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

FORM 10-Q

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

For the transition period from ______________ to ______________

Commission file number 001-34166


SPWR-20210404_G1.GIF
SunPower Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware 94-3008969
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
51 Rio Robles San Jose California 95134
(Address of Principal Executive Offices) (Zip Code)

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

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of exchange on which registered
Common Stock SPWR NASDAQ

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x    No  o

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

Large accelerated filer Accelerated filer
Emerging growth company Non-accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

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

The total number of outstanding shares of the registrant’s common stock as of April 30, 2021 was 172,521,148.


1


TABLE OF CONTENTS


2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

  April 4, 2021 January 3, 2021
Assets
Current assets:
Cash and cash equivalents $ 213,105  $ 232,765 
Restricted cash and cash equivalents, current portion 10,928  5,518 
Short-term investments 325,380  — 
Accounts receivable, net1
104,804  108,864 
Contract assets1
114,029  114,506 
Inventories 230,694  210,582 
Advances to suppliers, current portion 3,852  2,814 
Project assets - plants and land, current portion 9,746  21,015 
Prepaid expenses and other current assets1
89,109  94,251 
Total current assets 1,101,647  790,315 
Restricted cash and cash equivalents, net of current portion 5,404  8,521 
Property, plant and equipment, net 46,790  46,766 
Operating lease right-of-use assets 62,722  54,070 
Solar power systems leased, net 48,331  50,401 
Advances to suppliers, net of current portion 2,813  — 
Other intangible assets, net 298  697 
Other long-term assets 326,766  695,712 
Total assets $ 1,594,771  $ 1,646,482 
Liabilities and (Deficit) Equity    
Current liabilities:    
Accounts payable1
$ 156,552  $ 166,066 
Accrued liabilities1
113,046  121,915 
Operating lease liabilities, current portion 13,529  9,736 
Contract liabilities, current portion1
60,385  72,424 
Short-term debt 94,724  97,059 
Convertible debt, current portion1
62,456  62,531 
Total current liabilities 500,692  529,731 
Long-term debt 86,436  56,447 
Convertible debt, net of current portion1
422,749  422,443 
Operating lease liabilities, net of current portion 42,340  43,608 
Contract liabilities, net of current portion1
28,748  30,170 
Other long-term liabilities 152,943  157,597 
Total liabilities 1,233,908  1,239,996 
Commitments and contingencies (Note 8)
Equity:    
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of April 4, 2021 and January 3, 2021
—  — 
Common stock, $0.001 par value, 367,500 shares authorized; 185,354 shares issued, and 172,264 shares outstanding as of April 4, 2021; 183,442 shares issued, and 170,428 shares outstanding as of January 3, 2021
172  170 
Additional paid-in capital 2,691,423  2,685,920 
Accumulated deficit (2,133,239) (2,085,246)
Accumulated other comprehensive income 8,897  8,799 
Treasury stock, at cost: 13,090 shares of common stock as of April 4, 2021; 13,014 shares of common stock as of January 3, 2021
(207,596) (205,476)
Total stockholders' equity 359,657  404,167 
Noncontrolling interests in subsidiaries 1,206  2,319 
Total equity 360,863  406,486 
Total liabilities and equity $ 1,594,771  $ 1,646,482 
1 We have related-party balances for transactions made with Total SE and its affiliates, Maxeon Solar and unconsolidated entities in which we have a direct equity investment. These related-party balances are recorded within the "accounts receivable, net," "contract assets," "prepaid expenses and other current assets," "other long-term assets," "accounts payable," "accrued liabilities," "contract liabilities, current portion," "convertible debt, net of current portion," and "contract liabilities, net of current portion" financial statement line items on our condensed consolidated balance sheets (see Note 2, Note 8, Note 9, Note 10, and Note 11).


