Edgar Filing: SUNPOWER CORP

form10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q/A

(Amendment No. 2)

_____________________

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

For the quarterly period ended March 29, 2009

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

For the transition period from ______________ to ______________

Commission file number 001-34166

SunPower Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware	94-3008969
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

3939 North First Street, San Jose, California 95134

(Address of Principal Executive Offices and Zip Code)

(408) 240-5500

(Registrant’s Telephone Number, Including Area Code)

_____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer T	Accelerated Filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No T

The total number of outstanding shares of the registrant’s class A common stock as of April 23, 2010 was 55,387,562.

The total number of outstanding shares of the registrant’s class B common stock as of April 23, 2010 was 42,033,287.

Explanatory Note

On March 19, 2010, SunPower Corporation (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended January 3, 2010 (the “2009 Form 10-K”). In the 2009 Form 10-K, the Company restated (a) its consolidated financial statements as of and for the year ended December 28, 2008 and consolidated financial data for each of the quarterly periods for the year then ended as well as for the first three quarterly periods in the year ended January 3, 2010, and (b) the Selected Financial Data in Item 6 as of and for the year ended December 28, 2008. These restatements corrected misstatements identified through an independent investigation into certain unsubstantiated accounting entries on the books of our Company’s Philippines operations, as well as other errors identified by the Audit Committee’s investigation and by management and out-of-period adjustments. For a more detailed explanation of the investigation and these restatements, please see Part I — “Item 1: Financial Statements and Supplementary Data — Note 2 of Notes to Condensed Consolidated Financial Statements” and “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Restatement of Previously Issued Condensed Consolidated Financial Statements” in this report and Part II — “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations — Restatement of Previously Issued Consolidated Financial Statements” and “Item 8: Financial Statements and Supplementary Data — Note 2 of Notes to Consolidated Financial Statements” in the 2009 Form 10-K.

The Company initially filed its Quarterly Report on Form 10-Q for the period ended March 29, 2009 on May 8, 2009 (“March 2009 Form 10-Q”). An amendment to the March 2009 Form 10-Q was filed on June 25, 2009 for the sole purpose of refiling Exhibit 10.1 in connection with a confidential treatment request. In this amendment to the March 2009 Form 10-Q (this “Amendment”), the Company is presenting restated condensed consolidated financial statements for the first quarter ended March 29, 2009 and March 30, 2008 (the “Restated Periods”). These restated financial statements reflect corrections of misstatements identified through the independent investigation referred to above, other errors identified by the investigation and by management and out-of-period adjustments. The following items of the March 2009 Form 10-Q are being amended in this Amendment:

Part I – “Item 1: Financial Statements”

Part I – “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations”

Part I – “Item 4: Controls and Procedures”

Part II – “Item 6: Exhibits”

In accordance with SEC regulations, new certifications of the Company’s Chief Executive Officer and Chief Financial Officer were executed in connection with this Amendment and have been filed as exhibits to this Amendment. No other items included in the March 2009 Form 10-Q have been amended in this Amendment, and such items remain in effect as of May 8, 2009.

The Company believes that presenting this information regarding the Restated Periods in this Amendment allows investors to review the restated financial statements and related information for the Restated Periods in more detail. The Company has not filed an amendment to its Quarterly Report on Form 10-Q for the quarter ended March 30, 2008. Accordingly, investors should not rely on the financial information and other disclosures in the Quarterly Report on Form 10-Q for the period ended March 30, 2008, but should refer to the condensed consolidated financial statements for the quarter ended March 30, 2008 included in this Amendment.

This Amendment should be read in conjunction with the 2009 Form 10-K and the other filings made by the Company with the Securities and Exchange Commission (“SEC”) subsequent to the filing of the 2009 Form 10-K.

SunPower Corporation

INDEX TO FORM 10-Q/A

		Page
PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements (unaudited)	4

	Condensed Consolidated Balance Sheets as of March 29, 2009 and December 28, 2008	4

	Condensed Consolidated Statements of Operations for the three months ended March 29, 2009 and March 30, 2008	5

	Condensed Consolidated Statements of Cash Flows for the three months ended March 29, 2009 and March 30, 2008	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37

Item 4.	Controls and Procedures	48

PART II. OTHER INFORMATION		49

Item 6.	Exhibits	49

Signatures		50

Index to Exhibits		51

Index

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

SunPower Corporation

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)

	March 29, 2009			December 28, 2008 (1)
	(As Restated)
Assets
Current assets:
Cash and cash equivalents	$	149,110		$	202,331
Restricted cash and cash equivalents, current portion		12,663			13,240
Short-term investments		2,297			17,179
Accounts receivable, net		149,179			194,222
Costs and estimated earnings in excess of billings		32,969			29,750
Inventories		330,061			248,255
Advances to suppliers, current portion		39,647			43,190
Prepaid expenses and other current assets		78,842			101,735
Total current assets		794,768			849,902
Restricted cash and cash equivalents, net of current portion		171,799			162,037
Long-term investments		18,971			23,577
Property, plant and equipment, net		676,604			622,484
Goodwill		196,224			196,720
Intangible assets, net		35,385			39,490
Advances to suppliers, net of current portion		114,879			119,420
Other long-term assets		70,681			69,116
Total assets	$	2,079,311		$	2,082,746
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	265,848		$	259,429
Accrued liabilities		71,631			136,116
Billings in excess of costs and estimated earnings		15,432			15,634
Customer advances, current portion		14,084			19,035
Total current liabilities		366,995			430,214
Long-term debt		103,850			54,598
Convertible debt		363,768			357,173
Long-term deferred tax liability		9,315			6,493
Customer advances, net of current portion		85,668			91,359
Other long-term liabilities		45,478			44,222
Total liabilities		975,074			984,059
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,042,490 shares authorized; none issued and outstanding		—			—
Common stock, $0.001 par value, 150,000,000 shares of class B common stock authorized; 42,033,287 shares of class B common stock issued and outstanding; $0.001 par value, 217,500,000 shares of class A common stock authorized; 44,274,852 and 44,055,644 shares of class A common stock issued; 43,999,060 and 43,849,566 shares of class A common stock outstanding, at March 29, 2009 and December 28, 2008, respectively		86			86
Additional paid-in capital		1,076,594			1,064,916
Accumulated other comprehensive loss		(19,677	)		(25,611	)
Retained earnings		58,250			67,953
		1,115,253			1,107,344
Less: shares of class A common stock held in treasury, at cost; 275,792 and 206,078 shares at March 29, 2009 and December 28, 2008, respectively		(11,016	)		(8,657	)
Total stockholders’ equity		1,104,237			1,098,687
Total liabilities and stockholders’ equity	$	2,079,311		$	2,082,746

(1)

As adjusted to reflect the adoption of new accounting guidance for convertible debt instruments that may be settled in cash upon conversion (see Note 1).

The accompanying notes are an integral part of these condensed consolidated financial statements.

Index

SunPower Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

	Three Months Ended
	March 29, 2009			March 30, 2008 (1)
	(As Restated)
Revenue:
Systems	$	103,953		$	179,423
Components		107,690			94,850
Total revenue		211,643			274,273
Costs and expenses:
Cost of systems revenue		95,324			143,928
Cost of components revenue		84,084			78,849
Research and development		7,880			4,642
Sales, general and administrative		42,404			33,858
Total costs and expenses		229,692			261,277
Operating income (loss)		(18,049	)		12,996
Other income (expense):
Interest income		1,184			4,147
Interest expense		(6,121	)		(6,017	)
Other, net		(7,157	)		715
Other income (expense), net		(12,094	)		(1,155	)
Income (loss) before income taxes and equity in earnings of unconsolidated investees		(30,143	)		11,841
Income tax provision (benefit)		(19,196	)		1,280
Income (loss) before equity in earnings of unconsolidated investees		(10,947	)		10,561
Equity in earnings of unconsolidated investees, net of taxes		1,245			582
Net income (loss)	$	(9,702	)	$	11,143

Net income (loss) per share of class A and class B common stock:
Basic	$	(0.12	)	$	0.14
Diluted	$	(0.12	)	$	0.13
Weighted-average shares:
Basic		83,749			78,965
Diluted		83,749			83,002

(1)

As adjusted to reflect the adoption of new accounting guidance for both convertible debt instruments that may be settled in cash upon conversion and unvested share-based payment awards that contain rights to nonforfeitable dividends that are participating securities (see Note 1).

The accompanying notes are an integral part of these condensed consolidated financial statements.

Index

SunPower Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Three Months Ended
	March 29, 2009			March 30, 2008 (1)
	(As Restated)
Cash flows from operating activities:
Net income (loss)	$	(9,702	)	$	11,143
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		9,054			14,508
Depreciation		18,365			10,139
Amortization of intangible assets		4,052			4,317
Impairment of long-lived assets		1,318			5,489
Non-cash interest expense		5,021			4,384
Amortization of debt issuance costs		537			537
Equity in earnings of unconsolidated investees		(1,245	)		(582	)
Excess tax benefits from stock-based award activity		—			(3,994	)
Deferred income taxes and other tax liabilities		(17,003	)		(981	)
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		40,931			(17,162	)
Costs and estimated earnings in excess of billings		(3,178	)		(20,709	)
Inventories		(86,049	)		(43,131	)
Prepaid expenses and other assets		11,671			(11,200	)
Advances to suppliers		7,993			(2,559	)
Accounts payable and other accrued liabilities		(24,798	)		25,536
Billings in excess of costs and estimated earnings		88			(43,663	)
Customer advances		(10,180	)		(786	)
Net cash used in operating activities		(53,125	)		(68,714	)
Cash flows from investing activities:
Increase in restricted cash and cash equivalents		(9,185	)		(55,550	)
Purchase of property, plant and equipment		(52,101	)		(51,070	)
Purchase of available-for-sale securities		—			(50,970	)
Proceeds from sales or maturities of available-for-sale securities		18,177			84,106
Cash paid for acquisition, net of cash acquired		—			(13,484	)
Cash paid for investments in joint ventures and other non-public companies		—			(5,625	)
Net cash used in investing activities		(43,109	)		(92,593	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		51,232			—
Proceeds from exercise of stock options		396			1,138
Excess tax benefits from stock-based award activity		—			3,994
Purchases of stock for tax withholding obligations on vested restricted stock		(2,359	)		(3,334	)
Net cash provided by financing activities		49,269			1,798
Effect of exchange rate changes on cash and cash equivalents		(6,256	)		6,817
Net decrease in cash and cash equivalents		(53,221	)		(152,692	)
Cash and cash equivalents at beginning of period		202,331			285,214
Cash and cash equivalents at end of period	$	149,110		$	132,522

Non-cash transactions:
Additions to property, plant and equipment acquired under accounts payable and other accrued liabilities	$	18,780		$	4,446
Non-cash interest expense capitalized and added to the cost of qualified assets		2,073			1,784
Change in goodwill relating to adjustments to acquired net assets		—			231

(1)

As adjusted to reflect the adoption of new accounting guidance for convertible debt instruments that may be settled in cash upon conversion (see Note 1).

The accompanying notes are an integral part of these condensed consolidated financial statements.

Index

SunPower Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

SunPower Corporation (together with its subsidiaries, the “Company” or “SunPower”) designs, manufactures and markets high-performance solar electric power technologies. The Company’s solar cells and solar panels are manufactured using proprietary processes, and our technologies are based on more than 15 years of research and development. The Company operates in two business segments: systems and components. The Systems Segment generally represents sales directly to systems owners of engineering, procurement, construction and other services relating to solar electric power systems that integrate the Company’s solar panels and balance of systems components, as well as materials sourced from other manufacturers. The Components Segment primarily represents sales of the Company’s solar cells, solar panels and inverters to solar systems installers and other resellers, including the Company’s global dealer network.

The Company was a majority-owned subsidiary of Cypress Semiconductor Corporation (“Cypress”) through September 29, 2008. After the close of trading on September 29, 2008, Cypress completed a spin-off of all of its shares of the Company’s class B common stock in the form of a pro rata dividend to the holders of record of Cypress common stock as of September 17, 2008. As a result, the Company’s class B common stock now trades publicly and is listed on the Nasdaq Global Select Market, along with the Company’s class A common stock.

Recently Adopted Accounting Pronouncements

Convertible Debt

On December 29, 2008, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) Accounting Principles Board (“APB”) 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”), which requires recognition of both the liability and equity components of convertible debt instruments with cash settlement features. The debt component is required to be recognized at the fair value of a similar instrument that does not have an associated equity component. The equity component is recognized as the difference between the proceeds from the issuance of the convertible debt and the fair value of the liability, after adjusting for the deferred tax impact. FSP APB 14-1 also requires an accretion of the resulting debt discount over the expected life of the convertible debt. FSP APB 14-1 is required to be applied retrospectively to prior periods, and accordingly, financial statements for prior periods have been adjusted to reflect its adoption.

In February 2007, the Company issued $200.0 million in principal amount of its 1.25% senior convertible debentures, or the 1.25% debentures. In the fourth quarter of fiscal 2008, the Company received notices for the conversion of approximately $1.4 million of the 1.25% debentures. In July 2007, the Company issued $225.0 million in principal amount of its 0.75% senior convertible debentures, or the 0.75% debentures. The 1.25% debentures and the 0.75% debentures contain partial cash settlement features and are therefore subject to FSP APB 14-1. As of December 28, 2008, the carrying value of the equity component was $61.8 million and the principal amount of the outstanding debentures, the unamortized discount and the net carrying value was $423.6 million, $66.4 million and $357.2 million, respectively (see Note 11). On a cumulative basis from the respective issuance dates of the 1.25% debentures and the 0.75% debentures through December 28, 2008, the Company has retrospectively recognized $24.4 million in non-cash interest expense related to the adoption of FSP APB 14-1 excluding the related tax effects.

As a result of the Company’s adoption of FSP APB 14-1, the Company’s Condensed Consolidated Balance Sheet as of December 28, 2008 has been adjusted. The impact of the Company’s adoption of the new accounting guidance on its Condensed Consolidated Balance Sheet as of December 28, 2008 is shown in its Annual Report on Form 10-K for the year ended January 3, 2010 (the “2009 Form 10-K”).

As a result of the Company’s adoption of FSP APB 14-1, the Company’s Condensed Consolidated Statement of Operations for the three months ended March 30, 2008 has been adjusted as follows:

(In thousands)	As Adjusted in this Quarterly Report on Form 10-Q/A			Prior to Retrospective Application of New Accounting Guidance
Cost of systems revenue	$	143,928		$	143,877
Cost of components revenue		78,849			78,775
Operating income		12,996			13,121
Interest expense		(6,017	)		(1,184	)
Other, net		715			(257	)
Income before income taxes and equity in earnings of unconsolidated investees		11,841			15,827
Income tax provision		1,280			4,508
Income before equity in earnings of unconsolidated investees		10,561			11,319
Net income		11,143			11,901

Index

As a result of the Company’s adoption of FSP APB 14-1, the Company’s Condensed Consolidated Statement of Cash Flows for the three months ended March 30, 2008 has been adjusted as follows:

(In thousands)	As Adjusted in this Quarterly Report on Form 10-Q/A			Prior to Retrospective Application of New Accounting Guidance
Cash flows from operating activities:
Net income	$	11,143		$	11,901
Depreciation		10,139			10,102
Non-cash interest expense		4,384			—
Amortization of debt issuance costs		537			972
Deferred income taxes and other tax liabilities		(981	)		2,247
Net cash used in operating activities		(68,714	)		(68,714	)

Earnings Per Share

On December 29, 2008, the Company adopted FSP Emerging Issues Task Force Issue (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”), which clarifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. In fiscal 2007, the Company granted restricted stock awards with the same dividend rights as its other stockholders, therefore, unvested restricted stock awards are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied (see Note 15). The new guidance was applied retrospectively to the Company’s historical results of operations, and as a result, the Company’s Condensed Consolidated Statement of Operations for the three months ended March 30, 2008 has been adjusted as follows:

(In thousands, except per share data)	As Adjusted in this Quarterly Report on Form 10-Q/A		Prior to Retrospective Application of New Accounting Guidance
Net income	$	11,143	$	11,901

Net income per share of class A and class B common stock:
Basic	$	0.14	$	0.15
Diluted	$	0.13	$	0.14
Weighted-average shares:
Basic		78,965		78,965
Diluted		83,002		83,661

Disclosures about Derivative Instruments and Hedging Activities

On December 29, 2008, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of SFAS No. 133” (“SFAS No. 161”), which had no financial impact on the Company’s condensed consolidated financial statements and only required additional financial statement disclosures as set forth in Note 12. SFAS No. 161 specifically requires entities to provide enhanced disclosures addressing the following: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.

Index

Fair Value of Nonfinancial Assets and Nonfinancial Liabilities

In February 2008, the FASB issued FSP SFAS No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP SFAS No. 157-2”), which delayed the effective date of SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2009. Therefore, in the first quarter of fiscal 2009, the Company adopted SFAS No. 157 for nonfinancial assets and nonfinancial liabilities. The adoption of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities that are not measured and recorded at fair value on a recurring basis did not have a significant impact on the Company’s condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In April 2009, the FASB issued three Staff Positions: (i) FSP SFAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS No. 157-4”), (ii) SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS No. 115-2 and FSP SFAS No. 124-2”), and (iii) SFAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS No. 107 and APB 28-1”), which will be effective for interim and annual periods ending after June 15, 2009. FSP SFAS No. 157-4 provides guidance on how to determine the fair value of assets and liabilities under SFAS No. 157 in the current economic environment and reemphasizes that the objective of a fair value measurement remains an exit price. If the Company were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and the Company may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate. FSP SFAS No. 115-2 and FSP SFAS No. 124-2 modify the requirements for recognizing other-than-temporarily impaired debt securities and revise the existing impairment model for such securities by modifying the current intent and ability indicator in determining whether a debt security is other-than-temporarily impaired. FSP SFAS No. 107 and APB 28-1 enhance the disclosure of instruments under the scope of SFAS No. 157 for both interim and annual periods. The Company is currently evaluating the potential impact, if any, of the adoption of these Staff Positions on its financial position, results of operations and disclosures.

