Equity Investments

9 Months Ended

Oct. 03, 2021

Equity Method Investments and Joint Ventures [Abstract]

EQUITY INVESTMENTS

Our equity investments consist of equity investments with readily determinable fair value, investments without readily determinable fair value, equity investments accounted for using the fair value option, and equity method investments.

Our share of earnings (losses) from equity investments accounted for under the equity method is reflected as "Equity in earnings (losses) of unconsolidated investees" in our 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

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


	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

For Solar Sail LLC ("Solar Sail") and Solar Sail Commercial Holdings, LLC ("Solar Sail Commercial"), a joint venture with Hannon Armstrong, our consolidated VIEs, total revenue was $5.0 million and $12.7 million for the three and nine months ended October 3, 2021, respectively. Total revenue was $4.7 million and $8.1 million for the three and nine months ended September 27, 2020, respectively. The assets of these consolidated VIEs are restricted for use only by the particular investee and are not available for our general operations. As of October 3, 2021, we had $67.2 million of assets from the consolidated VIEs.