form10-q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q
 

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

For the quarterly period ended April 4, 2010

OR

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  x    No  o

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 x
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  x

The total number of outstanding shares of the registrant’s class A common stock as of May 7, 2010 was 55,420,956.
The total number of outstanding shares of the registrant’s class B common stock as of May 7, 2010 was 42,033,287.
 
 
1
 
 
SunPower Corporation

INDEX TO FORM 10-Q

 
 
Page
3
 
 
  
Item 1.
3
 
 
  
 
3
 
 
  
 
4
 
 
  
 
5
 
 
  
 
6
 
 
  
Item 2.
41
 
 
  
Item 3.
54
 
 
  
Item 4.
56
 
 
  
57
 
 
  
Item 1.
57
 
 
  
Item 1A.
58
 
 
  
Item 2.
58
 
 
  
Item 6.
59
 
 
  
60
 
 
  
61

 
2
 
PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

SunPower Corporation

Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)

 
 
April 4,
2010
 
 
January 3,
2010 (1)
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
499,154
 
 
$
615,879
 
Restricted cash and cash equivalents, current portion
 
 
109,089
 
 
 
61,868
 
Short-term investments
 
 
172
 
 
 
172
 
Accounts receivable, net
 
 
221,640
 
 
 
248,833
 
Costs and estimated earnings in excess of billings
 
 
30,309
 
 
 
26,062
 
Inventories
 
 
252,181
 
 
 
202,301
 
Assets held-for-sale
    
175,439
      
—
  
Advances to suppliers, current portion
 
 
26,658
 
 
 
22,785
 
Prepaid expenses and other current assets
 
 
193,948
 
 
 
104,531
 
Total current assets
 
 
1,508,590
 
 
 
1,282,431
 
 
 
 
 
 
 
 
 
 
Restricted cash and cash equivalents, net of current portion
 
 
268,203
 
 
 
248,790
 
Property, plant and equipment, net
 
 
704,549
 
 
 
682,344
 
Project assets
 
 
107,292
 
 
 
9,607
 
Goodwill
 
 
330,846
 
 
 
198,163
 
Other intangible assets, net
 
 
21,326
 
 
 
24,974
 
Advances to suppliers, net of current portion
 
 
160,791
 
 
 
167,843
 
Other long-term assets
 
 
191,376
 
 
 
82,743
 
Total assets
 
$
3,292,973
 
 
$
2,696,895
 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
257,030
 
 
$
234,692
 
Accrued liabilities
 
 
115,608
 
 
 
114,008
 
Billings in excess of costs and estimated earnings
 
 
28,584
 
 
 
17,346
 
Short-term debt and current portion of long-term debt
 
 
52,337
 
 
 
11,250
 
Convertible debt, current portion
 
 
140,484
 
 
 
137,968
 
Customer advances, current portion
 
 
20,652
 
 
 
19,832
 
Total current liabilities
 
 
614,695
 
 
 
535,096
 
 
 
 
 
 
 
 
 
 
Long-term debt
 
 
386,555
 
 
 
237,703
 
Convertible debt, net of current portion
 
 
550,178
 
 
 
398,606
 
Customer advances, net of current portion
 
 
70,204
 
 
 
72,288
 
Long-term deferred tax liability
 
 
5,661
 
 
 
6,777
 
Other long-term liabilities
 
 
243,009
 
 
 
70,045
 
Total liabilities
 
 
1,870,302
 
 
 
1,320,515
 
Commitments and contingencies (Note 10)
 
 
 
 
 
 
 
 
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; 55,792,989 and 55,394,612 shares of class A common stock issued; 55,382,875 and 55,039,193 shares of class A common stock outstanding, at April 4, 2010 and January 3, 2010, respectively
 
 
97
 
 
 
97
 
Additional paid-in capital
 
 
1,532,624
 
 
 
1,520,933
 
Accumulated other comprehensive income (loss)
 
 
5,850
  
 
 
(17,357
)
Accumulated deficit
 
 
(101,736
)
 
 
(114,309
)
 
 
 
1,436,835
 
 
 
