Last10K.com

Sunpower Corp (SPWR) SEC Filing 10-Q Quarterly Report for the period ending Sunday, July 4, 2021

Sunpower Corp

CIK: 867773 Ticker: SPWR

FOR IMMEDIATE RELEASE

Contacts:

Investors
Bob Okunski
408-240-5447
Bob.Okunski@sunpower.com

Media
Sarah Spitz
832-444-7151
Sarah.Spitz@sunpower.com

SunPower Reports Second Quarter 2021 Results

Met Net Income and Adjusted EBITDA guidance; Strong residential margin growth
Expected $15 billion TAM expansion through Wallbox partnership
Materially delevered balance sheet ahead of 2021 plan

SAN JOSE, Calif., August 3, 2021
- SunPower Corp. (NASDAQ:SPWR), a leading solar technology and energy services provider, today announced financial results for its second quarter ended July 4, 2021.

“Consumer demand for better, more resilient energy is increasing and with more than 100 million homes in the U.S. that could benefit from solar and storage, we see a significant opportunity to meet that demand,” said Peter Faricy, CEO of SunPower. “To lead in customer adoption and growth we are focused on delivering world class customer experiences and continuing to invest in strategic priorities that will make solar easy, reliable and affordable. We believe this long-term strategic approach will position SunPower as a leader as the market continues to expand.”

“Our solid second quarter results reflect continued execution in both our residential and commercial businesses as year over year megawatts grew 40 percent and we doubled our gross margin per watt,” said Faricy. “We also made material progress on a number of our key initiatives to expand our addressable market during the quarter including increasing our dealer footprint, expanding our financial platform to include loan servicing as well as announcing our strategic alliance with leading EV solutions provider Wallbox. This alliance will enable us to offer our residential customers a simple and cost effective integrated solar, storage and EV solution that will lower overall energy costs while reducing strain on the grid. Looking forward, we remain on track to achieve our 2021 financial outlook and are well positioned to drive growth and profitability in 2022 and beyond.”


Residential and Light Commercial (RLC)
Residential strength – 23 percent gross margin, up 160 basis points sequentially, $28 million Adjusted EBITDA
Added 13,000 customers - residential bookings up 16 percent sequentially, 67 percent year-over-year (YoY)
Continued progress in converting residential mix to more full systems sales (>55 percent in Q221)
EV business alliance with Wallbox expected to expand addressable market by $15 billion

Commercial and Industrial Solutions (CIS)
YoY megawatts (MW) growth of ~30 percent, 1 gigawatt installed base, backlog above 260MW
Strong bookings momentum – up more than 20 percent YoY


The following information was filed by Sunpower Corp (SPWR) on Tuesday, August 3, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2021

OR
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


spwr-20210704_g1.gif
SunPower Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware94-3008969
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
51 Rio RoblesSan JoseCalifornia95134
(Address of Principal Executive Offices)(Zip Code)

(408) 240-5500
(Registrant's Telephone Number, Including Area Code)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.001 par value per shareSPWRThe Nasdaq Stock Market LLC

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 every Interactive Data File required to be submitted 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 such files). Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Emerging growth company Non-accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

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

The total number of outstanding shares of the registrant’s common stock as of July 30, 2021 was 172,855,274.

1

SunPower Corporation
Form 10-Q for the quarterly period ended July 4, 2021



2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SunPower Corporation
Condensed Consolidated Balance Sheets
(In thousands, except share par values)
(unaudited)

 July 4, 2021January 3, 2021
Assets
Current assets:
Cash and cash equivalents$140,462 $232,765 
Restricted cash and cash equivalents, current portion2
5,818 5,518 
Short-term investments372,820 — 
Accounts receivable, net1
110,450 108,864 
Contract assets1
89,219 114,506 
Inventories235,843 210,582 
Advances to suppliers, current portion4,995 2,814 
Project assets - plants and land, current portion12,850 21,015 
Prepaid expenses and other current assets1
88,890 94,251 
Total current assets1,061,347 790,315 
Restricted cash and cash equivalents, net of current portion2
5,347 8,521 
Property, plant and equipment, net32,507 46,766 
Operating lease right-of-use assets55,893 54,070 
Solar power systems leased, net47,385 50,401 
Other long-term assets1
344,153 696,409 
Total assets$1,546,632 $1,646,482 
Liabilities and Equity  
Current liabilities:  
Accounts payable1
$158,631 $166,066 
Accrued liabilities1
97,134 121,915 
Operating lease liabilities, current portion12,969 9,736 
Contract liabilities, current portion1
65,425 72,424 
Short-term debt74,071 97,059 
Convertible debt, current portion1
— 62,531 
Total current liabilities408,230 529,731 
Long-term debt58,224 56,447 
Convertible debt, net of current portion1
423,059 422,443 
Operating lease liabilities, net of current portion35,230 43,608 
Contract liabilities, net of current portion1
28,283 30,170 
Other long-term liabilities149,593 157,597 
Total liabilities1,102,619 1,239,996 
Commitments and contingencies (Note 8)
Equity:  
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of July 4, 2021 and January 3, 2021
— — 
Common stock, $0.001 par value, 367,500 shares authorized; 186,119 shares issued, and 172,842 shares outstanding as of July 4, 2021; 183,442 shares issued, and 170,428 shares outstanding as of January 3, 2021
172 170 
Additional paid-in capital2,703,647 2,685,920 
Accumulated deficit(2,058,032)(2,085,246)
Accumulated other comprehensive income9,389 8,799 
Treasury stock, at cost: 13,277 shares of common stock as of July 4, 2021; 13,014 shares of common stock as of January 3, 2021
(211,931)(205,476)
Total stockholders' equity443,245 404,167 
Noncontrolling interests in subsidiaries768 2,319 
Total equity444,013 406,486 
Total liabilities and equity$1,546,632 $1,646,482 

1 We have related-party balances for transactions made with TotalEnergies SE and its affiliates, Maxeon Solar Technologies, Ltd. ("Maxeon Solar"), and unconsolidated entities in which we have a direct equity investment. These related-party balances are recorded within the "accounts receivable, net," "contract assets," "prepaid expenses and other current assets," "other long-term assets," "accounts payable," "accrued liabilities," "contract liabilities, current portion," "convertible debt, current portion," "convertible debt, net of current portion," and "contract liabilities, current portion" financial statement line items on our unaudited condensed consolidated balance sheets (see Note 2, Note 8, Note 9, Note 10, and Note 11).

