Notes to the Condensed Consolidated Financial Statements
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 energy company that delivers complete solar 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. downstream Distributed Generation (“DG”) market, providing an affordable and sustainable source of electricity compared to traditional utility energy to residential homeowners and commercial customers through multiple financial offerings. Our sales channels include a strong network of dealers and resellers that operate in both residential and commercial markets. 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 Total SE (“Total SE,” formerly Total SA) (see “Note 3. Transactions with Total and Total SE”).
On August 26, 2020, we completed the previously announced spin-off (the “Spin-Off”) of Maxeon Solar Technologies, Ltd., a Singapore public company limited by shares (“Maxeon Solar”), consisting of certain non-U.S. operations and assets of our former SunPower Technologies business unit. The Spin-Off was completed by way of a pro rata distribution of all of the then-issued and outstanding ordinary shares, no par value, of Maxeon Solar to holders of record of the Company’s common stock (the “Distribution”) as of the close of business on August 17, 2020.
As a result of the Spin-Off, SunPower no longer consolidates Maxeon Solar within its financial results of continuing operations. For all the periods prior to the Spin-Off, the financial results of Maxeon Solar are presented as net earnings from discontinued operations on the condensed consolidated statement of operations and the assets and liabilities of Maxeon Solar are presented as assets and liabilities of discontinued operations on the condensed consolidated balance sheets. (Refer Note 2. Discontinued Operations for additional details).
Liquidity
The global spread of the coronavirus ("COVID-19") created significant uncertainty and economic disruptions worldwide. In our response to the COVID-19 pandemic, we instituted several measures, including requirements to work remotely for the majority of our workforce and travel restrictions, as well as other mitigating actions to prudently manage our business during the current industry uncertainty. These measures included temporary reductions in the salaries of certain of our executive officers and the fees payable to our independent directors, as well as temporary reductions in salaries and reduced work week schedules for certain of our employees to address reduced demand and workloads, with exceptions for certain groups, including those supporting customer and asset services. In June 2020, most of our employees resumed a full work week and returned to full salary during the last week of July. In September 2020, our executive officers and independent board of directors returned to full salary.
Despite the challenging and volatile economic conditions, 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 our financial statements, including repayment of our 0.875% senior convertible debentures due June 1, 2021 (the "0.875% debentures due 2021"), which were outstanding in an aggregate principal amount of $301.6 million as of September 27, 2020. In addition, we have historically been successful in our ability to divest certain investments and non-core assets, secure other sources of financing, such as accessing the capital markets, and implement other cost reduction initiatives such as restructuring, to address our liquidity needs. However, our ability to take these steps may be adversely affected by many factors impacting us and the markets generally, including the COVID-19 pandemic. If alternative actions were to be necessary, we believe they could be implemented prior to the maturity date of the 0.875% debentures due 2021.
Although we have historically been able to generate liquidity, we cannot predict, with certainty, the outcome of our actions to generate liquidity as planned. Additionally, we are uncertain of the full extent to which the COVID-19 pandemic will impact our business, operations and financial results over time.
Basis of Presentation and Preparation
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of SunPower and our wholly-owned subsidiaries, and 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. For all the periods prior to the Spin-Off, the financial results, assets and liabilities of Maxeon Solar are presented as net of earnings from discontinued operations in the condensed statement of operations and the assets and liabilities are presented as assets and liabilities from discontinued operations in the condensed consolidated balance sheets The historical statements of comprehensive income and cash flows and the balances related to stockholders’ (deficit) equity have not been revised to reflect the effect of the Spin-Off. For further information on discontinued operations, see Note 2. “Discontinued Operations." All intercompany transactions and balances have been eliminated on 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 December 29, 2019 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 December 29, 2019, as filed with the Securities and Exchange Commission ("SEC") on February 18, 2020 but does not include all disclosures required by U.S. GAAP. The 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 December 29, 2019. The operating results for the three and nine months ended September 27, 2020 are not necessarily indicative of the results that may be expected for fiscal year 2020, 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 2020, is a 53-week fiscal year, while fiscal year 2019 was a 52-week fiscal year. The third quarter of fiscal 2020 ended on September 27, 2020, while the third quarter of fiscal 2019 ended on September 29, 2019.
Management Estimates
The preparation of the 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 condensed consolidated financial statements and accompanying notes. Significant estimates in these 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; allowances for credit losses, including estimating macroeconomic factors affecting historical recovery rate of receivables; inventory and project asset write-downs; stock-based compensation; fair value assumptions for solar power systems and other long-lived assets sold under sale-leaseback transactions; long-lived asset impairment, specifically estimates for valuation assumptions including discount rates and future cash flows; economic useful lives of property, plant and equipment, and intangible assets; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; residual value of solar power systems; valuation of contingencies such as accrued warranty; 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. As a result of the uncertainty involved with industry impacts of the COVID-19 pandemic, many of our estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. These estimates may change as impacts become more certain and additional information becomes available, which may result in a significant change to our estimates in future periods. Actual results could materially differ from those estimates.
Summary of Selected Significant Accounting Policies
Included below, are selected significant accounting policies that were added or modified during the nine months ended September 27, 2020 as a result of new transactions entered into or the adoption of new accounting policies. Refer to our Annual Report on Form 10-K for the fiscal year ended December 29, 2019 for the full list of our significant accounting policies.
Financial Instruments - Credit Losses
Effective December 30, 2019, we adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13) and subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02, and ASU 2020-03 (collectively, "Topic 326"). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The amendment applies to entities which hold financial assets and net investments in leases that are not
accounted for at fair value through net income as well as loans, debt securities, accounts receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For additional information on the changes resulting from the new standard and the impact to our financial results on adoption, refer to the section Recently Adopted Accounting Pronouncements below.
We recognize an allowance for credit loss at the time a receivable is recorded based on our estimate of expected credit losses and adjust this estimate over the life of the receivable as needed. We evaluate the aggregation and risk characteristics of a receivable pool and develop loss rates that reflect historical collections, current forecasts of future economic conditions over the time horizon we are exposed to credit risk, and payment terms or conditions that may materially affect future forecasts.
As of September 27, 2020, we reported $94.8 million of accounts receivable, net of allowances of $17.0 million. Based on aging analysis as of September 27, 2020, 77% of our trade accounts receivable was outstanding less than 60 days. Refer to Note 6. Balance Sheet Components for more details on changes in allowance for credit losses. We are continuing to actively monitor the impact of the COVID-19 pandemic on our expected credit losses.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. We adopted the ASU during first quarter of fiscal 2020. The adoption did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) requiring a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. We adopted the ASU during the first quarter of fiscal 2020. The adoption did not have a material impact on our consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, which broadens the scope of the private company alternative to include all common control arrangements that meet specific criteria (not just leasing arrangements) and also eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. We adopted the ASU during the first quarter of fiscal 2020. The adoption did not have a material impact on our consolidated financial statements.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which 1) clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606; 2) adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606; and 3) requires that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. We adopted the ASU during the first quarter of fiscal 2020. The adoption did not have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We adopted the ASU during the second quarter of fiscal 2020. The adoption did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
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. ASU 2019-12 is effective for us no later than the first quarter of fiscal 2021. 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 are currently evaluating the impacts of the provisions of ASU 2019-12 on our financial statements and disclosures.
In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendment clarifies accounting for equity investments and non-derivative forward contracts or purchased call options under ASC 321. ASU 2020-01 is effective no later than the first quarter of fiscal 2021. Early adoption is permitted, and the ASU should be applied prospectively. While we are still evaluating the impacts of the provisions of ASU 2020-01 on our financial statements and disclosures, the impact is not expected to be material.
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. Discontinued Operations
Maxeon Solar Separation Transaction
On August 26, 2020, the Company completed the Spin-Off of Maxeon Solar, consisting of certain non-U.S. operations and assets of our former SunPower Technologies business unit. The Spin-Off was completed by way of a pro rata Distribution of all of the then-issued and outstanding ordinary shares, no par value, of Maxeon Solar to holders of record of the Company’s common stock as of the close of business on August 17, 2020.
Immediately after the Distribution, Maxeon Solar and Tianjin Zhonghuan Semiconductor Co., Ltd., a PRC joint stock limited company (“TZS”), completed the previously announced transaction in which Zhonghuan Singapore Investment and Development Pte. Ltd., a Singapore private limited company and an affiliate of TZS, purchased from Maxeon Solar, for $298.0 million, 8,915,692 additional ordinary shares of Maxeon Solar (the “TZS Investment”), representing approximately 28.848% of the outstanding ordinary shares of Maxeon Solar after giving effect to the Spin-Off and the TZS Investment.
Shortly after the Spin-Off, Maxeon Solar paid us $125.0 million for the transfer of certain intellectual property and reimbursement of transaction expenses in accordance with the Separation and Distribution Agreement entered into between us and Maxeon Solar in connection with the Spin-Off.
In connection with the Spin-Off, we and Maxeon Solar entered into various ancillary agreements that provide a framework for the relationships between the parties going forward, including a tax matters agreement, an employee matters agreement, a transition services agreement, a brand framework agreement, a cross license agreement, a product collaboration agreement and a supply agreement (collectively, the “Ancillary Agreements”). For the descriptions of the Ancillary Agreements and the full text of such agreements, refer to our Current Report on Form 8-K and exhibits filed with the SEC on August 27, 2020.
Under the transition services agreement, Maxeon Solar and SunPower will provide various administrative services and assets to each other through August 26, 2021 with an option to extend for up to an additional 180 days. Services to be provided include, among others, certain services related to finance, accounting, business technology, human resources, facilities, document management and record retention, relationship and strategy management, module operations, and technical and quality support. In consideration for such services, Maxeon Solar and SunPower will each pay fees to the other for the services provided, and those fees will generally be in amounts intended to allow the party providing services to recover all of its direct and indirect costs incurred in providing those services, plus a standard markup, and subject to a 25% increase following an extension of the initial term (unless otherwise mutually agreed to by the parties). During the three and nine months ended September 27, 2020, we recorded $2.1 million of income associated with the transition services agreement. This was offset by $0.2 million of services provided by Maxeon Solar to us, resulting in a net reduction of operating expenses of $1.9 million, presented separately within operating expenses on the condensed consolidated statement of operations.
The product collaboration agreement provides a framework for the development of next-generation Maxeon 7 panels, flex panels, single solar panels, and any other products that are agreed to by the parties. Each project that will occur under the agreement will be governed by written plans that will be agreed to by the parties. These plans will include agreed-upon budgets, cost allocations and resource responsibilities of the parties and will last a maximum of 2 years. Both parties will have the sole right to manufacture the products developed under the agreement within the 50 states of the United States, the District of Columbia and Canada (the “Collaboration Territory”). Maxeon Solar will have the exclusive right to manufacture the products outside of the Collaboration Territory. For a period that will not be longer than two years commencing on the effective date or approval of a development plan for each developed product (the “Exclusivity Period”), SunPower will have the exclusive right to sell, and Maxeon Solar will have the exclusive right to supply, each developed product in specified markets. For one year after the Exclusivity Period for each developed product, neither party will be permitted to enter into an exclusive supply relationship with a third party for the relevant developed product within those markets. In addition, after the Exclusivity Period, if either party intends to enter into a supply agreement for the developed product, the other party has a right of first offer or refusal. Any new intellectual property arising from the agreement will be owned by Maxeon Solar, subject to a sole license to SunPower within the Collaboration Territory during the Exclusivity Period, and which will become non-exclusive after the Exclusivity Period. During the three and nine months ended September 27, 2020, we recorded an amount of $3.6 million reimbursable from Maxeon Solar under the product collaboration agreement, which is presented as a reduction of our R&D expense on the condensed consolidated statement of operations.
The supply agreement, which reflects good faith negotiations between the parties, provides that SunPower will purchase from Maxeon Solar certain designated products for use in residential and commercial solar applications in the Domestic Territory (as defined in the supply agreement). The supply agreement has a two-year term, subject to customary early termination provisions. Under the supply agreement, SunPower is required to purchase certain minimum volumes of products during each calendar quarter of the term. For the remainder of 2020, the minimum volumes are specifically enumerated for different types of products, and for each subsequent period, the minimum volumes will be established based on SunPower’s forecasted requirements, subject to certain limitations. The parties will be subject to reciprocal penalties for failing to purchase or supply, as applicable, the minimum product volumes. The purchase price for each product will be fixed for 2020 and 2021 based on the power output (in watts) of the relevant product. For subsequent periods, the purchase price will be set based on a formula and fixed for the covered period.
The Spin-Off meets the criteria for classification as “discontinued operations” in accordance with the guidance in ASC 205-20. Since Maxeon Solar was a major line of SunPower's business and formerly our global cell and module manufacturing platform, our global sales platform in Europe, and our distributed generation and power plant operations, the disposal has a strategic shift that has major impacts on SunPower's current and historical financial results. Thus, in accordance with the guidance, SunPower no longer consolidates the financial results of Maxeon Solar within its financial results of continuing operations. For all the periods prior to the Spin-Off, the financial results of Maxeon Solar are presented as net earnings from discontinued operations on the condensed consolidated statement of operations and assets and liabilities of discontinued operations on the condensed consolidated balance sheets.
