox product for our residential business customers during fiscal 2016. 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 Maxeon Gen 3 cell and ACPV technology for residential applications, where we are also expanding our initiatives on storage and Smart Energy solutions. Additionally, we continue to focus on producing our new lower cost, high efficiency P-Series product line and our next generation technology ("NGT"), 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 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 microinverters 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.

We currently believe our supplier relationships and various short- and long-term contracts will afford us the volume of material and services required to meet our planned output; however, we face the risk that the pricing of our long-term supply contracts may exceed market value. For example, we purchase our polysilicon under fixed-price long-term supply agreements. The pricing under these agreements significantly in excess of market value results in inventory write-downs based on expected net realizable value. Additionally, existing arrangements from prior years have resulted in above current market pricing for purchasing polysilicon, resulting in inventory losses we have realized. For several years now, we have elected to sell polysilicon inventory in excess of short-term needs to third parties at a loss, and may enter into further similar transactions in future periods. For more information about these risks, see the risk factors set forth under the caption "Part 1. Item 1A. Risk Factors—Risks Related to Our Supply Chain," including "—Our long-term, firm commitment supply agreements could result in excess or insufficient inventory, place us at a competitive disadvantage on pricing, or lead to disputes, each of which could impair our ability to meet our cost reduction roadmap, and in some circumstances may force us to take a significant accounting charge" and "—We will continue to be dependent on a limited number of third-party suppliers for certain raw materials and

of fiscal 2017, we determined it was necessary to evaluate the potential for impairment in our ability to recover the carrying amount of our Residential Lease Portfolio. As a result of our evaluation, we recognized non-cash impairment charges of $68.3 million and $117.4 million within "impairment of residential lease assets" on the condensed consolidated statements of operations for the three and six months ended July 1, 2018, respectively. In November 2018, we completed the sale of the majority of our Residential Lease Portfolio to Hannon Armstrong through sale of partial equity interests in SunStrong Capital Holdings LLC ("SunStrong"), our wholly-owned subsidiary at that time. The transaction resulted in deconsolidation of SunStrong from our balance sheet, as we and Hannon Armstrong exercised joint control following after the sale. In the first fiscal quarter of 2019, we continued recording additional non-cash impairment charges of $26.0 million for the remaining assets in the Residential Lease Portfolio that have yet to be sold. Also, during the three months ended June 30, 2019, we recognized a gain of $10.3 million primarily from additional consideration received relating to the sale of residential lease assets completed in the fourth quarter of fiscal 2018.

In the three and six months ended June 30, 2019, we attributed $11.4 million and $26.2 million, respectively, of net losses primarily to the third-party investors as a result of allocating certain assets, including tax credits and accelerated tax depreciation benefits, to the investors. In the three and six months ended July 1, 2018, we attributed $36.7 million and $68.3 million, respectively, of net losses primarily to the third-party investors as a result of allocating certain assets, including tax credits and accelerated tax depreciation benefits, to the investors. The decrease in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $25.3 million and $42.1 million during the three and six months ended June 30, 2019 as compared to the three and six months ended July 1, 2018 is primarily due to deconsolidation of majority of residential lease assets in the last quarter of fiscal 2018.

Net cash used in operating activities for the six months ended June 30, 2019 was $230.1 million and was primarily the result of: (i) net income of $5.5 million; (ii) net non-cash charges of $65.9 million related to depreciation, stock-based compensation and other non-cash charges; (iii) gain on sale and impairment of residential lease assets of $26.0 million; (iv) $24.8 million decrease in advance payments made to suppliers; (v) $7.4 million decrease in contract assets driven by construction activities; (vi) $11.2 million increase in accounts payable and other accrued liabilities, primarily attributable to timing of payments for accrued expenses; (vii) $8.7 million increase in operating lease liabilities; (viii) $3.4 million increase in contract liabilities driven by construction activities; (ix) $2.0 million net change in deferred income taxes; (x) impairment of long-lived assets of $0.8 million; and (xi) $0.3 million loss in equity in earnings of unconsolidated investees. This was partially offset by (i) $143.4 million gain on business divestiture; (ii) $100.5 million unrealized gain on equity investments with readily determinable fair value; (iii) $62.1 million increase in inventories to support the construction of our solar energy projects; (iv) $48.6 million increase in accounts receivable, primarily driven by billings; (v) $8.8 million increase in operating lease right-of-use assets; (vi) $6.2 million increase in project assets, primarily related to the construction of our Commercial solar energy projects; (vii) $15.5 million increase in prepaid expenses and other assets, primarily related to movements in prepaid inventory; and (viii) $0.9 million increase in long-term financing receivables related to our net investment in sales-type leases.