In April 2009, the FASB issued FSP SFAS No. 141(R)-1 which amends the provisions in SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”), for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP SFAS No. 141(R)-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in SFAS No. 141(R) and instead carries forward most of the provisions in SFAS No. 141, "Business Combinations" ("SFAS No. 141"), for acquired contingencies. FSP SFAS No. 141(R)-1 is effective for contingent assets and contingent liabilities acquired in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company expects FSP SFAS No. 141(R)-1 will have an impact in its condensed consolidated financial statements, but the nature and magnitude of the specific effects will depend upon the nature, term and size of the acquired contingencies.

Fiscal Years

The Company reports on a fiscal-year basis and ends its quarters on the Sunday closest to the end of the applicable calendar quarter, except in a 53-week fiscal year, in which case the additional week falls into the fourth quarter of that fiscal year. Fiscal year 2009 consists of 53 weeks while fiscal year 2008 consists of 52 weeks. The first quarter of fiscal 2009 ended on March 29, 2009 and the first quarter of fiscal 2008 ended on March 30, 2008.

Basis of Presentation

The accompanying condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of the Company and all of its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements adjusted for the retrospective application of FSP APB 14-1 discussed above. Accordingly, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 28, 2008.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("United States" or "U.S.") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these financial statements include percentage-of-completion for construction projects, allowances for doubtful accounts receivable and sales returns, inventory write-downs, estimates for future cash flows and economic useful lives of property, plant and equipment, goodwill, intangible assets and other long-term assets, asset impairments, valuation of auction rate securities, investments in joint ventures, certain accrued liabilities including accrued warranty reserves, valuation of debt without the conversion feature, and income taxes and tax valuation allowances. Actual results could materially differ from those estimates.

Index

In the opinion of management, the accompanying condensed consolidated interim financial statements contain all adjustments, consisting only of normal recurring adjustments, which the Company believes are necessary for a fair statement of the Company’s financial position as of March 29, 2009 and its results of operations for the three months ended March 29, 2009 and March 30, 2008 and its cash flows for the three months ended March 29, 2009 and March 30, 2008. These condensed consolidated interim financial statements are not necessarily indicative of the results to be expected for the entire year.

Note 2. RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On November 16, 2009, the Company announced that its Audit Committee commenced an independent investigation into certain accounting and financial reporting matters at the Company’s Philippines operations (“SPML”). The Audit Committee retained independent counsel, forensic accountants and other experts to assist it in conducting the investigation.

As a result of the investigation, the Audit Committee concluded that certain unsubstantiated accounting entries were made at the direction of the Philippines-based finance personnel in order to report results for manufacturing operations that would be consistent with internal expense projections. The entries generally resulted in an understatement of the Company’s cost of goods sold (referred to as “cost of revenue” in the Condensed Consolidated Statement of Operations). The Audit Committee concluded that the efforts were not directed at achieving the Company’s overall financial results or financial analysts’ projections of the Company’s financial results. The Audit Committee also determined that these accounting issues were confined to the accounting function in the Philippines. Finally, the Audit Committee concluded that executive management neither directed nor encouraged, nor was aware of, these activities and was not provided with accurate information concerning the unsubstantiated entries. In addition to the unsubstantiated entries, during the Audit Committee investigation various accounting errors were discovered by the investigation and by management. See Part I — “Item 4: Controls and Procedures” of this report.

The nature of the restatement adjustments and the impact of the adjustments for the three months ended March 29, 2009 and March 30, 2008 are shown in the following table (in thousands):

	March 29, 2009			March 30, 2008 (1)
Investigation related adjustments	$	(4,040	)	$	(4,364	)
Errors identified during course of investigation		(8,468	)		2,342
		(12,508	)		(2,022	)
Out-of-period adjustments		(3,042	)		641
Total adjustments		(15,550	)		(1,381	)
Income tax effect of adjustments		10,634			525
Decrease in net income (loss)	$	(4,916	)	$	(856	)

(1)

Includes the correction of errors identified that occurred in fiscal 2007 and 2006 that were determined to be immaterial both individually and in the aggregate to those years. Consequently, a total of approximately $0.6 million and $0.5 million of pre-tax expense and after tax expense, respectively, identified in fiscal 2007 were recorded in the three months ended March 30, 2008 as well as a total of approximately $0.4 million of both pre-tax income and after tax income identified in fiscal 2006 were recorded in the three months ended March 30, 2008.

Investigation Related Adjustments:

As noted above, the Audit Committee’s investigation found that unsubstantiated entries (a) were made at the direction of the Philippines-based finance personnel in order to report results for manufacturing operations that would be consistent with internal expense projections, (b) generally resulted in an understatement of the Company’s cost of goods sold, and (c) were not directed or encouraged by, or done with the knowledge of, executive management. During the course of the investigation, various accounting errors which required adjustments were also identified. Adjustments for these unsubstantiated entries and errors affected cost of goods sold and the following balance sheet accounts:

●

Accounts payable and accrued liabilities: The investigation found that certain expenses were understated by (a) not sufficiently accruing expenses or (b) reversing previously recorded expenses through manual journal entries that were not based on actual transactions or reasonable estimates of expenses. The accounts primarily affected were accruals for manufacturing expenses such as subcontracted wafering costs, electricity, and freight and other accrued expenses. Unsubstantiated entries were also recorded to reduce uninvoiced receipts liability accounts, with an offsetting reduction to cost of goods sold.

Index

●

Inventories: The investigation found that unsubstantiated entries were made to increase inventory and decrease cost of goods sold by adjusting variance capitalization amounts. In addition, inventory obsolescence was understated for materials used in-house by wafering services of silicon ingots.

Errors Identified during Course of Investigation:

Through the investigation, errors were also found in the Philippines relating to inventories, prepaid expenses and other current assets, property, plant and equipment, and accounts payable and accrued liabilities. The primary categories of these adjustments are discussed below:

●

Inventories: The Company recorded corrections related to accounting for inventories in-transit and scrap, as well as the methodology used to calculate the capitalization of inventory variances.

●

Prepaid expenses and other current assets: Certain foreign individual income tax filings prepared for employees on foreign assignments contained omissions of taxable income. The amount of the estimated tax understatement plus interest and penalties less any employee receivables generated by the filing of amended returns has been included in the restated financials.

●

Property plant and equipment: In some instances, depreciation expense was not recorded in the proper period.

●

Accounts payable and accrued liabilities: Vendor credits were not properly applied and certain employee bonuses were not correctly accrued.

Out-Of-Period Adjustments:

The Company also recorded out-of-period adjustments during the restatement periods that were previously considered to be immaterial. These adjustments related to systems revenue, inventories, accounts payable and accruals and stock-based compensation. As part of the restatement these adjustments have now been reflected in the quarterly period in which a substantial portion of the errors arose. The primary categories of these adjustments are discussed below:

●

Systems revenue: The Company determined it had improperly deferred revenue earned in 2008 due to the improper application of multiple element accounting. In addition, the Company recorded revenue adjustments for several solar system contracts in 2008 for which costs to complete had not been properly estimated. Also, the Company incorrectly recorded a materials-only sale using the percentage-of-completion method.

●

Inventories: Various inventory adjustments were the result of the improper accounting for consigned inventory, in-transit inventories, and standard costing.

●

Accounts payable and accruals: The Company noted several under and over accruals of operating expenses.

●

Stock based compensation: The Company determined it had recorded excess stock based compensation expense due to a spreadsheet error.

●

The Company has also made some minor revisions to disclosures in connection with this Amendment.

Index

The table below summarizes: (i) the adjustments related to the investigation; (ii) errors identified during the course of the investigation; and (iii) out-of-period adjustments on the Condensed Consolidated Balance Sheet as of March 29, 2009.

	March 29, 2009
	As Previously Reported (1)			Restatement Adjustments			As Restated
Assets
Current assets:
Cash and cash equivalents	$	149,110		$	-		$	149,110
Restricted cash and cash equivalents, current portion		12,663			-			12,663
Short-term investments		2,297			-			2,297
Accounts receivable, net		149,179			-			149,179
Costs and estimated earnings in excess of billings		34,164			(1,195	)		32,969
Inventories		343,169			(13,108	)		330,061
Advances to suppliers, current portion		39,647			-			39,647
Prepaid expenses and other current assets		75,119			3,723			78,842
Total current assets		805,348			(10,580	)		794,768

Restricted cash and cash equivalents, net of current portion		171,799			-			171,799
Long-term investments		18,971			-			18,971
Property, plant and equipment, net		687,159			(10,555	)		676,604
Goodwill		196,224			-			196,224
Other intangible assets, net		35,385			-			35,385
Advances to suppliers, net of current portion		114,879			-			114,879
Other long-term assets		78,316			(7,635	)		70,681
Total assets	$	2,108,081		$	(28,770	)	$	2,079,311

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	272,600		$	(6,752	)	$	265,848
Accrued liabilities		82,836			(11,205	)		71,631
Billings in excess of costs and estimated earnings		6,904			8,528			15,432
Customer advances, current portion		15,404			(1,320	)		14,084
Total current liabilities		377,744			(10,749	)		366,995

Long-term debt		103,850			-			103,850
Convertible debt		363,768			-			363,768
Customer advances, net of current portion		85,668			-			85,668
Long-term deferred tax liability		10,963			(1,648	)		9,315
Other long-term liabilities		46,019			(541	)		45,478
Total liabilities		988,012			(12,938	)		975,074
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,042,490 shares authorized; none issued and outstanding		-			-			-
Common stock, $0.001 par value, 150,000,000 shares of class B common stock authorized; 42,033,287 shares of class B common stock issued and outstanding; $0.001 par value, 217,500,000 shares of class A common stock authorized; 44,274,852 shares of class A common stock issued; 43,999,060 shares of class A common stock outstanding		86			-			86
Additional paid-in capital		1,077,851			(1,257	)		1,076,594
Accumulated other comprehensive loss		(19,677	)		-			(19,677	)
Retained earnings		72,825			(14,575	)		58,250
		1,131,085			(15,832	)		1,115,253
Less: 275,792 shares of class A common stock held in treasury, at cost		(11,016	)		-			(11,016	)
Total stockholders’ equity		1,120,069			(15,832	)		1,104,237
Total liabilities and stockholders’ equity	$	2,108,081		$	(28,770	)	$	2,079,311

(1)

Certain short-term warranty reserves have been revised to long-term warranty reserves to conform to the presentation in the Company's Condensed Consolidated Balance Sheets in the 2009 Form 10-K.

Index

	Three Months Ended March 29, 2009
	As Previously Reported			Restatement Adjustments			As Restated

Revenue:
Systems	$	106,097		$	(2,144	)	$	103,953
Components		107,690			-			107,690
Total revenue		213,787			(2,144	)		211,643
Operating costs and expenses:
Cost of systems revenue		88,351			6,973			95,324
Cost of components revenue		77,688			6,396			84,084
Research and development		7,964			(84	)		7,880
Selling, general and administrative		42,283			121			42,404
Total operating costs and expenses		216,286			13,406			229,692
Operating loss		(2,499	)		(15,550	)		(18,049	)
Other income (expense)
Interest income		1,184			-			1,184
Interest expense		(6,121	)		-			(6,121	)
Other, net		(7,157	)		-			(7,157	)
Other income (expense), net		(12,094	)		-			(12,094	)
Loss before income taxes and equity in earnings of unconsolidated investees		(14,593	)		(15,550	)		(30,143	)
Benefit from income taxes		(8,562	)		(10,634	)		(19,196	)
Loss before equity in earnings of unconsolidated investees		(6,031	)		(4,916	)		(10,947	)
Equity in earnings of unconsolidated investees		1,245			-			1,245
Net loss	$	(4,786	)	$	(4,916	)	$	(9,702	)

Net loss per share of class A and class B common stock:
Basic	$	(0.06	)	$	(0.06	)	$	(0.12	)
Diluted	$	(0.06	)	$	(0.06	)	$	(0.12	)

Weighted-average shares:
Basic		83,749						83,749
Diluted		83,749						83,749

Index

	Three Months Ended March 29, 2009
	As Previously Reported			Restatement Adjustments			As Restated
Net loss	$	(4,786	)	$	(4,916	)	$	(9,702	)
Other comprehensive income (loss):
Translation adjustment		(16,608	)		-			(16,608	)
Unrealized gain on derivatives, net of tax		22,534			-			22,534
Unrealized gain on investments, net of tax		8			-			8
Total comprehensive income (loss)	$	1,148		$	(4,916	)	$	(3,768	)

Index

	Three Months Ended March 29, 2009
	As Previously Reported			Restatement Adjustments			As Restated
Cash flows from operating activities:
Net loss	$	(4,786	)	$	(4,916	)	$	(9,702	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		9,483			(429	)		9,054
Depreciation		18,365			-			18,365
Amortization of other intangible assets		4,052			-			4,052
Impairment of investments and long-lived assets		1,318			-			1,318
Non-cash interest expense		5,021			-			5,021
Amortization of debt issuance costs		537			-			537
Equity in earnings of unconsolidated investees		(1,245	)		-			(1,245	)
Deferred income taxes and other tax liabilities		(6,369	)		(10,634	)		(17,003	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		40,931			-			40,931
Costs and estimated earnings in excess of billings		(3,797	)		619			(3,178	)
Inventories		(95,870	)		9,821			(86,049	)
Prepaid expenses and other assets		11,913			(242	)		11,671
Advances to suppliers		7,993			-			7,993
Accounts payable and other accrued liabilities		(27,199	)		2,401			(24,798	)
Billings in excess of costs and estimated earnings		(4,612	)		4,700			88
Customer advances		(8,860	)		(1,320	)		(10,180	)
Net cash used in operating activities		(53,125	)		-			(53,125	)

Cash flows from investing activities:
Increase in restricted cash and cash equivalents		(9,185	)		-			(9,185	)
Purchases of property, plant and equipment		(52,101	)		-			(52,101	)
Proceeds from sales or maturities of available-for-sale securities		18,177			-			18,177
Net cash used in investing activities		(43,109	)		-			(43,109	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of issuance costs		51,232			-			51,232
Proceeds from exercise of stock options		396			-			396
Purchases of stock for tax withholding obligations on vested restricted stock		(2,359	)		-			(2,359	)
Net cash provided by financing activities		49,269			-			49,269

Effects of exchange rate changes on cash and equivalents		(6,256	)		-			(6,256	)
Net decrease in cash and cash equivalents		(53,221	)		-			(53,221	)
Cash and cash equivalents at beginning of period		202,331			-			202,331
Cash and cash equivalents at end of period	$	149,110		$	-		$	149,110

Non-cash transactions:
Additions to property, plant and equipment included in accounts payable and other accrued liabilities	$	22,571		$	(3,791	)	$	18,780
Non-cash interest expense capitalized and added to the cost of qualified assets		2,073			-			2,073

Index

	Three Months Ended March 30, 2008
	As Previously Reported (1)			Restatement Adjustments			As Restated

Revenue:
Systems	$	178,851		$	572		$	179,423
Components		94,850			-			94,850
Total revenue		273,701			572			274,273
Operating costs and expenses:
Cost of systems revenue		143,264			664			143,928
Cost of components revenue		77,242			1,607			78,849
Research and development		4,642			-			4,642
Selling, general and administrative		33,858			-			33,858
Total operating costs and expenses		259,006			2,271			261,277
Operating income		14,695			(1,699	)		12,996
Other income (expense)
Interest income		4,147			-			4,147
Interest expense		(6,297	)		280			(6,017	)
Other, net		715			-			715
Other income (expense), net		(1,435	)		280			(1,155	)
Income before income taxes and equity in earnings of unconsolidated investees		13,260			(1,419	)		11,841
Provision for income taxes		1,805			(525	)		1,280
Income before equity in earnings of unconsolidated investees		11,455			(894	)		10,561
Equity in earnings of unconsolidated investees		544			38			582
Net income	$	11,999		$	(856	)	$	11,143

Net income per share of class A and class B common stock:
Basic	$	0.15		$	(0.01	)	$	0.14
Diluted	$	0.14		$	(0.01	)	$	0.13

Weighted-average shares:
Basic		78,965						78,965
Diluted		83,002						83,002

(1)	As adjusted to reflect the adoption of new accounting guidance for both convertible debt instruments that may be settled in cash upon conversion and unvested share-based payment awards that contain rights to nonforfeitable dividends that are participating securities (see Note 1).

Index

	Three Months Ended March 30, 2008
	As Previously Reported (1)			Restatement Adjustments			As Restated
Net income	$	11,999		$	(856	)	$	11,143
Other comprehensive income:
Translation adjustment		10,405			-			10,405
Unrealized loss on derivatives, net of tax		(1,456	)		-			(1,456	)
Unrealized loss on investments, net of tax		(1,471	)		-			(1,471	)
Total comprehensive income	$	19,477		$	(856	)	$	18,621

(1)	As adjusted to reflect the adoption of new accounting guidance for convertible debt instruments that may be settled in cash upon conversion (see Note 1).