The following table presents the assets and liabilities of Maxeon Solar as of December 29, 2019 presented as assets and liabilities of discontinued operations on the condensed consolidated balance sheet:
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(In thousands)
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December 29, 2019
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Assets:
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|
|
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Current Assets:
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|
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Cash and cash equivalents
|
|
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$
|
120,956
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|
|
Restricted cash and cash equivalents, current portion
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|
|
—
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|
|
Restricted short-term marketable securities
|
|
|
6,187
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|
|
Accounts receivable, net
|
|
|
98,598
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|
|
Contract assets, current portion
|
|
|
—
|
|
|
Inventories
|
|
|
194,852
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|
|
Advances to suppliers, current portion
|
|
|
75,545
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|
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Prepaid expenses and other current assets
|
|
|
34,489
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|
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Total current assets of discontinued operations
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|
|
530,627
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|
|
|
|
|
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Property, plant and equipment, net
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267,866
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|
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Operating lease right-of-use assets
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|
|
10,559
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|
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Advances to suppliers, net of current portion
|
|
|
13,993
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|
|
|
|
|
|
|
|
|
|
|
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Other long-term assets
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|
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53,395
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Total assets of discontinued operations
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$
|
876,440
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Liabilities:
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Current Liabilities:
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Accounts payable
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$
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234,697
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Accrued and other current liabilities1
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87,614
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|
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Contract liabilities, current portion
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|
|
47,096
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|
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Short-term debt and current portion of long-term debt
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|
60,383
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|
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Total current liabilities of discontinued operations
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431,694
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Long-term debt
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1,487
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Convertible debt, net of current portion
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|
|
—
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Contract liabilities, net of current portion
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35,616
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Other long-term liabilities
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46,526
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Total liabilities of discontinued operations
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$
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524,755
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The following table presents financial results of Maxeon Solar presented as discontinued operations in the Company's income statement in the corresponding periods:
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Three Months Ended
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Nine Months Ended
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(In thousands)
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September 27, 2020
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September 29, 2019
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September 27, 2020
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September 29, 2019
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Net revenues1
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$
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63,272
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|
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$
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189,916
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$
|
357,164
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$
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569,856
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|
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Gross income (loss)1
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|
(30,820)
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|
|
2,756
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|
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(26,609)
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|
|
(46,637)
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Operating expenses2
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33,177
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|
|
30,601
|
|
|
92,581
|
|
|
82,191
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Operating loss
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(63,997)
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|
|
(27,845)
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|
|
119,191
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|
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(128,828)
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|
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Loss before income taxes and equity in earnings (losses) of unconsolidated investees
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|
(70,761)
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|
|
(29,417)
|
|
|
(125,599)
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|
|
(131,181)
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|
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Provision for income taxes
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|
6,137
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|
|
(2,450)
|
|
|
3,191
|
|
|
(7,169)
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|
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Equity in earnings (losses) of unconsolidated investees
|
|
58
|
|
|
(807)
|
|
|
(586)
|
|
|
(1,334)
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|
|
Net loss from discontinued operations, net of taxes
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|
(64,566)
|
|
|
(32,674)
|
|
|
(122,994)
|
|
|
(139,684)
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Net income from discontinued operations attributable to noncontrolling interests and redeemable noncontrolling interests
|
|
(258)
|
|
|
(987)
|
|
|
(1,313)
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|
|
(3,057)
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Net loss from discontinued operations attributable to stockholders
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|
$
|
(64,824)
|
|
|
$
|
(33,661)
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|
|
$
|
(124,307)
|
|
|
$
|
(142,741)
|
|
1 Excludes intersegment revenue and gross margin from sale of photovoltaic modules to SunPower prior to the Spin-Off, which is eliminated in consolidation.
2 Operating expenses include separation costs classified within discontinued operations.
The following table presents significant non-cash items and capital expenditures of discontinued operations:
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Nine Months Ended
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(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
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Depreciation and amortization
|
|
$
|
31,143
|
|
|
$
|
34,759
|
|
|
Stock-based compensation
|
|
6,401
|
|
|
5,246
|
|
|
Equity in losses of unconsolidated investees
|
|
586
|
|
|
1,334
|
|
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Gain from sale of investments
|
|
—
|
|
|
6,275
|
|
|
|
|
|
|
|
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Purchases of property, plant and equipment
|
|
10,707
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|
|
31,523
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|
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Aged supplier financing balances reclassified from accounts payable to short-term debt
|
|
63,111
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|
|
22,852
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Note 3. TRANSACTIONS WITH TOTAL AND TOTAL 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 (the "Private Placement Agreement"), 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 September 27, 2020, ownership of our outstanding common stock by Total SE and its affiliates was approximately 52%. Subsequent to the Spin-Off of Maxeon Solar on August 26, 2020, Total received a pro rata distribution of ordinary shares of Maxeon Solar and its percentage ownership of shares in SunPower did not change.
Supply Agreements
In December 2019, we sold our membership interests in certain project companies to Total Strong, LLC., a joint venture between Total and Hannon Armstrong. We recognized revenue of $6.2 million for sales to this joint venture, which is included within "Solar power systems, components, and other" on our consolidated statements of operations for fiscal 2019. During the three months and nine months ended September 27, 2020, we recognized revenue of $34.3 million and $65.7 million, respectively, for sales to this joint venture, that included project companies sold in the previous quarters, and continued recognition of engineering, procurement and construction ("EPC") revenue for sales in the previous quarters, which is included within "Solar power systems, components, and other" on our condensed consolidated statements of operations.
Affiliation Agreement
We and Total have 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, Total 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 Total 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 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 certain restrictions with respect to the ability of us and our board of directors 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.
0.875% Debentures Due 2021
In June 2014, we issued $400.0 million in principal amount of our 0.875% debentures due 2021. An aggregate principal amount of $250.0 million of the 0.875% debentures due 2021 was initially acquired by Total. During the three and nine months ended September 27, 2020, we purchased $8.1 million and $98.4 million respectively, in aggregated principal amount of the 0.875% debentures for approximately $95.1 million, net. Total held a principal amount of $56.4 million, of the 0.875% debentures due 2021 repurchased and the remaining debentures were held by other third-party investors. The purchases and early retirements resulted in a gain from extinguishment of debt of approximately $0.0 million and $3.1 million in the three and nine months ended September 27, 2020 respectively, which represented the difference between the book value of the 0.875% debentures due 2021, net of the remaining unamortized discount prior to repurchase and the reacquisition price of the 0.875% debentures due 2021 upon repurchase. The gain was recorded within “Other, net” on the condensed consolidated statement of operations.
Interest is payable on the 0.875% debentures due 2021 semi-annually, beginning on December 1, 2014. The 0.875% debentures due 2021 are 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 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), which provides Total the right to acquire up to 4,865,886 shares of our common stock after giving effect to the purchase described above. The applicable conversion rate may further adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 0.875% debentures due 2021. If not earlier repurchased or converted, the 0.875% debentures due 2021 mature on June 1, 2021.
4.00% Debentures Due 2023
In December 2015, we issued $425.0 million in principal amount of our 4.00% senior convertible debentures due 2023 (the "4.00% debentures due 2023"). An aggregate principal amount of $100.0 million of the 4.00% debentures due 2023 was acquired by Total. 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. 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.
Joint Solar Projects with Total and its Affiliates
We enter into various EPC and 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 September 27, 2020, we had $44.8 million of "Contract assets" and $0.3 million of "Accounts receivable, net" on our condensed consolidated balance sheets related to projects in which Total and its affiliates have a direct or indirect material interest.
During fiscal year 2018, in connection with a co-development solar project in Japan among us, Total, and an independent third party, we sold 25% of ownership interests in the co-development solar project to Total, for an immaterial amount of proceeds. We sold the remaining 25% of ownership interest to Total in the nine months ended September 29, 2019, for proceeds of $4.6 million, and recognized a gain of $2.9 million, which is included within "other, net" in our condensed consolidated statements of operations for fiscal 2019. Development service revenue of $6.4 million was also recognized during fiscal 2019. We have also agreed to supply solar panels under this arrangement with sales beginning in October 2019 and expected to occur through November 2020. We recognize revenue from these sales consistent with our revenue recognition policy from solar power components.
In connection with a co-development solar project in Chile between us and Total, we sold all of our 50% of ownership interests in the co-development project to Total in fiscal 2019, for proceeds of $14.1 million, and recognized a gain of $11.0 million, which is included within "other, net" in our condensed consolidated statements of operations for fiscal 2019.
Related-Party Transactions with Total and its Affiliates:
The following related-party balances and amounts are associated with transactions entered into with Total and its Affiliates. Refer to Note 11. Equity Investments for related-party transactions with unconsolidated entities in which we have a direct equity investment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Accounts receivable
|
|
$
|
267
|
|
|
$
|
3,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Refer to Note 10. Commitments and Contingencies - Advances from Customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Solar power systems, components, and other
|
|
$
|
34,465
|
|
|
$
|
112
|
|
|
$
|
98,244
|
|
|
$
|
112
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
Solar power systems, components, and other
|
|
26,177
|
|
|
84
|
|
|
70,501
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
Gain on early retirement of convertible debt
|
|
104
|
|
|
—
|
|
|
1,954
|
|
|
—
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
Guarantee fees incurred under the Credit Support Agreement
|
|
—
|
|
|
93
|
|
|
13
|
|
|
244
|
|
|
Interest expense incurred on the 0.875% debentures due 2021
|
|
384
|
|
|
547
|
|
|
1,216
|
|
|
1,641
|
|
|
Interest expense incurred on the 4.00% debentures due 2023
|
|
1,000
|
|
|
1,000
|
|
|
3,000
|
|
|
3,000
|
|
Note 4. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following tables represent disaggregated revenue from contracts with customers for the three and nine months ended September 27, 2020, and September 29, 2019 along with the reportable segment for each category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Category
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Total
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar power systems sales and EPC services
|
|
191,016
|
|
|
73,840
|
|
|
2,688
|
|
|
267,544
|
|
|
195,686
|
|
|
58,507
|
|
|
8,354
|
|
|
262,547
|
|
|
Operations and maintenance
|
|
—
|
|
|
—
|
|
|
75
|
|
|
75
|
|
|
—
|
|
|
4,659
|
|
|
10,074
|
|
|
14,733
|
|
|
Residential leasing
|
|
1,284
|
|
|
—
|
|
|
—
|
|
|
1,284
|
|
|
3,523
|
|
|
—
|
|
|
—
|
|
|
3,523
|
|
|
Solar services1
|
|
5,485
|
|
|
418
|
|
|
—
|
|
|
5,903
|
|
|
4,881
|
|
|
358
|
|
|
—
|
|
|
5,239
|
|
|
Revenue
|
|
$
|
197,785
|
|
|
$
|
74,258
|
|
|
$
|
2,763
|
|
|
$
|
274,806
|
|
|
$
|
204,090
|
|
|
$
|
63,524
|
|
|
$
|
18,428
|
|
|
$
|
286,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Category
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Other
|
|
Total
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar power systems sales and EPC services
|
|
568,303
|
|
|
170,403
|
|
|
3,147
|
|
|
741,853
|
|
|
458,141
|
|
|
147,221
|
|
|
22,973
|
|
|
628,335
|
|
|
Operations and maintenance
|
|
—
|
|
|
3,619
|
|
|
19,844
|
|
|
23,463
|
|
|
—
|
|
|
7,696
|
|
|
29,592
|
|
|
37,288
|
|
|
Residential leasing
|
|
3,937
|
|
|
—
|
|
|
—
|
|
|
3,937
|
|
|
9,083
|
|
|
—
|
|
|
—
|
|
|
9,083
|
|
|
Solar services1
|
|
12,524
|
|
|
1,242
|
|
|
—
|
|
|
13,766
|
|
|
15,046
|
|
|
856
|
|
|
—
|
|
|
15,902
|
|
|
Revenue
|
|
$
|
584,764
|
|
|
$
|
175,264
|
|
|
$
|
22,991
|
|
|
$
|
783,019
|
|
|
$
|
482,270
|
|
|
$
|
155,773
|
|
|
$
|
52,565
|
|
|
$
|
690,608
|
|
1 Upon adoption of ASC 842, revenues from residential leasing are being accounted for under ASU No. 2014-09 ("ASC 606") and recorded under 'Solar services'
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 that are owned by a to joint venture formed between Total and Hannon Armstrong, 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.
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 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 condensed 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 nine months ended September 27, 2020 and September 29, 2019 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 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 Ended
|
|
Nine Months Ended
|
|
(In thousands, except number of projects)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Increase (decrease) in revenue from net changes in transaction prices
|
|
$
|
1,142
|
|
|
$
|
—
|
|
|
$
|
834
|
|
|
$
|
(3,301)
|
|
|
Increase (decrease) in revenue from net changes in input cost estimates
|
|
(1,041)
|
|
|
1,734
|
|
|
(1,092)
|
|
|
4,144
|
|
|
Net decrease in revenue from net changes in estimates
|
|
$
|
101
|
|
|
$
|
1,734
|
|
|
(258)
|
|
|
$
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of projects
|
|
2
|
|
1
|
|
4
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Net change in estimate as a percentage of aggregate revenue for associated projects
|
|
0.3
|
%
|
|
3.6
|
%
|
|
(0.2)
|
%
|
|
1.5
|
%
|
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 6. Balance Sheet Components" for further details.
During the three and nine months ended September 27, 2020, the increase in contract assets of $5.7 million and $4.5 million, respectively, was primarily driven by billings for commercial projects where certain milestones had not yet been reached, but criteria for revenue recognition has been met. During the three and nine months ended September 29, 2019, the increase in contract assets of $26.0 million and $18.4 million, respectively, was primarily driven by unbilled receivables for commercial projects where certain milestones had not yet been reached, but the criteria for revenue had been met. During the three and nine months ended September 27, 2020, the decrease in contract liabilities of $2.0 million and $6.7 million, respectively, was primarily due to utilization of customer advances. During the three and nine months ended September 29, 2019, the increase in contract liabilities of $15.2 million and $16.7 million was primarily due to additional customer advances. During the three and nine months ended September 27, 2020, we recognized revenue of $26.9 million and $78.4 million that was included in contract liabilities as of June 28, 2020 and December 29, 2019, respectively. During the three and nine months ended September 29, 2019, we recognized revenue of $32.5 million and $29.2 million, respectively, that was included in contract liabilities as of June 30, 2019 and December 30, 2018, respectively.
The following table represents our remaining performance obligations as of September 27, 2020 for EPC agreements for projects that we are constructing or expect to construct. We expect to recognize $140.5 million of revenue upon transfer of control of the projects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project
|
|
Revenue Category
|
|
EPC Contract/Partner Developed Project
|
|
Expected Year Revenue Recognition Will Be Completed
|
|
Average Percentage of Revenue Recognized
|
|
Various Distribution Generation Projects
|
|
Solar power systems sales and EPC services
|
|
Various
|
|
2021
|
|
76.9%
|
|
|
|
|
|
|
|
|
|
|
As of September 27, 2020, we have entered into contracts with customers for sales of modules, components, and residential solar systems, for an aggregate transaction price of $211.9 million, the substantial majority of which we expect to recognize over the next 12 months.
