Published: 2021-11-04 00:00:00 ET

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Organization

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

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

Liquidity

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

Basis of Presentation and Preparation

    

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States ("United States" or "U.S.," and such accounting principles, "U.S. GAAP") for interim financial information, and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The January 3, 2021 consolidated balance sheet data was derived from SunPower’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021, as filed with the Securities and Exchange Commission ("SEC") on February 22, 2021, but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in SunPower's Annual Report on Form 10-K for the fiscal year ended January 3, 2021. The operating results for the three and nine months ended October 3, 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 third quarter of fiscal 2021 ended on October 3, 2021, while the third quarter of fiscal 2020 ended on September 27, 2020.

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Management Estimates

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

Summary of Selected Significant Accounting Policies

    

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

Recently Adopted Accounting Pronouncements

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

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The ASU is an update to ASU 2020-04 issued by the FASB in March 2020 and is intended to clarify the scope of ASC 848 to include derivatives that are affected by a change in the interest rate used for margining, discounting, or contract price alignment that do not also reference LIBOR or another reference rate expected to be discontinued as a result of reference rate reform. This guidance was 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.

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Supply Agreements

In December 2019, we sold our membership interests in certain project companies that hold commercial solar power plant projects to Total Strong, LLC, a joint venture between Total and Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“Hannon Armstrong”). During the three and nine months ended October 3, 2021, we recognized revenue of $11.3 million and $48.7 million, respectively, and revenue of $34.3 million and $65.7 million, during the three and nine months ended September 27, 2020, respectively, for sales to this joint venture. Sales were due to the continued recognition of engineering, procurement and construction ("EPC") revenue during the quarter, which is included within "Solar power systems, components, and other" on our consolidated statements of operations.

Affiliation Agreement

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

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

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

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

On April 19, 2021, we entered into an amendment to the Affiliation Agreement with Total (the “April Affiliation Agreement Amendment”). The April Affiliation Agreement Amendment provides that our Board will include 11 members, composed of our president and chief executive officer, our immediate past chief executive officer, ("Mr. Werner"), six directors designated by Total, and three non-Total-designated directors. If the ownership of our voting securities by Total, together with the controlled subsidiaries of TotalEnergies SE, declines below certain thresholds, the number of members of the Board that Total is entitled to designate will be reduced as set forth in the Affiliation Agreement. Pursuant to the April Affiliation Agreement Amendment, Mr. Werner resigned from his position as a member of the Board on November 1, 2021. On October 29, 2021, we entered into a further amendment to the Affiliation Agreement (the “October Affiliation Agreement Amendment”), which provides that our Board will remain at 11 members until March 31, 2022 and allows for the appointment of one additional independent director to fill the vacancy created by Mr. Werner’s resignation from the Board. The October Affiliation Agreement Amendment further provides that, after March 31, 2022, the Board will revert to nine members, at which time one independent director and one Total designee will resign from the Board.

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;

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•exclusivity over our offering of various post-sale services for projects sold to Total or its affiliates; and

•our right to offer EPC services on certain downstream generation projects being developed by Total.

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

0.875% Debentures Due 2021

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

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

4.00% Debentures Due 2023

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

Joint Solar Projects with Total and Its Affiliates

We enter into various EPC and operations and maintenance ("O&M") agreements relating to solar projects, including EPC and O&M services agreements relating to projects owned or partially owned by Total and its affiliates. As of October 3, 2021, we had $47.6 million of "Contract assets," $1.8 million of "Contract liabilities" and $0.3 million of "Accounts receivable, net" on our unaudited condensed consolidated balance sheets related to projects in which Total and its affiliates have a direct or indirect material interest.

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Related-Party Transactions with Total and Its Affiliates:

The following are balances and transactions entered into with Total and its affiliates.

						As of
(In thousands)						October 3, 2021						January 3, 2021
Accounts receivable						$	289					$	76

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Revenue:
Solar power systems, components, and other						$	11,275					$	34,465					$	48,652					$	98,244
Cost of revenue:
Solar power systems, components, and other						11,945						26,177						43,762						70,501
Other income:
Gain on early retirement of convertible debt						—						104						—						1,954
Interest expense:
Guarantee fees incurred under the Credit Support Agreement						—						—						—						13
Interest expense incurred on the 0.875% debentures due 2021						—						384						—						1,216
Interest expense incurred on the 4.00% debentures due 2023						1,000						1,000						3,000						3,000

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Disaggregation of Revenue

The following tables represent disaggregated revenue from contracts with customers for the three and nine months ended October 3, 2021 and September 27, 2020 along with the reportable segment for each category:

						Three Months Ended
(In thousands)						October 3, 2021																								September 27, 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						$	276,606					$	36,956					$	980					$	314,542					$	191,016					$	73,840					$	2,688					$	267,544
Operations and maintenance						—						3,368						697						4,065						—						—						75						75
Residential leasing						1,291						—						—						1,291						1,284						—						—						1,284
Solar services						3,738						—						—						3,738						5,485						418						—						5,903
Total revenues						$	281,635					$	40,324					$	1,677					$	323,636					$	197,785					$	74,258					$	2,763					$	274,806