Index

	Three Months Ended March 30, 2008
	As Previously Reported (1)			Restatement Adjustments			As Restated
Cash flows from operating activities:
Net income	$	11,999		$	(856	)	$	11,143
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation		14,508			-			14,508
Depreciation		10,139			-			10,139
Amortization of other intangible assets		4,317			-			4,317
Impairment of investments and long-lived assets		5,489			-			5,489
Non-cash interest expense		4,384			-			4,384
Amortization of debt issuance costs		537			-			537
Equity in earnings of unconsolidated investees		(544	)		(38	)		(582	)
Excess tax benefits from stock-based award activity		(4,361	)		367			(3,994	)
Deferred income taxes and other tax liabilities		(455	)		(526	)		(981	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(17,162	)		-			(17,162	)
Costs and estimated earnings in excess of billings		(20,709	)		-			(20,709	)
Inventories		(39,530	)		(3,601	)		(43,131	)
Prepaid expenses and other assets		(13,948	)		2,748			(11,200	)
Advances to suppliers		(2,559	)		-			(2,559	)
Accounts payable and other accrued liabilities		22,983			2,553			25,536
Billings in excess of costs and estimated earnings		(43,663	)		-			(43,663	)
Customer advances		(786	)		-			(786	)
Net cash used in operating activities		(69,361	)		647			(68,714	)

Cash flows from investing activities:
Increase in restricted cash and cash equivalents		(55,550	)		-			(55,550	)
Purchases of property, plant and equipment		(50,790	)		(280	)		(51,070	)
Purchases of available-for-sale securities		(50,970	)		-			(50,970	)
Proceeds from sales or maturities of available-for-sale securities		84,106			-			84,106
Cash paid for acquisitions, net of cash acquired		(13,484	)		-			(13,484	)
Cash paid for investments in joint ventures and other non-public companies		(5,625	)		-			(5,625	)
Net cash used in investing activities		(92,313	)		(280	)		(92,593	)

Cash flows from financing activities:
Proceeds from exercise of stock options		1,138			-			1,138
Excess tax benefits from stock-based award activity		4,361			(367	)		3,994
Purchases of stock for tax withholding obligations on vested restricted stock		(3,334	)		-			(3,334	)
Net cash provided by financing activities		2,165			(367	)		1,798

Effects of exchange rate changes on cash and equivalents		6,817			-			6,817
Net decrease in cash and cash equivalents		(152,692	)		-			(152,692	)
Cash and cash equivalents at beginning of period		285,214			-			285,214
Cash and cash equivalents at end of period	$	132,522		$	-		$	132,522

Non-cash transactions:
Additions to property, plant and equipment included in accounts payable and other accrued liabilities	$	4,446		$	-		$	4,446
Non-cash interest expense capitalized and added to the cost of qualified assets		1,784			-			1,784
Change in goodwill relating to adjustments to acquired net assets		231			-			231

(1) As adjusted to reflect the adoption of new accounting guidance for convertible debt instruments that may be settled in cash upon conversion (see Note 1).

Index

Note 3. INVENTORIES

(In thousands)	March 29, 2009 (2)		December 28, 2008 (3)
		(As Restated)
Raw materials (1)	$	109,225	$	95,092
Work-in-process		47,179		25,813
Finished goods		173,657		127,350
	$	330,061	$	248,255

(1)

In addition to polysilicon and other raw materials for solar cell manufacturing, raw materials include installation materials for systems projects.

(2)

Certain balances of raw materials, work-in-process and finished goods have been reclassified to conform to the presentation in the Company's Notes to Condensed Consolidated Financial Statements in the 2009 Form 10-K.

(3)

The balance of finished goods increased by $0.2 million for the change in amortization of capitalized non-cash interest expense capitalized in inventory as a result of the Company’s adoption of FSP APB 14-1 (see Note 1).

Note 4. PROPERTY, PLANT AND EQUIPMENT

(In thousands)	March 29, 2009			December 28, 2008 (1)
		(As Restated)
Land and buildings	$	13,914		$	13,912
Leasehold improvements		159,748			148,190
Manufacturing equipment		450,879			387,860
Computer equipment		28,550			18,658
Solar power systems		8,299			8,299
Furniture and fixtures		4,330			4,327
Construction-in-process		131,314			142,894
		797,034			724,140
Less: Accumulated depreciation		(120,430	)		(101,656	)
	$	676,604		$	622,484

(1)	Property, plant and equipment, net increased $16.6 million for non-cash interest expense associated with the 1.25% debentures and 0.75% debentures that was capitalized and added to the cost of qualified assets as a result of the Company’s adoption of FSP APB 14-1 (see Note 1).

Certain manufacturing equipment associated with solar cell manufacturing lines located at our second facility in the Philippines are collateralized in favor of a customer by way of a chattel mortgage, a first ranking mortgage and a security interest in the property. The Company provided security for advance payments received from a customer in fiscal 2008 totaling $40.0 million in the form of collateralized manufacturing equipment with a net book value of $41.2 million and $43.1 million as of March 29, 2009 and December 28, 2008, respectively.

The Company evaluates its long-lived assets, including property, plant and equipment and intangible assets with finite lives (see Note 5), for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). Factors considered important that could result in an impairment review include significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of use of acquired assets and significant negative industry or economic trends.

Ongoing weak global credit market conditions have had a negative impact on the Company’s earnings during the first quarter of fiscal 2009. In addition, the Company expects that the current credit market conditions will continue through at least the first half of fiscal 2009, reducing demand for its solar power products in the near term, which could harm future earnings. From time to time, the Company may temporarily remove certain long-lived assets from service based on projections of reduced capacity needs. The Company believes the current adverse change in its business climate resulting in lower forecasted revenue for fiscal 2009 is temporary in nature and does not indicate that the fair values of its long-lived assets have fallen below their carrying values as of March 29, 2009.

Note 5. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table presents the changes in the carrying amount of goodwill under the Company's reportable business segments:

Index

(In thousands)	Systems		Components			Total
As of December 28, 2008	$	181,801	$	14,919		$	196,720
Translation adjustment		—		(496	)		(496	)
As of March 29, 2009	$	181,801	$	14,423		$	196,224

The Company records a translation adjustment for the revaluation of its Euro functional currency and Australian dollar functional currency subsidiaries’ goodwill and intangible assets into U.S. dollar. As of March 29, 2009, the translation adjustment decreased the balance of goodwill by $0.5 million.

In accordance with SFAS No. 142, “Accounting for Goodwill and Other Intangible Assets” (“SFAS No. 142”), goodwill is tested for impairment at least annually, or more frequently if certain indicators are present. The Company conducts its annual impairment test of goodwill as of the Sunday closest to the end of the third fiscal quarter of each year. Impairment of goodwill is tested at the Company’s reporting unit level which is at the segment level by comparing each segment’s carrying amount, including goodwill, to the fair value of that segment. To determine fair value, the Company’s process has historically utilized a market multiples comparative approach. In performing its analysis, the Company has utilized information with assumptions and projections it considers reasonable and supportable. If the carrying amount of the reporting unit exceeds its implied fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if any. Based on its last impairment test as of September 28, 2008, the Company determined there was no impairment.

Under SFAS No. 142, goodwill of a reporting unit shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Ongoing weak global credit market conditions have had a negative impact on the Company’s earnings and the profitability of its reporting units during the first quarter of fiscal 2009. The Company expects that the current credit market conditions will continue through at least the first half of fiscal 2009, negatively affecting its ability to finance systems projects. Management evaluated all the facts and circumstances, including the duration and severity of the decline in its revenue and market capitalization and the reasons for it, to assess whether an impairment indicator exists that would require impairment testing of its reporting units. Management has concluded that no impairment indicator exists as of March 29, 2009, because the decline in revenue is temporary in nature and management does not believe that there is a significant adverse change in the long-term business climate.

Intangible Assets

The following tables present details of the Company's acquired identifiable intangible assets:

(In thousands)	Gross		Accumulated Amortization			Net
As of March 29, 2009
Patents and purchased technology	$	51,398	$	(33,995	)	$	17,403
Tradenames		2,478		(1,768	)		710
Customer relationships and other		27,381		(10,109	)		17,272
	$	81,257	$	(45,872	)	$	35,385

As of December 28, 2008
Patents and purchased technology	$	51,398	$	(31,322	)	$	20,076
Tradenames		2,501		(1,685	)		816
Customer relationships and other		27,456		(8,858	)		18,598
	$	81,355	$	(41,865	)	$	39,490

All of the Company’s acquired identifiable intangible assets are subject to amortization. Amortization expense for intangible assets totaled $4.1 million and $4.3 million for the three months ended March 29, 2009 and March 30, 2008, respectively. As of March 29, 2009, the estimated future amortization expense related to intangible assets is as follows (in thousands):

2009 (remaining nine months)	$	12,182
2010	14,656
2011	4,546
2012	3,896
Thereafter	105
	$	35,385

Index

Note 6. INVESTMENTS

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). Level 2 measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1.

Assets Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s available-for-sale securities accounted for under SFAS No. 115, “Accounting for Investment in Certain Debt and Equity Securities” (“SFAS No. 115”), that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value in accordance with the provisions of SFAS No. 157. Information about the Company’s foreign currency derivatives measured at fair value on a recurring basis is disclosed in Note 12 below. The Company does not have any nonfinancial assets or nonfinancial liabilities that are recognized or disclosed at fair value in its condensed consolidated financial statements on a recurring basis.

	March 29, 2009
(In thousands)	Level 1		Level 2		Level 3		Total
Asset
Money market funds	$	186,462	$	—	$	2,297	$	188,759
Bank notes		—		16,631		—		16,631
Corporate securities		—		—		18,971		18,971
Total available-for-sale securities	$	186,462	$	16,631	$	21,268	$	224,361

	December 28, 2008
(In thousands)	Level 1		Level 2		Level 3		Total
Asset
Money market funds	$	227,190	$	—	$	7,185	$	234,375
Bank notes		—		49,610		—		49,610
Corporate securities		—		9,994		23,577		33,571
Total available-for-sale securities	$	227,190	$	59,604	$	30,762	$	317,556

Available-for-sale securities utilizing Level 3 inputs to determine fair value are comprised of investments in money market funds totaling $2.3 million and $7.2 million as of March 29, 2009 and December 28, 2008, respectively, and auction rate securities totaling $19.0 million and $23.6 million as of March 29, 2009 and December 28, 2008, respectively.

Money Market Funds

Investments in money market funds utilizing Level 3 inputs consist of the Company’s investments in the Reserve Primary Fund and the Reserve International Liquidity Fund (collectively referred to as the "Reserve Funds"). The net asset value per share for the Reserve Funds fell below $1.00 because the funds had investments in Lehman Brothers Holdings, Inc. (“Lehman”), which filed for bankruptcy on September 15, 2008. As a result of this event, the Reserve Funds wrote down their investments in Lehman to zero and also announced that the funds would be closed and distributed to holders. The Company has estimated its loss on the Reserve Funds to be approximately $2.2 million based upon information publicly disclosed by the Reserve Funds relative to its holdings and remaining obligations. The Company recorded impairment charges of $1.2 million and $1.0 million during the first quarter of fiscal 2009 and the second half of fiscal 2008, respectively, in “Other, net” in its Condensed Consolidated Statements of Operations, thereby establishing a new cost basis for each fund. The Company’s other money market fund instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets.

Auction Rate Securities

Auction rate securities in which the Company invested are typically over-collateralized and secured by pools of student loans originated under the Federal Family Education Loan Program (“FFELP”) that are guaranteed and insured by the U.S. Department of Education. In addition, all auction rate securities held are rated by one or more of the Nationally Recognized Statistical Rating Organizations (“NRSRO”) as triple-A. Historically, these securities have provided liquidity through a Dutch auction at pre-determined intervals every 7 to 49 days. At the end of each reset period, investors can continue to hold the securities or sell the securities at par through an auction process. The “stated” or “contractual” maturities for these securities generally are between 20 to 30 years. Beginning in February 2008, the auction rate securities market experienced a significant increase in the number of failed auctions, resulting from a lack of liquidity, which occurs when sell orders exceed buy orders, and does not necessarily signify a default by the issuer.

Index

All auction rate securities held by the Company have failed to clear at auctions in subsequent periods. For failed auctions, the Company continues to earn interest on these investments at the contractual rate. Prior to last year, failed auctions have rarely occurred, however, such failures could continue to occur in the future. In the event the Company needs to access these funds, the Company will not be able to do so until a future auction is successful, the issuer redeems the securities, a buyer is found outside of the auction process or the securities mature. Accordingly, auction rate securities held are classified as “Long-term investments” in the Condensed Consolidated Balance Sheets, because they are not expected to be used to fund current operations and consistent with the stated contractual maturities of the securities.

The Company determined that use of a valuation model was the best available technique for measuring the fair value of its auction rate securities. The Company used an income approach valuation model to estimate the price that would be received to sell its securities in an orderly transaction between market participants ("exit price") as of the balance sheet dates. The exit price was derived as the weighted average present value of expected cash flows over various periods of illiquidity, using a risk adjusted discount rate that was based on the credit risk and liquidity risk of the securities. While the valuation model was based on both Level 2 (credit quality and interest rates) and Level 3 inputs, the Company determined that the Level 3 inputs were the most significant to the overall fair value measurement, particularly the estimates of risk adjusted discount rates and ranges of expected periods of illiquidity. The valuation model also reflected the Company's intention to hold its auction rate securities until they can be liquidated in a market that facilitates orderly transactions. The following key assumptions were used in the valuation model:

5 years to liquidity;

continued receipt of contractual interest which provides a premium spread for failed auctions; and

discount rates ranging from 4.5% to 6.3%, which incorporates a spread for both credit and liquidity risk.

Based on these assumptions, the Company estimated that the auction rate securities with a stated par value of $21.1 million at March 29, 2009 would be valued at approximately 90% of their stated par value, or $19.0 million, representing a decline in value of approximately $2.1 million. At December 28, 2008, the Company estimated that auction rate securities with a stated par value of $26.1 million would be valued at approximately 91% of their stated par value, or $23.6 million, representing a decline in value of approximately $2.5 million. Due to the length of time that has passed since the auctions failed and the ongoing uncertainties regarding future access to liquidity, the Company has determined the impairment is other-than-temporary and recorded impairment losses of $0.1 million and $2.5 million in the first quarter of fiscal 2009 and fourth quarter of fiscal 2008, respectively, in “Other, net” in its Condensed Consolidated Statements of Operations. The following table provides a summary of changes in fair value of the Company’s available-for-sale securities utilizing Level 3 inputs for the three months ended March 29, 2009:

(In thousands)	Money Market Funds			Auction Rate Securities
Balance at December 28, 2008	$	7,185		$	23,577
Sales and distributions (1)		(3,650	)		(4,526	)
Impairment loss recorded in “Other, net”		(1,238	)		(80	)
Balance at March 29, 2009 (2)	$	2,297		$	18,971

(1)	The Company sold an auction rate security with a carrying value of $4.5 million for $4.6 million to a third-party outside of the auction process and received distributions of $3.7 million from the Reserve Funds.

(2)	On April 17, 2009, the Company received distributions of $1.1 million from the Reserve Funds.

The following table provides a summary of changes in fair value of the Company’s available-for-sale securities which utilized Level 3 inputs for the three months ended March 30, 2008:

(In thousands)	Auction Rate Securities

Balance at December 31, 2007	$	—
Transfers from Level 2 to Level 3		29,050
Purchases		10,000
Unrealized loss included in other comprehensive income		(1,445	)
Balance at March 30, 2008	$	37,605

Index

The classification of available-for-sale securities is as follows:

(In thousands)	March 29, 2009		December 28, 2008
Included in:
Cash equivalents	$	18,631	$	101,523
Short-term restricted cash and cash equivalents(1)		12,663		13,240
Short-term investments		2,297		17,179
Long-term restricted cash and cash equivalents(1, 2)		171,799		162,037
Long-term investments		18,971		23,577
	$	224,361	$	317,556

(1)	The Company provided security in the form of cash collateralized bank standby letters of credit for advance payments received from customers.

(2)

In January 2009 and December 2008, the Company borrowed Malaysian Ringgit 185.0 million and 190.0 million, respectively, or approximately $51.2 million and $52.7 million, respectively, from the Malaysian Government under its facility agreement to finance the construction of its planned third solar cell manufacturing facility in Malaysia.

Note 7. ADVANCES TO SUPPLIERS

The Company has entered into agreements with various polysilicon, ingot, wafer, solar cell and solar panel vendors and manufacturers. These agreements specify future quantities and pricing of products to be supplied by the vendors for periods up to 12 years. Certain agreements also provide for penalties or forfeiture of advanced deposits in the event the Company terminates the arrangements (see Note 9). Under certain of these agreements, the Company is required to make prepayments to the vendors over the terms of the arrangements. In the first quarter of fiscal 2009, the Company paid advances totaling $5.6 million in accordance with the terms of existing supply agreements. As of March 29, 2009 and December 28, 2008, advances to suppliers totaled $154.5 million and $162.6 million, respectively, the current portion of which is $39.6 million and $43.2 million, respectively.

The Company’s future prepayment obligations related to these agreements as of March 29, 2009 are as follows (in thousands):

2009 (remaining nine months)	$	92,546
2010	161,414
2011	121,564
2012	72,694
	$	448,218

Note 8. RESTRUCTURING COSTS

The Company records restructuring costs in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”). In response to deteriorating economic conditions, the Company reduced its global workforce of regular employees by approximately 60 positions in the first quarter of fiscal 2009 in order to reduce its annual operating expenses. The restructuring actions included charges of $1.2 million for other severance, benefits and related costs.

A summary of total restructuring activity for the three months ended March 29, 2009 is as follows:

(in thousands)	Workforce Reduction
Balance as of December 28, 2008	$	—
Restructuring charges		1,185
Cash payments		(1,029	)
Balance as of March 29, 2009	$	156

Restructuring accruals totaled $0.2 million as of March 29, 2009 and are recorded in “Accrued liabilities” in the Condensed Consolidated Balance Sheet and represent estimated future cash outlays primarily related to severance expected to be paid within the second quarter of fiscal 2009.

Index

A summary of the charges in the Condensed Consolidated Statement of Operations resulting from workforce reductions is as follows:

	Three Months Ended
(in thousands)	March 29, 2009
Cost of systems revenue	$	179
Cost of components revenue		28
Research and development		77
Sales, general and administrative		901
Total restructuring charges	$	1,185

Note 9. COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases its San Jose, California facility under a non-cancelable operating lease from Cypress, which expires in April 2011. In addition, the Company leases its Richmond, California facility under a non-cancelable operating lease from an unaffiliated third-party, which expires in September 2018. The Company also has various lease arrangements, including its European headquarters located in Geneva, Switzerland under a lease that expires in September 2012, as well as sales and support offices in Southern California, New Jersey, Australia, Canada, Germany, Italy, Spain and South Korea, all of which are leased from unaffiliated third-parties. Future minimum obligations under all non-cancelable operating leases as of March 29, 2009 are as follows (in thousands):

2009 (remaining nine months)	$	4,096
2010		4,932
2011		3,642
2012		2,814
2013		2,756
Thereafter		14,597
	$	32,837

Purchase Commitments

The Company purchases raw materials for inventory, services and manufacturing equipment from a variety of vendors. During the normal course of business, in order to manage manufacturing lead times and help assure adequate supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure goods and services based upon specifications defined by the Company, or that establish parameters defining the Company’s requirements. In certain instances, these agreements allow the Company the option to cancel, reschedule or adjust the Company’s requirements based on its business needs prior to firm orders being placed. Consequently, only a portion of the Company’s disclosed purchase commitments arising from these agreements are firm, non-cancelable and unconditional commitments.