Note 5. BUSINESS DIVESTITURE
Sale of Operations and Maintenance Business
In the third quarter of fiscal 2019, we signed a Membership Interest and Purchase Agreement ("MIPA") with NovaSource Power Services ("NovaSource”) to sell certain operation and maintenance assets and related liabilities for total consideration of $36.3 million. The transaction closed on May 14, 2020 upon the satisfaction of agreed conditions precedent to closing, and payment was received from NovaSource at that time.
Upon closing, we received net cash consideration of $16.0 million after an estimated $5.3 million working capital adjustment, as well as hold-backs totaling in aggregate $15.0 million for certain retained obligations and contracts not novated as of closing. We assessed the recoverability of these holdbacks and included our best estimate of the amount recoverable in the future, in our calculation of net gain on sale. The final net consideration is subject to final working capital adjustments that are expected to be agreed and finalized with NovaSource during the fourth quarter of fiscal 2020, which are not expected to materially impact the gain recognized in the second quarter of fiscal 2020. Additionally, we also agreed to retain and subcontract certain O&M contracts for selected large utility scale power plant projects in North America at a fixed price to NovaSource. The contracts were deemed loss-making on the closing date and accordingly, we recorded a liability for the expected loss to be recognized for these contracts that will be amortized over the expected period of loss of 3 years. In the third quarter of fiscal 2020, we recorded final working capital adjustments as agreed upon with NovaSource which had an immaterial impact on the consolidated financial statements.
In evaluating the accounting treatment for this sale, the transaction was considered the sale of a business as defined in ASC 805, Business Combinations. We recorded a gain of $10.5 million, which was recorded "gain on business divestiture" in our condensed consolidated statements of operations for the nine months ended September 27, 2020. We recorded $2.1 million of tax expense related to the sale during the nine months ended September 27, 2020. We also recorded $2.7 million of transaction expenses, which were expensed as incurred and included within “sales, general and administrative expenses” in our condensed consolidated statement of operations for the nine months ended September 27, 2020.
The assets and liabilities of our O&M business that were sold in the transaction are summarized below:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
5,693
|
|
|
Contract assets, current portion
|
|
3,239
|
|
|
|
|
|
|
Prepaid expenses, other current assets, and cash
|
|
4,786
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets
|
|
634
|
|
|
Total assets
|
|
14,352
|
|
|
|
|
|
|
Accounts payable
|
|
3,434
|
|
|
|
|
|
|
Contract liabilities, current portion
|
|
4,204
|
|
|
Other current liabilities
|
|
808
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
2,245
|
|
|
Total liabilities
|
|
10,691
|
|
|
Net assets
|
|
$
|
3,661
|
|
Net proceeds received were as follows:
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Purchase price
|
|
$
|
36,300
|
|
|
Holdback receivables, including contracts not novated
|
|
(15,000)
|
|
|
Working capital adjustment, upon close
|
|
(5,324)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds received
|
|
$
|
15,976
|
|
Net gain on sale for the nine months ended September 27, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Nine Months Ended
|
|
|
|
|
September 27, 2020
|
|
Net proceeds received
|
|
|
$
|
15,976
|
|
|
Estimated receivable from amount held back for retained obligations
|
|
|
7,199
|
|
|
Liabilities for loss-making contracts retained
|
|
|
(6,026)
|
|
|
Book value of net assets sold
|
|
|
(3,661)
|
|
|
Working capital adjustment, post close
|
|
|
(3,030)
|
|
|
Net gain on sale
|
|
|
$
|
10,458
|
|
Note 6. BALANCE SHEET COMPONENTS
Accounts Receivable, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Accounts receivable, gross1
|
|
$
|
112,025
|
|
|
$
|
145,392
|
|
|
Less: allowance for credit losses
|
|
(16,986)
|
|
|
(17,208)
|
|
|
Less: allowance for sales returns
|
|
(283)
|
|
|
(306)
|
|
|
Accounts receivable, net
|
|
$
|
94,756
|
|
|
$
|
127,878
|
|
1 There is a lien on our accounts receivable of $58.1 million of our consolidated accounts receivable, gross, as of September 27, 2020 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 12. Debt and Credit Sources.
Allowance for Credit Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Balance at beginning of period
|
|
$
|
19,485
|
|
|
$
|
17,697
|
|
|
$
|
17,208
|
|
|
$
|
12,656
|
|
|
Provision for credit losses
|
|
(2,568)
|
|
|
(118)
|
|
|
998
|
|
|
1,361
|
|
|
Charge offs, net of recoveries
|
|
69
|
|
|
647
|
|
|
(1,220)
|
|
|
4,209
|
|
|
Balance at end of period
|
|
$
|
16,986
|
|
|
$
|
18,226
|
|
|
$
|
16,986
|
|
|
$
|
18,226
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Raw materials1
|
|
$
|
31,351
|
|
|
$
|
36,072
|
|
|
Work-in-process1
|
|
791
|
|
|
948
|
|
|
Finished goods and components
|
|
145,997
|
|
|
126,385
|
|
|
Inventories2 3
|
|
$
|
178,139
|
|
|
$
|
163,405
|
|
1 Pertains to inventory at our U.S. manufacturing facilities in Hillsboro, Oregon that was retained by the Company post-spin and other components including micro-inverters and installation materials.
2 A lien of $127.4 million exists on our gross inventory as of September 27, 2020 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 12. Debt and Credit Sources.
3 Refer to long-term inventory for the safe harbor program under the caption "Other long-term assets."
Prepaid Expenses and Other Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Deferred project costs
|
|
$
|
21,812
|
|
|
$
|
29,202
|
|
|
VAT receivables, current portion
|
|
993
|
|
|
2,989
|
|
|
Deferred costs for solar power systems
|
|
23,401
|
|
|
29,631
|
|
|
|
|
|
|
|
|
Other receivables
|
|
33,148
|
|
|
17,185
|
|
|
Prepaid taxes
|
|
198
|
|
|
462
|
|
|
|
|
|
|
|
|
Other
|
|
16,695
|
|
|
7,286
|
|
|
Prepaid expenses and other current assets
|
|
$
|
96,247
|
|
|
$
|
86,755
|
|
Property, Plant and Equipment, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Manufacturing equipment
|
|
$
|
17,192
|
|
|
$
|
17,080
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
29,385
|
|
|
22,237
|
|
|
Solar power systems
|
|
30,895
|
|
|
29,192
|
|
|
Computer equipment
|
|
57,436
|
|
|
62,292
|
|
|
Furniture and fixtures
|
|
7,909
|
|
|
8,043
|
|
|
Construction-in-process
|
|
2,499
|
|
|
4,506
|
|
|
Property, plant and equipment, gross
|
|
145,316
|
|
|
143,350
|
|
|
Less: accumulated depreciation
|
|
(94,919)
|
|
|
(87,490)
|
|
|
Property, plant and equipment, net
|
|
50,397
|
|
|
55,860
|
|
Property, Plant and Equipment, Net, by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
|
|
United States
|
|
$
|
49,474
|
|
|
$
|
54,923
|
|
|
|
|
Philippines
|
|
294
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
629
|
|
|
614
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net, by geography1
|
|
$
|
50,397
|
|
|
$
|
55,860
|
|
|
|
|
|
|
|
|
|
|
|
1 Based on the physical location of the assets.
Other Long-term Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Equity investments with readily determinable fair value
|
|
$
|
331,293
|
|
|
$
|
173,908
|
|
|
Equity investments without readily determinable fair value
|
|
801
|
|
|
801
|
|
|
Equity investments with fair value option
|
|
9,924
|
|
|
17,500
|
|
|
|
|
|
|
|
|
Long-term inventory1
|
|
42,582
|
|
|
48,214
|
|
|
Other
|
|
38,597
|
|
|
37,382
|
|
|
Other long-term assets
|
|
$
|
423,197
|
|
|
$
|
277,805
|
|
|
|
|
|
|
|
1 Entire balance consists of finished goods under the safe harbor program. Refer to Note 11. Equity Investments for details.
Accrued Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Employee compensation and employee benefits
|
|
$
|
15,865
|
|
|
$
|
28,354
|
|
|
|
|
|
|
|
|
Interest payable
|
|
7,713
|
|
|
10,161
|
|
|
Short-term warranty reserves
|
|
40,505
|
|
|
20,868
|
|
|
Restructuring reserve
|
|
3,806
|
|
|
6,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal expenses
|
|
12,244
|
|
|
7,846
|
|
|
Taxes payable
|
|
25,314
|
|
|
18,365
|
|
|
|
|
|
|
|
|
Other
|
|
23,200
|
|
|
24,597
|
|
|
Accrued liabilities
|
|
$
|
128,647
|
|
|
$
|
116,276
|
|
Other Long-term Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Deferred revenue1
|
|
$
|
37,458
|
|
|
$
|
40,246
|
|
|
Long-term warranty reserves
|
|
47,889
|
|
|
80,512
|
|
|
|
|
|
|
|
|
Unrecognized tax benefits
|
|
8,181
|
|
|
7,218
|
|
|
Long-term pension liability
|
|
4,440
|
|
|
2,894
|
|
|
Derivative financial instruments
|
|
633
|
|
|
373
|
|
|
|
|
|
|
|
|
Other
|
|
39,380
|
|
|
26,531
|
|
|
Other long-term liabilities
|
|
$
|
137,981
|
|
|
$
|
157,774
|
|
1 Consists of advance consideration received from customers under the residential lease program for leases entered into prior to December 31, 2018, which continue to be accounted for in accordance with the superseded lease accounting guidance.
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Cumulative translation adjustment
|
|
$
|
9,604
|
|
|
$
|
(12,250)
|
|
|
Net unrealized loss on derivative financial instruments
|
|
—
|
|
|
(1,238)
|
|
|
Net gain on long-term pension liability obligation
|
|
(1,529)
|
|
|
3,976
|
|
|
Deferred taxes
|
|
(5)
|
|
|
—
|
|
|
Accumulated other comprehensive gain (loss)
|
|
$
|
8,070
|
|
|
$
|
(9,512)
|
|
Note 7. SOLAR SERVICES
Upon adoption of ASC 842 on December 31, 2018, all arrangements under our residential lease program entered into on or after December 31, 2018 are accounted for as contracts with customers in accordance with ASC 606. The disclosure below relates to the residential lease arrangements entered into before December 31, 2018, which we continue to retain and are accounted for in accordance with the superseded lease accounting guidance.
Operating Leases
The following table summarizes "Solar power systems leased and to be leased, net" under operating leases on our condensed consolidated balance sheets as of September 27, 2020 and December 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Solar power systems leased and to be leased, net1:
|
|
|
|
|
|
Solar power systems leased
|
|
$
|
115,775
|
|
|
$
|
116,948
|
|
|
|
|
|
|
|
|
|
|
115,775
|
|
|
116,948
|
|
|
Less: accumulated depreciation and impairment2
|
|
(64,596)
|
|
|
(62,610)
|
|
|
Solar power systems leased, net
|
|
$
|
51,179
|
|
|
$
|
54,338
|
|
1 Solar power systems leased, net, are physically located exclusively in the United States.
2 For the three and nine months ended September 29, 2019, we recognized a non-cash impairment charge of $0.0 million and $4.0 million, respectively on solar power systems leased. No impairment charges were recorded for the three and nine months ended September 27, 2020.
The following table presents our minimum future rental receipts on operating leases placed in service as of September 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fiscal 2020
(remaining three months)
|
|
Fiscal 2021
|
|
Fiscal 2022
|
|
Fiscal 2023
|
|
Fiscal 2024
|
|
Thereafter
|
|
Total
|
|
Minimum future rentals on operating leases placed in service1
|
|
$
|
30
|
|
|
$
|
65
|
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
959
|
|
|
$
|
1,252
|
|
1 Does not include contingent rentals that may be received from customers under agreements that include performance-based incentives.
Sale of residential lease assets
On July 10, 2018, we created SunStrong Capital Holdings, LLC ("SunStrong") to own and operate a portion of our residential lease assets and subsequently contributed to SunStrong our controlling equity interests in a number of solar project entities that we controlled. Further, on November 5, 2018, we entered into a Purchase and Sale agreement ("PSA") with HA SunStrong Capital LLC ("HA SunStrong Parent"), a subsidiary of Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong"), to sell 49.0% of the membership interests in SunStrong for cash proceeds of $10 million.
On September 27, 2019, we sold the majority of our remaining residential lease assets. These residential lease assets were sold under a new assignment of interest agreement entered into with SunStrong. SunStrong also assumed debts related to the residential lease assets sold.
Refer to our annual consolidated financial statements in Annual Report on Form 10-K for fiscal years ended December 29, 2019 and December 30, 2018 for details of these transactions.
On January 13, 2020, certain subsidiaries of SunStrong entered into a loan agreement with Wells Fargo National Association, as administrative agent, Credit Suisse Securities (USA) LLC, as arranger, and the lenders party thereto, for a senior loan of $216.2 million, the proceeds of which were used to pay off the warehouse loans previously borrowed from Credit Agricole. Concurrently, certain other subsidiaries of SunStrong entered into a subordinated mezzanine loan agreement with Hannon Armstrong to borrow $72.8 million, the proceeds of which refinanced two mezzanine loans previously borrowed from Hannon Armstrong. We received a special distribution of $7.0 million from SunStrong, of which $4.0 million was applied against prior receivables from the loans that were refinanced, and the remaining amount of $3.0 million was recorded as a gain on the above refinancing transactions recorded in "(Gain) loss on sale and impairment of residential lease assets" in the condensed consolidated statements of operations.
Note 8. 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.