1,389,364
 
Less: shares of class A common stock held in treasury, at cost; 410,114 and 355,419 shares at April 4, 2010 and January 3, 2010, respectively
 
 
(14,164
)
 
 
(12,984
)
Total stockholders’ equity
 
 
1,422,671
 
 
 
1,376,380
 
Total liabilities and stockholders’ equity
 
$
3,292,973
 
 
$
2,696,895
 

 
(1)
As adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

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

 
3
 
SunPower Corporation

Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)

 
 
Three Months Ended
 
 
 
April 4,
2010
 
 
March 29,
2009
(As Restated) (1)
 
Revenue:
 
 
 
 
 
 
Systems
 
$
64,581
 
 
$
103,953
 
Components
 
 
282,693
 
 
 
107,690
 
Total revenue
 
 
347,274
 
 
 
211,643
 
Costs and expenses:
 
 
  
 
 
 
 
 
Cost of systems revenue
 
 
61,741
 
 
 
95,324
 
Cost of components revenue
 
 
213,790
 
 
 
84,084
 
Research and development
 
 
10,407
 
 
 
7,880
 
Sales, general and administrative
 
 
64,280
 
 
 
42,404
 
Total costs and expenses
 
 
350,218
 
 
 
229,692
 
Operating loss
 
 
(2,944
)
 
 
(18,049
)
Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 
 
273
 
 
 
1,184
 
Interest expense
 
 
(10,940
)
 
 
(6,271
)
Other, net
 
 
(7,809
)
 
 
(7,157
)
Other income (expense), net
 
 
(18,476
)
 
 
(12,244
)
Loss before income taxes and equity in earnings of unconsolidated investees
 
 
(21,420
)
 
 
(30,293
)
Benefit from income taxes
 
 
(30,875
)
 
 
(19,196
)
Income (loss) before equity in earnings of unconsolidated investees
 
 
9,455
 
 
 
(11,097
)
Equity in earnings of unconsolidated investees
 
 
3,118
 
 
 
1,245
 
Net income (loss)
 
$
12,573
 
 
$
(9,852
)
 
 
 
 
 
 
 
 
 
Net income (loss) per share of class A and class B common stock:
 
 
 
 
 
 
 
 
Basic
 
$
0.13
 
 
$
(0.12
)
Diluted
 
$
0.13
 
 
$
(0.12
)
Weighted-average shares:
 
 
 
 
 
 
 
 
Basic
 
 
95,154
 
 
 
83,749
 
Diluted
 
 
96,472
 
 
 
83,749
 

 
(1)
The Condensed Consolidated Statement of Operations for the three months ended March 29, 2009 has been restated as a result of the Company’s Audit Committee investigation of certain unsubstantiated accounting entries (see Note 2). In addition, the Condensed Consolidated Statement of Operations for the three months ended March 29, 2009 has been adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

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

 
4
 
SunPower Corporation

Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)

 
 
Three Months Ended
 
 
 
April 4,
2010
 
 
March 29,
2009
(As Restated) (1)
 
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
 
$
12,573
 
 
$
(9,852
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
  
 
 
 
 
 
Stock-based compensation
 
 
10,808
 
 
 
9,054
 
Depreciation
 
 
24,715
 
 
 
18,365
 
Amortization of other intangible assets
 
 
4,759
 
 
 
4,052
 
Impairment (gain on sale) of investments
 
 
(1,572
)
 
 
1,318
 
Loss on mark-to-market derivatives
 
 
2,218
 
 
 
—
 
Non-cash interest expense
 
 
6,390
 
 
 
5,171
 
Amortization of debt issuance costs
 
 
699
 
 
 
537
 
Equity in earnings of unconsolidated investees
 
 
(3,118
)
 
 
(1,245
)
Deferred income taxes and other tax liabilities
 
 
(35,720
)
 
 
(17,003
)
Changes in operating assets and liabilities, net of effect of acquisition:
 
 
  
 
 
 
 
 
Accounts receivable
 
 
30,511
 
 
 
40,931
  
Costs and estimated earnings in excess of billings
 
 
(4,907
)
 
 
(3,178
)
Inventories
 
 
(51,085
)
 