						Nine Months Ended
(In thousands)						October 3, 2021																								September 27, 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						$	757,983					$	145,986					$	7,945					$	911,914					$	568,303					$	170,403					$	3,147					$	741,853
Operations and maintenance						—						8,776						2,562						11,338						—						3,619						19,844						23,463
Residential leasing						3,765						—						—						3,765						3,937						—						—						3,937
Solar services						11,944						—						—						11,944						12,524						1,242						—						13,766
Total revenues						$	773,692					$	154,762					$	10,507					$	938,961					$	584,764					$	175,264					$	22,991					$	783,019

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

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

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

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

Changes in estimates for sales of systems for EPC services occur for a variety of reasons, including but not limited to (i) construction plan accelerations or delays, (ii) product cost forecast changes, (iii) change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect in our consolidated statements of operations. The table below outlines the impact on revenue of net changes in estimated transaction prices and input costs for systems related sales contracts (both increases and decreases) for the three and nine months ended October 3, 2021 and September 27, 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 revenues and or costs of at least $1.0 million, calculated on a quarterly basis during the periods, were presented. Also included in the table is the net change in estimate as a percentage of the aggregate revenue for such projects.

						Three Months Ended												Nine Months Ended
(In thousands, except number of projects)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Increase in revenue from net changes in transaction prices						$	—					$	1,142					$	2,131					$	834
Decrease in revenue from net changes in input cost estimates						—						(1,041)						(2,084)						(1,092)
Net increase (decrease) in revenue from net changes in estimates						$	—					$	101					$	47					$	(258)
Number of projects						—						2						3						4
Net change in estimate as a percentage of aggregate revenue for associated projects						—		%				0.3		%				0.6		%				(0.2)		%

Contract Assets and Liabilities

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

						As of
(In thousands)						October 3, 2021						January 3, 2021
Contract assets						$	94,115					$	122,802
Contract liabilities						98,756						102,594

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During the three months ended October 3, 2021, the decrease in contract assets of $4.2 million was primarily driven by billings for commercial projects where certain milestones had been reached. During the nine months ended October 3, 2021, decrease of $28.7 million was primarily driven by a settlement for milestone achievement for one legacy power plant project, as well as a collection of variable consideration on a power plant development project sold in prior years.

During the three and 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 months ended October 3, 2021, the increase in contract liabilities of $5.0 million was primarily due to an increased volume of invoiced contracts waiting for revenue recognition. During the nine months ended October 3, 2021, decrease of $3.8 million was due to the attainment of milestones billings for various projects.

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 the utilization of customer advances.

During the three and nine months ended October 3, 2021, we recognized revenue of $32.0 million and $43.7 million, respectively, that was included in contract liabilities as of July 4, 2021 and January 3, 2021, respectively. During the three and nine months ended September 27, 2020, we recognized revenue of $26.9 million and $78.4 million, respectively, that was included in contract liabilities as of June 28, 2020 and December 29, 2019, respectively.

The following table represents the average percentage of completion as of October 3, 2021 for EPC agreements for projects that we are constructing. We expect to recognize $152.0 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

92.2

%

As of October 3, 2021, we have entered into contracts with customers for sales of modules and components for an aggregate transaction price of $357.3 million, the substantial majority of which we expect to recognize over the next 12 months.

Accounts Receivable, Net

						As of
(In thousands)						October 3, 2021						January 3, 2021
Accounts receivable, gross1						$	127,006					$	124,402
Less: allowance for credit losses						(14,678)						(15,379)
Less: allowance for sales returns						(269)						(159)
Accounts receivable, net						$	112,059					$	108,864

1 A lien exists on $64.9 million of our consolidated accounts receivable, gross, as of October 3, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

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Allowance for Credit Losses

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Balance at beginning of period						$	14,997					$	19,485					$	15,379					$	17,208
Provision for credit losses						37						(2,568)						228						998
Write-offs						(356)						69						(929)						(1,220)
Balance at end of period						$	14,678					$	16,986					$	14,678					$	16,986

Inventories

						As of
(In thousands)						October 3, 2021						January 3, 2021
Photo-voltaic modules						$	178,957					$	170,013
Microinverters						13,467						16,774
Energy Storage						24,709						4,548
Other solar power system component materials						24,292						19,247
Inventories1 2						$	241,425					$	210,582

1 A lien exists on $176.6 million of our gross inventory as of October 3, 2021 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 10. Debt and Credit Sources.

2 Photovoltaic modules are classified as finished goods, while the remaining components of total inventories are classified as raw materials.