The following table summarizes our assets and liabilities measured and recorded at fair value on a recurring basis as of September 27, 2020 and December 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2020
|
|
December 29, 2019
|
|
(In thousands)
|
|
Total Fair Value
|
|
Level 3
|
|
Level 2
|
|
Level 1
|
|
Total Fair Value
|
|
Level 3
|
|
Level 2
|
|
Level 1
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments with fair value option ("FVO")
|
|
9,924
|
|
|
9,924
|
|
|
—
|
|
|
—
|
|
|
17,500
|
|
|
17,500
|
|
|
—
|
|
|
—
|
|
|
Equity investments with readily determinable fair value
|
|
331,293
|
|
|
—
|
|
|
—
|
|
|
331,293
|
|
|
173,908
|
|
|
—
|
|
|
—
|
|
|
173,908
|
|
|
Total assets
|
|
$
|
341,217
|
|
|
$
|
9,924
|
|
|
$
|
—
|
|
|
$
|
331,293
|
|
|
$
|
191,408
|
|
|
$
|
17,500
|
|
|
$
|
—
|
|
|
$
|
173,908
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
633
|
|
|
—
|
|
|
633
|
|
|
—
|
|
|
373
|
|
|
—
|
|
|
373
|
|
|
—
|
|
|
Total liabilities
|
|
$
|
633
|
|
|
$
|
—
|
|
|
$
|
633
|
|
|
$
|
—
|
|
|
$
|
373
|
|
|
$
|
—
|
|
|
$
|
373
|
|
|
$
|
—
|
|
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 11). 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 on a quarterly basis. 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 nine months ended September 27, 2020. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the nine months ended September 27, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Beginning balance as of December 29, 2019
|
Equity Distribution1
|
Additional Investment2
|
Ending balance as of September 27, 2020
|
|
Equity investments with FVO
|
$17,500
|
$(7,724)
|
$148
|
$9,924
|
1 During the second quarter of fiscal 2020, we received a total of $7.7 million in cash proceeds. Proceeds of $7.2 million were received from SunStrong Partners and proceeds of $0.5 million were received from SunStrong. The distribution was approved by the SunStrong Board of Directors on June 24, 2020. The distribution reduced our equity investment balance in SunStrong Partners and SunStrong classified in "other long-term assets" on our condensed consolidated balance sheet.
2 During the three months ended September 27, 2020, we contributed a total of $0.1 million additional capital to purchase Class B member units in Ultralight 2 HoldCo, LLC.
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 September 27, 2020. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Assets:
|
Fair value
|
Valuation Technique
|
Unobservable input
|
Range (Weighted Average)
|
|
Other long-term assets:
|
|
|
|
|
|
Equity investments
|
$
|
9,924
|
|
Discounted cash flows
|
Discount rate
Residual value
|
12.5%-13% 1
7.5% - 7.75% 1
|
|
Total assets
|
$
|
9,924
|
|
|
|
|
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 our 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 Energy, Inc. ("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 nine months ended September 27, 2020, we recorded gains of $155.4 million and $274.4 million, respectively, within "other, net" in our condensed consolidated statement of operations as compared to $28.5 million and $129.0 million in the three and nine months ended September 29, 2019. During fiscal 2019, we sold one million shares of Enphase common stock in open market transactions. During the three and nine months ended September 27, 2020, we sold an additional one million and two million shares of Enphase common stock, respectively, in open market transactions for cash proceeds of $73.3 million and $117.0 million, respectively. As of September 27, 2020, we retained 4.5 million shares of Enphase common stock.
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 September 27, 2020 and December 29, 2019, there were no material items recorded at fair value.
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 9. RESTRUCTURING
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 recent changes to our business, including the previously announced planned Spin-Off of Maxeon Solar. In connection with the restructuring plan, which includes actions implemented in the fourth quarter of 2019 and is expected to be substantially completed by the end of 2022, we expect 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 in the legacy SunPower Technologies business unit and corporate have largely been informed, most of whom exited our company following the Spin-Off, and the remainder of which will exit upon completion of transition services. As the legacy SunPower Energy Services business unit refines 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. We expected to incur restructuring charges totaling approximately $16 million to $22 million, consisting primarily of severance benefits (between $8 million and $11 million) and retention benefits (between $8 million and $11 million) primarily associated with the retention of employees impacted by the Spin-Off transaction and certain key research and development employees. A substantial portion of such charges was incurred in the fourth quarter of fiscal 2019 and expected to be incurred throughout fiscal 2020, and we expect between $14 million and $19 million of the charges to be cash. As of September 27, 2020, we have incurred cumulative costs of approximately $10.2 million in restructuring charges.
February 2018 Restructuring Plan
During the first quarter of fiscal 2018, we adopted a restructuring plan and began implementing initiatives to reduce operating expenses and cost of revenue overhead in light of the known shorter-term impact of U.S. tariffs imposed on PV solar cells and modules pursuant to Section 201 of the Trade Act of 1974 and our broader initiatives to control costs and improve cash flow. In connection with the plan, we expected between 150 and 250 non-manufacturing employees to be affected, representing approximately 3% of our global workforce, with a portion of those employees exiting from us as part of a voluntary departure program. The changes to our workforce varied by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. We expected to incur restructuring charges totaling between $20 million to $30 million, consisting primarily of severance benefits (between $11 million and $16 million) and real estate lease termination and other associated costs (between $9 million and $14 million). We expected between $12 million and $20 million of the charges to be paid in cash. This restructuring plan is substantially complete, and any remaining costs to be incurred are not expected to be material.
Legacy Restructuring Plans
Prior to fiscal 2018, we implemented approved restructuring plans, related to all segments, to reduce costs and focus on improving cash flow, to realign our legacy power plant business unit, to align with changes in the global solar market, as well as actions to accelerate operating cost reduction and improve overall operating efficiency. These restructuring activities were substantially complete as of December 30, 2018, and any remaining costs to be incurred are not expected to be material.
The following table summarizes the comparative periods-to-date restructuring charges by plan recognized in our condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Cumulative To Date
|
|
December 2019 Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and benefit charges
|
|
$
|
(104)
|
|
|
$
|
—
|
|
|
$
|
2,784
|
|
|
$
|
—
|
|
|
$
|
10,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
Total December 2019 Restructuring Plan
|
|
(104)
|
|
|
—
|
|
|
2,784
|
|
|
—
|
|
|
10,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2018 Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash asset impairment charges
|
|
—
|
|
|
3,527
|
|
|
—
|
|
|
5,874
|
|
|
5,874
|
|
|
Severance and benefit credits
|
|
—
|
|
|
(12)
|
|
|
—
|
|
|
(46)
|
|
|
6,210
|
|
|
Lease and related termination credits
|
|
—
|
|
|
213
|
|
|
(26)
|
|
|
213
|
|
|
528
|
|
|
Other costs (credits)1
|
|
7
|
|
|
490
|
|
|
45
|
|
|
581
|
|
|
1,000
|
|
|
Total February 2018 Restructuring Plan
|
|
7
|
|
|
4,218
|
|
|
19
|
|
|
6,622
|
|
|
$
|
13,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
Legacy restructuring plan charges (credits)
|
|
—
|
|
|
34
|
|
|
(65)
|
|
|
4
|
|
|
55,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring charges (credits)
|
|
$
|
(97)
|
|
|
$
|
4,252
|
|
|
$
|
2,738
|
|
|
$
|
6,626
|
|
|
$
|
78,856
|
|
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 nine months ended September 27, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
(In thousands)
|
|
December 29, 2019
|
|
Charges (Benefits)
|
|
(Payments) Recoveries
|
|
September 27, 2020
|
|
December 2019 Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and benefits
|
|
$
|
5,822
|
|
|
$
|
2,784
|
|
|
$
|
(5,000)
|
|
|
$
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total December 2019 Restructuring Plan
|
|
5,822
|
|
|
2,784
|
|
|
(5,000)
|
|
|
3,606
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2018 Restructuring Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and benefits
|
|
76
|
|
|
—
|
|
|
(6)
|
|
|
70
|
|
|
Lease and related termination costs
|
|
—
|
|
|
(26)
|
|
|
26
|
|
|
—
|
|
|
Other costs1
|
|
—
|
|
|
45
|
|
|
(45)
|
|
|
—
|
|
|
Total February 2018 Restructuring Plan
|
|
76
|
|
|
19
|
|
|
(25)
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy Restructuring Plans
|
|
187
|
|
|
(65)
|
|
|
8
|
|
|
130
|
|
|
Total restructuring reserve activities
|
|
$
|
6,085
|
|
|
$
|
2,738
|
|
|
$
|
(5,017)
|
|
|
$
|
3,806
|
|
1 Other costs primarily represent associated legal and advisory services, and costs of relocating employees.
Note 10. COMMITMENTS AND CONTINGENCIES
Facility and Equipment Leases
We lease certain facilities under non-cancellable operating leases from third parties. We also lease certain buildings under non-cancellable capital leases. Operating leases are subject to renewal options for periods ranging from (1 year to 10 years).
We have disclosed quantitative information related to the lease contracts we have entered into as a lessee by aggregating the information based on the nature of asset such that the assets of similar characteristics and lease terms are shown within one single financial statement line item.
The table below presents the summarized quantitative information with regard to lease contracts we have entered into:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Operating leases:
|
|
|
|
|
|
|
|
|
|
Operating lease expense
|
|
$
|
3,524
|
|
|
$
|
2,700
|
|
|
$
|
10,458
|
|
|
$
|
7,890
|
|
|
Sublease income (expense)
|
|
(111)
|
|
|
(20)
|
|
|
(166)
|
|
|
(330)
|
|
|
Rent expense
|
|
$
|
3,413
|
|
|
$
|
2,680
|
|
|
$
|
10,292
|
|
|
$
|
7,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
|
|
|
|
|
Operating cash flows for operating leases1
|
|
$
|
7,117
|
|
|
$
|
2,849
|
|
|
$
|
14,314
|
|
|
$
|
11,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for leases 1,2
|
|
$
|
8,362
|
|
|
$
|
8,939
|
|
|
$
|
21,786
|
|
|
$
|
103,744
|
|
|
Weighted-average remaining lease term (in years) - operating leases
|
|
7.5
|
|
7.0
|
|
7.5
|
|
7.0
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate - operating leases
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
1 Amounts for the three months and nine months ended September 27, 2020 and September 29, 2019 include consolidated balances, including discontinued operations.
2 Amounts for the three months and nine months ended September 29, 2019 include the transition adjustment for the adoption of ASC 842.
The future minimum lease payments to be paid under non-cancellable leases in effect at September 27, 2020, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of September 27, 2020
|
|
Operating Leases
|
|
2020 (remaining three months)
|
|
$
|
3,450
|
|
|
2021
|
|
14,712
|
|
|
2022
|
|
14,217
|
|
|
2023
|
|
11,217
|
|
|
2024
|
|
7,675
|
|
|
Thereafter
|
|
26,937
|
|
|
Total lease payments
|
|
78,208
|
|
|
Less: imputed interest
|
|
(24,114)
|
|
|
Total
|
|
$
|
54,094
|
|
As of September 27, 2020, we have additional operating leases that have not yet commenced with future minimum lease payments amounting to $24.2 million as of quarter ending September 27, 2020. These operating leases will have a lease term of 17 years after their commencement.
Purchase Commitments
In connection with the Spin-Off on August 26, 2020, we entered into a Supply Agreement with Maxeon Solar to purchase photovoltaic modules for a period of two years. Under the Supply Agreement, SunPower is required to purchase certain minimum volumes of products during each calendar quarter of the term based on a fixed purchase price. SunPower will be subject to penalties for failing to purchase the minimum product volumes.
Future purchase obligations under non-cancellable purchase orders and long-term supply agreements as of September 27, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fiscal 2020
(remaining three months)
|
|
Fiscal 2021
|
|
Fiscal 2022
|
|
Fiscal 2023
|
|
Fiscal 2024
|
|
Thereafter
|
|
Total1
|
|
Future purchase obligations
|
|
$
|
155,486
|
|
|
$
|
205,998
|
|
|
$
|
94,686
|
|
|
$
|
33,148
|
|
|
$
|
1,710
|
|
|
$
|
6,082
|
|
|
$
|
497,110
|
|
1cTotal future purchase obligations were composed of $47.9 million related to non-cancellable purchase orders and $449.2 million related to long-term supply agreements.
Note that the future purchase obligations immediately above primarily consist of commitments to purchase photovoltaic modules from Maxeon Solar as well as commitments to purchase Module-Level Power Electronics ("MLPE") supplied by one vendor.
The terms of all our long-term supply agreements are reviewed annually by us and we assess the need for any accruals for estimated losses on adverse purchase commitments, such as lower of cost or net realizable value adjustments that will not be recovered by future sales prices, forfeiture of advanced deposits and liquidated damages, as necessary.
Product Warranties
The following table summarizes accrued warranty activities for the three months and nine months ended September 27, 2020 and September 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Balance at the beginning of the period
|
|
$
|
92,400
|
|
|
$
|
108,025
|
|
|
$
|
101,381
|
|
|
$
|
121,512
|
|
|
Accruals for warranties issued during the period
|
|
4,996
|
|
|
1,742
|
|
|
14,068
|
|
|
12,707
|
|
|
Settlements and adjustments during the period
|
|
(9,002)
|
|
|
(11,944)
|
|
|
(27,055)
|
|
|
(36,396)
|
|
|
Balance at the end of the period
|
|
$
|
88,394
|
|
|
$
|
97,823
|
|
|
$
|
88,394
|
|
|
$
|
97,823
|
|
The warranty provision represents the warranty retained by SunPower, and excludes warranties of $38.4 million relating to product manufacturing defects and workmanship that were assumed by Maxeon Solar in connection with the Spin-Off on August 26, 2020 in accordance with the separation and distribution agreement
In some cases, we may offer customers the option to purchase extended warranties to ensure protection beyond the standard warranty period. In those circumstances, the warranty is considered a distinct service and we account for the extended warranty as a performance obligation and allocate a portion of the transaction price to that performance obligation. More frequently, customers do not purchase a warranty separately. In those situations, we account for the warranty as an assurance-type warranty, which provides customers with assurance that the product complies with agreed-upon specifications, and this does not represent a separate performance obligation. Such warranties are recorded separately as liabilities and presented within "accrued liabilities" and "other long-term liabilities" on our condensed consolidated balance sheets (see Note 5. Balance Sheet Components).
Project Agreements with Customers
Project agreements entered into with our commercial and power plant customers often require us to undertake obligations including: (i) system output performance warranties, (ii) penalty payments or customer termination rights if the system we are constructing is not commissioned within specified time frames or other milestones are not achieved, and (iii) system put-rights whereby we could be required to buy back a customer's system at fair value on specified future dates if certain minimum performance thresholds are not met for specified periods. Historically, our systems have performed significantly above their performance warranty thresholds, and there have been no cases in which we have had to buy back a system. As of September 27, 2020 and December 29, 2019, we had $7.7 million and $7.5 million, respectively, classified as "accrued liabilities," and $0.6 million and $2.8 million, respectively, classified as "other long-term liabilities" on our condensed consolidated balance sheets for such obligations.