Net cash used in operating activities in the six months ended July 1, 2018 was $355.3 million and was primarily the result of: (i) a net loss of $631.4 million; (ii) $109.2 million increase in long-term financing receivables related to our net investment in sales-type leases; (iii) $79.4 million decrease in accounts payable and other accrued liabilities, primarily attributable to the procurement of polysilicon and vendor payments; (iv) $75.8 million increase in inventories to support the construction of our solar energy projects; (v) $50.0 million gain on the sale of equity method investment; (vi) $35.9 million decrease in contract liabilities driven by construction activities; (vii) $35.4 million increase in contract assets driven by construction activities; (viii) $4.0 million increase in accounts receivable; and (ix) $2.4 million gain from various non-cash adjustments. This was partially offset by: (i) the impairment of property, plant and equipment of $369.2 million; (ii) the impairment of residential lease assets of $117.4 million; (iii) net non-cash charges of $100.4 million related to depreciation, stock-based compensation and other non-cash charges; (iv) a $34.3 million decrease in prepaid expenses and other assets, primarily related to movements in prepaid inventory; (v) $15.6 million decrease in equity in earnings of unconsolidated investees; (vi) a $15.1 million decrease in advance payments made to suppliers (vii) a $11.1 million decrease in project assets, primarily related to the write-downs in Power Plant solar energy development projects; (viii) $3.9 million dividend from 8point3 Energy Partners; and (ix) $1.4 million net change in deferred income taxes

As of June 30, 2019, 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.

As of June 30, 2019, an aggregate principal amount of $400.0 million of the 0.875% senior convertible debentures due 2021 (the “0.875% debentures due 2021”) remained issued and outstanding. The 0.875% debentures due 2021 were issued on June 11, 2014. Interest on the 0.875% debentures due 2021 is payable on June 1 and December 1 of each year. 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 $48.76 per share, subject to adjustment in certain circumstances. If not earlier repurchased or converted, the 0.875% debentures due 2021 mature on June 1, 2021. Holders may require us to repurchase all or a portion of their 0.875% debentures due 2021, 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 0.875% debentures due 2021 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 0.875% debentures due 2021 are not redeemable at our option prior to the maturity date. In the event of certain events of default, Wells Fargo, the trustee, or the holders of a specified amount of then-outstanding 0.875% debentures due 2021 will have the right to declare all amounts then outstanding due and payable.

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.

As of June 30, 2019, we had unrestricted cash and cash equivalents of $167.3 million as compared to $309.4 million as of December 30, 2018. Our cash balances are held in numerous locations throughout the world, and as of June 30, 2019, we had approximately $31.5 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), however, would not result in a cash payment due to our cumulative net operating loss position. We expect total capital expenditures related to purchases of property, plant and equipment of approximately $73.5 million in fiscal 2019 in order to increase our manufacturing capacity for our highest efficiency Maxeon 3 product platform and our new P-Series technology, improve our current and next generation solar cell manufacturing technology, and other projects. 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 S.A. 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 June 30, 2019, letters of credit issued under the Deutsche Bank Trust facility amounted to $3.6 million which were fully collateralized with restricted cash on our condensed consolidated balance sheets.

