CY » Topics » SunPower recognizes most of its revenues generated from SP Systems on a "percentage of completion" basis and upon the achievement of contractual milestone, so any delay or cancellation of a project could adversely affect SunPower's and Cypress's business

These excerpts taken from the CY 10-K filed Mar 3, 2008.

SunPower recognizes most of its revenues generated from SP Systems on a "percentage of completion" basis and upon the achievement of contractual milestone, so any delay or cancellation of a project could adversely affect SunPower's and Cypress's business and results of operations.

        SP Systems, which was acquired by SunPower in fiscal 2007, recognizes revenue on a "percentage of completion" basis and, as a result, the revenue from this business is driven by the performance of its contractual obligations, which is generally driven by the timelines of installation of its solar power systems at customer sites. The percentage-of-completion method of accounting for revenue recognition is inherently subjective because it relies on management estimates of total project cost as a basis for recognizing revenue and profit. Accordingly, revenue and profit SunPower has recognized under the percentage-of-completion method are potentially subject to adjustments in subsequent periods based on refinements in estimated costs of project completion that could materially impact SunPower's future revenue and profit.

        As with any project-related business, there is the potential for delays within any particular customer project. Variation of project timelines and estimates may impact SunPower's ability to recognize revenue in a particular period. Moreover, incurring penalties involving the return of the contract price to the customer for failure to timely install one project could negatively impact SunPower's ability to continue to recognize revenue on a "percentage of completion" basis generally for other projects. In addition, certain customer contracts may include payment milestones due at specified points during a project. Because SP Systems usually must invest substantial time and incur significant expense in advance of achieving milestones and the receipt of payment, failure to achieve such milestones could adversely affect SunPower's and Cypress' business and results of operations.

SunPower recognizes most of its revenues generated from SP Systems on a "percentage of completion" basis and upon the achievement of contractual
milestone, so any delay or cancellation of a project could adversely affect SunPower's and Cypress's business and results of operations.




        SP Systems, which was acquired by SunPower in fiscal 2007, recognizes revenue on a "percentage of completion" basis and, as a result, the revenue from this
business is driven by the performance of its contractual obligations, which is generally driven by the timelines of installation of its solar power systems at customer sites. The
percentage-of-completion method of accounting for revenue recognition is inherently subjective because it relies on management estimates of total project cost as a basis for
recognizing revenue and profit. Accordingly, revenue and profit
SunPower has recognized under the percentage-of-completion method are potentially subject to adjustments in subsequent periods based on refinements in estimated costs of
project completion that could materially impact SunPower's future revenue and profit.




        As
with any project-related business, there is the potential for delays within any particular customer project. Variation of project timelines and estimates may impact SunPower's ability
to recognize revenue in a particular period. Moreover, incurring penalties involving the return of the contract price to the customer for failure to timely install one project could negatively impact
SunPower's ability to continue to recognize revenue on a "percentage of completion" basis generally for other projects. In addition, certain customer contracts may include payment milestones due at
specified points during a project. Because SP Systems usually must invest substantial time and incur significant expense in advance of achieving milestones and the receipt of payment, failure to
achieve such milestones could adversely affect SunPower's and Cypress' business and results of operations.



EXCERPTS ON THIS PAGE:

10-K (2 sections)
Mar 3, 2008
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