 
(86,049
)
Prepaid expenses and other assets
 
 
(18,118
)
 
 
11,671
  
Advances to suppliers
 
 
3,178
 
 
 
7,993
  
Accounts payable and other accrued liabilities
 
 
26,873
  
 
 
(24,798
)
Billings in excess of costs and estimated earnings
 
 
11,615
  
 
 
88
  
Customer advances
 
 
(918
)
 
 
(10,180
)
Net cash provided by (used in) operating activities
 
 
18,901
  
 
 
(53,125
)
Cash flows from investing activities:
 
 
  
 
 
 
 
 
Increase in restricted cash and cash equivalents
 
 
(19,717
)
 
 
(9,185
)
Purchase of property, plant and equipment
 
 
(43,658
)
 
 
(52,101
)
Proceeds from sale of equipment to third-party
 
 
2,875
 
 
 
—
 
Proceeds from sales or maturities of available-for-sale securities
 
 
1,572
 
 
 
18,177
 
Cash paid for acquisition, net of cash acquired
 
 
(272,699
)
 
 
—
  
Cash paid for investments in other non-public companies
 
 
(1,618
)
 
 
—
  
Net cash used in investing activities
 
 
(333,245
)
 
 
(43,109
)
Cash flows from financing activities:
 
 
  
 
 
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
 
 
1,539
 
 
 
51,232
 
Proceeds from issuance of convertible debt, net of issuance costs
 
 
214,921
 
 
 
—
 
Cash paid for bond hedge
 
 
(66,176
)
 
 
—
 
Proceeds from warrant transactions
 
 
54,076
 
 
 
—
 
Proceeds from exercise of stock options
 
 
—
 
 
 
396
 
Purchases of stock for tax withholding obligations on vested restricted stock
 
 
(1,180
)
 
 
(2,359
)
Net cash provided by financing activities
 
 
203,180
 
 
 
49,269
 
Effect of exchange rate changes on cash and cash equivalents
 
 
(5,561
)
 
 
(6,256
)
Net decrease in cash and cash equivalents
 
 
(116,725
)
 
 
(53,221
)
Cash and cash equivalents at beginning of period
 
 
615,879
 
 
 
202,331
 
Cash and cash equivalents at end of period
 
$
499,154
 
 
$
149,110
 
 
 
 
 
 
 
 
 
 
Non-cash transactions:
 
 
 
 
 
 
 
 
Additions to property, plant and equipment included in accounts payable and other accrued liabilities
 
$
2,917
 
 
$
18,780
 
Non-cash interest expense capitalized and added to the cost of qualified assets
 
 
535
 
 
 
2,073
 

 
(1)
The Condensed Consolidated Statement of Cash Flows for the three months ended March 29, 2009 has been restated as a result of the Company’s Audit Committee investigation of certain unsubstantiated accounting entries (see Note 2). In addition, the Condensed Consolidated Statement of Cash Flows for the three months ended March 29, 2009 has been adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

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

 
5
 
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”) is a vertically integrated solar products and services company that designs, manufactures and markets high-performance solar electric power technologies. The Company’s solar cells and solar panels are manufactured using proprietary processes, and its 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 system owners and developers and includes engineering, procurement, construction (“EPC”) 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 panels and inverters to solar systems installers and other resellers, including the Company’s third-party global dealer network.

Summary of Significant Accounting Policies

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and notes thereto for the year ended January 3, 2010 included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). The Company’s significant accounting policies reflect: (i) the adoption of new accounting guidance effective in the first quarter of fiscal 2010 referred to below; and (ii) the change in the functional currency of SunPower Systems SARL in Switzerland from the Euro to the U.S. dollar referred to in Note 14.

Recently Adopted Accounting Guidance

Share Lending Arrangements
 
In June 2009, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance that changed how companies account for share lending arrangements that were executed in connection with convertible debt offerings or other financings. The new accounting guidance requires all such share lending arrangements to be valued and amortized as interest expense in the same manner as debt issuance costs. As a result of the new accounting guidance, existing share lending arrangements relating to the Company’s class A common stock are required to be measured at fair value and amortized as interest expense in its Condensed Consolidated Financial Statements. In addition, in the event that counterparty default pursuant to the share lending arrangement becomes probable, the Company is required to recognize an expense in its Condensed Consolidated Statement of Operations equal to the then fair value of the unreturned loaned shares, net of any probable recoveries. The Company adopted the new accounting guidance effective January 4, 2010, the start of its fiscal year, and applied it retrospectively to all prior periods as required by the guidance.
 