In fiscal 2011, we launched our residential lease program with dealers in the United States, in partnership with a third-party financial institution, which allows customers to obtain SunPower systems under lease agreements up to 20 years, subject to financing availability. In the fourth quarter of fiscal 2017, in conjunction with our efforts to generate more available liquid funds in the near-term, we made the decision to sell a portion of our interest in the Residential Lease Portfolio. As a result, we determined it was necessary to evaluate our Residential Lease Portfolio for potential impairment. For additional information, see "Item 1. Financial Statements—Note 6. Solar Services" in the Notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. During the three months June 30, 2019, we received $29.6 million in contributions and $0.3 million of distributions from investors under the related facility agreements. During the fourth quarter of fiscal 2018, we successfully sold a portion of our interest in the Residential Lease Portfolio. In conjunction with our sale of the residential lease assets, we deconsolidated these less-than-wholly-owned entities in which we previously held a controlling interest. For further information, see "Item 8. Financial Statements and Supplementary Data—Note 4. Business Combinations and Divestitures" in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018.

In fiscal 2019, we drew down $65.7 million of proceeds, net of issuance costs, under the loan agreements. During the fourth quarter of fiscal 2018, in conjunction with the sale of our interest in our residential lease assets portfolio we repaid these loans in full. We are actively arranging additional third-party financing for our continuing residential lease program; however, the credit markets are unpredictable, and if they become challenging, we may be unable to arrange additional financing partners for our residential lease program in future periods, which could have a negative impact on our sales. In the unlikely event that we enter into a material number of additional leases without promptly obtaining corresponding third-party financing, our cash and working capital could be negatively affected. Additionally, we have approximately $0.2 million of cash and cash equivalents within our remaining consolidated residential leasing subsidiaries that is used by those subsidiaries for their working capital needs. This cash is typically not available to us to use for general corporate purposes unless certain financial obligations are first settled. In the event that we choose to transfer cash out of these subsidiaries for general corporate purposes in the future, we would first be required to distribute a portion of the cash to lender debt reserves and investors who hold noncontrolling interests in the relevant subsidiaries. For further information, see "Item 1. Financial Statements—Note 6. Solar Services" in the Notes to the condensed consolidated financial statements" in this Quarterly Report on Form 10-Q.

On June 23, 2017, we entered into an Amended and Restated Revolving Credit Agreement with Credit Agricole, as administrative agent, and the other lenders party thereto, which amends and restates the Revolving Credit Agreement dated July 3, 2013, by and between us, the Administrative Agent and the other parties thereto, as amended to date. The Revolver was entered into in connection with the Letter Agreement between us and Total S.A. dated May 8, 2017, which was entered into to facilitate the issuance by Total S.A of one or more guaranties of our payment obligations of up to $100.0 million under the Revolver. The maturity date of the facility under the Revolver remains August 26, 2019, and amounts borrowed under the facility may be repaid and reborrowed until the Maturity Date. Available borrowings under the Revolver remain $300.0 million; provided that the aggregate principal amount of all amounts borrowed under the facility cannot exceed 95.0% of the amounts guaranteed by Total Solar International SAS ("Total"), formerly Total Energies Nouvelles Activités USA, a subsidiary of Total S.A., under the Letter Agreement, effectively allowing us to borrow up to a maximum of $95.0 million under the Revolver. As of June 30, 2019, $300.0 million remained undrawn under our revolving credit facility with Credit Agricole.

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 investments 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 investments 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.

continue through the remainder of fiscal 2019, however, we expect to generate positive net total cash and cash equivalents in the second half of fiscal 2019. We believe that our total cash and cash equivalents, including cash expected to be generated from operations, will be sufficient to meet our obligations over the next 12 months from the date of the issuance of our financial statements. We have been successful in our ability to divest certain investments and non-core assets, such as the divestiture of our equity interest in 8point3 Energy Partners LP, the sale of certain assets and intellectual property related to the production of microinverters, the sale of membership interests in our Residential Lease Portfolio, and the sale of membership interests in our Commercial Sale-Leaseback Portfolio (Note 4. Business Divestiture). Additionally, we have secured other sources of financing in connection with our liquidity needs, as well as realizing cash savings resulting from restructuring actions and cost reduction initiatives (Note 11. Debt and Credit Sources). We continue to focus on improving our overall operating performance and liquidity, including managing cash flow and working capital.