Prepaid Expenses and Other Current Assets

						As of
(In thousands)						October 3, 2021						January 3, 2021
Deferred project costs						$	38,391					$	26,996
VAT receivables, current portion						973						1,174
Deferred costs for solar power systems						19,869						24,526
Prepaid taxes						107						205
Related party receivables						4,955						9,891
Other						29,086						31,459
Prepaid expenses and other current assets						$	93,381					$	94,251

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Property, Plant and Equipment, Net

						As of
(In thousands)						October 3, 2021						January 3, 2021
Manufacturing equipment1						$	13,352					$	17,134
Leasehold improvements						29,256						29,385
Solar power systems						8,601						30,110
Computer equipment						53,854						49,935
Furniture and fixtures						7,855						7,899
Work-in-progress						3,328						3,080
Property, plant and equipment, gross						116,246						137,543
Less: accumulated depreciation and impairment						(86,495)						(90,777)
Property, plant and equipment, net2						$	29,751					$	46,766

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

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

Other Long-term Assets

						As of
(In thousands)						October 3, 2021						January 3, 2021
Equity investments with readily determinable fair value						$	77,683					$	614,148
Equity investments without readily determinable fair value						801						801
Equity investments with fair value option						8,374						9,924
Long-term inventory1						—						27,085
Cloud computing arrangements implementation costs2						8,204						—
Software development costs3						2,468						—
Long-term related party receivables						11,000						—
Long-term deferred project costs						11,202						5,758
Long-term prepaid taxes						4,145						3,677
Other						26,328						35,016
Other long-term assets						$	150,205					$	696,409

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

2 Includes our implementation costs incurred in cloud computing arrangements ("CCA") which are capitalized as other long-term assets in accordance with the guidance in ASC 350-40, Internal-Use Software.

3 Includes our external-use software development costs which are being capitalized in accordance with ASC 985-20, Software to be Sold or Leased Externally.

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Accrued Liabilities

						As of
(In thousands)						October 3, 2021						January 3, 2021
Employee compensation and employee benefits						$	20,327					$	23,312
Interest payable						3,830						8,796
Short-term warranty reserves						21,641						29,337
Restructuring reserve						2,538						2,808
Legal expenses						8,339						10,493
Taxes payable						4,126						25,968
Other						26,497						21,201
Accrued liabilities						$	87,298					$	121,915

Other Long-term Liabilities

						As of
(In thousands)						October 3, 2021						January 3, 2021
Deferred revenue						$	41,528					$	44,927
Long-term warranty reserves						43,014						52,540
Unrecognized tax benefits						15,048						12,584
Long-term pension liability						5,685						5,185
Long-term deferred tax liabilities						1,950						13,468
Long-term taxes payable						2,234						2,234
Related party liabilities						1,458						1,458
Other						26,552						25,201
Other long-term liabilities						$	137,469					$	157,597

Accumulated Other Comprehensive Income

						As of
(In thousands)						October 3, 2021						January 3, 2021
Cumulative translation adjustment						$	9,625					$	9,635
Net gain on long-term pension liability obligation						(250)						(250)
Net gain on long-term derivative financial instrument						—						(570)
Deferred taxes						—						(16)
Accumulated other comprehensive income						$	9,375					$	8,799

Sale of Commercial Projects

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

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

In evaluating the accounting treatment for this sale, the transaction was concluded to be a sale of a business in accordance with the guidance in ASC 805, Business Combinations. We recorded a loss of $5.1 million, inclusive of $0.1 million of transaction expenses, which was recorded and netted against "(gain) loss on business divestitures, net" in our unaudited condensed consolidated statements of operations for the nine months ended October 3, 2021.

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

(In thousands)
Accounts receivable, net						$	719
Prepaid expenses, other current assets, and cash						840
Property, plant and equipment, net						12,847
Total assets						14,406
Accrued liabilities						137
Short-term debt						614
Long-term debt						4,779
Other long-term liabilities						804
Total liabilities						6,334
Net assets						$	8,072

Net proceeds received were as follows:

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

Net loss on sale for the nine months ended October 3, 2021 was as follows:

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

Sale of Residential Leases

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

In evaluating the accounting treatment for this sale, the transaction was concluded to be a sale of a business in accordance with the guidance in ASC 805, Business Combinations. We recorded a gain of $5.3 million, inclusive of $0.4 million of transaction expenses, which was recorded as "(gain) loss on business divestitures, net" in our unaudited condensed consolidated statements of operations for the nine months ended October 3, 2021.

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

(In thousands)
Accounts receivable, net						$	253
Prepaid expenses and other current assets						825
Property, plant, and equipment, net						1,934
Solar power systems leased, net						186
Total assets						3,198
Accrued and other liabilities						106
Contract liabilities						332
Total liabilities						438
Net assets						$	2,760

Net proceeds received were as follows:

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

Net gain on sale for the nine months ended October 3, 2021 was as follows:

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

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 October 3, 2021 and January 3, 2021:

						October 3, 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")						$	8,374					$	8,374					$	—					$	—					$	9,924					$	9,924					$	—					$	—
Equity investments with readily determinable fair value						388,403						—						—						388,403						614,148						—						—						614,148
Total assets						$	396,777					$	8,374					$	—					$	388,403					$	624,072					$	9,924					$	—					$	614,148
Liabilities
Other long-term liabilities:
Interest rate swap contracts1						$	—					$	—					$	—					$	—					$	600					$	—					$	600					$	—
Total liabilities						$	—					$	—					$	—					$	—					$	600					$	—					$	600					$	—

1 Our interest rate swap contracts were related to our PNC Energy Capital loan and were terminated during the second quarter of fiscal 2021 (see Note 10. Debt and Credit Sources for details).