The Company has two historical share lending arrangements subject to the new guidance. In connection with the issuance of its 1.25% senior convertible debentures (“1.25% debentures”) and 0.75% senior convertible debentures (“0.75% debentures”), the Company loaned approximately 2.9 million shares of its class A common stock to Lehman Brothers International (Europe) Limited (“LBIE”) and approximately 1.8 million shares of its class A common stock to Credit Suisse International (“CSI”) under share lending arrangements. Application of the new accounting guidance resulted in higher non-cash amortization of imputed share lending costs in the current and prior periods, as well as a significant non-cash loss resulting from Lehman Brothers Holding Inc. (“Lehman”) filing of a petition for protection under Chapter 11 of the U.S. bankruptcy code on September 15, 2008, and LBIE commencing administration proceedings (analogous to bankruptcy) in the United Kingdom. The then fair value of the approximately 2.9 million shares of the Company’s class A common stock loaned and unreturned by LBIE is approximately $213.4 million, which was expensed retrospectively in the third quarter of fiscal 2008. In addition, on a cumulative basis from the respective issuance dates of the share lending arrangements through January 3, 2010, the Company has recognized $1.6 million in additional non-cash interest expense (see Note 12).

 
6
 
As a result of the Company’s adoption of the new accounting guidance for share lending arrangements, the Company’s Condensed Consolidated Balance Sheet as of January 3, 2010 has been adjusted as follows:

(In thousands)
  
As Adjusted
in this Quarterly Report
on Form 10-Q
    
As Previously Reported
in the 2009 Annual Report
on Form 10-K
  
Assets
  
 
    
 
  
Prepaid expenses and other current assets
   $ 104,531     $ 104,442  
Other long-term assets
     92,350       91,580  
Total assets
     2,696,895       2,696,036  
Stockholders’ Equity
                
Additional paid-in capital
     1,520,933       1,305,032  
Retained earnings (accumulated deficit)
     (114,309 )     100,733  
Total stockholders’ equity
     1,376,380       1,375,521  

As a result of the Company’s adoption of the new accounting guidance for share lending arrangements, the Company’s Condensed Consolidated Statement of Operations for the three months ended March 29, 2009 has been adjusted as follows:

 
 
Three Months Ended
 
(In thousands, except per share amounts)
 
March 29, 2009
 
 
 
As Adjusted
in this Quarterly Report
on Form 10-Q
 
 
As Previously Reported
in Quarterly Report
on Form 10-Q/A
 
Interest expense
 
$
(6,271
)
 
$
(6,121
)
Loss before income taxes and equity in earnings of unconsolidated investees
 
 
(30,293
)
 
 
(30,143
)
Loss before equity in earnings of unconsolidated investees
 
 
(11,097
)
 
 
(10,947
)
Net loss
 
 
(9,852
)
 
 
(9,702
)
Loss per share of class A and class B common stock:
 
              
Basic
 
 
(0.12
)
 
 
(0.12
)
Diluted
 
 
(0.12
)
 
 
(0.12
)

As a result of the Company’s adoption of the new accounting guidance for share lending arrangements, the Company’s Condensed Consolidated Statement of Cash Flows for the three months ended March 29, 2009 has been adjusted as follows:

 
 
Three Months Ended
 
(In thousands)
 
March 29, 2009
 
 
 
As Adjusted
in this Quarterly Report
on Form 10-Q
 
 
As Previously Reported
in Quarterly Report
on Form 10-Q/A
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(9,852
)
 
$
(9,702
)
Non-cash interest expense
 
 
5,171
 
 
 
5,021
 
Net cash used in operating activities
 
 
(53,125
)
 
 
(53,125
)

Variable Interest Entities (“VIEs”)

In June 2009, the FASB issued new accounting guidance regarding consolidation of VIEs to eliminate the exemption for qualifying special purpose entities, provide a new approach for determining which entity should consolidate a VIE, and require an enterprise to regularly perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. The new accounting guidance is effective for fiscal years beginning after November 15, 2009 and earlier application is prohibited. The Company’s adoption of the new accounting guidance in the first quarter of fiscal 2010 had no impact on its Condensed Consolidated Financial Statements (see Note 11).