The following table summarizes our contractual obligations as of June 30, 2019:



			Payments Due by Fiscal Period
(In thousands)	Total		2019 (remaining six months)		2020-2021		2022-2023		Beyond 2023
Convertible debt, including interest¹	$	891,926	$	10,250	$	438,968	$	442,708	$	—
CEDA loan, including interest²	60,600		1,275		5,100		5,100		49,125
Other debt, including interest³	184,356		53,451		75,648		5,713		49,544
Future financing commitments⁴	3,840		940		2,900		—		—
Operating lease commitments⁵	99,436		6,618		23,734		20,189		48,895
Finance lease commitments⁶	2,434		314		1,282		838		—
Non-cancellable purchase orders⁷	196,367		196,367		—		—		—
Purchase commitments under agreements⁸	577,421		87,012		414,498		69,120		6,791
Deferred purchase consideration in connection with acquisition⁹	60,000		30,000		30,000		—		—
Total	$	2,076,380	$	386,227	$	992,130	$	543,668	$	154,355

We currently conduct hedging activities which involve the use of option and/or forward currency contracts that are designed to address our exposure to changes in the foreign exchange rate between the U.S. dollar and other currencies. As of June 30, 2019 and December 30, 2018, we had designated outstanding cash flow hedge forward contracts with a notional value of $44.9 million and zero, respectively. As of June 30, 2019, we also had designated outstanding cash flow hedge option contracts with a notional value of $101.5 million. As of June 30, 2019 and December 30, 2018, we had non-designated outstanding forward currency contracts with aggregate notional values of $19.5 million and $11.4 million, respectively. Because we hedge some of our expected future foreign exchange exposure, if associated revenues do not materialize we could experience a reclassification of gains or losses into earnings. Such a reclassification could adversely impact our revenue, margins and results of operations. We cannot predict the impact of future exchange rate fluctuations on our business and operating results.

We are exposed to interest rate risk because many of our customers depend on debt financing to purchase our solar power systems. An increase in interest rates could make it difficult for our customers to obtain the financing necessary to purchase our solar power systems on favorable terms, or at all, and thus lower demand for our solar power products, reduce revenue and adversely impact our operating results. An increase in interest rates could lower a customer's return on investment in a system or make alternative investments more attractive relative to solar power systems, which, in each case, could cause our customers to seek alternative investments that promise higher returns or demand higher returns from our solar power systems, reduce gross margin and adversely impact our operating results. This risk is significant to our business because our sales model is highly sensitive to interest rate fluctuations and the availability of credit, and would be adversely affected by increases in interest rates or liquidity constraints.

Our interest expense would increase to the extent interest rates rise in connection with our variable interest rate borrowings. During the fourth quarter of fiscal 2018, we repaid all of our variable interest rate borrowings. We do not believe that an immediate 10% increase in interest rates would have a material effect on our financial statements under potential future borrowings. In addition, lower interest rates would have an adverse impact on our interest income. Due to the relatively short-term nature of our investment portfolio, we do not believe that an immediate 10% decrease in interest rates would have a material effect on the fair market value of our money market funds. Since we believe we have the ability to liquidate substantially all of this portfolio, we do not expect our operating results or cash flows to be materially affected to any significant degree by a sudden change in market interest rates on our investment portfolio.

On August 9, 2018, we completed the sale of certain assets and intellectual property related to the production of microinverters to Enphase in exchange for $25.0 million in cash and 7.5 million shares of Enphase common stock (NASDAQ: ENPH). We received the common stock and a $15.0 million cash payment upon closing, and received the final $10.0 million cash payment of the purchase price on December 10, 2018. The common stock was recorded as an equity investment with readily determinable fair value (Level 1), with changes in fair value recognized in net income. For the three and six months ended June 30, 2019, we recognized an unrealized gain of $67.5 million and $100.5 million within "Other, net" under other income (expense), net, on the condensed consolidated statement of operations. These strategic equity investments in third parties are subject to risk of changes in market value could result in realized impairment losses. We generally do not attempt to reduce or eliminate our market exposure in equity investments. We monitor these investments for impairment and record reductions in the carrying values when necessary. Circumstances that indicate an other-than-temporary decline include the valuation ascribed to the issuing company in subsequent financing rounds, decreases in quoted market prices and declines in operations of the issuer. There can be no assurance that our equity investments will not face risks of loss in the future.