Equity investments with fair value option ("FVO")

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

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

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

1 During the nine months ended October 3, 2021, we received $2.3 million in cash proceeds from SunStrong Partners. The distribution reduced our equity investment balance in SunStrong Partners classified within "other long-term assets" on our unaudited condensed consolidated balance sheet.

2 During the nine months ended October 3, 2021, we recognized $0.7 million gain on change in valuation of equity investments within "other, net" in our unaudited condensed consolidated statement of operations. The gain was primarily due to change in forecasted cash flows of SunStrong, resulting from the sale by us to SunStrong of certain commercial projects (Refer to Note 5. Business Divestitures).

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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 October 3, 2021. Included in the table are the inputs and 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

$

8,374

Discounted cash flows

Discount rate Residual value

12.5%-13% 1 7.5% 1

Total assets

$

8,374

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

Equity investments with readily determinable fair value

In connection with the divestment of our microinverter business to Enphase on August 9, 2018, we received 7.5 million shares of Enphase common stock (NASDAQ: ENPH). The common stock received was recorded as an equity investment with readily determinable fair value (Level 1), with changes in fair value recognized in net income in accordance with ASU 2016-01 Recognition and Measurement of Financial Assets and Liabilities. For the three and nine months ended October 3, 2021, we recorded losses of $86.3 million and $48.0 million, respectively, within "other, net" in our unaudited condensed consolidated statement of operations as compared to gains of $155.4 million and $274.4 million in the three and nine months ended September 27, 2020. During the three and nine months ended October 3, 2021, we sold one million shares of Enphase common stock, in open market transactions for cash proceeds of $177.8 million. During the three and nine months ended September 27, 2020, we sold 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.

Equity investments without readily determinable fair value

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January 2021 Restructuring Plan

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

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

As of October 3, 2021, we had incurred cumulative costs of approximately $3.6 million in restructuring charges, primarily relating to the payment of severance benefits. Remaining activities on this January 2021 restructuring plan primarily relate to payroll for some employees expected to be incurred through 2022 concurrent with the end of the R&D services agreement.

December 2019 Restructuring Plan

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

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

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020						Cumulative To Date
January 2021 Restructuring Plan:
Severance and benefits						$	(75)					$	—					$	3,533					$	—					$	3,533
Other costs1						1						—						36						—						36
Total January 2021 Restructuring Plan2						(74)						—						3,569						—						3,569
December 2019 Restructuring Plan:
Severance and benefits						(26)						(104)						793						2,784						10,826
Other costs1						—						—						112						—						159
Total December 2019 Restructuring Plan						(26)						(104)						905						2,784						10,985
Other Legacy Restructuring Plans						(130)						7						(130)						(46)						68,512
Total restructuring charges (credits)						$	(230)					$	(97)					$	4,344					$	2,738					$	83,066

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

2 A portion of the costs related to the plan were primarily comprised of real estate lease termination costs, amounting to $2.5 million, and were classified as cost of revenues within our unaudited condensed consolidated statements of operations for the nine months ended October 3, 2021.

The following table summarizes the restructuring reserve activities during the nine months ended October 3, 2021:

						Nine months ended
(In thousands)						January 3, 2021						Charges (Benefits)						(Payments) Recoveries						October 3, 2021
January 2021 Restructuring Plan:
Severance and benefits						$	—					$	3,533					$	(1,938)					$	1,595
Other costs1						—						36						(36)						—
Total January 2021 Restructuring Plan						—						3,569						(1,974)						1,595
December 2019 Restructuring Plan:
Severance and benefits						2,608						793						(2,458)						943
Other costs1						—						112						(112)						—
Total December 2019 Restructuring Plan						2,608						905						(2,570)						943
Other Legacy Restructuring Plans						200						(130)						(70)						—
Total restructuring reserve activities						$	2,808					$	4,344					$	(4,614)					$	2,538

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

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 one year to ten years.

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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)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Operating leases:
Operating lease expense						$	3,200					$	3,524					$	10,615					$	10,458
Sublease income						(81)						(111)						(292)						(166)
Rent expense						$	3,119					$	3,413					$	10,323					$	10,292
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases						$	3,473					$	7,117					$	12,073					$	14,314
Right-of-use assets obtained in exchange for leases						$	4,429					$	8,362					$	15,957					$	21,786
Weighted-average remaining lease term (in years) - operating leases						6.1						7.5						6.1						7.5
Weighted-average discount rate - operating leases						8.7		%				9		%				8.7		%				9		%

The future minimum lease payments to be paid under non-cancellable leases in effect as of October 3, 2021, are as follows (in thousands):

As of October 3, 2021						Operating Leases
2021 (remaining three months)						$	3,920
2022						15,805
2023						12,933
2024						9,100
2025						5,463
Thereafter						16,406
Total lease payments						63,627
Less: imputed interest						(14,919)
Total						$	48,708

Purchase Commitments

 

Future purchase obligations under non-cancellable purchase orders and long-term supply agreements as of October 3, 2021 are as follows:

(In thousands)						Fiscal 2021 (remaining three months)						Fiscal 2022						Fiscal 2023						Fiscal 2024						Fiscal 2025						Thereafter						Total1
Future purchase obligations						$	83,888					$	125,175					$	33,148					$	1,710					$	775					$	5,307					$	250,003

1 Total future purchase obligations consisted of $25.8 million related to non-cancellable purchase orders and $224.2 million related to long-term supply agreements.