The Company also has agreements with several suppliers, including joint ventures, for the procurement of polysilicon, ingots, wafers, solar cells and solar panels which specify future quantities and pricing of products to be supplied by the vendors for periods up to 12 years and provide for certain consequences, such as forfeiture of advanced deposits and liquidated damages relating to previous purchases, in the event that the Company terminates the arrangements (see Note 7).

As of March 29, 2009, total obligations related to non-cancelable purchase orders totaled approximately $115.6 million and long-term supply agreements totaled approximately $3,992.2 million. Future purchase obligations under non-cancelable purchase orders and long-term supply agreements as of March 29, 2009 are as follows (in thousands):

2009 (remaining nine months)	$	376,790
2010		519,550
2011		546,438
2012		359,223
2013		277,531
Thereafter		2,028,257
	$	4,107,789

Total future purchase commitments of $4,107.8 million as of March 29, 2009 include tolling agreements with suppliers in which the Company provides polysilicon required for silicon ingot manufacturing and procures the manufactured silicon ingots from the supplier. Annual future purchase commitments in the table above are calculated using the gross price paid by the Company for silicon ingots and are not reduced by the price paid by suppliers for polysilicon. Total future purchase commitments as of March 29, 2009 would be reduced by $614.9 million to $3,492.9 million had the Company’s obligations under such tolling agreements been disclosed using net cash outflows.

Product Warranties

The Company warrants or guarantees the performance of the solar panels that the Company manufactures at certain levels of power output for extended periods, usually 25 years. It also warrants that the solar cells will be free from defects for at least 10 years. In addition, it passes through to customers long-term warranties from the original equipment manufacturers (“OEMs”) of certain system components. Warranties of 25 years from solar panels suppliers are standard, while inverters typically carry a 2-, 5- or 10-year warranty. The Company generally warrants at the time of sale or guarantees systems installed for a period of 1, 2, 5 or 10 years. The Company maintains warranty reserves to cover potential liability that could result from these guarantees. The Company’s potential liability is generally in the form of product replacement or repair. Warranty reserves are based on the Company’s best estimate of such liabilities and are recognized as a cost of revenue. The Company continuously monitors product returns for warranty failures and maintains a reserve for the related warranty expenses based on various factors including, historical warranty claims, results of accelerated testing, field monitoring and vendor reliability estimates, and data on industry average for similar products. Historically, warranty costs have been within management’s expectations.

Index

Provisions for warranty reserves charged to cost of revenue were $3.7 million and $4.9 million during the three months ended March 29, 2009 and March 30, 2008, respectively. Activity within accrued warranty for the three months ended March 29, 2009 and March 30, 2008 is summarized as follows:

(In thousands)	March 29, 2009			March 30, 2008
Balance at the beginning of the period	$	28,062		$	17,194
Accruals for warranties issued during the period		3,677			4,899
Settlements made during the period		(1,173	)		(2,576	)
Balance at the end of the period	$	30,566		$	19,517

The accrued warranty balance at March 29, 2009 and December 28, 2008 includes $25.5 million and $24.4 million, respectively, of accrued costs included in “Other long-term liabilities” in the Condensed Consolidated Balance Sheets.

System Put-Rights

EPC projects often require the Systems Segment to undertake customer obligations including: (i) system output performance guarantees; (ii) system maintenance; (iii) penalty payments or customer termination rights if the system the Company is constructing is not commissioned within specified timeframes or other construction milestones are not achieved; (iv) guarantees of certain minimum residual value of the system at specified future dates; and (v) system put-rights whereby the Company could be required to buy-back a customer’s system at fair value on specified future dates if certain minimum performance thresholds are not met. To date, no such repurchase obligations have been required.

Uncertain Tax Positions

Total liabilities associated with uncertain tax positions under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, and Related Implementation Issues” (“FIN 48”), were $14.0 million as of both March 29, 2009 and December 28, 2008 and are included in "Other long-term liabilities" in the Company’s Condensed Consolidated Balance Sheets as they are not expected to be paid within the next twelve months. Due to the complexity and uncertainty associated with its tax positions, the Company cannot make a reasonably reliable estimate of the period in which cash settlement will be made for its liabilities associated with uncertain tax positions in other long-term liabilities.

Indemnifications

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of warranties, representations and covenants related to such matters as title to assets sold, negligent acts, damage to property, validity of certain intellectual property rights, non-infringement of third-party rights and certain tax related matters. In each of these circumstances, payment by the Company is typically subject to the other party making a claim to the Company pursuant to the procedures specified in the particular contract. These procedures usually allow the Company to challenge the other party’s claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, the Company’s obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration and/or amounts. In some instances, the Company may have recourse against third-parties and/or insurance covering certain payments made by the Company.

For up to two years (or possibly longer) after the date of Cypress’s distribution of the Company’s class B common stock on September 29, 2008, the Company cannot issue 85.8 million or more shares of its class A common stock or participate in one or more transactions (excluding the distribution itself) in which 42 million or more shares of its then-existing class A common stock were acquired, if any such transaction(s) are in connection with a plan or series of related transactions that includes the distribution. If the Company were to participate in such a transaction, and thereby triggered tax to Cypress on the distribution, then assuming that Cypress distributed 42 million shares, Cypress’s top marginal income tax rate was 40% for federal and state income tax purposes, the fair market value of the class B common stock was $25.00 per share, and Cypress’s tax basis in such stock was $5.00 per share on the date of the distribution, the Company’s liability under its indemnification obligation to Cypress would be approximately $336.0 million.

Index

Legal Matters

From time to time the Company is a party to litigation matters and claims that are normal in the course of its operations. While the Company believes that the ultimate outcome of these matters will not have a material adverse effect on the Company, the outcome of these matters is not determinable and negative outcomes may adversely affect its financial position, liquidity or results of operations.

Note 10. JOINT VENTURES

Woongjin Energy Co., Ltd (“Woongjin Energy”)

The Company and Woongjin Holdings Co., Ltd. (“Woongjin”), a provider of environmental products located in Korea, formed Woongjin Energy in fiscal 2006, a joint venture to manufacture monocrystalline silicon ingots. The Company and Woongjin have funded the joint venture through capital investments. In January 2008, the Company invested an additional $5.4 million in the joint venture. Until Woongjin Energy engages in an IPO, Woongjin Energy will refrain from declaring or making any distributions, including dividends, unless its debt-to-equity ratio immediately following such distribution would not be greater than 200%. The Company supplies polysilicon, services and technical support required for silicon ingot manufacturing to the joint venture, and the Company procures the manufactured silicon ingots from the joint venture under a five-year agreement. For the three months ended March 29, 2009 and March 30, 2008, the Company paid $32.3 million and $5.8 million, respectively, to Woongjin Energy for manufacturing silicon ingots. As of March 29, 2009 and December 28, 2008, $29.9 million and $22.5 million, respectively, remained due and payable to Woongjin Energy.

As of March 29, 2009 and December 28, 2008, the Company had a $25.3 million and $24.0 million, respectively, investment in the joint venture in its Condensed Consolidated Balance Sheets which consisted of a 42.1% equity investment. The Company periodically evaluates the qualitative and quantitative attributes of its relationship with Woongjin Energy to determine whether the Company is the primary beneficiary of the joint venture and needs to consolidate Woongjin Energy’s results into the Company’s financial statements in accordance with FSP FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FSP FIN 46(R)”). The Company has concluded it is not the primary beneficiary of the joint venture because Woongjin Energy supplies only a portion of the Company’s future estimated total ingot requirement through 2012 and the existing supply agreement is shorter than the estimated economic life of the joint venture. In addition, the Company believes that Woongjin is the primary beneficiary of the joint venture because Woongjin guarantees the initial $33.0 million loan for Woongjin Energy and exercises significant control over Woongjin Energy’s board of directors, management, and daily operations.

The Company accounts for its investment in Woongjin Energy under APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock” (the “equity method”), in which the investment is classified as “Other long-term assets” in the Condensed Consolidated Balance Sheets and the Company’s share of Woongjin Energy’s income totaling $1.3 million and $0.6 million for the three months ended March 29, 2009 and March 30, 2008, respectively, is included in “Equity in earnings of unconsolidated investees” in the Condensed Consolidated Statements of Operations. The amount of equity earnings increased due to 1) increases in production since Woongjin Energy began manufacturing in the third quarter of fiscal 2007; and 2) the Company’s equity investment increased from 28.8% as of March 30, 2008 to 42.1% as of March 29, 2009. Neither party has contractual obligations to provide any additional funding to the joint venture. The Company’s maximum exposure to loss as a result of its involvement with Woongjin Energy is limited to its carrying value.

The Company conducted other related-party transactions with Woongjin Energy during fiscal 2008. The Company recognized $0.6 million in components revenue during the three months ended March 30, 2008 related to the sale of solar panels to Woongjin Energy. As of March 29, 2009 and December 28, 2008, zero and $0.8 million, respectively, remained due and receivable from Woongjin Energy related to the sale of solar panels.

First Philec Solar Corporation (“First Philec Solar”)

The Company and First Philippine Electric Corporation (“First Philec”) formed First Philec Solar in fiscal 2007, a joint venture to provide wafer slicing services of silicon ingots to the Company. The Company and First Philec have funded the joint venture through capital investments. In fiscal 2008, the Company invested an additional $4.2 million in the joint venture. The Company supplies to the joint venture silicon ingots and technology required for slicing silicon, and the Company procures the silicon wafers from the joint venture under a five-year wafering supply and sales agreement. This joint venture is located in the Philippines and became operational in the second quarter of fiscal 2008. In the three months ended March 29, 2009, the Company paid $6.8 million to First Philec Solar for wafer slicing services of silicon ingots. As of March 29, 2009 and December 28, 2008, $2.1 million and $1.9 million, respectively, remained due and payable to First Philec Solar.

Index

As of March 29, 2009 and December 28, 2008, the Company had a $4.9 million and $5.0 million, respectively, investment in the joint venture in its Condensed Consolidated Balance Sheets which consisted of a 19% equity investment. The Company periodically evaluates the qualitative and quantitative attributes of its relationship with First Philec Solar to determine whether the Company is the primary beneficiary of the joint venture and needs to consolidate First Philec Solar’s results into the Company’s financial statements in accordance with FSP FIN 46(R). The Company has concluded it is not the primary beneficiary of the joint venture because the existing five-year agreement named above is considered a short period compared against the estimated economic life of the joint venture. In addition, the Company believes that First Philec is the primary beneficiary of the joint venture because First Philec exercises significant control over First Philec Solar’s board of directors, management, and daily operations.

The Company accounts for this investment using the equity method of accounting since the Company is able to exercise significant influence over First Philec Solar due to its board positions. The Company’s investment is classified as “Other long-term assets” in the Condensed Consolidated Balance Sheets and the Company’s share of First Philec Solar’s losses totaling $0.1 million in the three months ended March 29, 2009 are included in “Equity in earnings of unconsolidated investees” in the Condensed Consolidated Statement of Operations. The Company’s maximum exposure to loss as a result of its involvement with First Philec Solar is limited to its carrying value.

Note 11. DEBT AND CREDIT SOURCES

Line of Credit

On July 13, 2007, the Company entered into a credit agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) and has entered into amendments to the credit agreement from time to time. As of March 29, 2009, the credit agreement provides for a $50.0 million uncollateralized revolving credit line, with a $50.0 million uncollateralized letter of credit subfeature, and a separate $150.0 million collateralized letter of credit facility. The Company may borrow up to $50.0 million and request that Wells Fargo issue up to $50.0 million in letters of credit under the uncollateralized letter of credit subfeature through March 27, 2010. Letters of credit issued under the subfeature reduce the Company’s borrowing capacity under the revolving credit line. Additionally, the Company may request that Wells Fargo issue up to $150.0 million in letters of credit under the collateralized letter of credit facility through March 27, 2014. As detailed in the agreement, the Company pays interest of LIBOR plus 2% on outstanding borrowings under the uncollateralized revolving credit line, and a fee of 2% and 0.2% to 0.4% depending on maturity for outstanding letters of credit under the uncollateralized letter of credit subfeature and collateralized letter of credit facility, respectively. At any time, the Company can prepay outstanding loans. All borrowings under the uncollateralized revolving credit line must be repaid by March 27, 2010, and all letters of credit issued under the uncollateralized letter of credit subfeature expire on or before March 27, 2010 unless the Company provides by such date collateral in the form of cash or cash equivalents in the aggregate amount available to be drawn under letters of credit outstanding at such time. All letters of credit issued under the collateralized letter of credit facility expire no later than March 27, 2014.

In connection with the credit agreement, the Company entered into a security agreement with Wells Fargo, granting a security interest in a securities account and deposit account to secure its obligations in connection with any letters of credit that might be issued under the credit agreement. SunPower North America, LLC and SunPower Corporation, Systems (“SP Systems”), both wholly-owned subsidiaries of the Company, also entered into an associated continuing guaranty with Wells Fargo. In addition, SP Systems will pledge 60% of its equity interest in SunPower Systems SA to Wells Fargo in the second quarter of fiscal 2009 to collateralize up to $50.0 million of the Company’s obligations under the credit agreement. The terms of the credit agreement include certain conditions to borrowings, representations and covenants, and events of default customary for financing transactions of this type. Covenants contained in the credit agreement include, but are not limited to, restrictions on the incurrence of additional indebtedness, pledging of assets, payment of dividends or distribution on the Company’s common stock, and purchases of property, plant and equipment and financial covenants with respect to certain liquidity, net worth and profitability metrics. If the Company fails to comply with the financial and other restrictive covenants contained in the credit agreement resulting in an event of default, all debt to Wells Fargo could become immediately due and payable and the Company’s other debt may become due and payable in the event there are cross-default provisions in the agreements governing such other debt.

As of March 29, 2009 and December 28, 2008, letters of credit totaling $49.7 million and $29.9 million, respectively, were issued by Wells Fargo under the uncollateralized letter of credit subfeature. In addition, letters of credit totaling $74.5 million and $76.5 million were issued by Wells Fargo under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008, respectively. As of March 29, 2009 and December 28, 2008, cash available to be borrowed under the uncollateralized revolving credit line was $0.3 million and $20.1 million, respectively, and includes letter of credit capacities available to be issued by Wells Fargo under the uncollateralized letter of credit subfeature. Letters of credit available under the collateralized letter of credit facility at March 29, 2009 and December 28, 2008 totaled $75.5 million and $73.5 million, respectively.

Debt Facility Agreement with the Malaysian Government

On December 18, 2008, the Company entered into a facility agreement with the Malaysian Government. In connection with the facility agreement, the Company executed a debenture and deed of assignment in favor of the Malaysian Government, granting a security interest in a deposit account and all assets of SunPower Malaysia Manufacturing Sdn. Bhd., a wholly-owned subsidiary of the Company, to secure its obligations under the facility agreement.

Index

Under the terms of the facility agreement, the Company may borrow up to Malaysian Ringgit 1.0 billion (approximately $276.9 million) to finance the construction of its planned third solar cell manufacturing facility (“FAB3”) in Malaysia. The loans within the facility agreement are divided into two tranches that may be drawn through June 2010. Principal is to be repaid in six quarterly payments starting in July 2015, and a non-weighted average interest rate of approximately 4.4% per annum accrues and is payable starting in July 2015. The Company has the ability to prepay outstanding loans and all borrowings must be repaid by October 30, 2016. The terms of the facility agreement include certain conditions to borrowings, representations and covenants, and events of default customary for financing transactions of this type. As of March 29, 2009 and December 28, 2008, the Company had borrowed Malaysian Ringgit 375.0 million (approximately $103.9 million) and Malaysian Ringgit 190.0 million (approximately $54.6 million), respectively, under the facility agreement.

1.25% and 0.75% Convertible Debenture Issuances

In February 2007, the Company issued $200.0 million in principal amount of its 1.25% senior convertible debentures. Interest on the 1.25% debentures is payable on February 15 and August 15 of each year, which commenced August 15, 2007. The 1.25% debentures mature on February 15, 2027. Holders may require the Company to repurchase all or a portion of their 1.25% debentures on each of February 15, 2012, February 15, 2017 and February 15, 2022, or if the Company experiences certain types of corporate transactions constituting a fundamental change. In addition, the Company may redeem some or all of the 1.25% debentures on or after February 15, 2012. The 1.25% debentures are initially convertible, subject to certain conditions, into cash up to the lesser of the principal amount or the conversion value. If the conversion value is greater than $1,000, then the excess conversion value will be convertible into the Company’s class A common stock. The initial effective conversion price of the 1.25% debentures is approximately $56.75 per share, which represented a premium of 27.5% over the closing price of the Company's class A common stock on the date of issuance. The applicable conversion rate will be subject to customary adjustments in certain circumstances.

In July 2007, the Company issued $225.0 million in principal amount of its 0.75% senior convertible debentures. Interest on the 0.75% debentures is payable on February 1 and August 1 of each year, which commenced February 1, 2008. The 0.75% debentures mature on August 1, 2027. Holders may require the Company to repurchase all or a portion of their 0.75% debentures on each of August 1, 2010, August 1, 2015, August 1, 2020, and August 1, 2025, or if the Company is involved in certain types of corporate transactions constituting a fundamental change. In addition, the Company may redeem some or all of the 0.75% debentures on or after August 1, 2010. The 0.75% debentures will be classified as short-term debt in the Company’s Condensed Consolidated Balance Sheet beginning on August 1, 2009. The 0.75% debentures are initially convertible, subject to certain conditions, into cash up to the lesser of the principal amount or the conversion value. If the conversion value is greater than $1,000, then the excess conversion value will be convertible into cash, class A common stock or a combination of cash and class A common stock, at the Company’s election. The initial effective conversion price of the 0.75% debentures is approximately $82.24 per share, which represented a premium of 27.5% over the closing price of the Company's class A common stock on the date of issuance. The applicable conversion rate will be subject to customary adjustments in certain circumstances.

The 1.25% debentures and 0.75% debentures are senior, unsecured obligations of the Company, ranking equally with all existing and future senior unsecured indebtedness of the Company. The 1.25% debentures and 0.75% debentures are effectively subordinated to the Company’s secured indebtedness to the extent of the value of the related collateral and structurally subordinated to indebtedness and other liabilities of the Company’s subsidiaries. The 1.25% debentures and 0.75% debentures do not contain any covenants or sinking fund requirements.