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

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

  Three Months Ended
  April 4, 2021 March 29, 2020
Revenue:
Solar power systems, components, and other1
$ 301,237  $ 285,289 
Residential leasing 1,120  1,324 
Solar services 4,041  3,933 
306,398  290,546 
Cost of revenue:
Solar power systems, components, and other1
254,104  258,637 
Residential leasing 601  1,296 
Solar services 1,819  1,429 
256,524  261,362 
Gross profit 49,874  29,184 
Operating expenses:
Research and development1
5,015  7,768 
Sales, general, and administrative 47,744  40,717 
Restructuring charges 3,766  1,576 
Gain on sale and impairment of residential lease assets (226) (274)
Income from transition services agreement, net1
(3,087) — 
Total operating expenses 53,212  49,787 
Operating loss (3,338) (20,603)
Other income (expense), net:
Interest income 52  404 
Interest expense1
(7,965) (9,193)
Other, net (43,471) 50,438 
Other (expense) income, net (51,384) 41,649 
(Loss) income from continuing operations before income taxes and equity in earnings of unconsolidated investees (54,722) 21,046 
Benefit from (provision for) income taxes 5,224  (885)
Net (loss) income from continuing operations (49,498) 20,161 
Loss from discontinued operations before income taxes and equity in losses of unconsolidated investees —  (21,560)
Provision for income taxes —  (984)
Equity in earnings of unconsolidated investees —  245 
Net loss from discontinued operations, net of taxes —  (22,299)
Net loss (49,498) (2,138)
Net loss from continuing operations attributable to noncontrolling interests 1,113  1,379 
Net income from discontinued operations attributable to noncontrolling interests —  (672)
Net loss attributable to noncontrolling interests 1,113  707 
Net (loss) income from continuing operations attributable to stockholders (48,385) 21,540 
Net loss from discontinued operations attributable to stockholders —  (22,971)
Net loss attributable to stockholders $ (48,385) $ (1,431)
Net (loss) income per share attributable to stockholders - basic:
Continuing operations $ (0.28) $ 0.13 
Discontinued operations $ —  $ (0.14)
Net loss per share – basic
$ (0.28) $ (0.01)
Net (loss) income per share attributable to stockholders - diluted:
Continuing operations $ (0.28) $ 0.12 
Discontinued operations $ —  $ (0.13)
Net loss per share – diluted
$ (0.28) $ (0.01)
Weighted-average shares:
Basic 171,200  168,822 
Diluted 171,200  177,277 

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


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

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

  Three Months Ended
April 4, 2021 March 29, 2020
Net loss $ (49,498) $ (2,138)
Components of other comprehensive income (loss):
Translation adjustment (2) (775)
Net change in derivatives 147  1,688 
Net gain (loss) on long-term pension liability obligation —  (49)
Provision for income taxes (47) (141)
Total other comprehensive income 98  723 
Total comprehensive loss (49,400) (1,415)
Comprehensive loss attributable to noncontrolling interests $ 1,113  $ 707 
Comprehensive loss attributable to stockholders $ (48,287) $ (708)


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

5

SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)

Three Months Ended April 4, 2021
  Common Stock          
  Shares Value Additional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated Deficit Total
Stockholders’
Equity
Noncontrolling Interests in Subsidiaries Total Equity
Balances at January 3, 2021 170,428  $ 170  $ 2,685,920  $ (205,476) $ 8,799  $ (2,085,246) $ 404,167  $ 2,319  $ 406,486 
Net loss —  —  —  —  —  (48,385) (48,385) (1,113) (49,498)
Other comprehensive income —  —  —  —  98  —  98  —  98 
Issuance of restricted stock to employees, net of cancellations 1,908  —  —  —  —  — 
Stock-based compensation expense —  —  5,437  —  —  —  5,437  —  5,437 
Bond/debentures conversion —  155  —  —  —  155  —  155 
Purchases of treasury stock (76) —  —  (2,120) —  —  (2,120) —  (2,120)
Other adjustments —  —  (89) —  —  392  303  —  303 
Balances at April 4, 2021 172,264  $ 172  $ 2,691,423  $ (207,596) $ 8,897  $ (2,133,239) $ 359,657  $ 1,206  $ 360,863 

Three Months Ended March 29, 2020
  Common Stock          
  Shares Value Additional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated Deficit Total
Stockholders’
Equity
Noncontrolling Interests in Subsidiaries Total Equity
Balances at December 29, 2019 168,121  $ 168  $ 2,661,819  $ (192,633) $ (9,512) $ (2,449,679) $ 10,163  $ 11,336  $ 21,499 
Net loss —  —  —  —  —  (1,431) (1,431) (707) (2,138)
Other comprehensive income —  —  —  —  723  —  723  —  723 
Issuance of restricted stock to employees, net of cancellations 2,452  —  —  —  —  — 
Stock-based compensation expense —  —  6,885  —  —  —  6,885  —  6,885 
Purchases of treasury stock (818) (1) —  (6,910) —  —  (6,911) —  (6,911)
Balances at March 29, 2020 169,755  $ 170  $ 2,668,704  $ (199,543) $ (8,789) $ (2,451,110) $ 9,432  $ 10,629  $ 20,061 



The accompanying notes are an integral part of these condensed consolidated financial statements.
6