Liabilities Associated with Uncertain Tax Positions
Total liabilities associated with uncertain tax positions were $8.2 million and $7.2 million as of September 27, 2020 and December 29, 2019, respectively. These amounts are included within "other long-term liabilities" on our condensed consolidated balance sheets in their respective periods as they are not expected to be paid within the next 12 months. Due to the complexity and uncertainty associated with our tax positions, we cannot make a reasonably reliable estimate of the period in which cash settlement, if any, would be made for our liabilities associated with uncertain tax positions in Other long-term liabilities.
Indemnifications
We are a party to a variety of agreements under which we may be obligated to indemnify the counterparty with respect to certain matters. Typically, these obligations arise in connection with contracts and license agreements or the sale of assets, under which we customarily agree to hold the other party harmless against losses arising from a breach of warranties, representations and covenants related to such matters as title to assets sold, negligent acts, damage to property, validity of certain intellectual property rights, non-infringement of third-party rights, and certain tax related matters including indemnification to customers under Section 48(c) of the Internal Revenue Code of 1986, as amended, regarding solar commercial investment tax credits ("ITCs") and U.S. Treasury Department ("U.S. Treasury") cash grant payments under Section 1603 of the American Recovery and Reinvestment Act (each a "Cash Grant"). Further, in connection with our sale of residential lease assets in fiscal 2018 to SunStrong, we provide Hannon Armstrong indemnification related to cash flow losses arising from a recapture of California property taxes on account of a change in ownership, recapture of federal tax attributes and cash flow losses from leases that do not generate the promised savings to homeowners. The maximum exposure to loss arising from the indemnification for SunStrong is limited to the consideration received for the solar power systems. In each of these circumstances, payment by us is typically subject to the other party making a claim to us that is contemplated by and valid under the indemnification provisions of the particular contract, which provisions are typically contract-specific, as well as bringing the claim under the procedures specified in the particular contract. These procedures usually allow us to challenge the other party's claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration or amount. In some instances, we may have recourse against third parties or insurance covering certain payments made by us.
In certain circumstances, we have provided indemnification to customers and investors under which we are contractually obligated to compensate these parties for losses they may suffer as a result of reductions in benefits received under ITCs and U.S. Treasury Cash Grant programs. We apply for ITCs and Cash Grant incentives based on guidance provided by the Internal Revenue Service ("IRS") and the U.S. Treasury, which include assumptions regarding the fair value of the qualified solar power systems, among others. Certain of our development agreements, sale-leaseback arrangements, and financing arrangements with tax equity investors, incorporate assumptions regarding the future level of incentives to be received, which in some instances
may be claimed directly by our customers and investors. Generally, such obligations would arise as a result of reductions to the value of the underlying solar power systems as assessed by the IRS. At each balance sheet date, we assess and recognize, when applicable, the potential exposure from these obligations based on all the information available at that time, including any audits undertaken by the IRS. The maximum potential future payments that we could have to make under this obligation would depend on the difference between the eligible basis claimed on the tax filing for the solar energy systems sold or transferred to indemnified parties and the values that the IRS may re-determine as the eligible basis for the systems for purposes of claiming ITCs or Cash Grants. We use the eligible basis for tax filing purposes determined with the assistance of independent third-party appraisals to determine the ITCs that are passed-through to and claimed by the indemnified parties. We continue to retain certain indemnities, specifically, around ITCs and Cash Grants and California property taxes, even after the underlying portfolio of assets is sold to a third party. For contracts that have such indemnification provisions, we recognize a liability under ASC 460, "Guarantees," for the estimated premium that would be required by a guarantor to issue the same guarantee in a standalone arm’s-length transaction with an unrelated party. We recognize such liabilities at the greater of the fair value of the indemnity or the contingent liability required to be recognized under ASC 450, "Contingencies." We initially estimate the fair value of any such indemnities provided based on the cost of insurance policies that cover the underlying risks being indemnified and may purchase such policies to mitigate our exposure to potential indemnification payments. After an indemnification liability is recorded, we derecognize such amount typically upon expiration or settlement of the arrangement. As of September 27, 2020, and December 29, 2019, our provision was $10.5 million and $8.3 million primarily for tax related indemnifications.
SunPower is party to various supply agreements (collectively, the “Hemlock Agreements”) with Hemlock Semiconductor Operations LLC (f/k/a Hemlock Semiconductor Corporation) and its affiliate, Hemlock Semiconductor, LLC for the procurement of polysilicon. In connection with the Spin-Off, SunPower and Maxeon Solar entered into an agreement (the “Back-to-Back Agreement”) pursuant to which Maxeon Solar will effectively receive SunPower’s rights under the Hemlock Agreements (including SunPower’s deposits and advanced payments thereunder) and, in return, Maxeon Solar will agree to perform all of SunPower’s existing and future obligations under the Hemlock Agreements (including all take-or-pay obligations). While, as we remain a party to the Hemlock Agreements, we may contractually be liable to the vendor in case of non-payment by Maxeon Solar, we do not believe we have any current or future net exposure under the Hemlock Agreements as of the end of quarter ended September 27, 2020. Maxeon Solar's remaining obligations under this contract amounts to $25.8 million, 116.6 million and $125.8 million, for remainder of 2020, fiscal 2021 and fiscal 2022, respectively.
Pursuant to the Separation and Distribution Agreement, we also agreed to indemnify Maxeon Solar for any liabilities arising out of certain existing litigation relating to businesses contributed to Maxeon Solar in connection with the Spin-Off. We expect to be actively involved in managing this litigation together with Maxeon Solar. The indemnity qualifies for the criteria for accounting under the guidance in ASC 460 and we have recorded the liability of litigation of $1.8 million equal to the fair value of the guarantee provided as of the period ended September 27, 2020.
Legal Matters
We are a party to various litigation matters and claims that arise from time to time in the ordinary course of our business. While we believe that the ultimate outcome of such matters will not have a material adverse effect on us, their outcomes are not determinable and negative outcomes may adversely affect our financial position, liquidity, or results of operations.
Note 11. EQUITY INVESTMENTS
Our equity investments consist of equity investments with readily determinable fair value, investments without readily determinable fair value, equity investments accounted for using the fair value option, and equity method investments.
Our share of earnings (losses) from equity investments accounted for under the equity method is reflected as "Equity in earnings (losses) of unconsolidated investees" in our condensed consolidated statements of operations. Mark-to-market gains and losses on equity investments are reflected as "other, net" under other income (expense), net in our condensed consolidated statements of operations. The carrying value of our equity investments, classified as "other long-term assets" on our condensed consolidated balance sheets, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Equity investments with readily determinable fair value:
|
|
|
|
|
|
Enphase Energy, Inc.
|
|
$
|
331,293
|
|
|
$
|
173,908
|
|
|
Total equity investments with readily determinable fair value
|
|
331,293
|
|
|
173,908
|
|
|
Equity investments without readily determinable fair value:
|
|
|
|
|
|
Project entities
|
|
122
|
|
|
122
|
|
|
Other equity investments without readily determinable fair value
|
|
679
|
|
|
679
|
|
|
Total equity investments without readily determinable fair value
|
|
801
|
|
|
801
|
|
|
Equity investments with fair value option:
|
|
|
|
|
|
SunStrong Capital Holdings, LLC 1 2
|
|
7,645
|
|
|
8,000
|
|
|
SunStrong Partners, LLC 1 2
|
|
2,279
|
|
|
9,500
|
|
|
Total equity investment with fair value option
|
|
9,924
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity investments
|
|
$
|
342,018
|
|
|
$
|
192,209
|
|
1 During the second quarter of fiscal 2020, we received a total of $7.7 million in cash proceeds relating to the SunStrong joint venture. Proceeds of $7.2 million were received from SunStrong Partners and proceeds of $0.5 million were received from SunStrong. The distribution was approved by the SunStrong Board of Directors on June 24, 2020. The distribution reduced our equity investment balance in SunStrong Partners and SunStrong classified in "other long-term assets" on our condensed consolidated balance sheet.
2 During the three months ended September 27, 2020, we contributed a total of $0.1 million additional capital to purchase Class B member units in Ultralight 2 HoldCo, LLC.
Variable Interest Entities ("VIEs")
A VIE is an entity that has either (i) insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) equity investors who lack the characteristics of a controlling financial interest. Under ASC 810, Consolidation, an entity that holds a variable interest in a VIE and meets certain requirements would be considered to be the primary beneficiary of the VIE and is required to consolidate the VIE in its condensed consolidated financial statements. In order to be considered the primary beneficiary of a VIE, an entity must hold a variable interest in the VIE and have both:
•The power to direct the activities that most significantly impact the economic performance of the VIE; and
•The right to receive benefits from, or the obligation to absorb losses of the VIE that could be potentially significant to the VIE.
We follow guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct activities that most significantly impact the investees' economic performance, including powers granted to the investees' governing board and, to a certain extent, a company's economic interest in the investee. We analyze our investments in VIEs and classify them as either:
•A VIE that must be consolidated because we are the primary beneficiary or the investee is not a VIE and we hold the majority voting interest with no significant participative rights available to the other partners; or
•A VIE that does not require consolidation because we are not the primary beneficiary or the investee is not a VIE and we do not hold the majority voting interest.
As part of the above analysis, if it is determined that we have the power to direct the activities that most significantly impact the investees' economic performance, we consider whether or not we have the obligation to absorb losses or rights to receive benefits of the VIE that could potentially be significant to the VIE.
Unconsolidated VIEs
On November 5, 2018, we sold a portion of our interest in certain entities that have historically held the assets and liabilities comprising our residential lease business to an affiliate of Hannon Armstrong. The residential lease assets are held in SunStrong which owns and operates those assets. The SunStrong partnership is planned to scale as new residential lease assets are contributed to the partnership.
In furtherance of our long-term strategic goals, in June 2019, we entered into a joint venture with Hannon Armstrong and SunStrong to form SunStrong Partners, a jointly owned entity formed to own, operate, and control residential lease assets. Bank of America Merrill Lynch ("BAML") provided cash equity and a multi-draw term loan, with additional equity provided by us, Hannon Armstrong, and SunStrong. In June 2019, we made a $9.5 million equity investment in SunStrong Partners, in exchange for a 47.5% equity ownership.
Further, in June 2019, we entered into a joint venture with Hannon Armstrong and SunStrong to form 8point3 Solar Investco 3 Holdings, LLC ("8point3 Holdings"), a jointly owned entity to own, operate and control a separate portfolio of existing residential lease assets, that was purchased from Capital Dynamics. Hannon Armstrong provided all of the necessary initial capital contribution to 8point3 Holdings that was used to purchase this portfolio and Hanon Armstrong owns 45.1% of the equity in 8point3 Holdings. In connection with the formation of this joint venture, we received a 44.9% of the equity interest for a minimal value. SunStrong owns the remaining 10% of the equity in 8point3 Holdings.
With respect to our interest in the SunStrong and SunStrong Partners, we have offered certain substantive, non-standard indemnities to the investees or third party tax equity investors, related to cash flow losses arising from a recapture of California property taxes on account of a change in ownership, recapture of federal tax attributes, and any cash flow losses from leases that do not generate the promised savings to homeowners or tax equity investors. The maximum exposure to loss arising from the indemnification for SunStrong is limited to the consideration received for the solar power systems. The maximum exposure to loss arising from the indemnification for SunStrong Partners is limited to $250 million. Our retention of these indemnification obligations may require us to absorb losses that are not proportionate with our equity interests. As such, we determined that the investees are variable interest entities.
Based on the assessment of the required criteria for consolidation, we determined that we do not have the power to unilaterally make decisions that affect the performance of these investees. Under the respective operating and governance agreements, we and Hannon Armstrong are given equal governing rights and all major decisions, including among others, approving or modifying the budget, terminating service providers, incurring indebtedness, refinancing any existing loans, declaring distributions, commencing or settling any claims. Therefore, we concluded that these investees are under joint control and we are not the primary beneficiary of these investees.
During the second quarter of fiscal 2020, we received a total of $7.7 million in cash proceeds. Proceeds of $7.2 million were received from SunStrong Partners and proceeds of $0.5 million were received from SunStrong. The distribution was in accordance with the original investment agreements for SunStrong Partners upon closing of the tax equity fund and was approved by the SunStrong Board of Directors on June 24, 2020. The distribution reduced our equity investment balance in SunStrong Partners and SunStrong classified in "other long-term assets" on our condensed consolidated balance sheet.
In September 2020, we established a new residential lease fund (“Ultralight 2”) for solar and storage systems. The fund was established under SunStrong Partners, our existing joint venture with Hannon Armstrong to form a new cash equity limited liability corporation. The new fund met the criteria for reassessment of SunStrong Partners under the VIE model. Based on the reassessment performed, the new fund did not change our prior conclusion that we are not the primary beneficiary of SunStrong Partners, and therefore, do not consolidate it in our condensed consolidated financial statements.
We recorded an additional $0.1 million investment to establish Ultralight 2. In addition, we also recorded a $9.2 million receivable and $5.4 million customer advance recorded in "Prepaid expenses and other current assets" on our condensed consolidated balance sheet.
We have elected the FVO in accordance with the guidance in ASC 825, Financial Instruments, for our investments in SunStrong, SunStrong Partners, and 8point3 Holdings. Refer to Note 8. Fair Value Measurements.