 
7
 
Revenue Arrangements with Multiple Deliverables

In October 2009, the FASB issued new accounting guidance for revenue arrangements with multiple deliverables. Specifically, the new guidance requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In addition, the new guidance eliminates the use of the residual method of allocation and requires the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables. The new accounting guidance is effective in the fiscal year beginning on or after June 15, 2010. Early adoption is permitted. The Company adopted the new accounting guidance in the first quarter of fiscal 2010 and applied the prospective application for new or materially modified arrangements with multiple deliverables. The Company’s adoption of the new accounting guidance did not have a material impact on its Condensed Consolidated Financial Statements.

Fair Value of Assets and Liabilities

In January 2010, the FASB issued updated guidance related to fair value measurements and disclosures, which will require the Company to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. In addition, in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, the Company will disclose separately information about purchases, sales, issuances and settlements on a gross basis rather than on a net basis. The updated guidance also requires that the Company provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The updated guidance is effective for interim or annual financial reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company’s adoption of the updated guidance had no impact on its financial position, results of operations, or cash flows and only required additional financial statements disclosures as set forth in Notes 7 and 14.

Issued Accounting Guidance Not Yet Adopted

There has been no issued accounting guidance not yet adopted by the Company that it believes is material, or is potentially material to the Company’s Condensed Consolidated Financial Statements.

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 2010 consists of 52 weeks while fiscal year 2009 consists of 53 weeks. The first quarter of fiscal 2010 ended on April 4, 2010 and the first quarter of fiscal 2009 ended on March 29, 2009.

Basis of Presentation

The accompanying condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the 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 as adjusted for the Company’s adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007. Accordingly, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) 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 January 3, 2010.

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, other 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, valuation of share lending arrangements, income taxes and tax valuation allowances. Actual results could materially differ from those estimates.

 
8
 
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 April 4, 2010 and its results of operations and cash flows for the three months ended April 4, 2010 and March 29, 2009. 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 are shown in the following table (in thousands):
 
 
 
March 29,
2009
 
Investigation related adjustments
 
$
(4,040
)
Errors identified during course of investigation
 
 
(8,468
)
 
 
 
(12,508
)
Out-of-period adjustments
 
 
(3,042
)
Total adjustments
 
 
(15,550
)
Income tax effect of adjustments
 
 
10,634
 
Increase in net loss
 
$
(4,916
)

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.

 
·
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.

 
9
 
 
·
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 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 Statement of Operations for the three months ended March 29, 2009.
 
 
(In thousands, except per share amounts)
 
Three Months Ended
March 29, 2009
 
 
 
As Previously Reported,
As Adjusted (1)
 
 
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
 
 
(6,271
)
 
 
—
 
 
 
(6,271
)
Other, net
 
 
(7,157
)
 
 
—
 
 
 
(7,157
)
Other income (expense), net
 
 
(12,244
)
 
 
—
 
 
 
(12,244
)
Loss before income taxes and equity in earnings of unconsolidated investees
 
 
(14,743
)
 
 
(15,550
)
 
 
(30,293
)
Benefit from income taxes
 
 
(8,562
)
 
 
(10,634
)
 
 
(19,196
)
Loss before equity in earnings of unconsolidated investees
 
 
(6,181
)
 
 
(4,916
)
 
 
(11,097
)
Equity in earnings of unconsolidated investees
 
 
1,245
 
 
 
—
 
 
 
1,245
 
Net loss
 
$
(4,936
)
 
$
(4,916
)
 
$
(9,852
)
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 

(1)
As adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

 
10
 
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 Statement of Comprehensive Income (Loss) for the three months ended March 29, 2009.
 