2 Amounts included in the "Restricted cash and cash equivalents, current portion" and "Restricted cash and cash equivalents, net of current portion" financial statement line items on our unaudited condensed consolidated balance sheets include cash balances set aside for various financial obligations including loans, distributions, letter of credit facilities, and other projects' related cash transactions.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

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

 Three Months EndedSix Months Ended
 July 4, 2021June 28, 2020July 4, 2021June 28, 2020
Revenues:
Solar power systems, components, and other1
$303,408 $212,408 604,645 $497,697 
Residential leasing1,354 1,329 2,474 2,653 
Solar services4,165 3,930 8,206 7,863 
Total revenues308,927 217,667 615,325 508,213 
Cost of revenues:
Solar power systems, components, and other1
246,053 189,868 500,157 448,505 
Residential leasing678 1,217 1,279 2,513 
Solar services1,165 930 2,984 2,359 
Total cost of revenues247,896 192,015 504,420 453,377 
Gross profit61,031 25,652 110,905 54,836 
Operating expenses:
Research and development1
4,711 5,994 9,726 13,762 
Sales, general, and administrative1
56,730 36,014 104,474 76,731 
Restructuring charges808 1,259 4,574 2,835 
(Gain) loss on sale and impairment of residential lease assets(68)141 (294)(133)
Gain on business divestitures, net(224)(10,458)(224)(10,458)
Income from transition services agreement, net1
(1,656)— (4,743)— 
 Total operating expenses60,301 32,950 113,513 82,737 
Operating income (loss)730 (7,298)(2,608)(27,901)
Other income (expense), net:
Interest income114 174 166 578 
Interest expense1
(7,721)(8,448)(15,686)(17,641)
Other, net84,071 71,205 40,600 121,643 
Other income, net76,464 62,931 25,080 104,580 
Income from continuing operations before income taxes and equity in earnings of unconsolidated investees77,194 55,633 22,472 76,679 
(Provision for) benefit from income taxes1
(2,425)(1,106)2,799 (1,991)
Net income from continuing operations74,769 54,527 25,271 74,688 
Loss from discontinued operations before income taxes and equity in losses of unconsolidated investees— (33,278)— (54,838)
Provision for income taxes from discontinued operations— (1,962)— (2,946)
Equity in losses of unconsolidated investees— (889)— (644)
Net loss from discontinued operations, net of taxes— (36,129)— (58,428)
Net income74,769 18,398 25,271 16,260 
Net loss from continuing operations attributable to noncontrolling interests438 1,363 1,551 2,742 
Net income from discontinued operations attributable to noncontrolling interests— (383)— (1,055)
Net loss attributable to noncontrolling interests438 980 1,551 1,687 
Net income from continuing operations attributable to stockholders75,207 55,890 26,822 77,430 
Net loss from discontinued operations attributable to stockholders— (36,512)— (59,483)
Net income attributable to stockholders$75,207 $19,378 $26,822 $17,947 
Net income (loss) per share attributable to stockholders - basic:
Continuing operations$0.44 $0.33 $0.16 $0.46 
Discontinued operations$— $(0.21)$— $(0.35)
Net income per share – basic
$0.44 $0.12 $0.16 $0.11 
Net income (loss) per share attributable to stockholders - diluted:
Continuing operations$0.40 $0.31 $0.15 $0.44 
Discontinued operations$— $(0.19)$— $(0.33)
Net income per share – diluted
$0.40 $0.12 $0.15 $0.11 
Weighted-average shares:
Basic172,640 170,003 171,920 169,413 
Diluted194,363 192,040 176,794 179,174 

1 We have related-party transactions with TotalEnergies SE and its affiliates, Maxeon Solar, and unconsolidated entities in which we have a direct equity investment. These related-party transactions are recorded within the "revenue: solar power systems, components, and other," "cost of revenue: solar power systems, components, and other," "operating expenses: research and development," "operating expenses: sales, general and administrative," "operating expenses: income transition services agreement, net," and "other income (expense), net: interest expense," "(provision for) benefit from income taxes" financial statement line items in our unaudited condensed consolidated statements of operations (see Note 2, Note 9, and Note 11).


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4

SunPower Corporation
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)

 Three Months EndedSix Months Ended
July 4, 2021June 28, 2020July 4, 2021June 28, 2020
Net income$74,769 $18,398 $25,271 $16,260 
Components of other comprehensive income:
Translation adjustment909 134 
Net change in derivatives423 (2,626)570 (938)
Net loss on long-term pension liability obligation— — — (49)
Provision for income taxes63 141 16 — 
Total other comprehensive income (loss)492 (1,576)590 (853)
Total comprehensive income75,261 16,822 25,861 15,407 
Comprehensive income attributable to noncontrolling interests438 980 1,551 1,687 
Comprehensive income attributable to stockholders$75,699 $17,802 $27,412 $17,094 


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

5

SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 3, 2021170,428 $170 $2,685,920 $(205,476)$8,799 $(2,085,246)$404,167 $2,319 $406,486 
Net income (loss)— — — — — (48,385)(48,385)(1,113)(49,498)
Other comprehensive income— — — — 98 — 98 — 98 
Issuance of restricted stock to employees, net of cancellations1,908 — — — — — 
Stock-based compensation expense1
— — 5,437 — — — 5,437 — 5,437 
Bond/debentures conversion— 155 — — — 155 — 155 
Purchases of treasury stock(76)— — (2,120)— — (2,120)— (2,120)
Other adjustments— — (89)— — 392 303 — 303 
Balances at April 4, 2021172,264 172 2,691,423 (207,596)8,897 (2,133,239)359,657 1,206 360,863 
Net income (loss)— — — — — 75,207 75,207 (438)74,769 
Other comprehensive income— — — — 492 — 492 — 492 
Issuance of restricted stock to employees, net of cancellations664 — — — — — — — — 
Issuance of common stock to executive2
101 — 2,999 — — — 2,999 — 2,999 
Stock-based compensation expense1
— — 9,225 — — — 9,225 — 9,225 
Purchases of treasury stock(187)— — (4,310)— — (4,310)— (4,310)
Other adjustments— — — (25)— — (25)— (25)
Balances at July 4, 2021172,842 $172 $2,703,647 $(211,931)$9,389 $(2,058,032)$443,245 $768 $444,013 
6

SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at December 29, 2019168,121 $168 $2,661,819 $(192,633)$(9,512)$(2,449,679)$10,163 $11,336 $21,499 
Net income (loss)— — — — — (1,431)(1,431)(707)(2,138)
Other comprehensive income— — — — 723 — 723 — 723 
Issuance of restricted stock to employees, net of cancellations2,452 — — — — — 
Stock-based compensation expense— — 6,885 — — — 6,885 — 6,885 
Purchases of treasury stock(818)(1)— (6,910)— — (6,911)— (6,911)
Balances at March 29, 2020169,755 170 2,668,704 (199,543)(8,789)(2,451,110)9,432 10,629 20,061 
Net income (loss)— — — — — 19,378 19,378 (980)18,398 
Other comprehensive loss— — — — (1,576)— (1,576)— (1,576)
Issuance of restricted stock to employees, net of cancellations533 — — — — — — — — 
Stock-based compensation expense— — 5,675 — — — 5,675 — 5,675 
Purchases of treasury stock(229)— — (1,253)— — (1,253)— (1,253)
Balances at June 28, 2020170,059 $170 $2,674,379 $(200,796)$(10,365)$(2,431,732)$31,656 $9,649 $41,305 

1 Stock-based compensation expense includes a recharge to Maxeon Solar of $0.8 million and $0.4 million for the three and six months ended July 4, 2021, respectively, under the collaboration agreement (see Note 11. Related-Party Transactions).