As of June 30, 2019, we held outstanding convertible debentures with an aggregate face value of $825.0 million, comprised of $425.0 million of 4.00% debentures due in 2023 and $400.0 million of 0.875% debentures due in 2021. The aggregate estimated fair value of our outstanding convertible debentures was $744.4 million and $648.9 million as of June 30, 2019 and December 30, 2018, respectively. Estimated fair values are based on quoted market prices as reported by an independent pricing source. The fair market value of our debentures is subject to interest rate risk, market price risk and other factors due to the convertible feature of the debentures. The fair market value of the debentures will generally increase as interest rates fall, and decrease as interest rates rise. When our common stock price is in-the-money relative to these fixed stock price conversion rates, the fair market value of the debentures will generally increase as the market price of our common stock increases, and decrease as our common stock's market price falls, based on each debenture's respective fixed conversion rate. The interest and market value changes affect the fair market value of the debentures, but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligations, except to the extent increases in the value of our common stock may provide the holders the right to convert such debentures into stock, or cash, in certain instances, but only applicable during periods when our common stock is in-the-money relative to such conversion rights. As our common stock price is significantly below the conversion price for both debentures and therefore unlikely to be exercised by the holders, a 10% increase or decrease in our common stock will not impact our financial statements.

We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure control and procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.



Delaware			94-3008969
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)
77 Rio Robles	San Jose	California	95134
(Address of Principal Executive Offices and Zip Code)			(Zip Code)



Large accelerated filer	x	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐



Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	SPWR	NASDAQ

TABLE OF CONTENTS

		Page
Part I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations	4

	Condensed Consolidated Statements of Comprehensive Loss	5

	Condensed Consolidated Statements of Equity (Deficit)	6

	Condensed Consolidated Statements of Cash Flows	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	46

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	67

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67

Item 6.	Exhibits	69

Signatures		70



Net income (loss) per share attributable to stockholders:
Basic	$	0.85	$	(3.17	)	$	0.22	$	(4.01	)
Diluted	$	0.75	$	(3.17	)	$	0.22	$	(4.01	)
Weighted-average shares:
Basic	142,471		140,926			142,095		140,569
Diluted	166,837		140,926			143,062		140,569



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


1)	did not reassess expired contracts for presence of lease components therein and if it was already concluded that such contracts had lease components, then the classification of the respective lease components therein have not been re-assessed;


2)	did not re-assess initial direct costs for any existing leases;


3)	used hindsight for determining the lease term for all leases whereon ASC 842 has been applied;


4)	elected to not separate the lease and non-lease components;


5)	elected to not apply the recognition and measurement requirements of the new guidance to short-term leases;


6)	did not assess whether existing or expired land easements that were not previously assessed under legacy guidance on leases are or contain a lease under the new guidance;



(In thousands)	December 31, 2018			Adoption of ASC 842			December 31, 2018
Assets:
Prepaid expenses and other current assets	$	131,183		$	(4,433	)	$	126,750
Operating lease right-of-use assets	—			81,525			81,525
Other long-term assets	162,033			(14,028		)	148,005
Current Liabilities:
Accrued liabilities	235,252			(2,455		)	232,797
Operating lease liabilities	—			11,499			11,499
Contract liabilities, current portion	104,130			(2,079		)	102,051
Non-current liabilities:
Operating lease liabilities, net of current portion	—			70,132			70,132
Contract liabilities, net of current portion	99,509			(19,928		)	79,581
Other long-term liabilities	839,136			(3,256		)	835,880
Equity:
Accumulated deficit	$	(2,480,988	)	$	9,151		$	(2,471,837	)