For the quarter ended September 28, 2008, the closing price of the Company’s class A common stock equaled or exceeded 125% of the $56.75 per share initial effective conversion price governing the 1.25% debentures for 20 out of 30 consecutive trading days ending on September 28, 2008, thus satisfying the market price conversion trigger pursuant to the terms of the 1.25% debentures. During the fourth quarter in fiscal 2008, holders of the 1.25% debentures were able to exercise their right to convert the debentures any day in that fiscal quarter. As of December 28, 2008, the Company received notices for the conversion of approximately $1.4 million of the 1.25% debentures which the Company settled for approximately $1.2 million in cash and 1,000 shares of class A common stock.

Because the closing price of the Company’s class A common stock on at least 20 of the last 30 trading days during the fiscal quarters ending March 29, 2009 and December 28, 2008 did not equal or exceed $70.94, or 125% of the applicable conversion price for its 1.25% debentures, and $102.80, or 125% of the applicable conversion price governing its 0.75% debentures, holders of the 1.25% debentures and 0.75% debentures are unable to exercise their right to convert the debentures, based on the market price conversion trigger, any day in the first and second quarters of fiscal 2009. Accordingly, the Company classified the convertible debt as long-term debt in its Condensed Consolidated Balance Sheets as of March 29, 2009 and December 28, 2008. This test is repeated each fiscal quarter, therefore, if the market price conversion trigger is satisfied in a subsequent quarter, the debentures may again be re-classified as short-term debt.

The 1.25% debentures and 0.75% debentures are subject to the provisions of FSP APB 14-1, adopted by the Company on December 29, 2008, since the debentures can be settled in cash upon conversion. The Company estimated that the effective interest rate for similar debt without the conversion feature was 9.25% and 8.125% on the 1.25% debentures and 0.75% debentures, respectively. The principal amount of the outstanding debentures, the unamortized discount and the net carrying value as of March 29, 2009 was $423.6 million, $59.8 million and $363.8 million, respectively, and as of December 28, 2008 was $423.6 million, $66.4 million and $357.2 million, respectively. The Company recognized $5.0 million and $4.4 million in non-cash interest expense in the three months ended March 29, 2009 and March 30, 2008, respectively, related to the adoption of FSP APB 14-1 (see Note 1). As of March 29, 2009, the remaining weighted average period over which the unamortized discount will be recognized is as follows (in thousands):

Index

2009 (remaining nine months)	$	20,589
2010	22,667
2011	14,686
2012	1,898
	$	59,840

The following table summarizes the Company’s outstanding convertible debt:

	As of
	March 29, 2009				December 28, 2008
(In thousands)	Face Value		Fair Value*		Face Value		Fair Value*
1.25% debentures	$	198,608	$	151,190	$	198,608	$	143,991
0.75% debentures		225,000		187,875		225,000		166,747
Total convertible debt	$	423,608	$	339,065	$	423,608	$	310,738

*	The fair value of the convertible debt was determined based on quoted market prices as reported by an independent pricing source.

Note 12. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes unrealized gains and losses on the Company’s available-for-sale investments, foreign currency derivatives designated as cash flow hedges and translation adjustments. The components of comprehensive income (loss) were as follows:

	Three Months Ended
(In thousands)	March 29, 2009			March 30, 2008
		(As Restated)
Net income (loss)	$	(9,702	)	$	11,143
Other comprehensive income (loss):
Translation adjustment		(16,608	)		10,405
Unrealized gain (loss) on investments, net of tax	8			(1,471		)
Unrealized gain (loss) on derivatives, net of tax		22,534			(1,456	)
Total comprehensive income (loss)	$	(3,768	)	$	18,621

Note 13. FOREIGN CURRENCY DERIVATIVES

The Company has non-U.S. subsidiaries that operate and sell the Company’s products in various global markets, primarily in Europe. As a result, the Company is exposed to risks associated with changes in foreign currency exchange rates. It is the Company’s policy to use various hedge instruments to manage the exposures associated with purchases of foreign sourced equipment, net asset or liability positions of its subsidiaries and forecasted revenues and expenses. In connection with its global tax planning, the Company changed the flow of transactions to European subsidiaries that have Euro functional currency, resulting in greater exposure to changes in the value of the Euro beginning in the second quarter of fiscal 2008. Implementation of this tax strategy had, and will continue to have, the ancillary effect of limiting the Company’s ability to fully hedge certain Euro-denominated revenue. The Company currently does not enter into foreign currency derivative financial instruments for speculative or trading purposes.

On December 29, 2008, the Company adopted SFAS No. 161 which had no financial impact on the Company’s condensed consolidated financial statements and only required additional financial statement disclosures (see Note 1). The Company has applied the requirements of SFAS No. 161 on a prospective basis. Accordingly, disclosures related to interim periods prior to the date of adoption have not been presented.

Under SFAS No. 133, the Company is required to recognize derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company calculates the fair value of its option and forward contracts based on market volatilities, spot rates and interest differentials from published sources. The following table presents information about the Company’s hedge instruments measured at fair value on a recurring basis as of March 29, 2009 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value in accordance with the provisions of SFAS No. 157:

Index

(In thousands)	Balance Sheet Location	Significant Other Observable Inputs (Level 2)
Asset
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts	Prepaid expenses and other current assets	$	2,173

Liability
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts	Accrued liabilities	$	9,940
Derivatives designated as hedging instruments under SFAS No. 133
Cash flow hedges
Foreign currency forward exchange contracts	Accrued liabilities	$	7,856
Foreign currency option contracts	Accrued liabilities		485
		$	8,341

The following table summarizes the amount of unrealized loss recognized in “Accumulated other comprehensive loss” (“OCI”) in “Stockholders’ equity” in the Condensed Consolidated Balance Sheet:

	Unrealized Loss Recognized in OCI (Effective Portion)				Loss Reclassified from OCI to Cost of Revenue (Effective Portion)				Loss Recognized in Other, Net on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)
	As of				Three Months Ended				Three Months Ended
(In thousands)	March 29, 2009				March 29, 2009				March 29, 2009
Cash flow hedges
Foreign currency forward exchange contracts		$	(3,551	)		$	(125	)		$	(1,478	)
Foreign currency option contracts			—				—				(485	)
		$	(3,551	)		$	(125	)		$	(1,963	)

The following table summarizes the amount of loss recognized in “Other, net” in the Condensed Consolidated Statement of Operations in the three months ended March 29, 2009:

(In thousands)
Derivatives not designated as hedging instruments under SFAS No. 133
Balance sheet hedges
Foreign currency forward exchange contracts	$	(1,838	)

Foreign Currency Exchange Risk

Cash Flow Exposure

The Company’s subsidiaries have had and will continue to have material future cash flows, including revenues and expenses, that are denominated in currencies other than their functional currencies. The Company’s cash flow exposure primarily relates to trade accounts receivable and accounts payable. Changes in exchange rates between the Company’s subsidiaries’ functional currencies and other currencies in which they transact will cause fluctuations in cash flows expectations and cash flows realized or settled. Accordingly, the Company enters into option and forward contracts to hedge the value of a portion of these forecasted cash flows.

Index

In accordance with SFAS No. 133, the Company accounts for its hedges of forecasted foreign currency purchases as cash flow hedges. As of March 29, 2009, the Company has outstanding cash flow hedge forward contracts and option contracts with an aggregate notional value of $397.9 million and $76.3 million, respectively. As of December 28, 2008, the Company had outstanding cash flow hedge forward contracts and option contracts with an aggregate notional value of $364.5 million and $147.5 million, respectively. The maturity dates of the outstanding contracts as of March 29, 2009 range from April 2009 to December 2009. Changes in fair value of the effective portion of hedge contracts are recorded in “Accumulated other comprehensive loss” in “Stockholders’ equity” in the Condensed Consolidated Balance Sheets. Amounts deferred in accumulated other comprehensive loss are reclassified to “Cost of revenue” in the Condensed Consolidated Statements of Operations in the periods in which the hedged exposure impacts earnings. The Company expects to reclassify $3.6 million of net losses related to these option and forward contracts that are included in accumulated other comprehensive loss at March 29, 2009 to “Cost of revenue” in the following nine months as the Company realizes the cost effects of the related forecasted foreign currency cost of revenue transactions. The amounts ultimately recorded in the Condensed Consolidated Statements of Operations will be contingent upon the actual exchange rates when the related forecasted foreign currency cost of revenue transactions are realized, and therefore, unrealized losses at March 29, 2009 could change.

Cash flow hedges are tested for effectiveness each period on an average to average rate basis using regression analysis. The change in the time value of the options as well as the cost of forward points (the difference between forward and spot rates at inception) on forward exchange contracts are excluded from the Company’s assessment of hedge effectiveness. The premium paid or time value of an option whose strike price is equal to or greater than the market price on the date of purchase is recorded as an asset in the Condensed Consolidated Balance Sheets. Thereafter, any change to this time value and the cost of forward points is included in “Other, net” in the Condensed Consolidated Statements of Operations. Amounts recorded in “Other, net” were losses of $2.0 million and none during the three months ended March 29, 2009 and March 30, 2008, respectively, due to loss in time value and cost of forward points.

Transaction Exposure

Other derivatives not designated as hedging instruments under SFAS No. 133 consist of forward contracts used to hedge the net balance sheet effect of foreign currency denominated assets and liabilities primarily for intercompany transactions, receivables from customers, prepayments to suppliers and advances received from customers. Changes in exchange rates between the Company’s subsidiaries’ functional currencies and the currencies in which these assets and liabilities are denominated can create fluctuations in the Company’s reported consolidated financial position, results of operations and cash flows. The Company enters into forward contracts to hedge foreign currency denominated monetary assets and liabilities against the short-term effects of currency exchange rate fluctuations. The Company records its derivative contracts at fair value with the related gains or losses recorded in “Other, net.” The gains or losses on these contracts are substantially offset by transaction gains or losses on the underlying balances being hedged. As of March 29, 2009 and December 28, 2008, the Company held forward contracts with an aggregate notional value of $248.9 million and $66.6 million, respectively, to hedge balance sheet exposure related to transactions with third-parties. These forward contracts have maturities of one month or less.

Credit Risk

The Company’s option and forward contracts do not contain any credit-risk-related contingent features. The Company is exposed to credit losses in the event of nonperformance by the counter-parties of its option and forward contracts. The Company enters into derivative contracts with high-quality financial institutions and limits the amount of credit exposure to any one counter-party. In addition, the derivative contracts are limited to a time period of less than one year and the Company continuously evaluates the credit standing of its counter-party financial institutions.

Note 14. INCOME TAXES

In the three months ended March 29, 2009, the Company’s effective rate of income tax benefit of 63.7% was primarily attributable to domestic and foreign income losses in certain jurisdictions, nondeductible amortization of purchased intangible assets and discrete stock option deductions. The Company’s tax provision for the three months ended March 30, 2008 of 10.8% was primarily attributable to domestic and foreign income taxes in certain jurisdictions where the Company’s operations were profitable, net of the consumption of non-stock net operating loss carryforwards. As a result of the Company’s adoption of FSP APB 14-1, the tax provision during the first quarter of fiscal 2008 was retroactively adjusted from 28.5% to 10.8% (see Note 1). The Company’s interim period tax provision is estimated based on the expected annual worldwide tax rate and takes into account the tax effect of discrete items.

Index

Note 15. NET INCOME (LOSS) PER SHARE OF CLASS A AND CLASS B COMMON STOCK

Effective December 29, 2008, the Company adopted FSP EITF 03-6-1, which requires it to use the two-class method to calculate net income (loss) per share. Under the two-class method, net income (loss) per share is computed by dividing earnings allocated to common stockholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, earnings are allocated to both common stock and other participating securities based on their respective weighted-average shares outstanding during the period. No allocation is generally made to other participating securities in the case of a loss per share. In accordance with the implementation provisions of FSP EITF 03-6-1, prior period share data and net income (loss) per share has been retrospectively adjusted (see Note 1).

Basic weighted-average shares is computed using the weighted-average of the combined class A and class B common stock outstanding. Class A and class B common stock are considered equivalent securities for purposes of the earnings per share calculation because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. The Company's outstanding unvested restricted stock awards are considered participating securities as they may participate in dividends, if declared, even though the awards are not vested. As participating securities, the unvested restricted stock awards are allocated a proportionate share of net income, but excluded from the basic weighted-average shares. Diluted weighted-average shares is computed using the basic weighted-average shares plus any potentially dilutive securities outstanding during the period using the treasury stock method, except when their effect is anti-dilutive. Potentially dilutive securities include stock options, restricted stock units and senior convertible debentures.

Holders of the Company’s 1.25% debentures and 0.75% debentures may, under certain circumstances at their option, convert the debentures into cash and, if applicable, shares of the Company’s class A common stock at the applicable conversion rate, at any time on or prior to maturity (see Note 10). Pursuant to EITF 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion” (“EITF 90-19”), the 1.25% debentures and 0.75% debentures are included in the calculation of diluted net income (loss) per share if their inclusion is dilutive under the treasury-stock-type method.

The following is a summary of other outstanding anti-dilutive potential common stock:

	As of
(In thousands)	March 29, 2009		March 30, 2008
Stock options		2,089		17
Restricted stock units		332		412

The following table presents the calculation of basic and diluted net income (loss) per share:

	Three Months Ended
(In thousands, except per share amounts)	March 29, 2009			March 30, 2008
		(As Restated)
Basic net income (loss) per share
Net income (loss)	$	(9,702	)	$	11,143
Less: Undistributed earnings allocated to unvested restricted stock awards(1)		—			(173	)
Net income (loss) available to common stockholders	$	(9,702	)	$	10,970

Basic weighted-average common shares		83,749			78,965

Net income (loss) per share	$	(0.12	)	$	0.14

Diluted net income (loss) per share
Net income (loss)	$	(9,702	)	$	11,143
Less: Undistributed earnings allocated to unvested restricted stock awards(1)		—			(165	)
Net income (loss) available to common stockholders	$	(9,702	)	$	10,978

Basic weighted-average common shares		83,749			78,965
Effect of dilutive securities:
Stock options		—			3,038
Restricted stock units		—			39
1.25% debentures		—			960
Diluted weighted-average common shares		83,749			83,002

Net income (loss) per share	$	(0.12	)	$	0.13

(1) Losses are not allocated to unvested restricted stock awards because such awards do not contain an obligation to participate in losses.

Index

Beginning on September 15, 2008, the date on which Lehman Brothers International (Europe) Limited (“LBIE”) commenced administrative proceedings regarding the Lehman bankruptcy, approximately 2.9 million shares of class A common stock lent to LBIE in connection with the 1.25% debentures are included in basic weighted-average common shares. Basic weighted-average common shares exclude approximately 1.8 million shares of class A common stock lent to Credit Suisse International (“CSI”) in connection with the 0.75% debentures. If Credit Suisse Securities (USA) LLC (“Credit Suisse”) or its affiliates, including CSI, were to file bankruptcy or commence similar administrative, liquidating, restructuring or other proceedings, the Company may have to include approximately 1.8 million shares lent to CSI in basic weighted-average common shares.

For the three months ended March 29, 2009, the Company’s average stock price for the period did not exceed the conversion price for the senior convertible debentures. For the three months ended March 30, 2008, dilutive potential common shares includes approximately 1.0 million shares for the impact of the 1.25% debentures as the Company experienced a substantial increase in its common stock price during the first quarter of fiscal 2008 as compared to the conversion price pursuant to the terms of the 1.25% debentures. For the three months ended March 30, 2008, the Company’s average stock price for the period did not exceed the conversion price for the 0.75% debentures. Under the treasury-stock-type method, the Company’s senior convertible debentures will generally have a dilutive impact on net income per share if the Company’s average stock price for the period exceeds the conversion price for the senior convertible debentures.

Note 16. STOCK-BASED COMPENSATION

The following table summarizes the consolidated stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations:

	Three Months Ended
(In thousands)	March 29, 2009		March 30, 2008
		(As Restated)
Cost of systems revenue	$	298	$	2,511
Cost of components revenue		598		1,203
Research and development		1,347		811
Sales, general and administrative		6,811		9,983
Total stock-based compensation expense	$	9,054	$	14,508

The following table summarizes the consolidated stock-based compensation expense, by type of awards:

	Three Months Ended
(In thousands)	March 29, 2009			March 30, 2008
		(As Restated)
Employee stock options	$	1,028		$	1,187
Restricted stock awards and units		10,084			7,901
Shares and options released from re-vesting restrictions		168			6,006
Change in stock-based compensation capitalized in inventory		(2,226	)		(586	)
Total stock-based compensation expense	$	9,054		$	14,508

In connection with its acquisition of PowerLight Corporation (now known as SP Systems) on January 10, 2007, the Company issued 1.1 million shares of its class A common stock and 0.5 million stock options to employees of SP Systems. The class A common stock and stock options were valued at $60.4 million and were subject to certain transfer restrictions and a repurchase option held by the Company. The Company recognized the expense as the re-vesting restrictions of these shares lapsed over the two-year period beginning on the date of acquisition. The value of shares released from such re-vesting restrictions is included in stock-based compensation expense in the table above.

Index

The following table summarizes the Company’s stock option activities:

	Shares (in thousands)			Weighted- Average Exercise Price Per Share
Outstanding as of December 28, 2008		2,545		$	8.96
Exercised		(118	)		3.36
Forfeited		(24	)		28.83
Outstanding as of March 29, 2009		2,403			9.03
Exercisable as of March 29, 2009		1,625			4.26

The following table summarizes the Company’s non-vested stock options and restricted stock activities thereafter:

	Stock Options					Restricted Stock Awards and Units
	Shares (in thousands)			Weighted- Average Exercise Price Per Share		Shares (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Outstanding as of December 28, 2008		1,113		$	14.82		1,604		$	69.71
Granted		—			—		1,156			27.94
Vested(1)		(311	)		3.28		(211	)		63.40
Forfeited		(24	)		28.83		(151	)		70.83
Outstanding as of March 29, 2009		778			19.00		2,398			49.90

(1)	Restricted stock awards and units vested include shares withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements.