(In thousands)
 
Three Months Ended
March 29, 2009
 
 
 
As Previously Reported,
As Adjusted (1)
 
 
Restatement
Adjustments
 
 
As Restated
 
Net loss
 
$
(4,936
)
 
$
(4,916
)
 
$
(9,852
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
Translation adjustment
 
 
(16,608
)
 
 
—
 
 
 
(16,608
)
Unrealized gain on derivatives
 
 
25,566
 
 
 
—
 
 
 
25,566
 
Unrealized gain on investments
 
 
8
 
 
 
—
 
 
 
8
 
Estimated provision for income taxes
 
 
(3,032
 ) 
 
 
—
 
 
 
(3,032
 ) 
Net change in accumulated other comprehensive income (loss)
 
 
5,934
 
 
 
—
 
 
 
5,934
 
Total comprehensive income (loss)
 
$
998
 
 
$
(4,916
)
 
$
(3,918
)

(1)
As adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

 
11
 
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 Statement of Cash Flows for the three months ended March 29, 2009.

 
(In thousands)
 
Three Months Ended
March 29, 2009
 
 
 
As Previously Reported,
As Adjusted (1)
 
 
Restatement
Adjustments
 
 
As Restated
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net loss
 
$
(4,936
)
 
$
(4,916
)
 
$
(9,852
)
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
 
 
5,171
 
 
 
—
 
 
 
5,171
 
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
 

(1)
As adjusted to reflect the adoption of new accounting guidance for share lending arrangements that were executed in connection with the Company’s convertible debt offerings in fiscal 2007 (see Note 1).

 
12
 
Note 3. BUSINESS COMBINATIONS

SunRay Malta Holdings Limited (“SunRay”)
 
On March 26, 2010, the Company completed its acquisition of SunRay, a European solar power plant developer company organized under the laws of Malta, under which the Company agreed to purchase all the issued share capital of SunRay. As a result of the completion of the acquisition, SunRay has become a wholly-owned subsidiary of the Company and the results of SunRay have been included in the consolidated results of the Company since March 26, 2010. As part of the acquisition, the Company acquired SunRay’s project pipeline of solar photovoltaic projects totaling more than 1,200 megawatts in Italy, France, Israel, Spain, the United Kingdom and Greece. The pipeline consists of projects in various stages of development. SunRay’s power plant development and project finance team consists of approximately 70 employees.

Purchase Price Consideration

Upon the completion of the acquisition, the shareholders of SunRay exchanged all of their share capital of SunRay in exchange for their respective share of the purchase price paid by the Company and it became the sole owner of SunRay. The total consideration for the acquisition was approximately $296.1 million, including approximately: (i) $263.4 million in cash to SunRay’s class A shareholders, class B shareholders and class C shareholders; (ii) $18.7 million in cash to repay outstanding debt of SunRay; and (iii) $14.0 million in promissory notes issued by SunPower North America, LLC, a wholly-owned subsidiary of the Company, and guaranteed by SunPower. A portion of the purchase price allocated to SunRay’s class A shareholders, class B shareholders and certain non-management class C shareholders (approximately $244.4 million in total) was paid by the Company in cash and the remaining portion of the purchase price allocated to SunRay’s class C management shareholders was paid with a combination of approximately $19.0 million in cash and approximately $14.0 million in promissory notes.

The $14.0 million in promissory notes issued to SunRay’s management shareholders have been structured to provide a retention incentive. All of the promissory notes provide that if the management shareholder’s employment is terminated after March 26, 2010 by the Company for “cause” or by the management shareholder without “good reason”, the amounts then remaining under the promissory notes will be cancelled. In general, the risk of cancellation of most of these notes will lapse as to one-half of the principal amount on the date that is either six or nine months after March 26, 2010, depending upon the note, and as to the other half on the date that is either twelve or eighteen months after March 26, 2010. Since the vesting and payment of the promissory notes are contingent on future employment, the promissory notes are considered deferred compensation and therefore are not included in the purchase price allocated to the net assets acquired.