	As of
(In thousands)	June 30, 2019		December 30, 2018
Accounts receivable	$	8,528	$	3,823
Contract assets	21		18
Contract liabilities, current portion¹	20,402		18,408
Contract liabilities, net of current portion¹	36,701		45,258



Project	Revenue Category	EPC Contract/Partner Developed Project	Expected Year Revenue Recognition Will Be Completed	Percentage of Revenue Recognized¹
Various Distribution Generation Projects	Solar power systems sales and EPC services	Various	2020	70.4%



	As of
(In thousands)	June 30, 2019		December 30, 2018
Raw materials	$	67,290	$	58,378
Work-in-process	86,097		86,639
Finished goods	197,188		163,129
Inventories¹	$	350,575	$	308,146



	As of
(In thousands)	June 30, 2019		December 30, 2018
Employee compensation and employee benefits	$	36,065	$	44,337
Deferred revenue¹	306		4,251
Interest payable	10,128		11,786
Short-term warranty reserves	41,703		38,161
Restructuring reserve	2,690		6,310
VAT payables	8,562		8,325
Derivative financial instruments	1,076		1,161
Legal expenses	13,163		12,442
Taxes payable	20,537		19,146
Liability due to supply agreement	29,329		28,045
Other	28,853		61,288
Accrued liabilities	$	192,412	$	235,252



	Three Months Ended
(In thousands)	SunPower Technologies				SunPower Energy Services				Total Revenue
Category	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Module and component sales	$	113,805	$	141,123	$	143,707	$	117,545	$	257,512	$	258,668
Solar power systems sales and EPC services	110,749		38,290		47,304		46,065		158,053		84,355
Operations and maintenance	—		—		11,276		10,757		11,276		10,757
Residential leasing	—		—		1,676		95,317		1,676		95,317
Solar services¹	—		—		7,764		—		7,764		—
Net Revenue	224,554		179,413		211,727		269,684		436,281		449,097



	Three Months Ended						Six Months Ended
(In thousands, except number of projects)	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Increase (decrease) in revenue from net changes in transaction prices	$	—		$	(4,639	)	$	(3,301	)	$	(4,639	)
Increase (decrease) in revenue from net changes in input cost estimates	—			(10,876		)	2,410			(9,165		)
Net increase (decrease) in revenue from net changes in estimates	$	—		$	(15,515	)	$	(891	)	$	(13,804	)

Number of projects	0			3			1			4

Net change in estimate as a percentage of aggregate revenue for associated projects	—		%	(17.9		)%	(11.3		)%	(4.2		)%




(In thousands)
Restricted cash and cash equivalents, current portion	$	43,641
Accounts receivable, net	7,959
Prepaid expenses and other current assets	957
Restricted cash and cash equivalents, net of current portion	1,746
Operating lease right-of-use assets	46,109
Property, plant and equipment	477,816
Total assets	578,228

Accounts payable	1,071
Accrued Liabilities	1,641
Operating lease liabilities, current	2,443
Operating lease liabilities, non-current	38,803
Other long-term liabilities¹	600,675
Total liabilities	644,633
Net liabilities sold	$	(66,405	)



(In thousands)	Fiscal 2019 (remaining six months)		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter		Total
Minimum future rentals on operating leases placed in service¹	$	623	$	1,197	$	1,201	$	1,206	$	1,211	$	18,726	$	24,164


•	Level 1 — Quoted prices in active markets for identical assets or liabilities.


•	Level 2 — Measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1.


•	Level 3 — Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.