Note 17. SEGMENT AND GEOGRAPHICAL INFORMATION

The Chief Operating Decision Maker (“CODM”), as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”), is the Company’s Chief Executive Officer. The CODM assesses the performance of the Systems Segment and Components Segment using information about their revenue and gross margin. The following tables present revenue by geography and segment, gross margin by segment and revenue by significant customer. Revenue is based on the destination of the shipments.

	Three Months Ended
	March 29, 2009			March 30, 2008
	(As Restated)
Revenue by geography:
United States		61	%		21	%
Europe:
Spain		4			52
Italy		15			3
Germany		11			8
Other		5			4
Rest of world		4			12
		100	%		100	%
Revenue by segment:
Systems		49	%		65	%
Components		51			35
		100	%		100	%
Gross margin by segment:
Systems		8	%		20	%
Components		22	%		17	%

		Three Months Ended
		March 29, 2009		March 30, 2008
Significant Customers	Business Segment
Florida Power & Light Company (“FPL”)	Systems		26%		*
Sedwick Corporate, S.L.	Systems		*		30%
Naturener Group	Systems		*		13%

* denotes less than 10% during the period

Index

Note 18. SUBSEQUENT EVENTS

Acquisition of Tilt Solar, LLC (“Tilt Solar”)

On April 14, 2009, the Company completed the acquisition of Tilt Solar, a California limited liability company, pursuant to a Membership Interest Purchase Agreement, dated as of April 14, 2009, by and among the selling stockholders and the Company. The acquisition of Tilt Solar was not material to the Company’s financial position or results of operations.

Term Loan with the Union Bank, N.A. (“Union Bank”)

On April 17, 2009, the Company entered into a loan agreement with Union Bank under which the Company borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. The loan is to be repaid in eight equal quarterly installments commencing June 30, 2010. Unless and until the Company has granted to Union Bank a security interest in cash collateral not less than 105% of the outstanding principal amount of the loan, the Company will maintain a depository account with Union Bank holding a predetermined amount of funds. During the first year of the loan, such account is required to hold at all times a balance equal to the aggregate sum of $10.0 million plus interest due and payable during the following 12 months, calculated monthly on a rolling basis. During the second and third years of the loan, such account is required to hold at all times a balance equal to the aggregate payments due and payable with respect to principal and interest during the following 12 months, calculated monthly on a rolling basis. In connection with the loan agreement, the Company entered into a security agreement with Union Bank, which will grant a security interest in the deposit account in favor of Union Bank on April 1, 2010 if, prior to then, all of the Company’s 0.75% debentures have not been converted or exchanged in a manner satisfactory to Union Bank. SunPower North America, LLC and SP Systems, both wholly-owned subsidiaries of the Company, have each guaranteed up to $30.0 million of the Company’s obligations under the loan agreement. The agreements include certain representations, covenants, and events of default customary for financing transactions of this type.

Supply Agreement with FPL Group Inc. ("FPL Group")

On April 21, 2009, SP Systems, a wholly-owned subsidiary of the Company, entered into a Photovoltaic Equipment Master Supply Agreement with FPL Group, an affiliate of FPL. The supply agreement sets forth the material terms and conditions pursuant to which SP Systems may sell to FPL Group solar panels and photovoltaic tracking and support structure equipment from 2010 through 2012 for use in solar projects of FPL Group or its affiliates.

Pursuant to the supply agreement, SP Systems guarantees delivery over such three year period of up to 100 megawatts (“MWAC ”) annually as a base commitment, and up to an additional 100 MWAC annually to the extent FPL Group exercises options to acquire such additional quantities. The parties may elect to satisfy SP Systems' quantity commitments as part of its provision of engineering, procurement and construction services in future FPL Group solar projects.

The supply agreement provides FPL Group the right to reduce or terminate its obligations with respect to the base commitment, which under certain, but not all, circumstances will result in an early termination payment. In addition, FPL Group’s purchase obligations are conditioned upon the State of Florida promulgating laws and the State of Florida Public Service Commission promulgating regulations, by no later than September 30, 2009 (or such later date as agreed by FPL Group and SP Systems), that allow FPL Group’s utility affiliate to build, own and operate, and receive cost recovery for, photovoltaic solar electric generation facilities that would enable FPL Group to satisfy the base commitment for each year. If such condition is not satisfied by the purchase condition date, then FPL Group shall have the right to reduce or eliminate the base commitment.

4.75% Convertible Debenture Issuance

On April 28, 2009, the Company entered into an underwriting agreement (the “Debenture Underwriting Agreement”) with Deutsche Bank Securities Inc. (“Deutsche Bank”) and Credit Suisse, as representatives of several underwriters (collectively, the “Debenture Underwriters”), providing for the offer and sale by the Company of $200.0 million principal amount of 4.75% senior convertible debentures due 2014 (the “4.75% debentures”), with an option in favor of the Debenture Underwriters for the purchase of up to an additional $30.0 million principal amount of the 4.75% debentures in certain circumstances, which option was exercised by the Debenture Underwriters in full on April 29, 2009. The 4.75% debentures were issued under an indenture, dated February 7, 2007 (the “Base Indenture”), between the Company and Wells Fargo, as trustee (the “Trustee”), as supplemented by a third supplemental indenture (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), which was executed by the Company and the Trustee on May 4, 2009. The Indenture provides, among other things, that the 4.75% debentures are senior unsecured obligations of the Company, ranking equally with all existing and future senior unsecured indebtedness of the Company. The 4.75% debentures are effectively subordinated to the Company’s secured indebtedness to the extent of the value of the related collateral and structurally subordinated to indebtedness and other liabilities of the Company’s subsidiaries. The 4.75% debentures do not contain any covenants or sinking fund requirements. Net proceeds received from the issuance of $230.0 million principal amount of the 4.75% debentures, before payment of the cost of the convertible debenture hedge transactions described below, were $225.0 million which closed on May 4, 2009.

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Interest is payable on the 4.75% debentures on April 15 and October 15 of each year, beginning on October 15, 2009. The 4.75% debentures are initially convertible into shares of the Company’s class A common stock at a conversion price equal to $26.40 per share, which represents a premium of 20% over the price of the Company’s class A common stock in the concurrent equity offering. The applicable conversion rate may adjust in certain circumstances, including upon a fundamental change (defined in the Supplemental Indenture). If not earlier converted, the 4.75% debentures mature on April 15, 2014. Holders may also require the Company to repurchase all or a portion of their 4.75% debentures upon a fundamental change at a cash repurchase price equal to 100% of the principal amount plus accrued and unpaid interest. In the event of certain events of default (defined in the Indenture), such as the Company’s failure to make certain payments or perform or observe certain obligations thereunder, the Trustee or holders of a specified amount of then-outstanding 4.75% debentures will have the right to declare all amounts then outstanding due and payable.

Common Stock Issuance

Also on April 28, 2009, the Company entered into an underwriting agreement (the “Equity Underwriting Agreement”) with Credit Suisse and Deutsche Bank, as representatives of several underwriters (collectively, the “Equity Underwriters”), providing for the offer and sale by the Company of 9.0 million shares of its class A common stock at a price of $22.00 per share. The Company also granted to the Equity Underwriters an option to purchase up to an additional 1.35 million shares of its class A common stock in certain circumstances, which such option was exercised by the Equity Underwriters in full on April 29, 2009. The sale of 10.35 million shares of the Company’s class A common stock pursuant to the Equity Underwriting Agreement closed on May 4, 2009 and generated net proceeds of $218.9 million.

Option and Warrant Issuance

Concurrently with entering into the Debenture Underwriting Agreement, the Company entered into certain convertible debenture hedge transactions with respect to the Company’s class A common stock (the “purchased options”), with affiliates of certain of the Debenture Underwriters referred to above. The purchased options cover, subject to antidilution adjustments substantially identical to those in the 4.75% debentures, up to approximately 8.7 million shares of the Company’s class A common stock. The purchased options are intended to reduce the potential dilution upon conversion of the 4.75% debentures in the event that the market price per share of the Company’s class A common stock, as measured under the 4.75% debentures, at the time of exercise is greater than the conversion price of the 4.75% debentures. The purchased options will be settled on a net share basis. Each convertible debenture hedge transaction is a separate transaction, entered into by the Company with each option counter-party, and is not part of the terms of the 4.75% debentures. The Company paid aggregate consideration of $97.3 million for the purchased options upon the closing of the purchased option transaction on May 4, 2009. The exercise price of the purchased options is $26.40 per share of the Company’s class A common stock, subject to adjustment for customary anti-dilution and other events.

Separately and concurrently with entering into the Debenture Underwriting Agreement, on April 28, 2009 the Company also entered into certain warrant transactions whereby the Company agreed to sell to affiliates of certain of the Debenture Underwriters warrants (the “Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 8.7 million shares of the Company’s class A common stock. The Warrants will expire in 2014. If the market price per share of the Company’s class A common stock, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on the Company’s earnings per share. Each warrant transaction is a separate transaction, entered into by the Company with each option counter-party, and is not part of the terms of the 4.75% debentures. Holders of the 4.75% debentures will not have any rights with respect to the Warrants. The Warrants were sold for aggregate cash consideration of approximately $71.0 million upon the closing of the sale of the Warrants on May 4, 2009. The exercise price of the Warrants is $38.50 per share of the Company’s class A common stock, subject to adjustment for customary anti-dilution and other events.

The purchase options and Warrants transactions described above create a call spread overlay with respect to the 4.75% debentures. Assuming full performance by the counter-parties, the transactions effectively increase the conversion premium of the 4.75% debentures from 20% over the price of the Company’s class A common stock in the concurrent equity offering to 75%, or from $26.40 to $38.50. The net cost of the purchase options and Warrants transactions for the call spread overlay was $26.3 million.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q/A contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and may be based on underlying assumptions. We use words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” and “continue” to identify forward-looking statements in this Quarterly Report on Form 10-Q/A including our plans and expectations regarding future financial results, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, our ability to obtain financing and industry trends. Such forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q/A and involve a number of risks and uncertainties, some beyond our control, that could cause actual results to differ materially from those anticipated by these forward-looking statements. Please see “PART II. OTHER INFORMATION, Item 1A: Risk Factors” of the March 2009 Form 10-Q and our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 28, 2008, for additional information on risks and uncertainties that could cause actual results to differ. 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.

The following information has been amended to reflect the impact of the restatements described elsewhere in this Quarterly Report on Form 10-Q/A. The following information has been revised to reflect our restated results of operations and cash flows and should be read in conjunction with the Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements included in this Amendment. Our fiscal quarters end on the Sunday closest to the end of the applicable calendar quarter. All references to fiscal periods apply to our fiscal quarters or year which ends on the Sunday closest to the calendar month end.

Restatement of Previously Issued Condensed Consolidated Financial Statements

Background and Scope of Investigation

On November 16, 2009, our Company announced that its Audit Committee commenced an independent investigation into certain accounting and financial reporting matters at our Philippines operations (“SPML”). The Audit Committee retained independent counsel, forensic accountants and other experts to assist it in conducting the investigation.

As a result of the investigation, the Audit Committee concluded that certain unsubstantiated accounting entries were made at the direction of the Philippines-based finance personnel in order to report results for manufacturing operations that would be consistent with internal expense projections. The entries generally resulted in an understatement of our Company’s cost of goods sold (referred to as “cost of revenue” in our Condensed Consolidated Statements of Operations). The Audit Committee concluded that the efforts were not directed at achieving our Company’s overall financial results or financial analysts’ projections of our Company’s financial results. The Audit Committee also determined that these accounting issues were confined to the accounting function in the Philippines. Finally, the Audit Committee concluded that executive management neither directed nor encouraged, nor was aware of, these activities and was not provided with accurate information concerning the unsubstantiated entries. In addition to the unsubstantiated entries, during the Audit Committee investigation various accounting errors were discovered by the investigation and by management. See Part I — “Item 4: Controls and Procedures” of this report.

Business

We are a vertically integrated solar products and services company that designs, manufactures and markets high-performance solar electric power technologies. Our solar cells and solar panels are manufactured using proprietary processes, and our technologies are based on more than 15 years of research and development. Of all the solar cells available for 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. Our solar power products are sold through our components and systems business segments.

Business Segments Overview

Components Segment: Our Components Segment sells solar power products, including solar cells, solar panels and inverters, which convert sunlight to electricity compatible with the utility network. We believe our solar cells provide the following benefits compared with conventional solar cells:

•	superior performance, including the ability to generate up to 50% more power per unit area;

•	superior aesthetics, with our uniformly black surface design that eliminates highly visible reflective grid lines and metal interconnect ribbons; and

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•	more efficient use of silicon, a key raw material used in the manufacture of solar cells.

We sell our solar components products to installers and resellers, including our global dealer network, for use in residential and commercial applications where the high efficiency and superior aesthetics of our solar power products provide compelling customer benefits. We also sell products for use in multi-megawatt solar power plant applications. In many situations, we offer a materially lower area-related cost structure for our customers because our solar panels require a substantially smaller roof or land area than conventional solar technology and half or less of the roof or land area of commercial solar thin film technologies. We sell our products primarily in North America, Europe and Asia, principally in regions where public policy has accelerated solar power adoption.

We manufacture our solar cells at our two facilities in the Philippines, and are developing a third solar cell manufacturing facility in Malaysia. Almost all of our solar cells are then combined into solar panels at our solar panel assembly facility located in the Philippines. Our solar panels are also manufactured for us by third-party subcontractors.

Systems Segment: Our Systems Segment generally sells solar power systems directly to system owners and developers. When we sell a solar power system, it may include services such as development, engineering, procurement of permits and equipment, construction management, access to financing, monitoring and maintenance. We believe our solar systems provide the following benefits compared with competitors’ systems:

•	superior performance delivered by maximizing energy delivery and financial return through systems technology design;

•	superior systems design to meet customer needs and reduce cost, including non-penetrating, fast roof installation technologies; and

•	superior channel breadth and delivery capability including turnkey systems.

Our customers include commercial and governmental entities, investors, utilities, production home builders and home owners. We work with development, construction, system integration and financing companies to deliver our solar power systems to customers. Our solar power systems are designed to generate electricity over a system life typically exceeding 25 years and are principally designed to be used in large-scale applications with system ratings of typically more than 500 kilowatts. Worldwide, more than 500 SunPower solar power systems have been constructed or are under contract, rated in the aggregate at more than 400 megawatts of peak capacity.

We have solar power system projects completed or in the process of being completed in various countries including Germany, Italy, Portugal, South Korea, Spain and the United States of America (the “United States” or “U.S”). We sell distributed rooftop and ground-mounted solar power systems as well as central-station power plants. In the United States, distributed solar power systems are typically rated at more than 500 kilowatts of capacity to provide a supplemental, distributed source of electricity for a customer’s facility . Many customers choose to purchase solar electricity under a power purchase agreement with a financing company which buys the system from us. In Europe, our products and systems are typically purchased by a financing company and operated as a central-station solar power plant. These power plants are rated with capacities of approximately one to thirty megawatts, and generate electricity for sale under tariff to private and public utilities.

In 2008, we began serving the utility market in the United States, as regulated utilities began seeking cost-effective renewable energy to meet governmental renewable portfolio standard requirements. We believe we are well positioned for long-term success, despite difficult near-term economic conditions, with our substantial order pipeline for utility scale projects. Examples include an agreement with Pacific Gas and Electric Company (“PG&E”) to build a 210 megawatt (“MWAC”) solar power plant in California from 2010 to 2012, an agreement with FPL Group Inc. (“FPL Group”) to supply solar panels and photovoltaic tracking and support structure equipment of 300 to 600 MWAC from 2010 to 2012, an agreement with Florida Power & Light Company (“FPL”) to build two solar photovoltaic power plants totaling 35 MWAC in Florida from 2009 to 2010, an agreement with Xcel Energy Inc (“Xcel”) to build a 17 MWAC solar power plant in Colorado in 2010, and another agreement with Exelon Corporation (“Exelon”) to build a 8 MWAC solar power plant in Chicago in 2009. While we have contracts for these projects, there are substantial additional events, including obtaining financing and proper governmental permits, which must occur in order for the projects to move forward.

We manufacture certain of our solar power system products at our manufacturing facilities in Richmond, California and at other facilities located close to our customers. Some of our solar power system products are also manufactured for us by third-party suppliers.

Restructuring Costs

In response to deteriorating economic conditions, we reduced our global workforce of regular employees by approximately 60 positions in the first quarter of fiscal 2009 in order to reduce our annual operating expenses. The restructuring actions included charges of $1.2 million incurred in the first quarter of fiscal 2009 for other severance, benefits and related costs. Restructuring accruals totaled $0.2 million as of March 29, 2009 and is recorded in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and represents estimated future cash outlays primarily related to severance expected to be paid within the second quarter of fiscal 2009. The restructuring, along with other cost-reduction strategies, is expected to reduce the Company’s 2009 operating budget by approximately $50 million. See Note 8 of Notes to our Condensed Consolidated Financial Statements.

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Accounting Changes and Recent Accounting Pronouncements

For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, in our Condensed Consolidated Financial Statements, see Note 1 of Notes to our Condensed Consolidated Financial Statements.

Results of Operations for the Three Months Ended March 29, 2009 (Restated) and March 30, 2008 (Restated)

Revenue

	Three Months Ended
	March 29,		March 30,
	2009		2008
(Dollars in thousands)	(As Restated)		(As Restated)
Systems revenue	$	103,953	$	179,423
Components revenue		107,690		94,850
Total revenue	$	211,643	$	274,273

Total Revenue: During the three months ended March 29, 2009 and March 30, 2008, our total revenue was $211.6 million and $274.3 million, respectively, a decrease of 23%. The decrease in our total revenue during the three months ended March 29, 2009 compared to the same period in fiscal 2008 is attributable to prolonged winter conditions in Europe, the difficult economic and credit environment domestically, and delayed purchasing decisions by many of our customers. Revenue earned in the three months ended March 30, 2008 resulted from ongoing construction of several large-scale solar power plants in Spain and high demand for our solar panels.

Sales outside the United States represented approximately 39% and 79% of our total revenue for the three months ended March 29, 2009 and March 30, 2008, respectively, representing a shift in the geography of the construction of system projects from Europe to the United States, particularly with the ongoing construction of a 25 MWAC solar power plant for FPL in Desoto County, Florida.