Approximately $32.3 million of the purchase price payable and promissory notes payable to certain principal shareholders of SunRay will be held in escrow for up to two years following March 26, 2010, and be subject to potential indemnification claims that may be made by the Company during that period. The Company has agreed to fund approximately $28.7 million in cash and approximately $3.6 million in promissory notes issued by SunPower North America, LLC to this escrow account for the benefit of SunRay’s class A and class B shareholders. The escrow is generally tied to compliance with the representations and warranties made as part of the acquisition, therefore, the $28.7 million in cash of the $263.4 million is considered a part of the purchase price allocated to the net assets acquired. The funds in escrow, less any amounts relating to paid or pending claims, will be released two years following March 26, 2010.

Preliminary Purchase Price Allocation
 
The Company accounted for this acquisition using the acquisition method. The Company preliminarily allocated the purchase price to the acquired assets and liabilities based on their estimated fair values at the acquisition date as summarized in the following table. The allocation of the purchase price on March 26, 2010 was as follows:
 
(In thousands)
 
Amount
 
Net tangible assets acquired
 
$
48,999
 
Project assets
 
98,784
 
Purchased technology
 
1,120
 
Goodwill
 
133,187
 
Total purchase consideration
 
$
282,090
 
 
The fair value of net tangible assets acquired on March 26, 2010 consisted of the following:
 
(In thousands)
 
Amount
 
Cash and cash equivalents
 
$
9,391
 
Restricted cash and cash equivalents
 
46,917
 
Accounts receivable, net
 
5,891
 
Prepaid expenses and other assets
 
54,584
 
Assets held-for-sale
 
175,439
 
Property, plant and equipment, net
 
455
 
Total assets acquired
 
292,677
 
Accounts payable
 
(16,479
)
Other accrued expenses and liabilities
 
(52,984
)
Debt (see Note 12)
 
(174,215
)
Total liabilities assumed
 
(243,678
)
Net assets acquired
 
$
48,999
 

 
13
 
The Company’s purchase price allocation was substantially complete as of April 4, 2010. However, the Company may be subject to goodwill adjustments as additional information relating to the fair value of project assets and recognition of prepaid expenses, other current assets, accounts payable and other accrued liabilities becomes available. Assets held-for-sale represent project assets which are available for immediate sale and the sale of the assets is probable. All intercompany receivables and payables related to SunRay at the acquisition date were eliminated in purchase accounting effective March 26, 2010.
 
Management engaged a third-party valuation firm to assist in the determination of the fair value of SunRay. In the Company’s determination of the fair value of the project assets and purchased technology acquired, it considered among other factors, three generally accepted valuation approaches: the income approach, market approach and cost approach. The Company selected the approaches that are most indicative of fair value of the assets acquired.

Project Assets

The project assets can be broken down into two distinct groups: (i) projects and EPC pipeline, which relate to the development of power plants; and (ii) operation and maintenance (“O&M”) pipeline, which relate to maintenance contracts that are established after the developed plants are sold. The Company applied the income approach using the Multi-Period Excess Earnings Method based on estimates and assumptions of future performance of these projects assets provided by SunRay’s and our management to determine the fair value of the project assets.

Purchased Technology

The Company applied the cost approach to calculate the fair value of internally developed technologies related to the project development business. The Company determined the fair value of the purchased technology based on estimates and assumptions for the cost of reproducing or replacing the asset. The Company is amortizing the purchased technology on a straight-line basis over estimated lives of 5 years.

Goodwill

Of the total estimated purchase price paid at the time of acquisition, approximately $133.2 million has been allocated to goodwill within the Systems Segment. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and other intangible assets and is not deductible for tax purposes. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and other intangible assets was the acquisition of an assembled workforce, synergies in technologies, skill sets, operations, customer base and organizational cultures that can be leveraged to enable the Company to build an enterprise greater than the sum of its parts.
 
 
Acquisition Related Costs

Acquisition-related costs of $6.4 million recognized in the three months ended April 4, 2010 include transaction costs such as legal, accounting, valuation and other professional services, which the Company has classified in “Selling, general and administrative” expense in its Condensed Consolidated Statement of Operations.