As of June 30, 2019	Operating leases
2019 (remaining six months)	$	5,770
2020	10,613
2021	10,206
2022	8,729
2023	8,676
Thereafter	24,998
Total lease payments	68,992
Less: imputed interest	(21,733		)
Total	$	47,259



(In thousands)	Amount
Year:
2019 (remaining six months)	$	940
2020	2,900
	$	3,840



	Three Months Ended		Six Months Ended
(In thousands)	June 30, 2019
Summarized statements of operations information:
Revenue	22,626		22,626
Gross loss	(1,209	)	(1,209	)
Net income	3,256		3,256



	Aggregate Carrying Value¹
(In thousands)	June 30, 2019	December 30, 2018	Balance Sheet Classification
Solar Services:
Tax equity partnership flip facilities	61,845	58,810	Non-controlling interests in subsidiaries
Credit Agricole warehouse facility	38,871	—	Short-term debt and Long-term debt
Mezzanine Loan	25,770	—	Short-term debt and Long-term debt

Commercial Projects:
Arizona loan	6,528	6,650	Short-term debt and Long-term debt



	June 30, 2019
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets, but Have Rights to Offset
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral		Net Amounts
Derivative assets	$	709	$	—	$	709	$	512	$	—	$	197
Derivative liabilities	$	1,403	—		1,403		512		—		891



	Three Months Ended					Six Months Ended
(In thousands, except per share amounts)	June 30, 2019		July 1, 2018			June 30, 2019		July 1, 2018
Basic net income (loss) per share:
Numerator:
Net income (loss) attributable to stockholders	$	121,459	$	(447,117	)	$	31,735	$	(563,091	)
Denominator:
Basic weighted-average common shares	142,471		140,926			142,095		140,569

Basic net income (loss) per share	$	0.85	$	(3.17	)	$	0.22	$	(4.01	)

Diluted net income (loss) per share¹
Numerator:
Net income (loss) attributable to stockholders	$	121,459	$	(447,117	)	$	31,735	$	(563,091	)
Add: Interest expense on 4.00% debenture due 2023, net of tax	3,358		—			—		$	—
Add: Interest expense on 0.875% debenture due 2021, net of tax	691		—			—		$	—
Net income (loss) available to common stockholders	$	125,508	$	(447,117	)	$	31,735	$	(563,091	)
Denominator:
Basic weighted-average common shares	142,471		140,926			142,095		$	140,569
Effect of dilutive securities:
Restricted stock units	2,241		—			967		—
0.875% debentures due 2021	13,922		—			—		—
4.00% debentures due 2023	8,203		—			—		—
Dilutive weighted-average common shares:	166,837		140,926			143,062		140,569

Dilutive net income (loss) per share	$	0.75	$	(3.17	)	$	0.22	$	(4.01	)



Reconciliation of Segment Revenue to Condensed Consolidated GAAP Revenue	Three Months Ended						Six Months Ended
(In thousands):	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Total segment revenue as reviewed by CODM	$	572,288		$	516,030		$	1,044,647		1,023,852
Adjustments to segment revenue:
Intersegment elimination	(90,416		)	(68,876		)	(151,216		)	(177,750		)
8point3 Energy Partners	—			8,337			—			8,588
Legacy utility and power plant projects	23			1,301			194			3,093
Legacy sale-leaseback transactions	—			(7,695		)	—			(16,798		)
Construction revenue on solar services contracts	(45,614		)	—			(109,119		)	—
Condensed consolidated GAAP revenue	$	436,281		$	449,097		$	784,506		$	840,985



Reconciliation of Segment Gross Profit to Condensed Consolidated GAAP Gross Profit	Three Months Ended						Six Months Ended
(In thousands):	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Segment gross profit	$	48,583		$	44,976		$	65,598		$	77,388
Adjustments to segment gross profit:
Intersegment elimination	2,157			7,445			9,793			1,301
8point3 Energy Partners	—			8,337			—			8,337
Legacy utility and power plant projects	(884		)	569			(1,000		)	837
Legacy sale-leaseback transactions	3,684			359			4,507			3,398
Impairment of property, plant and equipment	—			(355,107		)	—			(355,107		)
Construction revenue on solar services contracts	(5,506		)	—			(16,892		)	—
Gain on sale and impairment of residential lease assets	632			4,152			757			8,005
Cost of above-market polysilicon	(25,950		)	(16,669		)	(75,378		)	(35,369		)
Stock-based compensation expense	(1,133		)	(1,580		)	(1,301		)	(2,521		)
Amortization of intangible assets	(1,783		)	(2,443		)	(3,569		)	(4,935		)
Depreciation of idle equipment	—			—			—			(721		)
Condensed consolidated GAAP gross profit (loss)	$	19,800		$	(309,961	)	$	(17,485	)	$	(299,387	)