Concentrations: We have three customers that each accounted for 10 percent or more of our total revenue in one of the three months ended March 29, 2009 and March 30, 2008 as follows:

		Three Months Ended
		March 29,			March 28,
(As a percentage of total revenue)		2009			2008
Significant Customers:	Business Segment
FPL	Systems		26	%		*
Naturener Group	Systems		*			13	%
Sedwick Corporate, S.L.	Systems		*			30	%

denotes less than 10% during the period

We generate revenue from two business segments, as follows:

Systems Segment Revenue: Our systems revenue for the three months ended March 29, 2009 and March 30, 2008 was $104.0 million and $179.4 million, respectively, which accounted for 49% and 65%, respectively, of our total revenue. During the three months ended March 29, 2009, our systems revenue decreased 42% as compared to revenue earned in the three months ended March 30, 2008, due to the difficult economic conditions resulting in near-term challenges in financing system projects. In the three months ended March 30, 2008, our Systems Segment benefited from strong power plant scale demand in Europe, primarily in Spain, before the expiration of a pre-existing feed-in tariff in September 2008.

FPL was a significant customer to the Systems Segment during the three months ended March 29, 2009 due to the ongoing construction of a 25 MWAC solar power plant in Desoto County, Florida. Sedwick Corporate, S.L. and Naturener Group were significant customers to the Systems Segment during the three months ended March 30, 2008 due to the ongoing construction of several large-scale solar power plants in Spain.

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Components Segment Revenue: Components revenue for the three months ended March 29, 2009 and March 30, 2008 was $107.7 million and $94.9 million, respectively, or 51% and 35%, respectively, of our total revenue. During the three months ended March 29, 2009, our components revenue increased 14% as compared to revenue earned in the three months ended March 30, 2008, primarily due to growing demand for our solar power products in Italy. However, components revenue in the three months ended March 29, 2009 was lower than our internal forecast due to a long winter season in Europe, primarily in Germany, and challenging business conditions due to the uncertain economic environment and tight credit conditions which negatively influenced overall demand and timing of customers’ buying decisions. In the three months ended March 30, 2008, our Components Segment benefited from strong demand in the residential and small commercial roof-top markets through our dealer network in both Europe and the United States.

Cost of Revenue

Details to cost of revenue by segment:

	Three Months Ended
	Systems						Components						Consolidated
	March 29,			March 30,			March 29,			March 30,			March 29,			March 30,
	2009			2008			2009			2008			2009			2008
(Dollars in thousands)	(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)
Amortization of other intangible assets	$	1,841		$	2,168		$	952		$	1,044		$	2,793		$	3,212
Stock-based compensation		298			2,511			598			1,203			896			3,714
Non-cash interest expense		230			36			270			52			500			88
Impairment of long-lived assets		-			1,343			-			4,146			-			5,489
Materials and other cost of revenue		92,955			137,870			82,264			72,404			175,219			210,274
Total cost of revenue	$	95,324		$	143,928		$	84,084		$	78,849		$	179,408		$	222,777
Total cost of systems revenue as a percentage of revenue		92	%		80	%		78	%		83	%		85	%		81	%
Total gross margin percentage		8	%		20	%		22	%		17	%		15	%		19	%

Total Cost of Revenue: We had 12 and 7 solar cell manufacturing lines in our two facilities as of March 29, 2009 and March 30, 2008, respectively, with a total rated annual solar cell manufacturing capacity of 414 megawatts and 214 megawatts, respectively. During the three months ended March 29, 2009 and March 30, 2008, our two solar cell manufacturing facilities operated at approximately 73% and 68% capacity, respectively, producing 93.7 megawatts and 38.5 megawatts, respectively. During the three months ended March 29, 2009 and March 30, 2008, our total cost of revenue was $179.4 million and $222.8 million, respectively, which represents a decrease of 19%. The decrease in total cost of revenue corresponds with the decrease of 23% in total revenue during the three months ended March 29, 2009 compared to the same period in fiscal 2008. As a percentage of total revenue, our total cost of revenue increased to 85% in the three months ended March 29, 2009 compared to 81% in the three months ended March 30, 2008. This increase in total cost of revenue as a percentage of total revenue is reflective of (i) Systems Segment overhead costs incurred that are fixed in nature when systems revenue decreased 42% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008; (ii) restructuring charges of $0.2 million in the first quarter of fiscal 2009; and (iii) higher amortization of capitalized interest expense in the first quarter of fiscal 2009 compared to the same period in 2008. This increase in total cost of revenue as a percentage of total revenue was partially offset by (i) decreased costs of polysilicon beginning in the second quarter of fiscal 2008; (ii) improved manufacturing economies of scale associated with markedly higher production volume; (iii) reduced expenses associated with the amortization of intangible assets and stock-based compensation; and (iv) one-time asset impairment charges of $5.5 million in the first quarter of fiscal 2008 relating to the wind down of our imaging detector product line and for the write-down of certain solar product manufacturing equipment which became obsolete due to new processes (the costs associated with the $3.3 million write-down of certain solar product manufacturing equipment was recovered from the vendor in the third quarter of fiscal 2008).

Systems Segment Gross Margin: Gross margin was $8.6 million and $35.5 million for the three months ended March 29, 2009 and March 30, 2008, respectively, or 8% and 20%, respectively, of systems revenue. Gross margin decreased due to lower average selling prices for our solar power systems and Systems Segment overhead costs incurred that are fixed in nature when systems revenue decreased 42% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008.

Components Segment Gross Margin: Gross margin was $23.6 million and $16.0 million for the three months ended March 29, 2009 and March 30, 2008, respectively, or 22% and 17%, respectively, of components revenue. Gross margin increased due to higher average solar cell conversion efficiency and better silicon utilization, continued reduction in silicon costs and higher volume, partially offset by lower average selling prices for our solar power products.

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Research and Development

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)	(As Restated)
Stock-based compensation	$	1,347		$	811
Other research and development		6,533			3,831
Total research and development	$	7,880		$	4,642
Total research and development as a percentage of revenue		4	%		2	%

During the three months ended March 29, 2009 and March 30, 2008, our research and development expense was $7.9 million and $4.6 million, respectively, which represents an increase of 70%. The increase in spending during the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted primarily from: (i) increases in salaries, benefits and stock-based compensation costs as a result of increased headcount; and (ii) costs related to the improvement of our current generation solar cell manufacturing technology, development of our third generation of solar cells, development of next generation solar panels, development of next generation trackers and rooftop systems, and development of systems performance monitoring products. These increases were partially offset by grants and cost reimbursements received from various government entities in the United States of approximately $1.8 million and $1.7 million in the three months ended March 29, 2009 and March 30, 2008, respectively.

Sales, General and Administrative

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)	(As Restated)
Amortization of other intangible assets	$	1,259		$	1,105
Stock-based compensation		6,811			9,983
Other sales, general and administrative		34,334			22,770
Total sales, general and administrative	$	42,404		$	33,858
Total sales, general and administrative as a percentage of revenue		20	%		12	%

During the three months ended March 29, 2009 and March 30, 2008, our sales, general and administrative (“SG&A”) expense was $42.4 million and $33.9 million, respectively, which represents an increase of 25%. The increase in our SG&A expense during the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted primarily from higher spending in all areas of sales, marketing, finance and information technology to support the growth of our business, particularly: (i) sales and marketing spending to expand our dealer network with nearly 500 dealers worldwide; (ii) outside professional fees for legal and accounting services; (iii) increased headcount and payroll related expenses; and (iv) restructuring charges of $0.9 million.

Other Income (Expense), Net

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)				(As Restated)
Interest income	$	1,184		$	4,147
Total interest income as a percentage of revenue		1	%		2	%
Non-cash interest expense	$	(4,521	)	$	(4,296	)
Other interest expense		(1,600	)		(1,721	)
Total interest expense	$	(6,121	)	$	(6,017	)
Total interest expense as a percentage of revenue		3	%		2	%
Other, net	$	(7,157	)	$	715
Total other, net as a percentage of revenue		3	%		0	%

Interest income represents interest income earned on our cash, cash equivalents, restricted cash, restricted cash equivalents, available-for-sale securities and a notes receivable. The decrease in interest income of 71% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008 resulted from lower cash holdings related to capital expenditures for our manufacturing capacity expansion.

Interest expense during the three months ended March 29, 2009 relates to borrowings under our senior convertible debentures, the facility agreement with the Malaysian Government, fees for our outstanding letters of credit with Wells Fargo Bank, N.A. (“Wells Fargo”) and customer advance payments. Interest expense during the three months ended March 30, 2008 relates to borrowings under our senior convertible debentures, fees for our outstanding letters of credit with Wells Fargo and customer advance payments. The increase in interest expense of 2% in the three months ended March 29, 2009 as compared to the same period in fiscal 2008 is due to interest on borrowings totaling Malaysian Ringgit 375.0 million (approximately $103.9 million based on the exchange rate as of March 29, 2009) under the facility agreement with the Malaysian Government, partially offset by higher capitalized interest of $2.5 million in the three months ended March 29, 2009, as compared to $1.8 million in the same period of 2008. Our debt was used to fund our capital expenditures for our manufacturing capacity expansion.

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The following table summarizes the components of other, net:

	Three Months Ended
	March 29,			March 30,
(Dollars in thousands)	2009			2008
Gain (loss) on derivatives and foreign exchange	$	(5,778	)	$	756
Impairment of investments		(1,318	)		-
Other income (expense), net		(61	)		(41	)
Total other, net	$	(7,157	)	$	715

Other, net expenses during the three months ended March 29, 2009 consists primarily of losses totaling $2.0 million from expensing the time value of option contracts and forward points on forward exchange contracts, losses totaling $3.8 million on derivatives and foreign exchange largely due to the volatility in the current markets and impairment charges for certain money market funds and auction rate securities. Other, net income during the three months ended March 30, 2008 consists primarily of gains on derivatives and foreign exchange.

Income Taxes

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)	(As Restated)			(As Restated)
Provision for (benefit from) income taxes	$	(19,196	)	$	1,280
As a percentage of revenue		9	%		0	%

In the three months ended March 29, 2009, our effective rate of income tax benefit of 63.7% was primarily due to domestic and foreign income losses in certain jurisdictions, nondeductible amortization of purchased intangible assets and discrete stock option deductions. Our effective tax rate for the three months ended March 30, 2008 of 10.8% was primarily attributable to domestic and foreign income taxes in certain jurisdictions where our operations are profitable, net of the consumption of non-stock net operating loss carryforwards. Our interim period tax provision is estimated based on the expected annual worldwide tax rate and takes into account the tax effect of discrete items.

Equity in earnings of unconsolidated investees

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)				(As Restated)
Equity in earnings of unconsolidated investees	$	1,245		$	582
As a percentage of revenue		1	%		0	%

During the three months ended March 29, 2009 and March 30, 2008, our equity in earnings of unconsolidated investees were gains of $1.2 million and $0.6 million, respectively. Our share of Woongjin Energy Co. Ltd’s (“Woongjin Energy”) income totaled $1.3 million in the three months ended March 29, 2009 as compared to $0.6 million in the three months ended March 30, 2008 due to: (i) increases in production since Woongjin Energy began manufacturing in the third quarter of fiscal 2007; and (ii) our equity investment increased from 28.8% as of March 30, 2008 to 42.1% as of March 29, 2009. First Philec Solar Corporation (“First Philec Solar”) became operational in the second quarter of fiscal 2008 and our share of the joint venture’s loss totaled $0.1 million and zero in the three months ended March 29, 2009 and March 30, 2008, respectively.

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Liquidity and Capital Resources

Cash Flows

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

	Three Months Ended
	March 29,			March 30,
	2009			2008
(Dollars in thousands)	(As Restated)			(As Restated)
Net cash used in operating activities	$	(53,125	)	$	(68,714	)
Net cash used in investing activities		(43,109	)		(92,593	)
Net cash provided by financing activities		49,269			1,798

Operating Activities

Net cash used in operating activities of $53.1 million in the three months ended March 29, 2009 was primarily the result of an increase in inventory of $86.0 million because demand was lower than our internal forecast due to a long winter season in Europe, primarily in Germany, and challenging business conditions due to the uncertain economic environment and tight credit conditions which negatively influenced overall demand and timing of customers’ buying decisions. In addition, net cash used represents a decrease in accounts payable and other accrued liabilities of $24.8 million due to the elimination or delay of costs from our internal expenditure plan until the business climate and overall demand for our solar power products improves, other changes in operating assets and liabilities of $10.6 million and a net loss of $9.7 million, offset by non-cash charges totaling $38.3 million for depreciation, amortization, impairment of investments, stock-based compensation and non-cash interest expense, less non-cash income of $1.2 million related to our equity share in earnings of joint ventures, and a decrease in accounts receivable of $40.9 million.

Net cash used in operating activities of $68.7 million for the three months ended March 30, 2008 was primarily the result of decreases in billings in excess of costs and estimated earnings of $43.7 million related to contractual timing of system project billings, as well as increases in costs and estimated earnings in excess of billings of $20.7 million, inventory of $43.1 million, accounts receivable of $17.2 million and other changes in operating assets and liabilities totaling $19.5 million. These items were partially offset by net income of $11.1 million, plus non-cash charges totaling $39.4 million for depreciation, amortization, impairment of long-lived assets, stock-based compensation and non-cash interest expense, less non-cash income of $0.6 million for our equity share in earnings of Woongjin Energy. In addition, these items were offset by increases in accounts payable and other accrued liabilities of $25.5 million. The significant increases in substantially all of our operating assets and liabilities resulted from our substantial revenue increase in the three months ended March 30, 2008 compared to previous quarters which impacted net income and working capital.

Investing Activities

Net cash used in investing activities during the three months ended March 29, 2009 was $43.1 million, of which $52.1 million relates to capital expenditures primarily associated with manufacturing capacity expansion in the Philippines and Malaysia, $9.2 million relates to increases in restricted cash and cash equivalents for the second drawdown under the facility agreement with the Malaysian government, partially offset by $18.2 million in proceeds received from the sales or maturities of available-for-sale securities.

Net cash used in investing activities during the three months ended March 30, 2008 was $92.6 million, of which $51.1 million relates to capital expenditures primarily associated with manufacturing capacity expansion in the Philippines. Also during the three months ended March 30, 2008: (i) restricted cash and cash equivalents increased by $55.5 million for advanced payments received from customers that we provided security in the form of cash collateralized bank standby letters of credit; (ii) we paid $13.5 million in cash for the acquisition of Solar Solutions, net of cash acquired; and (iii) we invested an additional $5.6 million in joint ventures. Cash used in investing activities was partially offset by $33.1 million in proceeds received from the sales or maturities of available-for-sale securities, net of available-for-sale securities purchased during the period.

Financing Activities

Net cash provided by financing activities during the three months ended March 29, 2009 reflects proceeds received of Malaysian Ringgit 185.0 million (approximately $51.2 million based on the exchange rate as of March 29, 2009) from the Malaysian Government under our facility agreement, $0.4 million from stock option exercises, partially offset by cash paid of $2.4 million for treasury stock purchases that were used to pay withholding taxes on vested restricted stock. Net cash provided by financing activities during the three months ended March 30, 2008 reflects $1.1 million from stock option exercises and $4.0 million in excess tax benefits from stock-based award activity, partially offset by cash paid of $3.3 million for treasury stock purchases that were used to pay withholding taxes on vested restricted stock.

Debt and Credit Sources

Line of Credit

We have a credit agreement with Wells Fargo providing for a $50.0 million uncollateralized revolving credit line, with a $50.0 million uncollateralized letter of credit subfeature, and a separate $150.0 million collateralized letter of credit facility as of March 29, 2009. We may borrow up to $50.0 million and request that Wells Fargo issue up to $50.0 million in letters of credit under the uncollateralized letter of credit subfeature through March 27, 2010. Letters of credit issued under the subfeature reduce our borrowing capacity under the revolving credit line. Additionally, we may request that Wells Fargo issue up to $150.0 million in letters of credit under the collateralized letter of credit facility through March 27, 2014. As detailed in the agreement, we pay interest of LIBOR plus 2% on outstanding borrowings under the uncollateralized revolving credit line, and a fee of 2% and 0.2% to 0.4% depending on maturity for outstanding letters of credit under the uncollateralized letter of credit subfeature and collateralized letter of credit facility, respectively. At any time, we can prepay outstanding loans. All borrowings under the uncollateralized revolving credit line must be repaid by March 27, 2010, and all letters of credit issued under the uncollateralized letter of credit subfeature expire on or before March 27, 2010 unless we provide by such date collateral in the form of cash or cash equivalents in the aggregate amount available to be drawn under letters of credit outstanding at such time. All letters of credit issued under the collateralized letter of credit facility expire no later than March 27, 2014.