Pro Forma Financial Information
 
The results of operations of SunRay from March 26, 2010 to April 4, 2010 did not have a significant impact to the Company’s net income per share during the first quarter of fiscal 2010. Supplemental information on an unaudited pro forma basis, as if the acquisition of SunRay was completed at the beginning of the three months ended April 4, 2010 and March 29, 2009, is as follows:

(In thousands, except per share amounts)
 
Three Months Ended
 
 
 
April 4,
2010
 
 
March 29,
2009
 
Revenue
 
$
351,046
  
 
$
211,643
  
Net loss
 
 
(1,129
)
 
 
(12,177
)
Basic and diluted net loss per share
 
 
(0.01
)
 
 
(0.15
)

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable. The unaudited pro forma supplemental information prepared by management is not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had the Company and SunRay been a combined company during the specified periods.

 
14
 
 
Note 4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

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

(In thousands)
 
Systems
 
 
Components
 
 
Total
 
As of January 3, 2010
 
$
182,382
 
 
$
15,781
 
 
$
198,163
 
Goodwill arising from business combination
 
 
133,187
 
 
 
—
 
 
 
133,187
 
Translation adjustment
 
 
—
 
 
 
(504
)
 
 
(504
)
As of April 4, 2010
 
$
315,569
 
 
$
15,277
 
 
$
330,846
 

The balance of goodwill within the Systems Segment increased $133.2 million in the first quarter of fiscal 2010 due to the Company’s acquisition of SunRay which represents the excess of the purchase price over the fair value of the underlying net tangible and other intangible assets of SunRay (see Note 3). The translation adjustment for the revaluation of the Company’s subsidiaries’ goodwill into U.S. dollar equivalents decreased the balance of goodwill within the Components Segment by $0.5 million during the first quarter of fiscal 2010.

Based on the impairment tests as of the third fiscal quarter ended September 27, 2009 for the fiscal year ended January 3, 2010, the Company determined there was no impairment. 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. Management evaluated all the facts and circumstances and concluded that no impairment indicator exists as of April 4, 2010 that would require impairment testing of its reporting units.
 
Intangible Assets

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

(In thousands)
 
Gross
 
 
Accumulated
Amortization
 
 
Net
 
As of April 4, 2010
 
 
 
 
 
 
 
 
 
Patents and purchased technology
 
$
52,518
 
 
$
(44,693
)
 
$
7,825
 
Purchased in-process research and development
 
 
1,000
 
 
 
—
 
 
 
1,000
 
Trade names
 
 
2,605
 
 
 
(2,315
)
 
 
290
 
Customer relationships and other
 
 
28,574
 
 
 
(16,363
)
 
 
12,211
 
 
 
$
84,697
 
 
$
(63,371
)
 
$
21,326
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of January 3, 2010
 
 
 
 
 
 
 
 
 
 
 
 
Patents and purchased technology
 
$
51,398
 
 
$
(42,014
)
 
$
9,384
 
Purchased in-process research and development
    
1,000
      
—
      
1,000
  
Trade names
 
 
2,623
 
 
 
(2,212
)
 
 
411
 
Customer relationships and other
 
 
28,616
 
 
 
(14,437
)
 
 
14,179
 
 
 
$
83,637
 
 
$
(58,663
)
 
$
24,974
 

 
15
 
    In connection with the acquisition of SunRay during the first quarter of fiscal 2010, the Company recorded $1.1 million of other intangible assets. All of the Company’s acquired other intangible assets are subject to amortization. Aggregate amortization expense for other intangible assets totaled $4.8 million and $4.1 million in the three months ended April 4, 2010 and March 29, 2009, respectively. As of April 4, 2010, the estimated future amortization expense related to other intangible assets is as follows (in thousands):
 
Year
 
Amount
 
2010 (remaining nine months)
 
$
10,829
 
2011
 
 
5,562
 
2012
 
 
4,335
 
2013
 
 
330
 
2014
 
 
225
 
Thereafter
 
 
45
 
 
 
$
21,326
 
 
Note 5. BALANCE SHEET COMPONENTS

 
 
April 4,
2010
 
 
January 3,
2010
 
(In thousands)
 
 
 
    
 
Accounts receivable, net:
 
 
 
 
 
 
Accounts receivable, gross