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

Three Months Ended
  April 4, 2021 March 29, 2020
Cash flows from operating activities:
Net loss (49,498) (2,138)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,849  16,892 
Stock-based compensation 5,437  6,867 
Non-cash interest expense 1,505  1,910 
Equity in earnings of unconsolidated investees —  (245)
Loss (gain) on equity investments with readily determinable fair value 44,730  (49,152)
Gain on retirement of convertible debt —  (2,956)
Gain on sale of investments (1,162) — 
Deferred income taxes (3,901) (349)
Other, net (5,280) 289 
Changes in operating assets and liabilities:
       Accounts receivable 4,114  (17,880)
       Contract assets 487  295 
       Inventories (8,271) (43,061)
       Project assets 9,197  (8,881)
       Prepaid expenses and other assets 1,429  18,635 
       Operating lease right-of-use assets 2,875  2,923 
       Advances to suppliers (3,852) 8,936 
       Accounts payable and other accrued liabilities (24,152) (92,599)
       Contract liabilities (13,461) (16,130)
       Operating lease liabilities (3,429) (2,849)
Net cash used in operating activities (40,383) (179,493)
Cash flows from investing activities:
Purchases of property, plant and equipment (1,964) (6,213)
Cash paid for solar power systems (635) (610)
Cash received from sale of investments 1,200  — 
Proceeds from sale of equity investment —  46,149 
Net cash provided by (used in) investing activities (1,399) 39,326 
Cash flows from financing activities:
Proceeds from bank loans and other debt 71,323  76,544 
Repayment of bank loans and other debt (35,076) (65,730)
Proceeds from issuance of non-recourse residential and commercial financing, net of issuance costs —  9,754 
Repayment of non-recourse residential and commercial financing (9,713) — 
Cash paid for repurchase of convertible debt —  (87,141)
Receipt of contingent asset of a prior business combination —  423 
Equity offering costs paid —  (928)
Purchases of stock for tax withholding obligations on vested restricted stock (2,118) (6,914)
Net cash provided by financing activities 24,416  (73,992)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents $ —  $ (216)
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents (17,367) (214,375)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period1
$ 246,804  $ 458,657 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period1
$ 229,437  $ 244,282 
Non-cash transactions:
Costs of solar power systems funded by liabilities $ —  $ 1,184 
Property, plant and equipment acquisitions funded by liabilities $ 1,647  $ 2,385 
Right-of-use assets obtained in exchange for lease obligations $ 11,528  $ 12,461 
Accounts payable balances reclassified to short-term debt $ —  $ 5,000 
Contractual obligations satisfied by inventory $ —  $ 975 
1The "Cash, cash equivalents, restricted cash and restricted cash equivalents" balance consisted of "cash and cash equivalents", "restricted cash and cash equivalents, current portion" and "restricted cash and cash equivalents, net of current portion" financial statement line items on the condensed consolidated balance sheets for the respective periods.


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

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 technology and energy services provider 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. Distributed Generation (“DG”) storage and energy services market, providing customers control over electricity consumption and resiliency during power outages while providing cost savings to homeowners, businesses, governments, schools, and utilities through multiple offerings. Our sales channels include a strong network of 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 2. Transactions with Total and Total SE).

On August 26, 2020, we completed the 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. As a result of the Spin-Off, we no longer consolidate Maxeon Solar within our 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 statements of operations.

Liquidity

We believe that our total cash and cash equivalents will be sufficient to meet our obligations over the next 12 months from the date of issuance of our financial statements, including repayment of our 0.875% senior convertible debentures due June 1, 2021 (the "0.875% debentures due 2021"), of which an aggregate principal amount of $62.5 million was outstanding as of April 4, 2021. In addition, we have historically been successful in our ability to divest certain investments, including our investment in shares of Enphase Inc., 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. Although we have historically been able to generate liquidity, we cannot predict, with certainty, the outcome of our actions to generate liquidity as planned.

Basis of Presentation and Preparation
    
Principles of Consolidation

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

We have a 52-to-53-week fiscal year that ends on the Sunday closest to December 31. Accordingly, every fifth or sixth year will be a 53-week fiscal year. The current fiscal year, fiscal 2021, is a 52-week fiscal year, while fiscal year 2020 was a 53-week fiscal year. The first quarter of fiscal 2021 ended on April 4, 2021, while the first quarter of fiscal 2020 ended on March 29, 2020.

8

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; credit losses, including estimating macroeconomic factors affecting historical recovery rate of receivables; inventory and project asset write-downs; long-lived asset impairment, specifically estimates for valuation assumptions including discount rates and future cash flows; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; valuation of contingencies such as 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. Actual results could materially differ from those estimates.

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

Recently Adopted Accounting Pronouncements

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

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

Recent Accounting Pronouncements Not Yet Adopted

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

Note 2. TRANSACTIONS WITH TOTAL AND 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, 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 April 4, 2021, ownership of our outstanding common stock by Total SE and its affiliates was approximately 51%. Subsequent to the spin-off of Maxeon Solar, Total received a pro rata distribution of ordinary shares of Maxeon Solar, and its percentage ownership of shares in SunPower did not change.