2 Refer to Note 11. Related-Party Transactions for details.


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

SunPower Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
    
Six Months Ended
 July 4, 2021June 28, 2020
Cash flows from operating activities:
Net income$25,271 $16,260 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization5,817 33,810 
Stock-based compensation15,050 12,746 
Non-cash interest expense3,155 3,748 
Equity in losses of unconsolidated investees— 644 
Gain on equity investments(39,016)(120,214)
Gain on retirement of convertible debt— (2,956)
Gain on sale of investments(1,162)— 
Gain on business divestitures, net(224)(10,458)
Deferred income taxes(1,637)1,032 
Other, net(6,215)3,995 
Changes in operating assets and liabilities:
       Accounts receivable(2,909)58,909 
       Contract assets24,498 (2,869)
       Inventories1,825 (6,725)
       Project assets6,305 (11,905)
       Prepaid expenses and other assets5,180 28,038 
       Operating lease right-of-use assets6,365 7,786 
       Advances to suppliers(3,284)12,029 
       Accounts payable and other accrued liabilities(42,229)(126,236)
       Contract liabilities(8,554)(50,454)
       Operating lease liabilities(6,589)(6,022)
Net cash used in operating activities(18,353)(158,842)
Cash flows from investing activities:
Purchases of property, plant, and equipment(6,894)(10,805)
Proceeds from sale of property, plant, and equipment900 — 
Cash paid for solar power systems(635)(2,647)
Cash received from sale of investments1,200 — 
Proceeds from business divestitures, net of de-consolidated cash10,516 15,417 
Proceeds from return of capital from equity investments 2,276 53,873 
Net cash provided by investing activities7,363 55,838 
Cash flows from financing activities:
Proceeds from bank loans and other debt95,396 121,498 
Repayment of bank loans and other debt(103,573)(119,335)
Proceeds from issuance of non-recourse residential and commercial financing, net of issuance costs— 10,644 
Repayment of non-recourse residential and commercial financing debt(9,798)— 
Repayment of convertible debt(62,757)(87,141)
Receipt of contingent asset of a prior business combination— 2,234 
Issuance of common stock to executive2,998 — 
Equity offering costs paid— (928)
Purchases of stock for tax withholding obligations on vested restricted stock(6,453)(8,381)
Net cash used in financing activities(84,187)(81,409)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash— 114 
Net decrease in cash, cash equivalents, and restricted cash(95,177)(184,299)
Cash, cash equivalents, and restricted cash, Beginning of period246,804 458,657 
Cash, cash equivalents, and restricted cash, End of period$151,627 $274,358 
Reconciliation of cash, cash equivalents, and restricted cash to the unaudited condensed consolidated balance sheets:
Cash and cash equivalents$140,462 $235,307 
Restricted cash and cash equivalents, current portion5,818 30,631 
Restricted cash and cash equivalents, net of current portion5,347 8,420 
Total cash, cash equivalents, and restricted cash$151,627 $274,358 
Supplemental disclosure of cash flow information:
Costs of solar power systems funded by liabilities$— $1,716 
Property, plant and equipment acquisitions funded by liabilities$1,174 $5,452 
Right-of-use assets obtained in exchange for lease obligations$11,528 $13,424 
Deconsolidation of right-of-use assets and lease obligations$3,340 $— 
Debt repaid in sale of commercial projects1
$5,585 $— 
Accounts payable balances reclassified to short-term debt$— $23,933 
Assumption of liabilities in connection with business divestitures$— $9,085 
Holdbacks in connection with business divestitures$— $7,199 
Cash paid for interest$13,527 $16,523 
Cash paid for income taxes$20,233 $11,701 

1 Refer to Note 5. Business Divestitures for more details.



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SunPower Corporation (together with its subsidiaries, "SunPower," the “Company,” "we," "us," or "our") is a leading solar technology and energy services provider that delivers fully integrated solar, storage and home energy solutions to customers primarily in the United States and Canada through an array of hardware, software, and financing options and "Smart Energy" solutions. Our Smart Energy initiative is designed to add layers of intelligent control to homes, buildings, and grids—all personalized through easy-to-use customer interfaces. We are a leader in the U.S. Distributed Generation (“DG”) storage and energy services market, providing customers control over electricity consumption and resiliency during power outages while providing cost savings to homeowners, businesses, governments, schools, and utilities through multiple offerings. Our sales channels include a strong network of both installing and non-installing dealers and resellers that operate in both residential and commercial markets as well as a group of talented and driven in-house sales team within each segment engaged in direct sales to end customers. SunPower is a majority-owned subsidiary of Total Solar INTL SAS ("Total," formerly Total Solar International SAS) and Total Gaz Electricité Holdings France SAS (“Total Gaz”), each a subsidiary of TotalEnergies SE (“TotalEnergies SE,” formerly Total SE) (see “Note 2. Transactions with Total and TotalEnergies SE).

On August 26, 2020, we completed the spin-off (the “Spin-Off”) of Maxeon Solar, a Singapore public company limited by shares, consisting of certain non-U.S. operations and assets of our former SunPower Technologies business unit. As a result of the Spin-Off, we no longer consolidate Maxeon Solar within our financial results of continuing operations. For all periods prior to the Spin-Off, the financial results of Maxeon Solar are presented as net earnings from discontinued operations on the condensed consolidated statements of operations.

Liquidity

We believe that our total cash and cash equivalents will be sufficient to meet our obligations over the next 12 months from the date of issuance of these financial statements. In addition, we have historically been successful in generating liquidity by divesting certain investments, such as our shares of Enphase Energy Inc. ("Enphase") common stock, as well as other non-core assets; securing other sources of financing, such as accessing the capital markets; and implementing other cost reduction initiatives such as restructuring, to address our liquidity needs. Although we have historically been able to generate liquidity, we cannot assure that we will be able to continue to do so.