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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 and nine months ended October 3, 2021 and September 27, 2020:

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Balance at the beginning of the period						$	66,785					$	92,399					$	81,877					$	101,380
Accruals for warranties issued during the period						3,791						5,682						15,641						13,356
Settlements and adjustments during the period						(5,921)						(9,688)						(32,863)						(26,343)
Balance at the end of the period						$	64,655					$	88,393					$	64,655					$	88,393

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 unaudited condensed consolidated balance sheets (see Note 4. Balance Sheet Components). Further, if we encounter issues related to the quality of our products or components of our products, we may institute corrective action plans, including proactive repair or replacement, delay or stop shipment of one or more products, the result of which may cause us to incur material costs and divert operational attention. We assess the impact of such issues and resulting warranty obligations on the sufficiency of our warranty accrual when the issue is known and amount to be incurred is probable and measurable.

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 generally performed above their performance warranty thresholds, and our output performance warranty payments to the customers have not been material. Also, there have been no cases in which we have had to buy back a system. As of October 3, 2021 and January 3, 2021, we had $7.5 million and $9.1 million, respectively, classified as "accrued liabilities," and $2.7 million and $3.1 million, respectively, classified as "other long-term liabilities" on our unaudited condensed consolidated balance sheets for such obligations.

Liabilities Associated with Uncertain Tax Positions

 

Total liabilities associated with uncertain tax positions were $15.0 million and $12.6 million as of October 3, 2021 and January 3, 2021, respectively. These amounts are included within "other long-term liabilities" on our unaudited 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.

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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 typically 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 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. The indemnity expires in conjunction with the statute of limitation and recapture periods in accordance with the underlying laws and regulations for such ITCs and related benefits. 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, 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 October 3, 2021 and January 3, 2021, our provision was $9.6 million and $9.4 million, respectively, primarily for tax-related indemnifications.

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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 received SunPower’s rights under the Hemlock Agreements (including SunPower’s deposits and advanced payments thereunder) and, in return, Maxeon Solar 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 exposure under the Hemlock Agreements as of the quarter ended October 3, 2021. Maxeon Solar's remaining obligations under the Hemlock Agreements amount to $31.6 million and $125.8 million for the remainder of fiscal 2021 and fiscal 2022, respectively. This is gross of prepayments of $61.6 million as of October 3, 2021. This indemnity qualifies for the criteria for accounting under the guidance in ASC 460 which requires us to 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. As of the quarter ended October 3, 2021, our exposure to potential indemnification payments is deemed immaterial based on the information available to us.

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 $4.3 million equal to the fair value of the guarantee provided as of the period ended October 3, 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.

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 unaudited 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 unaudited condensed consolidated statements of operations. The carrying value of our equity investments, classified as "other long-term assets" on our unaudited condensed consolidated balance sheets, are as follows:

						As of
(In thousands)						October 3, 2021						January 3, 2021
Equity investments with readily determinable fair value:
Enphase Energy, Inc.						$	388,403					$	614,148
Total equity investments with readily determinable fair value 1						388,403						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						8,374						7,645
SunStrong Partners, LLC						—						2,279
Total equity investment with fair value option						8,374						9,924
Total equity investments						$	397,578					$	624,873

1 During the three months ended October 3, 2021, we sold one million shares of Enphase common stock for cash proceeds. As of October 3, 2021, we currently have two million shares of Enphase common stock within current assets as short-term investments, and 0.5 million shares

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of Enphase common stock within other long-term assets. Refer to Note 6. Fair Value Measurements and Note 4. Balance Sheet Components for details.

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 10-K 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												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Summarized statements of operations information:
Revenues						$	34,363					$	31,299					$	100,157					$	90,056
Gross income (loss)						1,188						1,057						3,409						(5,839)
Net (loss) income						2,440						13,596						(40,633)						35,019

						As of
(In thousands)						October 3, 2021						January 3, 2021
Summarized balance sheet information:
Current assets						$	87,197					$	93,752
Long-term assets						1,536,690						1,378,382
Current liabilities						62,839						48,126
Long-term liabilities						1,219,489						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 and balances with SunStrong and SunStrong Partners are as follows:

						As of
(In thousands)						October 3, 2021						January 3, 2021
Accounts receivable						$	31,302					$	16,767
Accrued liabilities						—						7,996
Contract liabilities						29,033						27,426

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						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Revenues and fees received from investees for products/services						$	60,073					$	47,378					$	160,195					$	146,570
(Gain) loss on business divestitures, net1						—						—						(224)						—

1 The gain relates to the net impact of the sales of businesses to SunStrong during the second quarter of fiscal 2021. Refer to Note 5. Business Divestitures for additional details on the sales.