9

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. During the three months ended April 4, 2021, we recognized revenue of $15.1 million for sales to this joint venture, for continued recognition of engineering, procurement and construction ("EPC") revenue during the quarter, which is included within "Solar power systems, components, and other" on our consolidated statements of operations.

Affiliation Agreement

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.

Cooperation Agreement

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

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

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

10

0.875% Debentures Due 2021

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

During the fiscal year ended January 3, 2021, we purchased $337.4 million of aggregate principal amount of the 0.875% debentures due 2021, including $250.0 million of principal amount representing the entire amount held by Total, for cash proceeds of approximately $334.7 million, net.

As of April 4, 2021, the outstanding principal amount of the 0.875% debentures due 2021 was $62.5 million, none of which was held by Total.

4.00% Debentures Due 2023

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

Joint Solar Projects with Total and its Affiliates

We enter into various EPC and operations and maintenance ("O&M") agreements relating to solar projects, including EPC and O&M services agreements relating to projects owned or partially owned by Total and its affiliates. As of April 4, 2021, we had $48.4 million of "Contract assets", $1.1 million of "Contract liabilities" and $0.2 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.

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 9. Equity Investments for related-party transactions with unconsolidated entities in which we have a direct equity investment.
As of
(In thousands) April 4, 2021 January 3, 2021
Accounts receivable $ 226  $ 76 


11

Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
Revenue:
Solar power systems, components, and other $ 15,105  $ 29,246 
Cost of revenue:
Solar power systems, components, and other 12,361  27,849 
Other income
     Gain (loss) on early retirement of convertible debt —  1,850 
Interest expense:
Guarantee fees incurred under the Credit Support Agreement —  13 
Interest expense incurred on the 0.875% debentures due 2021
—  404 
Interest expense incurred on the 4.00% debentures due 2023
1,000  1,000 

Note 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables represent disaggregated revenue from contracts with customers for the three months ended April 4, 2021, and March 29, 2020 along with the reportable segment for each category:

Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
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 $ 232,777  $ 62,992  $ 1,587  $ 297,356  $ 221,915  $ 47,627  $ 676  $ 270,218 
Operations and maintenance —  3,270  611  3,881  —  2,561  12,510  15,071 
Residential leasing 1,120  —  —  1,120  1,324  —  —  1,324 
Solar services 4,041  —  —  4,041  3,509  424  —  3,933 
Revenue $ 237,938  $ 66,262  $ 2,198  $ 306,398  $ 226,748  $ 50,612  $ 13,186  $ 290,546 

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

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

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

12

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

Changes in estimates for sales of systems for EPC services occur for a variety of reasons, including but not limited to (i) construction plan accelerations or delays, (ii) product cost forecast changes, (iii) change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect in our 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 months ended April 4, 2021 and March 29, 2020 as well as the number of projects that comprise such changes. For purposes of the following table, only projects with changes in estimates that have an impact on revenue and or cost of at least $1.0 million, calculated on a quarterly basis during the periods, are 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
(In thousands, except number of projects) April 4, 2021 March 29, 2020
Increase (decrease) in revenue from net changes in transaction prices $ —  $ — 
Increase (decrease) in revenue from net changes in input cost estimates —  (1,133)
Net decrease in revenue from net changes in estimates $ —  $ (1,133)
 
Number of projects 1
Net change in estimate as a percentage of aggregate revenue for associated projects —  % (1.1) %

Contract Assets and Liabilities

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

During the three months ended April 4, 2021, the decrease in contract assets of $0.5 million was primarily driven by billings for commercial projects where certain milestones had been reached, as well as a decrease in management's estimate of variable consideration on power plant development projects and commercial projects sold in prior years.

During the three months ended March 29, 2020, the decrease in contract assets of $35.7 million was primarily driven by billings for commercial projects where certain milestones had been reached as well as changes in estimates of variable consideration due for previous sales of certain power plant projects.

13

During the three months ended April 4, 2021 and March 29, 2020, the decrease in contract liabilities of $13.5 million and $11.4 million, respectively, was primarily due to the attainment of milestones billings for a variety of projects.

Three Months Ended
(In thousands, except number of projects) April 4, 2021 January 3, 2021
Contract Assets 122,315  122,802 
Contract Liabilities 89,133  102,594 

During the three months ended April 4, 2021, we recognized revenue of $40.6 million that was included in contract liabilities as of January 3, 2021. During the three months ended March 29, 2020, we recognized revenue of $46.6 million that was included in contract liabilities as of December 29, 2019.

The following table represents our remaining performance obligations as of April 4, 2021 for EPC agreements for projects that we are constructing or expect to construct. We expect to recognize $143.6 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 2023 92.7  %

As of April 4, 2021, we have entered into contracts with customers for sales of modules and components for an aggregate transaction price of $242.1 million, the substantial majority of which we expect to recognize over the next 12 months.