Summarized Financial Information of Unconsolidated VIEs
The following table presents summarized financial statements for SunStrong, a significant investee, based on unaudited information provided to us by the investee:1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Summarized statements of operations information:
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
31,299
|
|
|
$
|
23,288
|
|
|
$
|
90,056
|
|
|
$
|
46,450
|
|
|
Gross income (loss)
|
|
1,057
|
|
|
(11,189)
|
|
|
(5,839)
|
|
|
(12,398)
|
|
|
Net income (loss)
|
|
13,596
|
|
|
(9,162)
|
|
|
35,019
|
|
|
(5,906)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Summarized balance sheet information:
|
|
|
|
|
|
Current assets
|
|
$
|
89,684
|
|
|
$
|
225,576
|
|
|
Long-term assets
|
|
1,325,344
|
|
|
1,049,451
|
|
|
Current liabilities
|
|
48,280
|
|
|
125,601
|
|
|
Long-term liabilities
|
|
1,085,962
|
|
|
847,365
|
|
|
|
|
|
|
|
1 Note that amounts are reported one quarter in arrears as permitted by applicable guidance.
Consolidated VIEs
Our sale of solar power systems to residential and commercial customers in the United States are eligible for ITC. Under the current law, the ITC was reduced from approximately 30% of the cost of the solar power systems to approximately 26% for solar power systems placed into service after December 31, 2019, and then will be further reduced to approximately 22% for solar power systems placed into service after December 31, 2020, before being reduced permanently to 10% for commercial projects and 0% for residential projects. IRS guidance on the current law provides for the ability to obtain a safe harbor with respect to the ITC on qualifying solar power systems, allowing preservation of the current ITC rates for projects that are completed after the scheduled reduction in rates assuming other required criteria as prescribed by the IRS are met.
In September 2019, we entered into the Solar Sail LLC ("Solar Sail") and Solar Sail Commercial Holdings, LLC ("Solar Sail Commercial") joint ventures with Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“Hannon Armstrong”), to finance the purchase of 200 MWs of panel inventory in accordance with IRS safe harbor guidance, to preserve the 30% federal ITC for third-party owned commercial and residential systems. The companies expect to increase the volume in later years, for which Hannon Armstrong has extended a secured financing of up to $112.6 million as of September 27, 2020 (Refer to Note 12, Debt and Credit Sources for other terms and conditions of this facility). The portion of the value of the safe harbored panels was funded by equity contributions in the joint venture of $6.0 million each by SunPower and Hannon Armstrong.
Based on the relevant accounting guidance summarized above, we determined that Solar Sail and Solar Sail Commercial are VIEs and after performing the assessment of required criteria for consolidation, we determined that we are the primary beneficiary of Solar Sail and Solar Sail Commercial as we have power to direct the activities that significantly impact the entity’s economic performance and we have exposure to significant profits or losses, and as such, we consolidate both of these entities.
Total revenue of the consolidated investees was $4.7 million and $8.1 million for the three and nine months ended September 27, 2020, respectively. The assets of our consolidated investees are restricted for use only by the particular investee and are not available for our general operations. As of September 27, 2020, we had $121.4 million of assets from the consolidated investees.
Related-Party Transactions with Investees
Related-party transactions with investees are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Accounts receivable
|
|
$
|
14,284
|
|
|
$
|
23,900
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
—
|
|
|
7,540
|
|
|
Contract liabilities
|
|
$
|
27,938
|
|
|
$
|
29,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and fees received from investees for products/services
|
|
47,378
|
|
|
38,963
|
|
|
146,570
|
|
|
60,369
|
|
Note 12. DEBT AND CREDIT SOURCES
The following table summarizes our outstanding debt on our condensed consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2020
|
|
December 29, 2019
|
|
(In thousands)
|
|
Face Value
|
|
Short-term
|
|
Long-term
|
|
Total
|
|
Face Value
|
|
Short-term
|
|
Long-term
|
|
Total
|
|
Convertible debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.875% debentures due 2021
|
|
$
|
301,583
|
|
|
$
|
301,258
|
|
|
$
|
—
|
|
|
$
|
301,258
|
|
|
$
|
400,000
|
|
|
$
|
—
|
|
|
$
|
399,058
|
|
|
$
|
399,058
|
|
|
4.00% debentures due 2023
|
|
425,000
|
|
|
—
|
|
|
422,132
|
|
|
422,132
|
|
|
425,000
|
|
|
—
|
|
|
421,201
|
|
|
421,201
|
|
|
CEDA loan
|
|
30,000
|
|
|
—
|
|
|
29,200
|
|
|
29,200
|
|
|
30,000
|
|
|
—
|
|
|
29,141
|
|
|
29,141
|
|
|
Non-recourse financing and other debt
|
|
138,190
|
|
|
96,625
|
|
|
39,186
|
|
|
135,811
|
|
|
131,244
|
|
|
44,473
|
|
|
83,199
|
|
|
127,672
|
|
|
|
|
$
|
894,773
|
|
|
$
|
397,883
|
|
|
$
|
490,518
|
|
|
$
|
888,401
|
|
|
$
|
986,244
|
|
|
$
|
44,473
|
|
|
$
|
932,599
|
|
|
$
|
977,072
|
|
As of September 27, 2020, the aggregate future contractual maturities of our outstanding debt, at face value, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Fiscal 2020
(remaining three months)
|
|
Fiscal 2021
|
|
Fiscal 2022
|
|
Fiscal 2023
|
|
Fiscal 2024
|
|
Thereafter
|
|
Total
|
|
Aggregate future maturities of outstanding debt
|
|
$
|
39,867
|
|
|
$
|
377,774
|
|
|
$
|
17,395
|
|
|
$
|
425,733
|
|
|
$
|
774
|
|
|
$
|
33,230
|
|
|
$
|
894,773
|
|
Convertible Debt
The following table summarizes our outstanding convertible debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2020
|
|
December 29, 2019
|
|
(In thousands)
|
|
Carrying Value
|
|
Face Value
|
|
Fair Value1
|
|
Carrying Value
|
|
Face Value
|
|
Fair Value1
|
|
Convertible debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.875% debentures due 2021
|
|
$
|
301,258
|
|
|
$
|
301,583
|
|
|
$
|
296,794
|
|
|
$
|
399,058
|
|
|
$
|
400,000
|
|
|
$
|
371,040
|
|
|
4.00% debentures due 2023
|
|
422,132
|
|
|
425,000
|
|
|
401,124
|
|
|
421,201
|
|
|
425,000
|
|
|
348,628
|
|
|
|
|
$
|
723,390
|
|
|
$
|
726,583
|
|
|
$
|
697,918
|
|
|
$
|
820,259
|
|
|
$
|
825,000
|
|
|
$
|
719,668
|
|
1 The fair value of the convertible debt was determined using Level 2 inputs based on quarterly market prices as reported by an independent pricing source.
Our outstanding convertible debentures are senior, unsecured obligations ranking equally with all of our existing and future senior unsecured indebtedness.
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. Interest is payable semi-annually, beginning on December 1, 2014. An aggregate principal amount of $250.0 million of the 0.875% debentures due 2021 was initially acquired by Total. The 0.875% debentures due 2021 are 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 is 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), which provides Total the right to acquire up to 4,865,886 shares of our common stock after giving effect to the repurchases described below. 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 0.875% debentures due 2021. The applicable conversion rate may further adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 0.875% debentures due 2021.
During the three and nine months ended September 27, 2020, we purchased $8.1 million and $98.4 million respectively, of aggregated principal amount of the 0.875% debentures due 2021 for approximately $95.1 million, net. Total held a principal amount of $56.4 million of the total convertible debt repurchased and the remaining convertible debt repurchased was held by other third-party investors. The purchases and early retirements resulted in a gain from extinguishment of debt of approximately $0.1 million and $3.1 million in the three and nine months ended September 27, 2020 respectively, which represented the difference between the book value of the convertible notes, net of the remaining unamortized discount prior to repurchase and the reacquisition price of the convertible notes upon repurchase. The gain was recorded within “Other, net” on the condensed consolidated statement of operations. If not earlier repurchased or converted, the 0.875% debentures due 2021 mature on June 1, 2021.
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 were 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 was 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.
Other Debt and Credit Sources
Financing for Safe Harbor Panels Inventory
On September 27, 2019, we entered into a joint venture with Hannon Armstrong, to finance up to 200 MWs of panels inventory, preserving the 30% federal ITC for third-party owned commercial and residential systems and meeting safe harbor guidelines.
The loan carries an interest rate of 7.5% per annum payable quarterly. Principal amount on the loan is expected to be repaid quarterly from the financing proceeds of the underlying projects. The ultimate maturity date for the loan is June 30, 2022. As of September 27, 2020, we have $96.8 million outstanding under this facility. During the three and nine months ended September 27, 2020, we repaid $2.6 million and $4.2 million, respectively and did not have any additional drawdowns.
Loan Agreement with California Enterprise Development Authority ("CEDA")
In 2010, we borrowed the proceeds of the $30.0 million aggregate principal amount of CEDA's tax-exempt Recovery Zone Facility Revenue Bonds (SunPower Corporation - Headquarters Project) Series 2010 (the "Bonds") maturing April 1, 2031 under a loan agreement with CEDA. The Bonds mature on April 1, 2031, bear interest at a fixed rate of 8.50% through maturity, and include customary covenants and other restrictions on us. As of September 27, 2020, the fair value of the Bonds was $30.6 million, determined by using Level 2 inputs based on quarterly market prices as reported by an independent pricing source.
Revolving Credit Facility with Credit Agricole
On October 29, 2019, we entered into a Green Revolving Credit Agreement (the “2019 Revolver”) with Crédit Agricole Corporate and Investment Bank (“Credit Agricole”), as lender, with a revolving credit commitment of $55.0 million. The 2019 Revolver contains affirmative covenants, events of default and repayment provisions customarily applicable to similar facilities and has a per annum commitment fee of 0.05% on the daily unutilized amount, payable quarterly. Loans under the 2019 Revolver bear either an adjusted LIBOR interest rate for the period elected for such loan or a floating interest rate of the higher of prime rate, federal funds effective rate, or LIBOR for an interest period of one month, plus an applicable margin, ranging from 0.25% to 0.60%, depending on the base interest rate applied, and each matures on the earlier of April 29, 2021, or the termination of commitments thereunder. Our payment obligations under the 2019 Revolver are guaranteed by Total SE up to the maximum aggregate principal amount of $55.0 million. In consideration of the commitments of Total SE, we are required to pay them a guaranty fee of 0.25% per annum on any amounts borrowed under the 2019 Revolver and to reimburse Total SE for any amounts paid by them under the parent guaranty. We have pledged the equity of a wholly-owned subsidiary that holds our shares of Enphase Energy, Inc. common stock to secure our reimbursement obligation under the parent guaranty. We have also agreed to limit our ability to draw funds under the 2019 Revolver to no more than 67% of the fair market value of the common stock held by our subsidiary at the time of the draw.
As of both September 27, 2020 and December 29, 2019, we had no outstanding borrowings under the Revolver.
September 2011 Letter of Credit Facility with Deutsche Bank and Deutsche Bank Trust Company Americas (together, "Deutsche Bank Trust")
In September 2011, we entered into a letter of credit facility with Deutsche Bank Trust which provides for the issuance, upon our request, of letters of credit to support our obligations in an aggregate amount not to exceed $200.0 million. Each letter of credit issued under the facility is fully cash-collateralized and we have entered into a security agreement with Deutsche Bank Trust, granting them a security interest in a cash collateral account established for this purpose.
As of September 27, 2020 and December 29, 2019, letters of credit issued and outstanding under the Deutsche Bank Trust facility totaled $2.6 million and $3.6 million, respectively, which were fully collateralized with restricted cash on the condensed consolidated balance sheets.
Other Facilities
Asset-Backed Loan with Bank of America
On March 29, 2019, we entered in a Loan and Security Agreement with Bank of America, N.A, which provides a revolving credit facility secured by certain inventory and accounts receivable in the maximum aggregate principal amount of $60.0 million. The Loan and Security Agreement contains negative and affirmative covenants, events of default and repayment and prepayment provisions customarily applicable to asset-backed credit facilities. The facility bears a floating interest rate of LIBOR plus an applicable margin, and matures on the earliest of March 29, 2022, if the balance of the revolver at the time is not zero, March 1, 2021 (a date that is 91 days prior to the maturity of our 0.875% debentures due 2021), or the termination of the commitments thereunder. On September 8, 2020, we signed an amendment with Bank of America, that provides that if we pay the full outstanding balance 91 days before the maturity of our convertible debt, and maintain the outstanding at zero during that period of 91 days, as well as immediately after the repayment of the 0.875% debentures due 2021, then the convert maturity does not trigger the termination of the Asset-Backed Loan. During the three and nine months ended September 27, 2020 we repaid $28.1 million and $40.4 million, respectively. During the three and nine months ended September 27, 2020, we drew an additional $25.3 million and $46.4 million, respectively. We had a balance outstanding of $25.2 million as of September 27, 2020.
SunTrust Facility
On June 28, 2018, we entered in a Financing Agreement with SunTrust Bank, which provides a revolving credit facility in the maximum aggregate principal amount of $75.0 million. Each loan drawn from the facility bears interest at either a base rate of federal funds rate plus an applicable margin or a floating interest rate of LIBOR plus an applicable margin, and matures no later than three years. As of both September 27, 2020 and December 29, 2019, we had $75.0 million in borrowing capacity under this limited recourse construction financing facility. We have not drawn any amounts under this facility as of September 27, 2020.
Non-recourse Financing and Other Debt
In order to facilitate the construction, sale or ongoing operation of certain solar projects, including our residential leasing program, we regularly obtain project-level financing. These financings are secured either by the assets of the specific project being financed or by our equity in the relevant project entity and the lenders do not have recourse to our general assets for repayment of such debt obligations, and hence the financings are referred to as non-recourse. Non-recourse financing is typically in the form of loans from third-party financial institutions, but also takes other forms, including partnership flip structures, sale-leaseback arrangements, or other forms commonly used in the solar or similar industries. We may seek non-recourse financing covering solely the construction period of the solar project or may also seek financing covering part or all of the operating life of the solar project. We classify non-recourse financings on our condensed consolidated balance sheets in accordance with their terms; however, in certain circumstances, we may repay or refinance these financings prior to stated maturity dates in connection with the sale of the related project or similar such circumstances. As of September 27, 2020, we had $15.7 million outstanding under these financings.
We also enter other debt arrangements to finance operations. The following presents a summary of these financing arrangements, including non-recourse debt:
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Aggregate Carrying Value1
|
|
|
|
(In thousands)
|
|
September 27, 2020
|
|
December 29, 2019
|
|
Balance Sheet Classification
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
Non-Recourse Project Debt:
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|
|
|
|
|
|
|
Arizona loan2
|
|
$
|
5,742
|
|
|
$
|
6,111
|
|
|
Short-term debt and Long-term debt
|
|
Various construction project debt3
|
|
$
|
9,917
|
|
|
$
|
3,004
|
|
|
Short-term debt
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1 Based on the nature of the debt arrangements included in the table above, and our intention to fully repay or transfer the obligations at their face values plus any applicable interest, we believe their carrying value materially approximates fair value, which is categorized within Level 3 of the fair value hierarchy.