Basis of Presentation and Preparation
    
Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States ("United States" or "U.S.," and such accounting principles, "U.S. GAAP") for interim financial information, and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The January 3, 2021 consolidated balance sheet data was derived from SunPower’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021, as filed with the Securities and Exchange Commission ("SEC") on February 22, 2021 but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in SunPower's Annual Report on Form 10-K for the fiscal year ended January 3, 2021. The operating results for the three and six months ended July 4, 2021 are not necessarily indicative of the results that may be expected for fiscal year 2021, or for any other future period.

We have a 52-to-53-week fiscal year that ends on the Sunday closest to December 31. Accordingly, every fifth or sixth year will be a 53-week fiscal year. The current fiscal year, fiscal 2021, is a 52-week fiscal year, while fiscal year 2020 was a 53-week fiscal year. The second quarter of fiscal 2021 ended on July 4, 2021, while the second quarter of fiscal 2020 ended on June 28, 2020.

9

Management Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts reported in these unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in these unaudited condensed consolidated financial statements include revenue recognition, specifically the nature and timing of satisfaction of performance obligations, standalone selling price of performance obligations, and variable consideration; credit losses, including estimating macroeconomic factors affecting historical recovery rate of receivables; inventory and project asset write-downs; long-lived asset impairment, specifically estimates for valuation assumptions including discount rates and future cash flows; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; valuation of contingencies such as warranty and litigation; the incremental borrowing rate used in discounting of lease liabilities; the fair value of indemnities provided to customers and other parties; and income taxes and tax valuation allowances. Actual results could materially differ from those estimates.

Summary of Selected Significant Accounting Policies
    
Refer to our Annual Report on Form 10-K for the fiscal year ended January 3, 2021 for the full list of our significant accounting policies.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted the ASU during the first quarter of fiscal 2021. The adoption did not have a material impact on our consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The ASU is an update to ASU 2020-04 issued by the FASB in March 2020 and is intended to clarify the scope of ASC 848 to include derivatives that are affected by a change in the interest rate used for margining, discounting, or contract price alignment that do not also reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. This guidance is effective immediately upon issuance on January 7, 2021. We adopted the ASU during the first quarter of fiscal 2021. The adoption did not have any impact on our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendment reduces the number of accounting models used for convertible debt instruments and convertible preferred stock, which results in fewer embedded conversion features separately recognized from the host contracts. ASU 2020-06 is effective no later than the first quarter of fiscal 2022. Early adoption is permitted no earlier than the first quarter of fiscal 2021, and the ASU should be applied retrospectively. We are currently evaluating the impacts of the provisions of ASU 2020-06 on our financial statements and disclosures.

Note 2. TRANSACTIONS WITH TOTAL AND TOTALENERGIES SE

In June 2011, Total completed a cash tender offer to acquire 60% of our then outstanding shares of common stock at a price of $23.25 per share, for a total cost of approximately $1.4 billion. In December 2011, we entered into a Private Placement Agreement with Total, under which Total purchased, and we issued and sold, 18.6 million shares of our common stock for a purchase price of $8.80 per share, thereby increasing Total's ownership to approximately 66% of our outstanding common stock as of that date. As of July 4, 2021, ownership of our outstanding common stock by TotalEnergies SE and its affiliates was approximately 51%. Subsequent to the Spin-Off, Total received a pro rata distribution of ordinary shares of Maxeon Solar, and its percentage ownership of shares in SunPower did not change.

10

Supply Agreements

In December 2019, we sold our membership interests in certain project companies that hold commercial solar power plant projects to Total Strong, LLC, a joint venture between Total and Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“Hannon Armstrong”). During the three and six months ended July 4, 2021, we recognized revenue of $22.3 million and $37.4 million, respectively, for sales to this joint venture, for continued recognition of engineering, procurement and construction ("EPC") revenue during the quarter, which is included within "Solar power systems, components, and other" on our consolidated statements of operations.

Affiliation Agreement

In April 2011, we and Total entered into an Affiliation Agreement that governs the relationship between Total and us (the "Affiliation Agreement"). Until the expiration of a standstill period specified in the Affiliation Agreement (the "Standstill Period"), and subject to certain exceptions, Total, TotalEnergies SE, and any of their respective affiliates and certain other related parties (collectively, the "Total Group") may not effect, seek, or enter into discussions with any third party regarding any transaction that would result in the Total Group beneficially owning our shares in excess of certain thresholds, or request us or our independent directors, officers, or employees to amend or waive any of the standstill restrictions applicable to the Total Group. The Standstill Period ends when Total holds less than 15% ownership of us.

The Affiliation Agreement imposes certain limitations on the Total Group's ability to seek to effect a tender offer or merger to acquire 100% of our outstanding voting power and imposes certain limitations on the Total Group's ability to transfer 40% or more of our outstanding shares or voting power to a single person or group that is not a direct or indirect subsidiary of TotalEnergies SE. During the Standstill Period, no member of the Total Group may, among other things, solicit proxies or become a participant in an election contest relating to the election of directors to our board of directors (the "Board").

The Affiliation Agreement provides Total with the right to maintain its percentage ownership in connection with any new securities issued by us, and Total may also purchase shares on the open market or in private transactions with disinterested stockholders, subject in each case to certain restrictions.

The Affiliation Agreement also imposes restrictions with respect to our and our Board's ability to take certain actions, including specifying certain actions that require approval by the directors other than the directors appointed by Total and other actions that require stockholder approval by Total.

On April 19, 2021, we entered into an amendment to the Affiliation Agreement with Total (the “Affiliation Agreement Amendment”). The Affiliation Agreement Amendment provides that our Board will include 11 members, composed of our president and chief executive officer, our immediate past chief executive officer, ("Mr. Werner"), six directors designated by Total, and three non-Total-designated directors. If the ownership of our voting securities by Total, together with the controlled subsidiaries of TotalEnergies SE, declines below certain thresholds, the number of members of the Board that Total is entitled to designate will be reduced as set forth in the Affiliation Agreement. The Affiliation Agreement Amendment further provides that, on November 1, 2021 (or such earlier date as may be designated by the Board), Mr. Werner will resign, and Total will as promptly as practicable cause one of the Total designees to resign, from their positions as members of the Board, and thereafter the Board will be reduced to nine authorized members.