Note 4. BALANCE SHEET COMPONENTS

Accounts Receivable, Net
As of
(In thousands) April 4, 2021 January 3, 2021
Accounts receivable, gross1
$ 119,818  $ 124,402 
Less: allowance for credit losses (14,846) (15,379)
Less: allowance for sales returns (168) (159)
     Accounts receivable, net $ 104,804  $ 108,864 
1 A lien of $59.2 million exists on our consolidated accounts receivable, gross, as of April 4, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

Allowance for Credit Losses

Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
Balance at beginning of period $ 15,379  $ 17,208 
Provision for credit losses 295  1,968 
Write-offs (828) — 
Balance at end of period $ 14,846  $ 19,176 


14

Inventories
As of
(In thousands) April 4, 2021 January 3, 2021
Raw materials1
$ 570  $ 2,630 
Work-in-process1
—  143 
Finished goods 2
230,124  207,809 
Inventories 3 4
$ 230,694  $ 210,582 
1 Pertains to inventory at our manufacturing facility in Hillsboro, Oregon that was retained by the Company post Spin-Off and includes installation and other solar power system component materials.

2 Pertains to photovoltaic module, microinverters, inverters, battery storage and other balance of system materials.

3 A lien of $161.2 million exists on our gross inventory as of April 4, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

4 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) April 4, 2021 January 3, 2021
Deferred project costs $ 26,870  $ 26,996 
VAT receivables, current portion 1,252  1,174 
Deferred costs for solar power systems 21,357  24,526 
Other receivables 19,626  19,348 
Prepaid taxes 67  205 
Other 19,937  22,002 
Prepaid expenses and other current assets $ 89,109  $ 94,251 

Property, Plant and Equipment, Net
As of
(In thousands) April 4, 2021 January 3, 2021
Manufacturing equipment $ 17,972  $ 17,134 
Leasehold improvements 29,257  29,385 
Solar power systems 30,844  30,110 
Computer equipment 49,738  49,935 
Furniture and fixtures 7,855  7,899 
Construction-in-process 6,132  3,080 
   Property, plant and equipment, gross 141,798  137,543 
Less: accumulated depreciation (95,008) (90,777)
   Property, plant and equipment, net 1
$ 46,790  $ 46,766 
1 Property, plant and equipment is predominantly located in the US.

15

Other Long-term Assets
As of
(In thousands) April 4, 2021 January 3, 2021
Equity investments with readily determinable fair value $ 244,038  $ 614,148 
Equity investments without readily determinable fair value 801  801 
Equity investments with fair value option 9,924  9,924 
Long-term inventory1
15,245  27,085 
Other 56,758  43,754 
Other long-term assets $ 326,766  $ 695,712 
1 Entire balance consists of finished goods under the safe harbor program. Refer to Note 9. Equity Investments for details.

Accrued Liabilities
As of
(In thousands) April 4, 2021 January 3, 2021
Employee compensation and employee benefits $ 20,742  $ 23,312 
Interest payable 3,953  8,796 
Short-term warranty reserves 25,036  29,337 
Restructuring reserve 4,532  2,808 
Legal expenses 10,991  10,493 
Taxes payable 23,056  25,968 
Other 24,736  21,201 
Accrued liabilities $ 113,046  $ 121,915 

Other Long-term Liabilities
As of
(In thousands) April 4, 2021 January 3, 2021
Deferred revenue $ 35,604  $ 36,527 
Long-term warranty reserves 47,235  52,540 
Unrecognized tax benefits 12,492  12,584 
Long-term pension liability 5,407  5,185 
Long-term deferred tax liabilities 10,671  13,468 
Other 41,534  37,293 
Other long-term liabilities $ 152,943  $ 157,597 

Accumulated Other Comprehensive Income
As of
(In thousands) April 4, 2021 January 3, 2021
Cumulative translation adjustment $ 9,633  $ 9,635 
Net gain on long-term pension liability obligation (250) (250)
Net gain on long-term derivative financial instrument (423) (570)
Deferred taxes (63) (16)
Accumulated other comprehensive income $ 8,897  $ 8,799 

Note 5. 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.
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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 April 4, 2021 and January 3, 2021:
As of
(In thousands) April 4, 2021 January 3, 2021
Solar power systems leased, net1:
Solar power systems leased 115,206  $ 115,620 
Less: accumulated depreciation and impairment (66,875) (65,219)
Solar power systems leased, net $ 48,331  $ 50,401 
1 Solar power systems leased, net, are physically located exclusively in the United States.