Consolidated VIEs

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

						October 3, 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						$	—					$	—					$	—					$	—					$	62,634					$	62,531					$	—					$	62,531
4.00% debentures due 20231						424,995						—						423,370						423,370						425,000						—						422,443						422,443
CEDA loan						—						—						—						—						30,000						—						29,219						29,219
Other debt						109,445						66,304						42,082						108,386						126,283						97,059						27,228						124,287
						$	534,440					$	66,304					$	465,452					$	531,756					$	643,917					$	159,590					$	478,890					$	638,480

1 The 4.00% debentures due 2023 with original principal amount of $425.0 million was reduced by $5.0 thousand during the first quarter of fiscal 2021 due to a bond conversion during the quarter.

As of October 3, 2021, the aggregate future contractual maturities of our outstanding debt, at face value, were as follows:

(In thousands)						Fiscal 2021 (remaining three months)						Fiscal 2022						Fiscal 2023						Fiscal 2024						Fiscal 2025						Thereafter						Total
Aggregate future maturities of outstanding debt						$	67,210					$	65					$	425,064					$	41,839					$	76					$	186					$	534,440

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Convertible Debt

The following table summarizes our outstanding convertible debt:

						October 3, 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						$	—					$	—					$	—					$	62,531					$	62,634					$	64,018
4.00% debentures due 2023						423,370						424,995						543,739						422,443						425,000						549,398
						$	423,370					$	424,995					$	543,739					$	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") 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.

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

Other Debt

We enter into other debt arrangements to finance our operations, including sometimes entering into project level non-recourse debt dependent on the needs of the project. As of October 3, 2021, we had other debt of $108.4 million outstanding.

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The following presents a summary of the other debt arrangements:

						Aggregate Carrying Value1
(In thousands)						October 3, 2021						January 3, 2021						Balance Sheet Classification
Recourse Debt:
PNC Energy Capital loan2						$	—					$	5,545					Short-term debt and Long-term debt
Asset-Backed Loan						$	41,662					$	32,690					Long-term debt
Safe Harbor						$	62,417					$	75,910					Short-term debt
Total Recourse Debt						$	104,079					$	114,145
Non-Recourse Debt:
Vendor financing and other debt						$	4,307					$	560					Short-term debt and Long-term debt
Construction project debt						$	—					$	9,583					Short-term debt
Total Non-Recourse Debt						$	4,307					$	10,143

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%. These debt obligations, and corresponding interest rate swap contracts, were assumed by the buyer in our sale of commercial projects portfolio during the second quarter of fiscal 2021 (see Note 5. Business Divestitures for additional details).

Asset-Backed Loan with Bank of America

In connection with the Spin-Off, we entered into certain agreements with Maxeon Solar, including a transition services agreement, supply agreement, and collaboration agreement.

The below table summarizes our transactions with Maxeon Solar for the three and nine months ended October 3, 2021:

						Three Months Ended						Nine Months Ended
(In thousands)						October 3, 2021						October 3, 2021
Purchases of photovoltaic modules (recorded in cost of revenues)						$	61,967					$	167,313
Research and development expenses reimbursement received						$	7,736					$	25,759
Income from transition services agreement, net						$	468					$	5,211

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The Company had the following balances related to transactions with Maxeon Solar as of October 3, 2021:

						As of
(In thousands)						October 3, 2021
Prepaid and other current assets						$	2,265
Accrued liabilities						$	7,838
Accounts payable						$	29,906
Other long-term liabilities						$	1,458

Refer to Note 2. Transactions with Total and TotalEnergies SE. for related-party transactions with Total and its affiliates and to Note 9. Equity Investments for related-party transactions with SunStrong and SunStrong Partners.

CEO Stock Purchase

In connection with his commencement of employment with the Company on April 19, 2021, Peter Faricy, SunPower Corporation’s chief executive officer, was granted the right to purchase up to $3.0 million in shares of SunPower’s common stock based on the closing trading price on the date of purchase. For each share of common stock purchased within the 12-month period commencing on April 19, 2021, SunPower agreed to grant to Mr. Faricy one restricted stock unit (the “Matching RSUs”). The Matching RSUs vest in equal installments on each of the first two anniversaries of the last day of the calendar quarter in which Mr. Faricy purchases the related common stock. On April 26, 2021, Mr. Faricy purchased 101,730 shares of common stock for an aggregate of $3.0 million and SunPower issued the equivalent Matching RSUs.

In the three months ended October 3, 2021, our income tax benefit of $2.2 million on a loss from continuing operations before income taxes and equity in earnings of unconsolidated investees of $86.5 million was primarily due to the deferred taxes on mark-to-market unrealized losses on equity investments. Our income tax provision of $36.7 million in the three months ended September 27, 2020 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.

In the nine months ended October 3, 2021, our income tax benefit of $5.0 million on a loss from continuing operations before income taxes and equity in earnings of unconsolidated investees of $64.0 million was primarily due to windfall benefits from stock-based compensation deduction and the true-up of estimated state tax liability. Our income tax provision of $38.7 million in the nine months ended September 27, 2020 on a profit from 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.