Index

As of March 29, 2009 and December 28, 2008, letters of credit totaling $49.7 million and $29.9 million, respectively, were issued by Wells Fargo under the uncollateralized letter of credit subfeature. In addition, letters of credit totaling $74.5 million and $76.5 million were issued by Wells Fargo under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008, respectively. As of March 29, 2009 and December 28, 2008, cash available to be borrowed under the uncollateralized revolving credit line was $0.3 million and $20.1 million, respectively, and includes letter of credit capacities available to be issued by Wells Fargo under the uncollateralized letter of credit subfeature. Letters of credit available under the collateralized letter of credit facility as of March 29, 2009 and December 28, 2008 totaled $75.5 million and $73.5 million, respectively. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

Term Loan

On April 17, 2009, we entered into a loan agreement with Union Bank, N.A. (“Union Bank”) under which we borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. The loan is to be repaid in eight equal quarterly installments commencing June 30, 2010. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

Debt Facility Agreement with the Malaysian Government

On December 18, 2008, we entered into a facility agreement with the Malaysian Government in which we may borrow up to Malaysian Ringgit 1.0 billion, or approximately $276.9 million, to finance the construction of FAB3 in Malaysia. The loans within the facility agreement are divided into two tranches that may be drawn through June 2010. Principal is to be repaid in six quarterly payments starting in July 2015, and a non-weighted average interest rate of approximately 4.4% per annum accrues and is payable starting in July 2015. We have the ability to prepay outstanding loans and all borrowings must be repaid by October 30, 2016. As of March 29, 2009 and December 28, 2008, we borrowed Malaysian Ringgit 375.0 million, approximately $103.9 million, and Malaysian Ringgit 190.0 million, approximately $54.6 million, respectively, under the facility agreement. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

1.25%, 0.75% and 4.75% Convertible Debenture Issuances

In February 2007, we issued $200.0 million in principal amount of our 1.25% senior convertible debentures (“1.25% debentures”) and received net proceeds of $194.0 million. In the fourth quarter of fiscal 2008, we received notices for the conversion of approximately $1.4 million of the 1.25% debentures. Interest on the 1.25% debentures is payable on February 15 and August 15 of each year, which commenced August 15, 2007. The 1.25% debentures mature on February 15, 2027. Holders may require us to repurchase all or a portion of their 1.25% debentures on each of February 15, 2012, February 15, 2017 and February 15, 2022, or if we experience certain types of corporate transactions constituting a fundamental change. Any repurchase of the 1.25% debentures pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the 1.25% debentures to be repurchased plus accrued and unpaid interest. In addition, we may redeem some or all of the 1.25% debentures on or after February 15, 2012 for cash at a redemption price equal to 100% of the principal amount of the 1.25% debentures to be redeemed plus accrued and unpaid interest. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

In July 2007, we issued $225.0 million in principal amount of our 0.75% senior convertible debentures (“0.75% debentures”) and received net proceeds of $220.1 million. Interest on the 0.75% debentures is payable on February 1 and August 1 of each year, which commenced February 1, 2008. The 0.75% debentures mature on August 1, 2027. Holders may require us to repurchase all or a portion of their 0.75% debentures on each of August 1, 2010, August 1, 2015, August 1, 2020 and August 1, 2025, or if we experience certain types of corporate transactions constituting a fundamental change. Therefore, the 0.75% debentures will be classified as short-term debt in our Condensed Consolidated Balance Sheets beginning on August 1, 2009. Any repurchase of the 0.75% debentures pursuant to these provisions will be for cash at a price equal to 100% of the principal amount of the 0.75% debentures to be repurchased plus accrued and unpaid interest. In addition, we may redeem some or all of the 0.75% debentures on or after August 1, 2010 for cash at a redemption price equal to 100% of the principal amount of the 0.75% debentures to be redeemed plus accrued and unpaid interest. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

Index

On May 4, 2009, we issued $230.0 million in principal amount of our 4.75% senior convertible debentures (“4.75% debentures”) and received net proceeds of $225.0 million, before payment of the net cost of the convertible debenture hedge transactions of $26.3 million. Interest on the 4.75% debentures is payable on April 15 and October 15 of each year, beginning on October 15, 2009. The 4.75% debentures mature on April 15, 2014. The 4.75% debentures are initially convertible into shares of our class A common stock at a conversion price equal to $26.40 per share, which represents a premium of 20% over the price of our class A common stock in the concurrent equity offering described below. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

Liquidity

As of March 29, 2009, we had cash and cash equivalents of $149.1 million as compared to $202.3 million as of December 28, 2008. Our cash balances are held in numerous locations throughout the world, including substantial amounts held outside of the U.S. Most of the amounts held outside of the U.S. could be repatriated to the U.S. but, under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. We have accrued U.S. federal taxes on the earnings of our foreign subsidiaries except when the earnings are considered indefinitely reinvested outside of the U.S. Repatriation could result in additional U.S. federal income tax payments in future years.

In addition, we had short-term investments and long-term investments of $2.3 million and $19.0 million as of March 29, 2009, respectively, as compared to $17.2 million and $23.6 million as of December 28, 2008, respectively. The decrease in the balance of our cash and cash equivalents, short-term investments and long-term investments as of March 29, 2009 compared to the balance as of December 28, 2008 was due primarily to the liquidation of our investment portfolio to fund our capital expenditures for our manufacturing capacity expansion.

We estimated that auction rate securities held with a stated par value of $21.1 million and $26.1 million at March 29, 2009 and December 28, 2008, respectively, would be valued at approximately 90% and 91%, respectively, of their stated par value, or $19.0 million and $23.6 million, respectively, representing a decline in value of approximately $2.1 million and $2.5 million, respectively. Due to the length of time that has passed since the auction rate securities failed to clear at auctions and the ongoing uncertainties regarding future access to liquidity, we have determined the impairment is other-than-temporary and recorded impairment losses of $0.1 million and $2.5 million in the first quarter of fiscal 2009 and fourth quarter of fiscal 2008, respectively, in “Other, net” in our Condensed Consolidated Statements of Operations. If market conditions were to deteriorate even further such that the current fair value were not achievable, we could realize additional impairment losses related to our auction rate securities. All our auction rate securities as of March 29, 2009 and December 28, 2008 have failed to clear at auctions in subsequent periods. Accordingly, auction rate securities at March 29, 2009 and December 28, 2008 totaling $19.0 million and $23.6 million, respectively, are classified as “Long-term investments” in our Condensed Consolidated Balance Sheets, because they are not expected to be used to fund current operations and consistent with their stated contractual maturities between 20 to 30 years. On February 4, 2009, we sold an auction rate security with a carrying value of $4.5 million as of December 28, 2008 for $4.6 million to a third-party outside of the auction process. See Note 6 of Notes to our Condensed Consolidated Financial Statements.

Because the closing price of our class A common stock on at least 20 of the last 30 trading days during the fiscal quarters ending March 29, 2009 and December 28, 2008 did not equal or exceed $70.94, or 125% of the applicable conversion price for our 1.25% debentures, and $102.80, or 125% of the applicable conversion price governing our 0.75% debentures, holders of the 1.25% debentures and 0.75% debentures are unable to exercise their right to convert the debentures, based on the market price conversion trigger, any day in the first and second quarters of fiscal 2009. Accordingly, the convertible debt is classified as long-term debt in our Condensed Consolidated Balance Sheets as of March 29, 2009 and December 28, 2008. This test is repeated each fiscal quarter, therefore, if the market price conversion trigger is satisfied in a subsequent quarter, the debentures may again be re-classified as short-term debt. See Note 11 of Notes to our Condensed Consolidated Financial Statements.

In addition, the holders of our 1.25% debentures and 0.75% debentures would be able to exercise their right to convert the debentures during the five consecutive business days immediately following any five consecutive trading days in which the trading price of our senior convertible debentures is less than 98% of the average of the closing sale price of a share of class A common stock during the five consecutive trading days, multiplied by the applicable conversion rate. As of March 29, 2009 and December 28, 2008, our 1.25% debentures and 0.75% debentures traded significantly below their historic trading prices. If the trading prices of our debentures continue to decline, holders of the debentures may have the right to convert the debentures in the future.

On May 4, 2009, we received aggregate net proceeds of $417.6 million from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of $230.0 million in principal amount of our 4.75% debentures named above, after deducting the underwriters’ discounts and commissions and estimated offering expenses payable by us (including approximately $26.3 million paid as the net cost of convertible debenture hedge transactions entered into in connection with the 4.75% debenture offering). See Note 18 of Notes to our Condensed Consolidated Financial Statements.

We intend to use the net proceeds from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of the 4.75% debentures for general corporate purposes, including working capital and capital expenditures as well as for the purposes described below. From time to time, we will evaluate potential acquisitions and strategic transactions of business, technologies, or products, and may use a portion of the net proceeds for such acquisitions or transactions. Currently, however, we do not have any agreements with respect to any such material acquisitions or strategic transactions.

Index

We may use a portion of the net proceeds from the follow-on public offering of 10.35 million shares of our class A common stock and the issuance of the 4.75% debentures to repurchase some of our outstanding 1.25% debentures or 0.75% debentures. We expect that holders of our outstanding 1.25% debentures or 0.75% debentures from whom we may repurchase such debentures (which holders may include one or more of the underwriters) may have outstanding short hedge positions in our class A common stock relating to such debentures. Upon repurchase, we expect that such holders will unwind or offset those hedge positions by purchasing class A common stock in secondary market transactions, including purchases in the open market, and/or entering into various derivative transactions with respect to our class A common stock. These activities could have the effect of increasing, or preventing a decline in, the market price of our class A common stock. The effect, if any, of any of these transactions and activities on the market price of our class A common stock or the debentures will depend in part on market conditions and cannot be ascertained at this time, but may be material.

We believe that our current cash and cash equivalents, cash generated from operations, and funds available from the credit agreement with Wells Fargo, facility agreement with the Malaysian Government, the term loan with the Union Bank, and the issuance of the 4.75% debentures and 10.35 million shares of our class A common stock will be sufficient to meet our working capital and capital expenditure commitments for at least the next 12 months. However, there can be no assurance that our liquidity will be adequate over time. We expect total capital expenditures in the range of $250 million to $300 million in 2009 as we continue to increase our solar cell and solar panel manufacturing capacity in the Philippines and Malaysia. These expenditures would be greater if we decide to bring capacity on line more rapidly. If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain other debt financing. However, after the tax-free distribution of our shares by Cypress Semiconductor Corporation (“Cypress”) on September 29, 2008, our ability to sell additional equity securities to obtain additional financing is limited before triggering our obligation to indemnify Cypress for taxes relating to the distribution of our class B common stock. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders and may not be available on favorable terms or at all, particularly in light of the current crises in the financial and credit markets. Additional debt would result in increased expenses and would likely impose new restrictive covenants like the covenants under the credit agreement with Wells Fargo, the facility agreement with the Malaysian Government, the term loan with the Union Bank, the 1.25% debentures, the 0.75% debentures and the 4.75% debentures. Financing arrangements may not be available to us, or may not be available in amounts or on terms acceptable to us.

We expect to experience growth in our operating expenses, including our research and development, sales and marketing and general and administrative expenses, for the foreseeable future to execute our business strategy. We may also be required to purchase polysilicon in advance to secure our wafer supplies or purchase third-party solar panels and materials in advance to support systems projects. We intend to fund these activities with existing cash and cash equivalents, cash generated from operations, borrowings under the term loan with the Union Bank, the issuance of the 4.75% debentures and 10.35 million shares of our class A common stock and, if necessary, borrowings under our credit agreement with Wells Fargo. These anticipated increases in operating expenses may not result in an increase in our revenue and our anticipated revenue may not be sufficient to support these increased expenditures. We anticipate that operating expenses, working capital and capital expenditures will constitute a significant use of our cash resources.

Contractual Obligations

The following summarizes our contractual obligations at March 29, 2009:

			Payments Due by Period
(In thousands)	Total		2009 (remaining 9 months)			2010 – 2011		2012 – 2013	Beyond 2013
Customer advances, including interest	$	100,441	$	10,257	$	26,184	$	16,000	$	48,000
Convertible debt, including interest		498,922		3,128		8,340		8,340		479,114
Loan from Malaysian Government		103,850		—		—		—		103,850
Lease commitments		32,837		4,096		8,574		5,570		14,597
Utility obligations		750		—		—		—		750
Royalty obligations		154		154		—		—		—
Non-cancelable purchase orders		115,632		114,982		650		—		—
Purchase commitments under agreements		3,992,157		261,808		1,065,338		636,754		2,028,257
Total	$	4,844,743	$	394,425	$	1,109,086	$	666,664	$	2,674,568

Index

Customer advances and interest on customer advances relate to advance payments received from customers for future purchases of solar power products. Convertible debt and interest on convertible debt relate to the aggregate of $423.6 million in outstanding principal amount of our senior convertible debentures. For the purpose of the table above, we assume that all holders of the convertible debt will hold the debentures through the date of maturity in fiscal 2027 and upon conversion, the values of the convertible debt are equal to the aggregate principal amount of $423.6 million with no premiums. Loan from the Malaysian Government relates to amounts borrowed for the financing and operation of FAB3 to be constructed in Malaysia. Lease commitments primarily relate to our 5-year lease agreement with Cypress for our headquarters in San Jose, California, an 11-year lease agreement with an unaffiliated third-party for our administrative, research and development offices in Richmond, California and other leases for various office space. Utility obligations relate to our 11-year lease agreement with an unaffiliated third-party for our administrative, research and development offices in Richmond, California. Royalty obligations result from several of the Systems Segment government awards and existing agreements. Non-cancelable purchase orders relate to purchases of raw materials for inventory, services and manufacturing equipment from a variety of vendors. Purchase commitments under agreements relate to arrangements entered into with suppliers of polysilicon, ingots, wafers, solar cells and solar panels as well as agreements to purchase solar renewable energy certificates from solar installation owners in New Jersey. These agreements specify future quantities and pricing of products to be supplied by the vendors for periods up to twelve years and there are certain consequences, such as forfeiture of advanced deposits and liquidated damages relating to previous purchases, in the event that we terminate the arrangements. See Note 8 of Notes to our Condensed Consolidated Financial Statements.

As of both March 29, 2009 and December 28, 2008, total liabilities associated with uncertain tax positions under FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, and Related Implementation Issues,” or FIN 48, were $14.0 million and are included in “Other long-term liabilities” in our Condensed Consolidated Balance Sheets as they are not expected to be paid within the next twelve months. 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. See Note 9 of Notes to our Condensed Consolidated Financial Statements.

On April 17, 2009, we entered into a loan agreement with the Union Bank, under which we borrowed $30.0 million for three years at an interest rate of LIBOR plus 2%. In addition, on May 4, 2009, we issued $230.0 million principal amount of our 4.75% debentures. These contractual obligations occurred subsequent to the first quarter of fiscal 2009, therefore, they have been excluded from the table above. See Note 18 of Notes to our Condensed Consolidated Financial Statements.

Index

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted 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 management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Management of our Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, initially conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 29, 2009 in connection with our Quarterly Report on Form 10-Q for the period ended March 29, 2009 (the “March 2009 Form 10-Q”). The Company disclosed in the March 2009 Form 10-Q that based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 29, 2009.

In connection with the restatement described in the 2009 Form 10-K and elsewhere in this Amendment, the Company re-evaluated the effectiveness of our disclosure controls and procedures as of March 29, 2009. As a result, management identified certain control deficiencies as of March 29, 2009 that constituted three material weaknesses in our internal control over financial reporting in our Philippines operations. Because of these material weaknesses, management subsequently concluded that we did not maintain effective disclosure controls and procedures as of March 29, 2009. For additional information regarding the restatement and the material weaknesses identified by management, see Note 2 to the condensed consolidated financial statements included in this Amendment and “Item 9A. Controls and Procedures” in the 2009 Form 10-K.

No steps were taken to remediate these material weaknesses during the quarter ended March 29, 2009, as these circumstances had not yet been identified by management. However, management implemented new processes and controls prior to the end of our 2009 fiscal year to remediate one of the material weaknesses and developed a plan, based, in part, on recommendations from our Audit Committee, to remediate the two remaining material weaknesses. For additional information regarding the remedial actions taken and planned by our management, see “Item 9A. Controls and Procedures” in the 2009 Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 29, 2009 that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting. However, as described above, there have been changes in our internal control over financial reporting during the quarter ended January 3, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. For additional information regarding these changes, see “Item 9A. Controls and Procedures” in the 2009 Form 10-K.

Index

PART II. OTHER INFORMATION

Item 6.

Exhibits

Exhibit Number		Description

10.1†*		Long-Term Supply Agreement, dated January 6, 2009, by and between SunPower Corporation and Hemlock Semiconductor, LLC.
10.2*		Amendment to Long-Term Supply Agreement, dated January 6, 2009, by and among SunPower Corporation, Hemlock Semiconductor, LLC, and SunPower Philippines Manufacturing Limited.
10.3*		Amended and Restated SunPower Corporation Annual Key Employee Bonus Plan.
10.4*		Amended and Restated SunPower Corporation Key Employee Quarterly Key Initiative Bonus Plan.
10.5*		Amendment to Credit Agreement, dated February 25, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.6*		Amendment to Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan dated March 12, 2009.
10.7*†		Amended and Restated Credit Agreement, dated March 20, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.8*		Continuing Guaranty, dated March 20, 2009, by and between SunPower North America, LLC and Wells Fargo Bank, National Association.
10.9*†		Amendment Three to Turnkey Engineering, Procurement and Construction Agreement, dated March 26, 2009, by and between SunPower Corporation, Systems and Florida Power and Light Company.
31.1		Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1		Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibits marked with an asterisk (*) were filed as part of the initial filing of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 29, 2009. On June 25, 2009, the Company filed an amendment to the Quarterly Report on Form 10-Q for the quarter ended March 29, 2009 for the sole purpose of refiling Exhibit 10.1 in connection with a confidential treatment request.

Exhibits marked with a cross (†) are subject to a request for confidential treatment filed with the Securities and Exchange Commission.

Index

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

	SUNPOWER CORPORATION

Dated: April 30, 2010	By:	/s/ DENNIS V. ARRIOLA

		Dennis V. Arriola
		Executive Vice President and
		Chief Financial Officer

Index

Index to Exhibits

Exhibit Number		Description
10.1†*		Long-Term Supply Agreement, dated January 6, 2009, by and between SunPower Corporation and Hemlock Semiconductor, LLC.
10.2*		Amendment to Long-Term Supply Agreement, dated January 6, 2009, by and among SunPower Corporation, Hemlock Semiconductor, LLC, and SunPower Philippines Manufacturing Limited.
10.3*		Amended and Restated SunPower Corporation Annual Key Employee Bonus Plan.
10.4*		Amended and Restated SunPower Corporation Key Employee Quarterly Key Initiative Bonus Plan.
10.5*		Amendment to Credit Agreement, dated February 25, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.6*		Amendment to Second Amended and Restated SunPower Corporation 2005 Stock Incentive Plan dated March 12, 2009.
10.7*†		Amended and Restated Credit Agreement, dated March 20, 2009, by and between SunPower Corporation and Wells Fargo Bank, National Association.
10.8*		Continuing Guaranty, dated March 20, 2009, by and between SunPower North America, LLC and Wells Fargo Bank, National Association.
10.9*†		Amendment Three to Turnkey Engineering, Procurement and Construction Agreement, dated March 26, 2009, by and between SunPower Corporation, Systems and Florida Power and Light Company.
31.1		Certification by Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certification by Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1		Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibits marked with a cross (†) are subject to a request for confidential treatment filed with the Securities and Exchange Commission.