2 In fiscal 2013, we entered into a financing agreement with PNC Energy Capital, LLC to finance our construction projects. Interest is calculated at a per annum rate equal to LIBOR plus 4.13%.
3 In the fourth quarter of fiscal 2019 and throughout fiscal 2020, we entered into various financing agreements with Fifth Third Bank, National Association, to finance our construction projects. The amount borrowed is non-recourse in nature and cannot exceed the total costs of the project. Each draw bears interest on the unpaid amount at a per annum rate equal to LIBOR. The loan matures at the earliest of 85 days after the project is placed in service;9 months after the initial borrowing date; or the first anniversary of satisfaction of the closing conditions set forth by the Lenders, including the delivery of the signed loan agreement by the borrower.
Note 13. RELATED PARTY TRANSACTIONS
In connection with the Spin-Off, the Company entered into certain agreements with Maxeon Solar including the Transition Services Agreement, supply agreement, and product collaboration agreement.
The below table summarizes the Company’s transactions with Maxeon Solar for the three and nine months ended September 27, 2020:
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|
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|
|
|
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|
|
|
|
Three Months Ended
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|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
|
September 27, 2020
|
|
|
Purchases of photovoltaic modules (recorded in cost of revenue)
|
|
$
|
18,895
|
|
|
|
$
|
18,895
|
|
|
|
Research and development expenses reimbursement
|
|
$
|
3,638
|
|
|
|
$
|
3,638
|
|
|
|
Income from transition services agreement, net
|
|
$
|
1,889
|
|
|
|
$
|
1,889
|
|
|
The Company had the following balances related to transactions with Maxeon Solar as of September 27, 2020:
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|
|
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|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
September 27, 2020
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|
|
Prepaid and other current assets
|
|
|
$
|
16,017
|
|
|
|
Accrued liabilities
|
|
|
$
|
2,373
|
|
|
|
Accounts payable
|
|
|
$
|
18,895
|
|
|
Note 14. INCOME TAXES
In the three months ended September 27, 2020, our income tax provision of $36.7 million on a profit from continuing operations before income taxes and equity in earnings of unconsolidated investees of $146.4 million was primarily due to associated domestic tax expenses arising from the taxable gain related to the Spin-Off, and foreign withholding taxes from foreign dividend distributions. Our income tax provision of $2.9 million in the three months ended September 29, 2019 on a profit from continuing operations before income taxes and equity in earnings of unconsolidated investees of $17.4 million was primarily due to tax expense in foreign jurisdictions that were profitable.
In the nine months ended September 27, 2020, our income tax provision of $38.7 million on a profit from a continuing operations before income taxes and equity in earnings of unconsolidated investees of $223.1 million was primarily due to domestic tax expense arising from the taxable gain related to the Spin-Off, and foreign withholding taxes from foreign dividend distributions. Our income tax provision of $10.1 million in the nine months ended September 29, 2019 on a profit from continuing operations before income taxes and equity in earnings of unconsolidated investees of $136.8 million was primarily due to the projected tax expense in foreign jurisdictions that were profitable, and a net change in valuation allowance from a foreign jurisdiction.
In the three and nine months ended September 27, 2020, in accordance with FASB guidance for interim reporting of income tax, we have computed our provision for income taxes based on a projected annual effective tax rate while excluding loss jurisdictions which cannot be benefited. Our projected effective tax rate is based on forecasted annualized results which may fluctuate significantly in future periods, in particular due to the uncertainty in our annual forecasts resulting from the unpredictable duration and severity of the COVID-19 pandemic on our operating results.
Total liabilities associated with uncertain tax positions were $8.2 million and $7.2 million as of September 27, 2020 and December 29, 2019, respectively. There have not been any material changes to our uncertain tax position as of September 27, 2020 as compared to our uncertain tax position as of December 29, 2019.
In June 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the 2015 U.S. tax court decision in Altera Co v. Commissioner, regarding the inclusion of stock-based compensation costs under cost sharing agreements. SunPower previously quantified and recorded the impact of including such compensation costs, as described in the Ninth Circuit decision, of $5.8 million in the fourth quarter of fiscal 2019, as a reduction to deferred tax asset, fully offset by a reduction to valuation allowance of the same amount, without any income tax expense impact. We will reevaluate the deferred tax disclosure at the end of the fiscal year 2020.
Note 15. NET INCOME (LOSS) PER SHARE
We calculate basic net income (loss) per share by dividing earnings allocated to common stockholders by the basic weighted-average number of common shares outstanding for the period.
Diluted weighted-average shares is computed using basic weighted-average number of common shares outstanding plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities include stock options, restricted stock units, and the outstanding senior convertible debentures.
ASC 260 requires that companies use income from continuing operations as a "control number" or benchmark to determine whether potential common shares are dilutive or antidilutive. When calculating discontinued operations, we used the same number of potential common shares used in computing the diluted per-share amount of income from continuing operations in computing all other reported diluted per-share amounts, even if the effect will be antidilutive compared to their respective basic per-share amounts.
The following table presents the calculation of basic and diluted net income (loss) per share attributable to stockholders:
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|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands, except per share amounts)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Basic net income per share:
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income attributable to stockholders - continuing operations
|
|
$
|
109,450
|
|
|
$
|
18,644
|
|
|
$
|
186,880
|
|
|
$
|
159,459
|
|
|
Net loss attributable to stockholders - discontinued operations
|
|
$
|
(64,824)
|
|
|
(33,661)
|
|
|
$
|
(124,307)
|
|
|
$
|
(142,741)
|
|
|
Net income attributable to stockholders
|
|
44,626
|
|
|
(15,017)
|
|
|
62,573
|
|
|
16,718
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares
|
|
170,113
|
|
|
142,553
|
|
|
169,646
|
|
|
142,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share - continuing operations
|
|
$
|
0.64
|
|
|
$
|
0.13
|
|
|
$
|
1.10
|
|
|
$
|
1.12
|
|
|
Basic net loss per share - discontinued operations
|
|
$
|
(0.38)
|
|
|
$
|
(0.24)
|
|
|
$
|
(0.73)
|
|
|
$
|
(1.00)
|
|
|
Basic net income (loss) per share
|
|
$
|
0.26
|
|
|
$
|
(0.11)
|
|
|
$
|
0.37
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share1
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income attributable to stockholders - continuing operations
|
|
$
|
109,450
|
|
|
$
|
18,644
|
|
|
$
|
186,880
|
|
|
$
|
159,459
|
|
|
Add: Interest expense on 4.00% debentures due 2023, net of tax
|
|
3,358
|
|
|
—
|
|
|
10,066
|
|
|
10,073
|
|
|
Add: Interest expense on 0.875% debentures due 2021, net of tax
|
|
467
|
|
|
691
|
|
|
1,507
|
|
|
2,074
|
|
|
Net income available to common stockholders - continuing operations
|
|
$
|
113,275
|
|
|
$
|
19,335
|
|
|
$
|
198,453
|
|
|
$
|
171,606
|
|
|
Net loss available to common stockholders - discontinued operations
|
|
$
|
(64,824)
|
|
|
(33,661)
|
|
|
$
|
(124,307)
|
|
|
(142,741)
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares
|
|
170,113
|
|
|
142,553
|
|
|
169,646
|
|
|
142,248
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
3,560
|
|
|
4,827
|
|
|
3,354
|
|
|
2,488
|
|
|
0.875% debentures due 2021
|
|
7,785
|
|
|
8,203
|
|
|
10,056
|
|
|
8,203
|
|
|
4.00% debentures due 2023
|
|
17,068
|
|
|
—
|
|
|
17,068
|
|
|
13,922
|
|
|
Dilutive weighted-average common shares:
|
|
198,526
|
|
|
155,583
|
|
|
200,124
|
|
|
166,861
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive net income per share - continuing operations
|
|
$
|
0.57
|
|
|
$
|
0.12
|
|
|
$
|
0.99
|
|
|
$
|
1.03
|
|
|
Dilutive net loss per share - discontinued operations
|
|
$
|
(0.33)
|
|
|
(0.22)
|
|
|
$
|
(0.62)
|
|
|
(0.86)
|
|
|
Dilutive net income (loss) per share
|
|
$
|
0.24
|
|
|
(0.10)
|
|
|
$
|
0.37
|
|
|
0.17
|
|
The following is a summary of outstanding anti-dilutive potential common stock that was excluded from diluted net loss per share attributable to stockholders in the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Restricted stock units
|
|
382
|
|
|
559
|
|
|
4,774
|
|
|
837
|
|
|
4.00% debentures due 2023
|
|
—
|
|
|
13,922
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16. STOCK-BASED COMPENSATION
The following table summarizes the consolidated stock-based compensation expense by line item in our condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Cost of revenue
|
|
$
|
968
|
|
|
$
|
854
|
|
|
$
|
2,154
|
|
|
$
|
1,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
38
|
|
|
343
|
|
|
575
|
|
|
979
|
|
|
Sales, general and administrative
|
|
3,448
|
|
|
3,778
|
|
|
10,657
|
|
|
11,116
|
|
|
Total stock-based compensation expense
|
|
$
|
4,454
|
|
|
$
|
4,975
|
|
|
$
|
13,386
|
|
|
$
|
13,681
|
|
The following table summarizes the consolidated stock-based compensation expense by type of award:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands)
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Restricted stock units
|
|
$
|
4,581
|
|
|
$
|
5,296
|
|
|
$
|
13,087
|
|
|
$
|
14,824
|
|
|
Change in stock-based compensation capitalized in inventory
|
|
(127)
|
|
|
(321)
|
|
|
299
|
|
|
(1,143)
|
|
|
Total stock-based compensation expense
|
|
$
|
4,454
|
|
|
$
|
4,975
|
|
|
$
|
13,386
|
|
|
$
|
13,681
|
|
In connection with the Spin-Off of Maxeon Solar and in accordance with the employee matters agreement we entered into with Maxeon Solar, we made certain adjustments to the unvested restricted stock-based compensation awards with the intention of preserving the intrinsic value of the awards prior to the Spin-Off. Unvested restricted stock unit awards and performance-contingent awards have been adjusted to provide holders with restricted stock units awards and performance-contingent awards in the company that employs such employee following the Spin-Off. Consequently, all outstanding restricted stock awards and stock options for employees transferred to Maxeon Solar were cancelled upon the Spin-Off.
The modification resulted in an additional grant of shares to the employees of SunPower, with no changes to other terms of the original grant. This resulted in an incremental compensation charge of $3.9 million to be recognized over the remaining term of the original grant. An incremental compensation charge of $0.3 million arising from this modification was recorded in net loss from continuing in the consolidated statement of operations for the three and nine months ended September 27, 2020.
Note 17. SEGMENT AND GEOGRAPHICAL INFORMATION
In the third quarter of fiscal 2020, and concurrent with the Spin-Off of the majority of our former SunPower Technologies segment, we reorganized our business into new segments to align our focus on the U.S. downstream DG market and new business model driven by financial offerings, solar energy systems storage, solutions and software services. Previously, we operated under two end-customer segments, comprised of our (i) SunPower Energy Services, and (ii) SunPower Technologies. The SunPower Energy Services segment referred to our downstream business consisting of sales of solar energy solutions to residential and commercial end-customers, and the SunPower Technologies segment referred to global manufacturing and our large-scale solar products and systems and international component sales.
Under the new segmentation, Residential, Light Commercial ("RLC") refers to sales of solar energy solutions previously included in the legacy SunPower Energy Services segment, including sales to our third-party dealer network and resellers, storage solutions, cash and loan sales and long-term leases directly to end customers. The Commercial and Industrial Solutions segment ("C&I Solutions") refers to direct sales of turn-key engineering, procurement and construction ("EPC") services, and sales of energy under power purchase agreements ("PPAs"). Certain legacy businesses consisting of worldwide power plant project development and project sales which we are winding down, as well as U.S. manufacturing, are not significant to overall operations, and are deemed non-core to our other businesses and classified as "Others". Certain key cross-functional support functions and responsibilities including corporate strategy, treasury, tax and accounting support and services, among others, continue to be centrally managed within the Corporate function.
Each segment is managed by a business general manager that reports to our Chief Executive Officer, as the chief operating decision maker (“CODM”), who reviews our business, manages resource allocations and measures performance of our activities between the RLC, C&I Solutions and Other segments. The CODM further views the business performance of each segment under two key sources of revenue - Dev Co and Power Co. Dev Co refers to our solar origination and installation revenue stream within each segment such as sale of solar power systems with our dealers and resellers network as well as installation and EPC revenues while Power Co refers to our post-system sale recurring services revenues, mainly from, asset management services and O&M services through our SunStrong partnership dealer services for RLC and our commercial dealer network for C&I. The risk profile each of the revenue stream is different and therefore, the segregation of Dev Co and Power Co provides the CODM with appropriate information to review business performance and allocate resources to each segment.
Adjustments Made for Segment Purposes
Adjustments Based on International Financial Reporting Standards (“IFRS”)
Legacy utility and power plant projects
We included adjustments related to the revenue recognition of certain utility and power plant projects based on percentage-of-completion accounting and, when relevant, the allocation of revenue and margin to our project development efforts at the time of initial project sale. Under IFRS, such projects are accounted for when the customer obtains control of the promised goods or services which generally results in earlier recognition of revenue and profit than U.S. GAAP. Over the life of each project, cumulative revenue and gross margin will eventually be equivalent under both U.S. GAAP and IFRS; however, revenue and gross margin will generally be recognized earlier under IFRS.
Legacy sale-leaseback transactions
We included adjustments related to the revenue recognition on certain legacy sale-leaseback transactions entered into before December 31, 2018, based on the net proceeds received from the buyer-lessor. Under U.S. GAAP, these transactions were accounted for under the financing method in accordance with the applicable accounting guidance. Under such guidance, no revenue or profit is recognized at the inception of the transaction, and the net proceeds from the buyer-lessor are recorded as a financing liability. Imputed interest is recorded on the liability equal to our incremental borrowing rate adjusted solely to prevent negative amortization. Under IFRS, such revenue and profit are recognized at the time of sale to the buyer-lessor if certain criteria are met. Upon adoption of IFRS 16, Leases, on December 31, 2018, IFRS is aligned with U.S. GAAP.
