Cost Method Investment and Collaborative Arrangement

12 Months Ended

Dec. 29, 2018

Investments, All Other Investments [Abstract]

Cost Method Investment

Cost Method Investment and Collaborative Arrangement

During fiscal 2015, we purchased a series of preferred stock ownership interests in a privately-held company that designs human-computer interaction technology for total consideration of $5.0 million. This gross investment constituted a 22.7% ownership interest. In the third quarter of fiscal 2016, we made an additional investment of $1.0 million via a convertible debt instrument, bringing our gross investment in the investee to $6.0 million at that time.

In each of the second and third quarters of fiscal 2017, we advanced the investee $1.0 million through a short-term instrument, bringing our total short-term advances to the investee to $2.0 million. As these advances were due and payable in the fourth quarter of fiscal 2017, they were included in Prepaid expenses and other current assets in our Consolidated Balance Sheets while outstanding. The investee repaid the total advances in October 2017.

In 2017, we signed new development and licensing contracts with the investee, and the investee obtained preferred debt that effectively subordinated our ownership position between their debt and common shareholders. After evaluating these events and our investment position, we concluded that we had a variable interest in the privately-held company. However, we were not the primary beneficiary of the investee, were not holding in-substance common stock, and did not have a significant amount of influence to direct the activities that most significantly impact the investee’s economic performance. Accordingly we accounted for our investment in this company under the cost method.

In the fourth quarter of fiscal 2018, we restructured our relationship such that we now own only preferred shares and the prior agreements were canceled, thereby eliminating the variable interest in the investee. See the “Collaborative Arrangement” section of this note for discussion of changes under the restructured relationship. We continue to account for our preferred shares investment in this company under the cost method.

We assess this investment for impairment on a quarterly basis by applying a fair value analysis using a revenue multiple approach. During fiscal 2018, we recognized an impairment adjustment, but our assessment as of December 29, 2018 concluded that no further impairment adjustment was necessary as of that date. The following table summarizes the impairment adjustments against this investment that we have recognized through Other (expense) income, net in the Consolidated Statements of Operations during the fiscal years presented:

	Year Ended
(In thousands)	December 29, 2018			December 30, 2017			December 31, 2016
Impairment of cost-basis investment	$	(266	)	$	(1,761	)	$	(1,459	)

Through December 29, 2018, we have reduced the value of our investment by approximately $4.0 million. The net balance of our investment included in Other long-term assets in the Consolidated Balance Sheets is detailed in the following table:

(In thousands)	Total
Balance at December 31, 2016	$	4,049
Impairment of cost-basis investment	(1,761		)
Balance at December 30, 2017	2,288
Impairment of cost-basis investment	(266		)
Balance at December 29, 2018	$	2,022

Collaborative Arrangement

During the fourth quarter of fiscal 2018, we restructured our relationship with the investee discussed above, including the cancellation of prior arrangements from the 2017 agreements that had provided for: (i) the assignment of certain Intellectual Property ("IP") from the investee to us, (ii) a license of certain IP from the investee to us, (iii) payment of royalties between the parties for future sales of co-developed products, (iv) the performance of certain services for each other at no additional charge. Under the 2017 agreements, we had agreed to make quarterly minimum payments to the investee, which were to be automatically credited against any future revenue share amount owed to the investee under the agreements, and which were accounted for as prepaid royalties under ASC 340. As of the fourth quarter 2018, and under the new contractual arrangement, we have returned the assignment of IP to the investee, we are no longer obligated to make quarterly royalty payments to the investee, and we have recorded Restructuring charges of $3.3 million in the Consolidated Statements of Operations for our abandonment of the accumulated balance of royalties prepaid under the 2017 agreements.

Collaborative Arrangement

Cost Method Investment and Collaborative Arrangement

During fiscal 2015, we purchased a series of preferred stock ownership interests in a privately-held company that designs human-computer interaction technology for total consideration of $5.0 million. This gross investment constituted a 22.7% ownership interest. In the third quarter of fiscal 2016, we made an additional investment of $1.0 million via a convertible debt instrument, bringing our gross investment in the investee to $6.0 million at that time.

In each of the second and third quarters of fiscal 2017, we advanced the investee $1.0 million through a short-term instrument, bringing our total short-term advances to the investee to $2.0 million. As these advances were due and payable in the fourth quarter of fiscal 2017, they were included in Prepaid expenses and other current assets in our Consolidated Balance Sheets while outstanding. The investee repaid the total advances in October 2017.

In 2017, we signed new development and licensing contracts with the investee, and the investee obtained preferred debt that effectively subordinated our ownership position between their debt and common shareholders. After evaluating these events and our investment position, we concluded that we had a variable interest in the privately-held company. However, we were not the primary beneficiary of the investee, were not holding in-substance common stock, and did not have a significant amount of influence to direct the activities that most significantly impact the investee’s economic performance. Accordingly we accounted for our investment in this company under the cost method.

In the fourth quarter of fiscal 2018, we restructured our relationship such that we now own only preferred shares and the prior agreements were canceled, thereby eliminating the variable interest in the investee. See the “Collaborative Arrangement” section of this note for discussion of changes under the restructured relationship. We continue to account for our preferred shares investment in this company under the cost method.

We assess this investment for impairment on a quarterly basis by applying a fair value analysis using a revenue multiple approach. During fiscal 2018, we recognized an impairment adjustment, but our assessment as of December 29, 2018 concluded that no further impairment adjustment was necessary as of that date. The following table summarizes the impairment adjustments against this investment that we have recognized through Other (expense) income, net in the Consolidated Statements of Operations during the fiscal years presented:

	Year Ended
(In thousands)	December 29, 2018			December 30, 2017			December 31, 2016
Impairment of cost-basis investment	$	(266	)	$	(1,761	)	$	(1,459	)

Through December 29, 2018, we have reduced the value of our investment by approximately $4.0 million. The net balance of our investment included in Other long-term assets in the Consolidated Balance Sheets is detailed in the following table:

(In thousands)	Total
Balance at December 31, 2016	$	4,049
Impairment of cost-basis investment	(1,761		)
Balance at December 30, 2017	2,288
Impairment of cost-basis investment	(266		)
Balance at December 29, 2018	$	2,022

Collaborative Arrangement

During the fourth quarter of fiscal 2018, we restructured our relationship with the investee discussed above, including the cancellation of prior arrangements from the 2017 agreements that had provided for: (i) the assignment of certain Intellectual Property ("IP") from the investee to us, (ii) a license of certain IP from the investee to us, (iii) payment of royalties between the parties for future sales of co-developed products, (iv) the performance of certain services for each other at no additional charge. Under the 2017 agreements, we had agreed to make quarterly minimum payments to the investee, which were to be automatically credited against any future revenue share amount owed to the investee under the agreements, and which were accounted for as prepaid royalties under ASC 340. As of the fourth quarter 2018, and under the new contractual arrangement, we have returned the assignment of IP to the investee, we are no longer obligated to make quarterly royalty payments to the investee, and we have recorded Restructuring charges of $3.3 million in the Consolidated Statements of Operations for our abandonment of the accumulated balance of royalties prepaid under the 2017 agreements.