The following table presents our minimum future rental receipts on operating leases placed in service as of April 4, 2021:
(In thousands) Fiscal 2021
(remaining nine months)
Fiscal 2022 Fiscal 2023 Fiscal 2024 Fiscal 2025 Thereafter Total
Minimum future rentals on operating leases placed in service1
$ 43  $ 52  $ 52  $ 52  $ 53  $ 701  $ 953 
1 Does not include contingent rentals that may be received from customers under agreements that include performance-based incentives.

Note 6. FAIR VALUE MEASUREMENTS

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

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

April 4, 2021 January 3, 2021
(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  $ —  $ —  $ 9,924  $ 9,924  $ —  $ — 
Equity investments with readily determinable fair value 569,418  —  —  569,418  614,148  —  —  614,148 
Total assets $ 579,342  $ 9,924  $ —  $ 569,418  $ 624,072  $ 9,924  $ —  $ 614,148 
Liabilities
Other long-term liabilities:
Interest rate swap contracts $ 452  $ —  $ 452  $ —  $ 600  $ —  $ 600  $ — 
Total liabilities $ 452  $ —  $ 452  $ —  $ 600  $ —  $ 600  $ — 

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

The following table summarizes movements in equity investments for the three months ended April 4, 2021. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the three months ended April 4, 2021.

(In thousands) Beginning balance as of January 3, 2021 Equity Distribution Additional Investment Ending balance as of April 4, 2021
Equity investments with FVO $9,924 $— $— $9,924

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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 April 4, 2021. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

2021
Assets: Fair 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% 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 risk appropriate projected cost of equity. We estimate the residual value based on the contracted systems in place in the years being projected. Significant increases (decreases) in the residual value in isolation would result in a significantly higher (lower) fair value measurement.

Equity investments with readily determinable fair value

In connection with the divestment of our microinverter business to Enphase 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 months ended April 4, 2021 and March 29, 2020, we recorded loss of $44.7 million and gain of $47.9 million, respectively, within "other, net" in our condensed consolidated statement of operations. During the three months ended March 29, 2020 , we sold an additional one million shares of Enphase common stock in open market transactions for cash proceeds of $43.7 million.

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

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

Equity investments without readily determinable fair value

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

Note 7. RESTRUCTURING

January 2021 Restructuring Plan

During the quarter ended April 4, 2021, we adopted a restructuring plan to realign and optimize workforce requirements concurrent with the planned closure of our manufacturing facility in Hillsboro, Oregon. In connection with the restructuring plan, which included actions to be implemented in the first quarter of 2021 and expected to be completed by the third quarter of 2021, we expected the majority of our approximately 170 primarily manufacturing employees to exit over a period of 3 to 6 months.
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Further, in connection with the closure, in April 2021, we signed agreements with two independent third parties to sell certain assets and liabilities, as well as, retain and engage some employees at the facility in providing R&D services. The proceeds for the assets and sale of R&D services, together with the assumption of certain liabilities, will reduce our previously anticipated restructuring charges.

As of April 4, 2021, we had incurred cumulative costs of approximately $3.7 million in restructuring charges, primarily relating to the severance benefits. The majority of the remaining charges relating to the severance benefits are expected to be incurred in the second fiscal quarter of 2021, while a small portion may be incurred in 2022 through the end of the R&D services agreement. We expect to incur restructuring charges totaling approximately $7.0 million to $9.0 million, consisting primarily of severance benefits (between $4.0 million and $5.0 million) and real estate lease termination costs (between $3.0 million and $4.0 million).

December 2019 Restructuring Plan

During the fourth quarter of fiscal 2019, we adopted a restructuring plan to realign and optimize workforce requirements in light of changes to our business, including the Spin-Off of Maxeon Solar. In connection with the restructuring plan, which included actions implemented in the fourth quarter of 2019, we expected between 145 and 160 non-manufacturing employees, representing approximately 3% of our global workforce, to exit over a period of approximately 12 to 18 months. Between 65 and 70 of these employees were in our legacy SunPower Technologies business unit and corporate, most of whom exited our company following the Spin-Off, and the remainder of which exited upon completion of transition services. As the legacy SunPower Energy Services business unit 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. As of April 4, 2021, we had incurred cumulative costs of approximately $10.2 million in restructuring charges consisting primarily of severance and retention benefits and the Plan is substantially complete.

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

Three Months Ended
(In thousands) April 4, 2021 March 29, 2020 Cumulative To Date
January 2021 Restructuring Plan:
Severance and benefits $ 3,671  $ —  $ 3,671 
Other costs1
13  —  13 
Total January 2021 Restructuring Plan 3,684  —  3,684 
December 2019 Restructuring Plan:
Severance and benefits (28) 1,639  10,005 
Other costs1
112  —  159 
Total December 2019 Restructuring Plan 84  1,639  10,164 
Other Legacy Restructuring Plans (2) (63) 68,640 
Total restructuring charges (credits) $ 3,766  $ 1,576  $ 82,488 
1 Other costs primarily represented associated legal and advisory services and costs of relocating employees.