Cooperation Agreement

In December 2020, we entered into a Strategic Cooperation Framework Agreement (the "Cooperation Agreement") with Total that governs the ongoing relationship between us and Total with respect to development and sale of certain future commercial solar power projects. The Cooperation Agreement lays the foundation for the potential to jointly develop certain projects and allows us and Total to expand investments in solar power projects to provide for future opportunities and investment volume.

Among other things, the Cooperation Agreement provides for:
our obligation to offer and ability to sell certain projects to Total at pre-agreed model metrics;
our ability to obtain non-recourse financing of construction costs;
our ability to obtain financing of development costs as various milestones in the project development cycle are achieved;
exclusivity over our offering of various post-sale services for projects sold to Total or its affiliates; and
our right to offer EPC services on certain downstream generation projects being developed by Total.

11

The Cooperation Agreement remains in effect until December 31, 2023, unless otherwise terminated.

0.875% Debentures Due 2021

In June 2014, we issued $400.0 million in principal amount of our 0.875% debentures due June 1, 2021. An aggregate principal amount of $250.0 million of the 0.875% debentures due 2021 was initially acquired by Total. Interest was payable semi-annually, beginning on December 1, 2014. The 0.875% debentures due 2021 were convertible into shares of our common stock at any time. When issued, the initial conversion rate in respect of the 0.875% debentures due 2021 was 20.5071 shares of common stock per $1,000 principal amount of 0.875% senior convertible debentures (which was equivalent to an initial conversion price of approximately $48.76 per share). After giving effect to the Spin-Off, effective September 1, 2020, the conversion rate was adjusted to 25.1388 shares of common stock per $1,000 principal amount of debentures (which is equivalent to a conversion price of approximately $39.78 per share).

During the fiscal year ended January 3, 2021, we purchased $337.4 million of aggregated principal amount of the 0.875% debentures due 2021, including $250.0 million of principal amount representing the entire amount held by Total. In June 2021, we repaid the remaining outstanding principal amount of $62.5 million, none of which was held by Total.

4.00% Debentures Due 2023

In December 2015, we issued $425.0 million in principal amount of our 4.00% debentures due 2023. An aggregate principal amount of $100.0 million of the 4.00% debentures due 2023 was acquired by Total. Interest is payable semi-annually, beginning on July 15, 2016. The 4.00% debentures due 2023 are convertible into shares of our common stock at any time. When issued, the initial conversion rate in respect of the 4.00% debentures due 2023 was 32.7568 shares of common stock per $1,000 principal amount of debentures (which was equivalent to an initial conversion price of approximately $30.53 per share). After giving effect to the Spin-Off, effective September 1, 2020, the conversion rate adjusted to 40.1552 shares of common stock per $1,000 principal amount of debentures (which is equivalent to a conversion price of approximately $24.90 per share), which provides Total the right to acquire up to 4,015,515 shares of our common stock. Notice of the conversion rate adjustment was delivered to Wells Fargo Bank, National Association, the trustee, in accordance with the terms of the indenture governing the 4.00% debentures due 2023. The applicable conversion rate may further adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 4.00% debentures due 2023. If not earlier repurchased or converted, the 4.00% debentures due 2023 mature on January 15, 2023.

Joint Solar Projects with Total and Its Affiliates

We enter into various EPC and operations and maintenance ("O&M") agreements relating to solar projects, including EPC and O&M services agreements relating to projects owned or partially owned by Total and its affiliates. As of July 4, 2021, we had $50.7 million of "Contract assets," $1.7 million of "Contract liabilities" and $0.3 million of "Accounts receivable, net" on our unaudited condensed consolidated balance sheets related to projects in which Total and its affiliates have a direct or indirect material interest.

Related-Party Transactions with Total and Its Affiliates:

The following balances and transactions are associated with transactions entered into with Total and its affiliates.
As of
(In thousands)July 4, 2021January 3, 2021
Accounts receivable$277 $76 

12

Three Months EndedSix Months Ended
(In thousands)July 4, 2021June 28, 2020July 4, 2021June 28, 2020
Revenue:
Solar power systems, components, and other$22,272 $34,533 $37,377 $63,779 
Cost of revenue:
Solar power systems, components, and other19,456 16,475 31,817 44,324 
Other income:
Gain on early retirement of convertible debt— — — 1,850 
Interest expense:
Guarantee fees incurred under the Credit Support Agreement— — — 13 
Interest expense incurred on the 0.875% debentures due 2021
— 428 — 832 
Interest expense incurred on the 4.00% debentures due 2023
1,000 1,000 2,000 2,000 

Note 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables represent disaggregated revenue from contracts with customers for the three and six months ended July 4, 2021 and June 28, 2020 along with the reportable segment for each category:

Three Months Ended
(In thousands)July 4, 2021June 28, 2020
CategoryResidential, Light CommercialCommercial and Industrial SolutionsOthersTotalResidential, Light CommercialCommercial and Industrial SolutionsOthersTotal
Solar power systems sales and EPC services$248,600 $46,038 $5,378 $300,016 $155,372 $47,858 $(219)$203,011 
Operations and maintenance— 2,138 1,254 3,392 — 2,136 7,261 9,397 
Residential leasing1,354 — — 1,354 1,329 — — 1,329 
Solar services4,165 — — 4,165 3,605 325 — 3,930 
Total revenues$254,119 $48,176 $6,632 $308,927 $160,306 $50,319 $7,042 $217,667 

Six Months Ended
(In thousands)July 4, 2021June 28, 2020
CategoryResidential, Light CommercialCommercial and Industrial SolutionsOthersTotalResidential, Light CommercialCommercial and Industrial SolutionsOthersTotal
Solar power systems sales and EPC services$481,377 $109,030 $6,965 $597,372 $377,286 $95,485 $459 $473,230 
Operations and maintenance— 5,408 1,865 7,273 — 4,697 19,770 24,467 
Residential leasing2,474 — — 2,474 2,653 — — 2,653 
Solar services8,206 — — 8,206 7,114 749 — 7,863 
Total revenues$492,057 $114,438 $8,830 $615,325 $387,053 $100,931 $20,229 $508,213 

13

We recognize revenue for sales of modules and components at the point that control transfers to the customer, which typically occurs upon shipment or delivery to the customer, depending on the terms of the contract, and we recognize revenue for operations and maintenance and solar services over the term of the service period.

For EPC revenue and solar power systems sales, we commence recognizing revenue when control of the underlying system transfers to the customer and continue recognizing revenue over time as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations. For contracts in which we sell membership interests in certain project companies, we recognize revenue for the initial development and other solar assets at the point that control transfers to the customer, and we recognize continuing EPC revenue for work provided to the joint venture over time as work is performed.