Reconciliation of Segments EBITDA to Loss before income taxes and equity in earnings (losses) of unconsolidated investees	Three Months Ended						Six Months Ended
(In thousands):	June 30, 2019			July 1, 2018			June 30, 2019			July 1, 2018
Segment adjusted EBITDA	$	14,042		$	65,313		$	(8,369	)	$	113,163
Adjustments to segment adjusted EBITDA:
8point3 Energy Partners	—			8,308			—			8,485
Legacy utility and power plant projects	(884		)	569			(1,000		)	837
Legacy sale-leaseback transactions	(1,025		)	(4,187		)	(5,936		)	(5,560		)
Unrealized gain on equity securities	67,500			—			100,500			—
Impairment of property, plant and equipment	—			(369,168		)	—			(369,168		)
Construction revenue on solar services contracts	6,398			—			10,138			—
Gain on sale and impairment of residential lease assets	(15,554		)	(50,360		)	(23,867		)	(95,499		)
Cost of above-market polysilicon	(25,950		)	(16,669		)	(75,378		)	(35,369		)
Stock-based compensation expense	(6,270		)	(6,643		)	(11,936		)	(15,401		)
Amortization of intangible assets	(1,783		)	(2,443		)	(3,569		)	(4,935		)
Depreciation of idle equipment	—			—			—			(721		)
Gain on business divestiture	137,286			—			143,400			—
Transaction-related costs	(1,173		)	—			(2,595		)	—
Business reorganization costs	(4,156		)	—			(6,805		)	—
Restructuring charges	(2,453		)	(3,504		)	(1,788		)	(14,681		)
Non-cash interest expense	(10		)	(23		)	(20		)	(45		)
Equity in earnings of unconsolidated investees	1,963			13,415			283			15,559
Net loss attributable to noncontrolling interests	(11,385		)	(36,726		)	(26,226		)	(68,349		)
Cash interest expense, net of interest income	(11,148		)	(21,509		)	(21,354		)	(41,674		)
Depreciation	(21,286		)	(36,983		)	(40,467		)	(74,559		)
Corporate	(6,007		)	(6,737		)	(7,354		)	(22,255		)
Income (loss) before income taxes and equity in earnings of unconsolidated investees	$	118,105		$	(467,347	)	$	17,657		$	(610,172	)



	Three Months Ended				Six Months Ended
(As a percentage of total revenue):	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Revenue by geography:
United States	48	%	68	%	49	%	68	%
France	11	%	8	%	11	%	9	%
Rest of World	41	%	24	%	40	%	23	%
	100	%	100	%	100	%	100	%



	Three Months Ended								Six Months Ended
(In thousands, except percentages)	June 30, 2019			July 1, 2018			% Change		June 30, 2019			July 1, 2018			% Change
SunPower Energy Services	$	211,726		$	269,683		(21	)%	$	389,947		$	516,611		(25	)%
SunPower Technologies	314,971			248,290			27	%	545,775			502,124			9	%
Intersegment eliminations	(90,416		)	(68,876		)	31	%	(151,216		)	(177,750		)	(15	)%
Total revenue	$	436,281		$	449,097		(3	)%	$	784,506		$	840,985		(7	)%



Period	Total Number of Shares Purchased¹	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Publicly Announced Plans or Programs
April 1, 2019 through April 28, 2019	5,505	$	7.40	—	—
April 29, 2019 through May 26, 2019	39,018	$	7.54	—	—
May 27, 2019 through June 30, 2019	6,565	$	8.15	—	—
	51,088	$	7.60	—	—


¹	The shares purchased represent shares surrendered to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.