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The following table summarizes the restructuring reserve activities during the three months ended April 4, 2021:
Three Months Ended
(In thousands) January 3, 2021 Charges (Benefits) (Payments) Recoveries April 4, 2021
January 2021 Restructuring Plan:
Severance and benefits $ —  $ 3,671  $ (34) $ 3,637 
Other costs1
—  13  (13) — 
Total January 2021 Restructuring Plan —  3,684  (47) 3,637 
December 2019 Restructuring Plan:
Severance and benefits 2,608  (28) (1,815) 765 
Other costs1
—  112  (112) — 
Total December 2019 Restructuring Plan 2,608  84  (1,927) 765 
Other Legacy Restructuring Plans 200  (2) (68) 130 
Total restructuring reserve activities $ 2,808  $ 3,766  $ (2,042) $ 4,532 
1 Other costs primarily represented associated legal and advisory services and costs of relocating employees.

Note 8. 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 finance 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
(In thousands) April 4, 2021 March 29, 2020
Operating leases:
Operating lease expense $ 3,714  $ 3,418 
Sublease income (106) (35)
Rent expense $ 3,608  $ 3,383 
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases1
$ 4,163  $ 3,309 
Right-of-use assets obtained in exchange for leases1
$ 11,528  $ 12,461 
Weighted-average remaining lease term (in years) - operating leases 8.0 7.0
Weighted-average discount rate - operating leases 8.8  % %
1 Amounts for the three months ended April 4, 2021 and March 29, 2020 include consolidated balances, including discontinued operations.

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The future minimum lease payments to be paid under non-cancellable leases in effect at April 4, 2021, are as follows (in thousands):

As of April 4, 2021 Operating Leases
2021 $ 13,375 
2022 15,090 
2023 12,289 
2024 8,426 
2025 4,758 
Thereafter 26,098 
Total lease payments 80,036 
Less: imputed interest (24,167)
Total $ 55,869 

As of April 4, 2021, we have two additional operating leases that have not yet commenced with future minimum lease payments amounting to $24.7 million. These operating leases will have a lease term of 16 years after their commencement.

Purchase Commitments
 
Future purchase obligations under non-cancellable purchase orders and long-term supply agreements as of April 4, 2021 are as follows:
(In thousands) Fiscal 2021
(remaining nine months)
Fiscal 2022 Fiscal 2023 Fiscal 2024 Fiscal 2025 Thereafter
Total1
Future purchase obligations $ 207,960  $ 108,401  $ 33,148  $ 1,710  $ 775  $ 5,307  $ 357,301 
1Total future purchase obligations were composed of $33.5 million related to non-cancellable purchase orders and $323.8 million related to long-term supply agreements.

The future purchase obligations presented above primarily consist of commitments to purchase photovoltaic modules pursuant to the supply agreement with Maxeon Solar entered into on August 26, 2020, as amended, 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 ended April 4, 2021 and March 29, 2020:
Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
Balance at the beginning of the period $ 81,877  $ 101,380 
Accruals for warranties issued during the period 9,484  6,526 
Settlements and adjustments during the period (19,090) (8,354)
Balance at the end of the period $ 72,271  $ 99,552 

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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 4. 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 April 4, 2021 and January 3, 2021, we had $8.3 million and $9.1 million, respectively, classified as "accrued liabilities," and $2.8 million and $3.1 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 $12.5 million and $12.6 million as of April 4, 2021 and January 3, 2021, 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.
 
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In certain circumstances, we are contractually obligated to compensate customers and investors 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 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 April 4, 2021, and January 3, 2021, our provision was $9.7 million and $9.4 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 pursuant to which Maxeon Solar has received SunPower’s rights under the Hemlock Agreements (including SunPower’s deposits and advanced payments thereunder) and, in return, Maxeon Solar has agreed 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 April 4, 2021. Maxeon Solar's remaining obligations under this contract amount to $90.9 million and $125.8 million, for the remainder of fiscal 2021 and fiscal 2022, respectively.

Pursuant to the Separation and Distribution Agreement entered into by us and Maxeon Solar, 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 $4.5 million equal to the fair value of the guarantee provided as of the period ended April 4, 2021.

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 9. 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.

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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) April 4, 2021 January 3, 2021
Equity investments with readily determinable fair value:
Enphase Energy, Inc. $ 569,418  $ 614,148 
Total equity investments with readily determinable fair value 1
569,418  614,148 
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 7,645  7,645 
SunStrong Partners, LLC 2,279  2,279 
Total equity investment with fair value option 9,924  9,924 
Total equity investments $ 580,143  $ 624,873 
1 As of April 4, 2021, two million shares of Enphase common stock have been reclassified from long-term to current assets as short-term investments.