Mark-to-market gain (loss) on equity investments
We recognize adjustments related to the fair value of equity investments with readily determinable fair value based on the changes in the stock price of these equity investments at every reporting period. Under U.S. GAAP, mark-to-market gains and losses due to changes in stock prices for these securities are recorded in earnings while under IFRS, an election can be made to recognize such gains and losses in other comprehensive income. Such an election was made by Total SE. Further, we elected the Fair Value Option (“FVO”) for some of our equity investments, and we adjust the carrying value of those investments based on their fair market value calculated periodically. Such option is not available under IFRS, and equity method accounting is required for those investments. Management believes that excluding these adjustments on equity investments is consistent with our internal reporting process as part of our status as a consolidated subsidiary of Total SE and better reflects our ongoing results.
Other Adjustments
Intersegment gross margin
Our U.S. manufacturing operations that are part of the Others segment manufacture and sell solar modules to both operating segments, RLC and C&I Solutions, based on transfer prices determined based on management's assessment of market-based pricing terms. Such intersegment sales and related costs are eliminated at the corporate level to derive our condensed consolidated financial results.
Gain/loss on sale and impairment of residential lease assets
In fiscal 2018 and 2019, in an effort to sell all the residential lease assets owned by us, we sold membership units representing a 49% membership interest in our residential lease business and retained a 51% membership interest. The loss on divestment, including adjustments to contingent consideration shortly after the closing of the transaction, and the remaining unsold residential lease assets impairment with its corresponding depreciation savings are excluded from our non-GAAP results as they are non-recurring in nature and cash in nature and not reflective of ongoing operating results. Additionally, in the third quarter of fiscal 2019, in continuation with our intention to sell all the residential lease assets owned by us, we sold the remainder of residential lease assets still owned by us, that were not previously sold. Gain/loss from such activity is excluded from our non-GAAP results as it is non-cash in nature and not reflective of ongoing operating results.
Construction revenue on solar services contracts
Upon adoption of ASC 842 in the first quarter of fiscal 2019, revenue and cost of revenue on solar services contracts with residential customers are recognized ratably over the term of those contracts, beginning when the projects are placed in service. For segment reporting purposes, we recognize revenue and cost of revenue upfront based on the expected cash proceeds to align with the legacy lease accounting guidance. We believe it is appropriate to recognize revenue and cost of revenue upfront based on total expected cash proceeds as it better reflects our ongoing results as such method aligns revenue and costs incurred most accurately in the same period. Starting in second quarter of fiscal 2020, we no longer have this non-GAAP measure.
Stock-based compensation
Stock-based compensation relates primarily to our equity incentive awards. Stock-based compensation is a non-cash expense that is dependent on market forces that are difficult to predict. We believe that this adjustment for stock-based compensation provides investors with a basis to measure our core performance, including the ability to compare our performance with the performance of other companies, without the period-to-period variability created by stock-based compensation.
Amortization of intangible assets
We incur amortization of intangible assets as a result of acquisitions, which includes patents, purchased technology, project pipeline assets, and in-process research and development. We believe that it is appropriate to exclude these amortization charges from our non-GAAP financial measures as they arise from prior acquisitions, are not reflective of ongoing operating results, and do not contribute to a meaningful evaluation of our past operating performance.
Business process improvements
During the second quarter of fiscal 2019, we initiated a project to improve our manufacturing and related processes to improve gross margin in coming years and engaged third-party experts to consult on business process improvements. Management believes it is appropriate to exclude these consulting expenses from our non-GAAP financial measures as they are non-recurring in nature and are not reflective of our ongoing operating results.
Gain on business divestiture
In fiscal 2019, we entered into a transaction pursuant to which we sold membership interest in certain of our subsidiaries that own leasehold interests in projects subject to sale-leaseback financing arrangements. In the second quarter of fiscal 2020, we sold our Operations and Maintenance services contracts. We recognized a gain relating to this business divestiture. We believe that it is appropriate to exclude this gain from our segment results as it is not reflective of ongoing operating results.
Transaction-related costs
In connection with material transactions such as acquisition or divestiture of a business, we incur transaction costs including legal and accounting fees. We believe that it is appropriate to exclude these costs from our segment results as they would not have otherwise been incurred as part of our business operations and are therefore not reflective of ongoing operating results.
Non-cash interest expense
We incur non-cash interest expense related to the amortization of items such as original issuance discounts on our debt. We exclude non-cash interest expense because the expense does not reflect our financial results in the period incurred. We believe that this adjustment for non-cash interest expense provides investors with a basis to evaluate our performance, including compared with the performance of other companies, without non-cash interest expense.
Restructuring expenses
We incur restructuring expenses related to reorganization plans aimed towards realigning resources consistent with our global strategy and improving our overall operating efficiency and cost structure. Although we have engaged in restructuring activities in the past, each has been a discrete event based on a unique set of business objectives. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.
Litigation
We may be involved in various instances of litigation, claims and proceedings that result in payments or recoveries. We exclude gains or losses associated with such events because the gains or losses do not reflect our underlying financial results in the period incurred. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.
Gain on convertible notes repurchased
In connection with the early repurchase of aggregate principal amount of our 0.875% debentures due 2021, we recognized a gain, which represented the difference between the book value of the convertible debentures, net of the remaining unamortized discount prior to repurchase and the reacquisition price of the convertible notes upon repurchase. We believe that it is appropriate to exclude this gain from our non-GAAP results as it is not reflective of our ongoing operating results.
Segment and Geographical Information
The following tables present segment results for the three months and nine months ended September 27, 2020 and September 29, 2019 for revenue, gross margin, and adjusted EBITDA, each as reviewed by the CODM, and their reconciliation to our condensed consolidated results under U.S. GAAP, as well as information about significant customers and revenue by geography based on the destination of the shipments, and property, plant and equipment, net by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
September 27, 2020
|
|
September 29, 2019
|
|
(In thousands):
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dev Co
|
|
$
|
190,480
|
|
|
$
|
73,790
|
|
|
$
|
2,688
|
|
|
$
|
217,112
|
|
|
$
|
63,127
|
|
|
$
|
8,289
|
|
|
Power Co
|
|
7,230
|
|
|
544
|
|
|
75
|
|
|
2,768
|
|
|
397
|
|
|
10,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenue
|
|
—
|
|
|
—
|
|
|
7,293
|
|
|
—
|
|
|
—
|
|
|
15,612
|
|
|
Total segment revenue as reviewed by CODM
|
|
$
|
197,710
|
|
|
$
|
74,334
|
|
|
$
|
10,056
|
|
|
$
|
219,880
|
|
|
$
|
63,524
|
|
|
$
|
33,975
|
|
|
Segment gross profit as reviewed by CODM
|
|
$
|
34,779
|
|
|
$
|
5,120
|
|
|
$
|
(3,168)
|
|
|
$
|
28,609
|
|
|
$
|
2,072
|
|
|
$
|
16,860
|
|
|
Adjusted EBITDA
|
|
$
|
15,521
|
|
|
$
|
1,228
|
|
|
$
|
(3,192)
|
|
|
$
|
10,508
|
|
|
$
|
(8,954)
|
|
|
$
|
35,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 27, 2020
|
|
September 29, 2019
|
|
(In thousands):
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Residential, Light Commercial
|
|
Commercial and Industrial Solutions
|
|
Others
|
|
Revenue from external customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dev Co
|
|
$
|
571,237
|
|
|
$
|
167,543
|
|
|
$
|
2,233
|
|
|
$
|
600,263
|
|
|
$
|
155,081
|
|
|
$
|
22,899
|
|
|
Power Co
|
|
18,904
|
|
|
7,721
|
|
|
20,567
|
|
|
6,731
|
|
|
692
|
|
|
29,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenue
|
|
—
|
|
|
—
|
|
|
32,815
|
|
|
—
|
|
|
—
|
|
|
26,237
|
|
|
Total segment revenue as reviewed by CODM
|
|
$
|
590,141
|
|
|
$
|
175,264
|
|
|
$
|
55,615
|
|
|
$
|
606,994
|
|
|
$
|
155,773
|
|
|
$
|
78,728
|
|
|
Segment gross profit as reviewed by CODM
|
|
$
|
94,501
|
|
|
$
|
14,533
|
|
|
$
|
(18,906)
|
|
|
$
|
64,428
|
|
|
$
|
8,031
|
|
|
$
|
5,751
|
|
|
Adjusted EBITDA
|
|
$
|
31,347
|
|
|
$
|
(1,245)
|
|
|
$
|
(19,279)
|
|
|
$
|
14,277
|
|
|
$
|
(27,637)
|
|
|
$
|
29,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Segment Revenue to Condensed Consolidated GAAP Revenue
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands):
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Total segment revenue as reviewed by CODM
|
|
$
|
282,100
|
|
|
$
|
317,379
|
|
|
$
|
821,020
|
|
|
$
|
841,495
|
|
|
Adjustments to segment revenue:
|
|
|
|
|
|
|
|
|
|
Intersegment elimination
|
|
(7,294)
|
|
|
(15,612)
|
|
|
(32,816)
|
|
|
(26,237)
|
|
|
Legacy utility and power plant projects
|
|
—
|
|
|
65
|
|
|
207
|
|
|
259
|
|
|
Construction revenue on solar services contracts
|
|
—
|
|
|
(15,790)
|
|
|
(5,392)
|
|
|
(124,909)
|
|
|
Condensed consolidated GAAP revenue
|
|
$
|
274,806
|
|
|
$
|
286,042
|
|
|
$
|
783,019
|
|
|
$
|
690,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Segment Gross Profit to Condensed Consolidated GAAP Gross Profit (Loss)
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands):
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Segment gross profit
|
|
$
|
36,731
|
|
|
47,541
|
|
|
$
|
90,128
|
|
|
$
|
78,210
|
|
|
Adjustments to segment gross profit:
|
|
|
|
|
|
|
|
|
|
Intersegment elimination
|
|
1,752
|
|
|
939
|
|
|
11,604
|
|
|
19,004
|
|
|
Legacy utility and power plant projects
|
|
—
|
|
|
7
|
|
|
34
|
|
|
(993)
|
|
|
|
|
|
|
|
|
|
|
|
|
Legacy sale-leaseback transactions
|
|
—
|
|
|
181
|
|
|
(20)
|
|
|
4,688
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction revenue on solar services contracts
|
|
—
|
|
|
(1,160)
|
|
|
(4,735)
|
|
|
(18,052)
|
|
|
Gain on sale and impairment of residential lease assets
|
|
469
|
|
|
511
|
|
|
1,375
|
|
|
1,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
(623)
|
|
|
(741)
|
|
|
(1,653)
|
|
|
(1,370)
|
|
|
Amortization of intangible assets
|
|
(1,189)
|
|
|
(1,783)
|
|
|
(4,757)
|
|
|
(5,352)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed consolidated GAAP gross profit (loss)
|
|
$
|
37,140
|
|
|
$
|
45,495
|
|
|
$
|
91,976
|
|
|
$
|
77,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Segments EBITDA to Loss before income taxes and equity in losses of unconsolidated investees
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In thousands):
|
|
September 27, 2020
|
|
September 29, 2019
|
|
September 27, 2020
|
|
September 29, 2019
|
|
Segment adjusted EBITDA
|
|
$
|
13,557
|
|
|
37,119
|
|
|
$
|
10,823
|
|
|
16,504
|
|
|
Adjustments to segment adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
Legacy utility and power plant projects
|
|
—
|
|
|
7
|
|
|
34
|
|
|
(993)
|
|
|
Legacy sale-leaseback transactions
|
|
—
|
|
|
181
|
|
|
(20)
|
|
|
(5,755)
|
|
|
Construction revenue on solar services contracts
|
|
—
|
|
|
(1,160)
|
|
|
(4,735)
|
|
|
8,978
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
(4,454)
|
|
|
(4,975)
|
|
|
(13,387)
|
|
|
(13,682)
|
|
|
Amortization of intangible assets
|
|
(1,189)
|
|
|
(1,783)
|
|
|
(4,759)
|
|
|
(5,352)
|
|
|
Depreciation and amortization
|
|
(5,156)
|
|
|
(5,373)
|
|
|
(12,589)
|
|
|
(19,472)
|
|
|
Transaction-related costs
|
|
—
|
|
|
(976)
|
|
|
(1,863)
|
|
|
(3,571)
|
|
|
Litigation
|
|
(395)
|
|
|
—
|
|
|
(880)
|
|
|
—
|
|
|
Restructuring charges
|
|
97
|
|
|
(4,283)
|
|
|
(2,738)
|
|
|
(6,071)
|
|
|
Loss (gain) on sale and impairment of residential lease assets
|
|
83
|
|
|
(5,135)
|
|
|
1,122
|
|
|
(29,002)
|
|
|
Gain on business divestiture
|
|
—
|
|
|
—
|
|
|
10,529
|
|
|
143,400
|
|
|
Cash interest expense, net of interest income
|
|
(6,918)
|
|
|
(7,635)
|
|
|
(24,102)
|
|
|
(25,691)
|
|
|
Mark-to-market gain on equity investments
|
|
155,431
|
|
|
27,595
|
|
|
274,362
|
|
|
128,095
|
|
|
Gain on convertible notes repurchased
|
|
104
|
|
|
—
|
|
|
3,060
|
|
|
—
|
|
|
Equity in losses of unconsolidated investees
|
|
—
|
|
|
960
|
|
|
—
|
|
|
716
|
|
|
Net loss attributable to noncontrolling interests
|
|
230
|
|
|
(5,178)
|
|
|
(2,512)
|
|
|
(33,474)
|
|
|
Corporate
|
|
(4,985)
|
|
|
(12,010)
|
|
|
(9,261)
|
|
|
(17,855)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in loss of unconsolidated investees
|
|
$
|
146,405
|
|
|
$
|
17,354
|
|
|
$
|
223,084
|
|
|
$
|
136,775
|
|
|
|
|
|
|
|
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