Our arrangements may contain clauses such as liquidated damages for delays or early performance bonuses, most favorable pricing, or other provisions that can either increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics or milestones. Variable consideration is estimated at each measurement date at its most likely amount to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur and true-ups are applied prospectively as such estimates change.

Judgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize. If estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known. For contracts with post-installation systems monitoring and maintenance, we recognize revenue related to systems monitoring and maintenance over the non-cancellable contract term on a straight-line basis.

Changes in estimates for sales of systems for EPC services occur for a variety of reasons, including but not limited to (i) construction plan accelerations or delays, (ii) product cost forecast changes, (iii) change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect in our consolidated statements of operations. The table below outlines the impact on revenue of net changes in estimated transaction prices and input costs for systems related sales contracts (both increases and decreases) for the three and six months ended July 4, 2021 and June 28, 2020 as well as the number of projects that comprise such changes. For purposes of the following table, only projects with changes in estimates that have an impact on revenue and or cost of at least $1.0 million, calculated on a quarterly basis during the periods, were presented. Also included in the table is the net change in estimate as a percentage of the aggregate revenue for such projects.

Three Months EndedSix Months Ended
(In thousands, except number of projects)July 4, 2021June 28, 2020July 4, 2021June 28, 2020
Increase (decrease) in revenue from net changes in transaction prices$2,131 $(308)$2,131 $(308)
Increase (decrease) in revenue from net changes in input cost estimates(2,084)1,082 (2,084)(51)
Net increase (decrease) in revenue from net changes in estimates$47 $774 $47 $(359)
 
Number of projects3132
Net change in estimate as a percentage of aggregate revenue for associated projects0.6 %11.5 %0.6 %(0.3)%


Contract Assets and Liabilities

Contract assets consist of (i) retainage which represents the earned, but unbilled, portion of a construction and development project for which payment is deferred by the customer until certain contractual milestones are met; and (ii) unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for long-term construction contracts. Contract liabilities consist of deferred revenue and customer advances, which represent consideration received from a customer prior to transferring control of goods or services to the customer under the terms of a sales contract. Refer to Note 4. Balance Sheet Components for further details. Total contract assets and contract liabilities balances as of the respective dates are as follows:
14

As of
(In thousands)July 4, 2021January 3, 2021
Contract Assets$98,304 $122,802 
Contract Liabilities93,709 102,594 

During the three and six months ended July 4, 2021, the decrease in contract assets of $24.0 million and $24.5 million, respectively, was primarily driven by a settlement for milestone accomplishment for one legacy power plant project, as well as a collection of variable consideration on a power plant development project sold in prior years.

During the three and six months ended June 28, 2020, the increase and decrease in contract assets of $2.9 million and $32.8 million, respectively, was primarily driven by billings for commercial projects where certain milestones had been reached as well as changes in estimates of variable consideration due for previous sales of certain power plant projects.

During the three months ended July 4, 2021, the increase in contract liabilities of $4.6 million was primarily due to the increase in milestone payments from customers. During the six months ended July 4, 2021, decrease of $8.9 million was due to the attainment of milestones billings for various projects.

During the three and six months ended June 28, 2020, the decrease in contract liabilities of $25.1 million and $36.5 million, respectively, was primarily due to the utilization of customer advances.

During the three and six months ended July 4, 2021, we recognized revenue of $30.9 million and $37.4 million, respectively, that was included in contract liabilities as of April 4, 2021 and January 3, 2021, respectively. During the three and six months ended June 28, 2020, we recognized revenue of $30.1 million and $60.9 million, respectively, that was included in contract liabilities as of March 29, 2020 and December 29, 2019, respectively.

The following table represents the average percentage of completion as of July 4, 2021 for EPC agreements for projects that we are constructing. We expect to recognize $122.2 million of revenue upon transfer of control of the projects.

ProjectRevenue CategoryEPC Contract/Partner Developed ProjectExpected Year Revenue Recognition Will Be CompletedAverage Percentage of Revenue Recognized
Various Distribution Generation ProjectsSolar power systems sales and EPC servicesVarious202393.4 %

As of July 4, 2021, we have entered into contracts with customers for sales of modules and components for an aggregate transaction price of $281.5 million, the substantial majority of which we expect to recognize over the next 12 months.

Note 4. BALANCE SHEET COMPONENTS

Accounts Receivable, Net
As of
(In thousands)July 4, 2021January 3, 2021
Accounts receivable, gross1
$125,726 $124,402 
Less: allowance for credit losses(14,997)(15,379)
Less: allowance for sales returns(279)(159)
     Accounts receivable, net$110,450 $108,864 

1 A lien exists on $63.2 million of our consolidated accounts receivable, gross, as of July 4, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

15

Allowance for Credit Losses
Three Months EndedSix Months Ended
(In thousands)July 4, 2021June 28, 2020July 4, 2021June 28, 2020
Balance at beginning of period$14,846 $19,176 $15,379 $17,208 
Provision for credit losses 239 619 191 2,587 
Write-offs(88)(310)(573)(310)
Balance at end of period$14,997 $19,485 $14,997 $19,485 

Inventories
As of
(In thousands)July 4, 2021January 3, 2021
Photo-voltaic modules$180,779 $170,013 
Microinverters15,419 16,774 
Energy Storage20,634 4,548 
Other solar power system component materials 19,011 19,247 
Inventories1 2 3
$235,843 $210,582 

1 A lien exists on $163.0 million of our gross inventory as of July 4, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

2 Refer to long-term inventory for the safe harbor program under the caption "Other long-term assets."

3 Photo-voltaic modules are classified as finished goods, while the remaining components of total inventories consist of raw materials.

Prepaid Expenses and Other Current Assets
As of
(In thousands)July 4, 2021January 3, 2021
Deferred project costs$31,716 $26,996 
VAT receivables, current portion734 1,174 
Deferred costs for solar power systems21,927 24,526 
Prepaid taxes— 205 
Other34,513 41,350 
Prepaid expenses and other current assets$88,890 $94,251 

16

Property, Plant and Equipment, Net
As of
(In thousands)July 4, 2021January 3, 2021
Manufacturing equipment1
$17,883 $17,134 
Leasehold improvements29,257 29,385 
Solar power systems8,653 30,110 
Computer equipment50,903 49,935 
Furniture and fixtures7,855 7,899 
Work-in-progress8,031 3,080 
   Property, plant and equipment, gross122,582 137,543 
Less: accumulated depreciation and impairment(90,075)(90,777)
   Property, plant and equipment, net2
$32,507 $46,766 

1 As of January 3, 2021 and July 4, 2021, manufacturing equipment is predominantly related to our equipment in our manufacturing facility in Hillsboro, Oregon.