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.

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 unconsolidated VIEs or consolidated VIEs (Refer to our Form 10K for the fiscal year ended January 3, 2021 for further details on our various VIE arrangements).

Unconsolidated VIEs    

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, our unconsolidated VIEs. Refer to Note 6. 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
(In thousands) April 4, 2021 March 29, 2020
Summarized statements of operations information:
Revenue $ 33,097  $ 29,464 
Gross income (loss) 1,214  (1,438)
Net (loss) income (45,789) 21,640 

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As of
(In thousands) April 4, 2021 January 3, 2021
Summarized balance sheet information:
      Current assets $ 92,493  $ 93,752 
      Long-term assets 1,439,119  1,378,382 
      Current liabilities 47,859  48,126 
      Long-term liabilities 1,168,705  1,130,484 
1 Note that amounts are reported one quarter in arrears as permitted by applicable guidance.

Related-Party Transactions with Investees

Related-party transactions with SunStrong and SunStrong Partners are as follows:
As of
(In thousands) April 4, 2021 January 3, 2021
Accounts receivable $ 18,313  $ 16,767 
Other long-term assets 11,000  — 
Accrued liabilities 216  7,996 
Contract liabilities 22,844  27,426 

Three Months Ended
(In thousands) April 4, 2021 March 29, 2020
Revenues and fees received from investees for products/services 49,647  55,935 

Consolidated VIEs

For 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”), our consolidated VIEs, total revenue was $3.6 million and $0.7 million for the three months ended April 4, 2021 and March 29, 2020, respectively. The assets of these consolidated VIEs are restricted for use only by the particular investee and are not available for our general operations. As of April 4, 2021, we had $79.1 million of assets from the consolidated VIEs.

Note 10. DEBT AND CREDIT SOURCES

The following table summarizes our outstanding debt on our condensed consolidated balance sheets:

April 4, 2021 January 3, 2021
(In thousands) Face Value Short-term Long-term Total Face Value Short-term Long-term Total
Convertible debt:
0.875% debentures due 2021
$ 62,484  $ 62,456  $ —  $ 62,456  $ 62,634  $ 62,531  $ —  $ 62,531 
4.00% debentures due 2023
424,995  —  422,749  422,749  425,000  —  422,443  422,443 
CEDA loan 30,000  29,616  —  29,616  30,000  —  29,219  29,219 
Non-recourse financing and other debt 153,195  65,108  86,456  151,564  126,283  97,059  27,228  124,287 
$ 670,674  $ 157,180  $ 509,205  $ 666,385  $ 643,917  $ 159,590  $ 478,890  $ 638,480 

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As of April 4, 2021, the aggregate future contractual maturities of our outstanding debt, at face value, were as follows:

(In thousands) Fiscal 2021 (remaining nine months) Fiscal 2022 Fiscal 2023 Fiscal 2024 Fiscal 2025 Thereafter Total
Aggregate future maturities of outstanding debt $ 126,417  $ 13,153  $ 425,729  $ 69,833  $ 817  $ 32,402  $ 668,351 

Convertible Debt

The following table summarizes our outstanding convertible debt:
  April 4, 2021 January 3, 2021
(In thousands) Carrying Value Face Value
Fair Value1
Carrying Value Face Value
Fair Value1
Convertible debt:
0.875% debentures due 2021
$ 62,456  $ 62,484  $ 64,065  $ 62,531  $ 62,634  $ 64,018 
4.00% debentures due 2023
422,749  424,995  652,750  422,443  425,000  549,398 
$ 485,205  $ 487,479  $ 716,815  $ 484,974  $ 487,634  $ 613,416 
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.

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 and bear interest at a fixed rate of 8.50% through maturity, and include customary covenants and other restrictions on us. As per the terms of the agreement, the bonds were subject to a 'make-whole' provision, wherein if retired prior to April 1, 2021, the Company has to 'make-whole' the bond holders for the full amount of unpaid interest through the term of the loan. After the make-whole provision expired in April 2021, the bonds can be retired any time at par value. As of April 4, 2021, the fair value of the Bonds was $30.1 million, determined by using Level 2 inputs based on quarterly market prices as reported by an independent pricing source.

On April 15, 2021, we repaid the outstanding principal amount of our $30.0 million loan with CEDA.

Non-recourse Financing and Other Debt

In order to facilitate the construction, sale, or ongoing operation of certain solar projects, including our commercial projects, 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 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 April 4, 2021, we had $151.5 million outstanding under these financings.

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We also enter other debt arrangements to finance operations. The following presents a summary of these non-recourse financing and other debt arrangements:
 
Aggregate Carrying Value1
(In thousands) April 4, 2021 January 3, 2021 Balance Sheet Classification
PNC Energy Capital loan2
$ 5,478