During the three and nine months ended October 3, 2021, 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. Estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on evaluations of possible future events and transactions and may be subject to subsequent refinement or revision. If a reliable estimate cannot be made, the actual effective tax rate for the year to date may be the best estimate of the annual effective tax rate.

Total liabilities associated with uncertain tax positions were $15.0 million and $12.6 million as of October 3, 2021 and January 3, 2021, respectively. The increase of $2.4 million was primarily due to amounts reclassified from deferred tax liability related to the treatment of equity investment tax gain for states.

 

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 by using the basic weighted-average number of common shares outstanding plus any potentially dilutive securities outstanding during the period using the treasury-stock method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities include restricted stock units and the outstanding senior convertible debentures.

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The following table presents the calculation of basic and diluted net income (loss) per share attributable to stockholders:

						Three Months Ended												Nine Months Ended
(In thousands, except per share amounts)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Basic net (loss) income per share:
Numerator:
Net (loss) income attributable to stockholders - continuing operations						$	(84,376)					$	109,450					$	(57,554)					$	186,880
Net (loss) income attributable to stockholders - discontinued operations						—						(64,824)						—						(124,307)
Net (loss) income attributable to stockholders						$	(84,376)					$	44,626					$	(57,554)					$	62,573
Denominator:
Basic weighted-average common shares						172,885						170,113						172,242						169,646
Basic net (loss) income per share - continuing operations						$	(0.49)					$	0.64					$	(0.33)					$	1.10
Basic net (loss) income per share - discontinued operations						—						(0.38)						—						(0.73)
Basic net (loss) income per share						$	(0.49)					$	0.26					$	(0.33)					$	0.37
Diluted net (loss) income per share:
Numerator:
Net (loss) income attributable to stockholders - continuing operations						$	(84,376)					$	109,450					$	(57,554)					$	186,880
Add: Interest expense on 0.875% debentures due 2021, net of tax						—						467						—						1,507
Add: Interest expense on 4.00% debentures due 2023, net of tax						—						3,358						—						10,066
Net (loss) income available to common stockholders - continuing operations						(84,376)						113,275						$	(57,554)					$	198,453
Net (loss) income available to common stockholders - discontinued operations						$	—					$	(64,824)					$	—					$	(124,307)
Denominator:
Basic weighted-average common shares						172,885						170,113						172,242						169,646
Effect of dilutive securities:
Restricted stock units						—						3,560						—						3,354
0.875% debentures due 2021						—						7,785						—						10,056
4.00% debentures due 2023						—						17,068						—						17,068
Dilutive weighted-average common shares:						172,885						198,526						172,242						200,124
Dilutive net (loss) income per share - continuing operations						$	(0.49)					$	0.57					$	(0.33)					$	0.99
Dilutive net (loss) income per share - discontinued operations						—						(0.33)						—						(0.62)
Dilutive net (loss) income per share						$	(0.49)					$	0.24					$	(0.33)					$	0.37

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The following is a summary of outstanding anti-dilutive potential common stock that was excluded from diluted net income per share attributable to stockholders in the following periods:

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Restricted stock units						1,053						382						1,155						4,774
4.00% debentures due 2023						—						—						17,068						—

The following table summarizes the consolidated stock-based compensation expense by line item in our unaudited condensed consolidated statements of operations:

						Three Months Ended												Nine Months Ended
(In thousands)						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Cost of revenues						$	1,049					$	968					$	3,021					$	2,154
Research and development						624						38						2,450						575
Sales, general, and administrative						3,053						3,448						14,305						10,657
Total stock-based compensation expense						$	4,726					$	4,454					$	19,776					$	13,386

Our Residential, Light Commercial ("RLC") segment refers to sales of fully integrated solar, storage and home energy solutions and components, through a combination of our third-party installing and non-installing dealer network and resellers and our in-house sales team. The Commercial and Industrial Solutions ("C&I Solutions") segment refers to direct sales of turn-key EPC services and sales of energy under power purchase agreements ("PPAs"). Certain legacy businesses consisting of worldwide power plant project development and project sales that 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 revenues - 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 revenue, while Power Co refers to our post-system sale recurring services revenue, 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 Solutions. The risk profile of each 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.

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Adjustments Made for Segment Purposes

Adjustments Based on International Financial Reporting Standards (“IFRS”)

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 TotalEnergies SE. Further, we elected the 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 TotalEnergies 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 by management's assessment of market-based pricing terms. Such intersegment sales and related costs are eliminated at the corporate level to derive our unaudited condensed consolidated financial results.

Gain or 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 majority of our residential lease business and retained a 51% membership interest. We record an impairment charge based on the expected fair value for a portion of residential lease assets portfolio that was retained. Any charges or credits on these remaining unsold residential lease assets, as well as corresponding depreciation savings, are excluded from our non-GAAP results as they are not reflective of ongoing operating results.

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.

Gain or Loss on business divestitures, net

In the second quarter of fiscal 2021, we sold a portion of our residential lease business and certain commercial projects recognizing a gain and a loss, respectively relating to these business divestitures. We believe that it is appropriate to exclude this gain and loss from our segment results as they are 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.