2 Property, plant and equipment is predominantly located in the U.S.

Other Long-term Assets
As of
(In thousands)July 4, 2021January 3, 2021
Equity investments with readily determinable fair value$279,618 $614,148 
Equity investments without readily determinable fair value801 801 
Equity investments with fair value option8,374 9,924 
Long-term inventory1
— 27,085 
Other55,360 44,451 
Other long-term assets$344,153 $696,409 

1 Entire balance consists of finished goods under the safe harbor program. Refer to Note 9. Equity Investments for details.

Accrued Liabilities
As of
(In thousands)July 4, 2021January 3, 2021
Employee compensation and employee benefits$23,400 $23,312 
Interest payable7,922 8,796 
Short-term warranty reserves21,017 29,337 
Restructuring reserve3,148 2,808 
Legal expenses8,436 10,493 
Taxes payable2,777 25,968 
Other30,434 21,201 
Accrued liabilities$97,134 $121,915 

17

Other Long-term Liabilities
As of
(In thousands)July 4, 2021January 3, 2021
Deferred revenue$34,756 $36,527 
Long-term warranty reserves45,768 52,540 
Unrecognized tax benefits12,239 12,584 
Long-term pension liability5,610 5,185 
Long-term deferred tax liabilities12,280 13,468 
Other38,940 37,293 
Other long-term liabilities$149,593 $157,597 

Accumulated Other Comprehensive Income
As of
(In thousands)July 4, 2021January 3, 2021
Cumulative translation adjustment$9,639 $9,635 
Net gain on long-term pension liability obligation(250)(250)
Net gain on long-term derivative financial instrument— (570)
Deferred taxes— (16)
Accumulated other comprehensive income$9,389 $8,799 

Note 5. BUSINESS DIVESTITURES

Sale of Commercial Projects

During the quarter ended July 4, 2021, we sold certain commercial projects including the underlying fixed assets and debt to SunStrong Capital Holdings, LLC ("SunStrong") for total consideration of $8.9 million.

Upon closing, we received net cash consideration of $2.8 million after holdbacks totaling $0.4 million for certain retained obligations, and debt obligations repaid directly by the buyer totaling $5.6 million which were related to our PNC Energy Capital loan. We assessed the recoverability of these holdbacks and included our best estimate of the amount recoverable in the future in our calculation of net loss on sale.

In evaluating the accounting treatment for this sale, the transaction was concluded to be a sale of a business in accordance with the guidance in ASC 805, Business Combinations. We recorded a loss of $5.1 million, inclusive of $0.1 million of transaction expenses, which was recorded and netted against "gain on business divestitures, net" in our unaudited condensed consolidated statements of operations for the three and six months ended July 4, 2021.

18

The assets and liabilities of the commercial projects that were sold in the transaction are summarized below:

(In thousands)
Accounts receivable, net$719 
Prepaid expenses, other current assets, and cash840 
Property, plant and equipment, net12,847 
Total assets14,406 
Accrued liabilities137 
Short-term debt614 
Long-term debt4,779 
Other long-term liabilities804 
Total liabilities6,334 
Net assets$8,072 

Net proceeds received were as follows:

(In thousands)
Purchase price$8,881 
Transaction costs(105)
Holdback receivables(369)
Debt repaid directly by buyer(5,585)
     Net proceeds received$2,822 

Net loss on sale for three and six months ended July 4, 2021 was as follows:

(In thousands)
Net proceeds received$2,822 
Estimated receivable from amount held back for retained obligations
184 
Book value of net assets sold(8,072)
    Net loss on sale $(5,066)

Sale of Residential Leases

During the quarter ended July 4, 2021, we sold certain residential lease solar systems to SunStrong for total consideration of $8.5 million.

In evaluating the accounting treatment for this sale, the transaction was concluded to be a sale of a business in accordance with the guidance in ASC 805, Business Combinations. We recorded a gain of $5.3 million, inclusive of $0.4 million of transaction expenses, which was recorded as "gain on business divestitures, net" in our unaudited condensed consolidated statements of operations for the three and six months ended July 4, 2021.

19

The assets and liabilities related to the residential leases that were sold are summarized below:

(In thousands)
Accounts receivable, net$253 
Prepaid expenses and other current assets825 
Property, plant, and equipment, net1,934 
Solar power systems leased, net186 
Total assets3,198 
Accrued and other liabilities106 
Contract liabilities332 
Total liabilities438 
Net assets$2,760 

Net proceeds received were as follows:

(In thousands)
Purchase price$8,500 
Transaction costs(449)
     Net proceeds received$8,051 

Net gain on sale for three and six months ended July 4, 2021 was as follows:

(In thousands)
Net proceeds received$8,051 
Book value of net assets sold(2,760)
    Net gain on sale $5,291 

Note 6. FAIR VALUE MEASUREMENTS

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement (observable inputs are the preferred basis of valuation):

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1.
Level 3 — Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure certain assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during any presented period.

20

The following table summarizes our assets and liabilities measured and recorded at fair value on a recurring basis as of July 4, 2021 and January 3, 2021:

July 4, 2021January 3, 2021
(In thousands)Total Fair ValueLevel 3Level 2Level 1Total Fair ValueLevel 3Level 2Level 1
Assets
Other long-term assets:
Equity investments with fair value option ("FVO")$8,374 $8,374 $— $— $9,924 $9,924 $— $— 
Equity investments with readily determinable fair value652,438 — — 652,438 614,148 — — 614,148 
Total assets$660,812 $8,374 $— $652,438 $624,072 $9,924 $— $614,148 
Liabilities
Other long-term liabilities:
Interest rate swap contracts1
$— $— $— $— $600 $— $600 $— 
Total liabilities$— $— $— $— $600 $— $600 $— 

1 Our interest rate swap contracts were related to our PNC Energy Capital loan and were terminated during the quarter (see Note 10. Debt and Credit Sources for details).

Equity investments with fair value option ("FVO")

We have elected the fair value option in accordance with the guidance in ASC 825, Financial Instruments, for our investment in the SunStrong joint venture and SunStrong Partners, LLC ("SunStrong Partners"), to mitigate volatility in reported earnings that results from the use of different measurement attributes (see Note 9. Equity Investments). We initially computed the fair value for our investments consistent with the methodology and assumptions that market participants would use in their estimates of fair value with the assistance of a third-party valuation specialist. The fair value computation is updated using the same methodology on a quarterly basis considering material changes in the business of SunStrong and SunStrong Partners or other inputs. The investments are classified within Level 3 in the fair value hierarchy because we estimate the fair value of the investments using the income approach based on the discounted cash flow method which considered estimated future financial performance, including assumptions for, among others, forecasted contractual lease income, lease expenses, residual value of these lease assets and long-term discount rates, and forecasted default rates over the lease term and discount rates, some of which require significant judgment by management and are not based on observable inputs.