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Executive transition costs

We incur non-recurring charges related to the hiring and transition of new executive officers. During the second quarter of fiscal 2021, we appointed a new chief executive officer and chief legal officer, and are investing resources in those executive transitions and in developing new members of management as we complete our restructuring transformation. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.

Business reorganization costs

In connection with the Spin-Off of Maxeon Solar in fiscal 2020, we incurred, and expect to continue to incur in upcoming quarters, non-recurring charges on third-party consulting expenses, primarily to enable the separation of shared information technology systems and applications. We believe that it is appropriate to exclude these from our non-GAAP results as they are not reflective of ongoing operating results.

Restructuring charges or credits

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.

Results of operations of legacy business to be exited

We excluded the first quarter 2021 results of operations of our Hillsboro, Oregon, facility from our non-GAAP results given that the Hillsboro, Oregon, facility ceased revenue generation in the first fiscal quarter of 2021 and all subsequent activities are focused on the wind-down of operations. As such, they are not reflective of ongoing operating results.

Litigation

We may be involved in various 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.

Segment and Geographical Information

The following tables present segment results for the three and nine months ended October 3, 2021 for revenues, gross margin, and adjusted EBITDA, each as reviewed by the CODM, and their reconciliation to our unaudited condensed consolidated results under U.S. GAAP, as well as information about significant customers and revenues by geography based on the destination of the shipments, and property, plant and equipment, net by segment.

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						Three Months Ended
						October 3, 2021																		September 27, 2020
(In thousands):						Residential, Light Commercial						Commercial and Industrial Solutions						Others						Residential, Light Commercial						Commercial and Industrial Solutions						Others
Revenues from external customers:
Dev Co						$	274,747					$	36,596					$	980					$	190,480					$	73,790					$	2,688
Power Co						6,888						3,728						697						7,230						544						75
Intersegment revenue						—						—						—						—						—						7,293
Total segment revenues as reviewed by CODM						$	281,635					$	40,324					$	1,677					$	197,710					$	74,334					$	10,056
Segment gross profit as reviewed by CODM						$	63,108					$	(2,387)					$	(19)					$	34,779					$	5,120					$	(3,168)
Adjusted EBITDA						$	30,825					$	(8,133)					$	(649)					$	15,521					$	1,228					$	(3,192)

						Nine Months Ended
						October 3, 2021																		September 27, 2020
(In thousands):						Residential, Light Commercial						Commercial and Industrial Solutions						Others						Residential, Light Commercial						Commercial and Industrial Solutions						Others
Revenues from external customers:
Dev Co						$	753,429					$	139,486					$	7,320					$	571,236					$	167,544					$	2,954
Power Co						20,262						15,277						2,562						18,904						7,721						19,846
Intersegment revenue						—						—						(11)						—						—						32,815
Total segment revenues as reviewed by CODM						$	773,691					$	154,763					$	9,871					$	590,140					$	175,265					$	55,615
Segment gross profit as reviewed by CODM						$	173,239					$	2,527					$	5,013					$	94,501					$	14,533					$	(18,906)
Adjusted EBITDA						$	83,771					$	(13,125)					$	3,615					$	31,346					$	(1,244)					$	(19,278)

Reconciliation of Segment Revenues to Unaudited Condensed Consolidated GAAP Revenues						Three Months Ended												Nine Months Ended
(In thousands):						October 3, 2021						September 27, 2020						October 3, 2021						September 27, 2020
Total segment revenues as reviewed by CODM						$	323,636					$	282,100					$	938,325					$	821,020
Adjustments to segment revenues:
Intersegment elimination						—						(7,294)						11						(32,816)
Legacy utility and power plant projects						—						—						—						207
Construction revenue on solar services contracts						—						—						—						(5,392)
Results of operations of legacy business to be exited						—						—						625						—
Unaudited Condensed consolidated GAAP revenues						$	323,636					$	274,806					$	938,961					$	783,019

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Acquisition of Blue Raven Solar Holdings, LLC ("Blue Raven")

On October 4, 2021, we acquired all of the issued and outstanding membership interests of Blue Raven, a Delaware limited liability company, and thirty-five percent (35%) of the issued and outstanding membership interests in Albatross Software LLC, also a Delaware limited liability company and an affiliate of Blue Raven, pursuant to a Securities Purchase Agreement (“Purchase Agreement“) dated as of October 4, 2021.

Pursuant to the Purchase Agreement, we agreed to pay up to $145 million in cash consideration, subject to a customary working capital adjustment. While a majority of the cash consideration was paid upon closing, a portion was deferred and is payable at a later date, and is subject to continued employment of certain sellers as well as Blue Raven employees and service providers, in accordance with the terms of the Purchase Agreement as well as employment and retention agreements entered into with such individuals. The Company has also agreed to make an additional cash payment of up to $20 million based on Blue Raven’s revenue for the period beginning on September 13, 2021 and ending June 19, 2022 by meeting certain quantitative thresholds.

We are currently in the process of evaluating the business combination accounting considerations, including the consideration transferred and the initial purchase price allocation in accordance with the guidance in ASC 805, Business Combinations.

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