The following table summarizes movements in equity investments for the six months ended July 4, 2021. There were no internal movements between Level 1 or Level 2 fair value measurements to or from Level 3 fair value measurements for the six months ended July 4, 2021.

(In thousands)Beginning balance as of January 3, 2021
Equity Distribution 1
Additional Investment
Other adjustment 2
Ending balance as of July 4, 2021
Equity investments with FVO$9,924$(2,276)$—$726 $8,374 

1 During the three months ended July 4, 2021, we received $2.3 million in cash proceeds from SunStrong Partners. The distribution reduced our equity investment balance in SunStrong Partners classified in "other long-term assets" on our unaudited condensed consolidated balance sheet.

2 During the three months ended July 4, 2021, we recognized $0.7 million gain on change in valuation of equity investments within "other, net" in our unaudited condensed consolidated statement of operations. The gain was primarily due to change in forecasted cash flows of SunStrong, resulting from the sale of certain commercial projects (Refer to Note 5. Business Divestitures).

21

Level 3 significant unobservable inputs sensitivity

The following table summarizes the significant unobservable inputs used in Level 3 valuation of our investments carried at fair value as of July 4, 2021. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

2021
Assets:Fair valueValuation TechniqueUnobservable inputRange (Weighted Average)
Other long-term assets:
    Equity investments $8,374 Discounted cash flows Discount rate
Residual value
12.5%-13% 1
7.5% 1
Total assets$8,374 

1 The primary unobservable inputs used in the fair value measurement of our equity investments, when using a discounted cash flow model, are the discount rate and residual value. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. We estimate the discount rate based on risk appropriate projected cost of equity. We estimate the residual value based on the contracted systems in place in the years being projected. Significant increases (decreases) in the residual value in isolation would result in a significantly higher (lower) fair value measurement.

Equity investments with readily determinable fair value

In connection with the divestment of our microinverter business to Enphase on August 9, 2018, we received 7.5 million shares of Enphase common stock (NASDAQ: ENPH). The common stock received was recorded as an equity investment with readily determinable fair value (Level 1), with changes in fair value recognized in net income in accordance with ASU 2016-01 Recognition and Measurement of Financial Assets and Liabilities. For the three and six months ended July 4, 2021, we recorded gains of $83.0 million and $38.3 million, respectively, within "other, net" in our unaudited condensed consolidated statement of operations as compared to gains of $71.1 million and $119.0 million in the three and six months ended June 28, 2020. During the six months ended June 28, 2020, we sold one million shares of Enphase common stock, in open market transactions for cash proceeds of $43.7 million.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure certain investments and non-financial assets (including property, plant and equipment, and other intangible assets) at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such asset is impaired below its recorded cost. As of July 4, 2021 and January 3, 2021, there were no material items recorded at fair value on a non-recurring basis.

22

Equity investments without readily determinable fair value

These equity investments are securities in privately-held companies without readily determinable market values. We periodically adjust the carrying value of our equity securities to cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. Equity investments without readily determinable fair value are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using a combination of observable and unobservable inputs including valuation ascribed to the issuing company in subsequent financing rounds, volatility in the results of operations of the issuers and rights and obligations of the securities we hold.

Note 7. RESTRUCTURING

January 2021 Restructuring Plan

During the quarter ended April 4, 2021, we adopted a restructuring plan to realign and optimize workforce requirements concurrent with the planned closure of our manufacturing facility in Hillsboro, Oregon. In connection with the restructuring plan, which included actions to be implemented in the first quarter of 2021 and expected to be completed by the third quarter of 2021, we expected the majority of our approximately 170 primarily manufacturing employees to exit over a period of three to six months. We expected to incur restructuring charges totaling approximately $7.0 million to $9.0 million, consisting primarily of severance benefits (between $4.0 million and $5.0 million) and real estate lease termination costs (between $3.0 million and $4.0 million).

In connection with the closure, in April 2021, we signed agreements with two independent third parties to sell certain assets and liabilities, as well as retain and engage certain employees at the facility in providing R&D services. The proceeds for the assets and sale of R&D services, together with the assumption of certain liabilities, reduced our previously anticipated restructuring charges by approximately $1.2 million.

As of July 4, 2021, we had incurred cumulative costs of approximately $3.6 million in restructuring charges, primarily relating to the payment of severance benefits. The 2021 restructuring plan primarily relates to payroll for remaining employees expected to be incurred through 2022 and the end of the R&D services agreement.

December 2019 Restructuring Plan

During the fourth quarter of fiscal 2019, we adopted a restructuring plan to realign and optimize workforce requirements in light of changes to our business, including the Spin-Off. In connection with the restructuring plan, which included actions implemented in the fourth quarter of 2019, we expected between 145 and 160 non-manufacturing employees, representing approximately 3% of our global workforce, to exit over a period of approximately 12 to 18 months. Between 65 and 70 of these employees were expected in the legacy SunPower Technologies business unit and corporate, and most of whom exited our company following the Spin-Off, and the remainder of which exited upon completion of transition services. As the legacy SunPower Energy Services business unit refined its focus on distributed generation, storage, and energy services, 80 to 90 employees exited during the fourth fiscal quarter of 2019 and the first half of 2020. As of July 4, 2021, we had incurred cumulative costs of approximately $11.0 million in restructuring charges consisting primarily of severance and retention benefits. The 2019 restructuring plan is substantially completed.

23

The following table summarizes the comparative periods-to-date restructuring charges by plan recognized in our unaudited condensed consolidated statements of operations:

Three Months EndedSix Months Ended
(In thousands)July 4, 2021June 28, 2020July 4, 2021June 28, 2020Cumulative To Date
January 2021 Restructuring Plan:
Severance and benefits$(63)$— $3,608 $— $3,608 
Other costs1
22 — 35 — 35 
Total January 2021 Restructuring Plan(41)— 3,643 — 3,643 
December 2019 Restructuring Plan:
Severance and benefits847 1,249 819 2,888 10,852 
Other costs1
— — 112 — 159 
Total December 2019 Restructuring Plan847 1,249 931 2,888 11,011 
Other Legacy Restructuring Plans10 — (53)68,642 
Total restructuring charges$808 $1,259 $4,574 $2,835 $83,296 

1 Other costs primarily represent associated legal and advisory services, and costs of relocating employees.

The following table summarizes the restructuring reserve activities during the six months ended July 4, 2021: