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Table of Contents


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

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2022

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34166


spwr-20220403_g1.gif
SunPower Corporation
(Exact Name of Registrant as Specified in Its Charter)

Delaware94-3008969
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
51 Rio RoblesSan JoseCalifornia95134
(Address of Principal Executive Offices)(Zip Code)

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

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of exchange on which registered
Common Stock, $0.001 par value per shareSPWRThe Nasdaq Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Emerging growth company Non-accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

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

The total number of outstanding shares of the registrant’s common stock as of April 29, 2022 was 173,862,474.

1

Table of Contents

SunPower Corporation
Form 10-Q for the quarterly period ended April 3, 2022

Table of Contents
Page


2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


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

 April 3, 2022January 2, 2022
Assets
Current assets:
Cash and cash equivalents$142,250 $123,735 
Restricted cash and cash equivalents, current portion2
681 691 
Short-term investments308,835 365,880 
Accounts receivable, net1
116,354 121,268 
Contract assets35,721 25,994 
Inventories245,612 214,432 
Advances to suppliers, current portion2,685 462 
Prepaid expenses and other current assets1
128,271 100,212 
Current assets of discontinued operations1
179,484 120,792 
Total current assets1,159,893 1,073,466 
Restricted cash and cash equivalents, net of current portion2
12,857 14,887 
Property, plant and equipment, net42,495 33,560 
Operating lease right-of-use assets30,337 31,654 
Solar power systems leased, net44,550 45,502 
Goodwill126,338 126,338 
Other intangible assets, net24,776 24,879 
Other long-term assets129,529 156,994 
Long-term assets of discontinued operations 47,526 
Total assets$1,570,775 $1,554,806 
Liabilities and Equity  
Current liabilities:  
Accounts payable1
$179,069 $138,514 
Accrued liabilities1
129,569 101,980 
Operating lease liabilities, current portion11,439 10,753 
Contract liabilities, current portion1
66,127 62,285 
Short-term debt107,863 109,568 
Convertible debt, current portion1
423,987  
Current liabilities of discontinued operations1
138,153 86,496 
Total current liabilities1,056,207 509,596 
Long-term debt338 380 
Convertible debt, net of current portion1
 423,677 
Operating lease liabilities, net of current portion26,215 28,566 
Contract liabilities, net of current portion19,059 18,705 
Other long-term liabilities1
109,295 141,197 
Long-term liabilities of discontinued operations1
 42,661 
Total liabilities1,211,114 1,164,782 
Commitments and contingencies (Note 9)
Equity:  
Preferred stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding as of April 3, 2022 and January 2, 2022
  
Common stock, $0.001 par value, 367,500 shares authorized; 187,652 shares issued and 173,846 shares outstanding as of April 3, 2022; 186,452 shares issued and 173,052 shares outstanding as of January 2, 2022
174 173 
Additional paid-in capital2,719,927 2,714,500 
Accumulated deficit(2,150,083)(2,122,212)
Accumulated other comprehensive income11,170 11,168 
Treasury stock, at cost: 13,807 shares of common stock as of April 3, 2022; 13,401 shares of common stock as of January 2, 2022
(222,573)(215,240)
Total stockholders' equity358,615 388,389 
Noncontrolling interests in subsidiaries1,046 1,635 
Total equity359,661 390,024 
Total liabilities and equity$1,570,775 $1,554,806 

1 We have related-party balances for transactions made with TotalEnergies SE and its affiliates, Maxeon Solar Technologies, Ltd. (“Maxeon Solar”), and unconsolidated entities in which we have a direct equity investment. These related-party balances are recorded within the “accounts receivable, net,” “prepaid expenses and other current assets,” “accounts payable,” “accrued liabilities,” “convertible debt, current portion,” “contract liabilities, current portion,” “convertible debt, net of current portion,” “other long-term liabilities,” “current assets of discontinued operations,” “current liabilities of discontinued operations,” and “long-term liabilities of discontinued operations” financial statement line items on our condensed consolidated balance sheets (see Note 3, Note 9, Note 10, Note 11, and Note 12).

2 Amounts included in the “Restricted cash and cash equivalents, current portion” and “Restricted cash and cash equivalents, net of current portion” financial statement line items on our condensed consolidated balance sheets include cash balances set aside for various financial obligations including loans, distributions, letter of credit facilities, and other projects’ related cash transactions.


The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)

 Three Months Ended
 April 3, 2022April 4, 2021
Total revenues$350,277 $240,136 
Total cost of revenues277,968 194,170 
Gross profit72,309 45,966 
Operating expenses:
Research and development1
5,010 4,624 
Sales, general, and administrative76,996 42,267 
Restructuring charges (credits)627 3,766 
(Gain) loss on sale and impairment of residential lease assets (226)
(Income) expense from transition services agreement, net1
266 (3,087)
 Total operating expenses82,899 47,344 
Operating income (loss)(10,590)(1,378)
Other (expense) income, net:
Interest income42 52 
Interest expense1
(5,044)(7,027)
Other, net1,444 (44,515)
Other (expense) income, net(3,558)(51,490)
(Loss) income from continuing operations before income taxes(14,148)(52,868)
Benefits from (provision for) income taxes11,643 5,126 
Net (loss) income from continuing operations(2,505)(47,742)
(Loss) income from discontinued operations before income taxes1
(26,298)(1,854)
Benefits from (provision for) income taxes from discontinued operations343 98 
Net (loss) income from discontinued operations, net of taxes(25,955)(1,756)
Net (loss) income(28,460)(49,498)
Net loss (income) from continuing operations attributable to noncontrolling interests339 595 
Net loss (income) from discontinued operations attributable to noncontrolling interests250 518 
Net loss (income) attributable to noncontrolling interests589 1,113 
Net (loss) income from continuing operations attributable to stockholders(2,166)(47,147)
Net (loss) income from discontinued operations attributable to stockholders(25,705)(1,238)
Net (loss) income attributable to stockholders$(27,871)$(48,385)
Net (loss) income per share attributable to stockholders - basic:
Continuing operations$(0.01)$(0.28)
Discontinued operations$(0.15)$(0.01)
Net (loss) income per share – basic
$(0.16)$(0.29)
Net (loss) income per share attributable to stockholders - diluted:
Continuing operations$(0.01)$(0.28)
Discontinued operations$(0.15)$(0.01)
Net (loss) income per share – diluted
$(0.16)$(0.29)
Weighted-average shares:
Basic173,376 171,200 
Diluted173,376 171,200 

1 We have related-party transactions with TotalEnergies SE and its affiliates, Maxeon Solar, and unconsolidated entities in which we have a direct equity investment. These related-party transactions are recorded within the “revenues: solar power systems and components,” “operating expenses: research and development,” “operating expenses: (income) expense transition services agreement, net,” “other income (expense), net: interest expense,” and “(loss) income from discontinued operations before income taxes” financial statement line items in our condensed consolidated statements of operations (see Note 3, Note 10, and Note 12).


The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(unaudited)

 Three Months Ended
April 3, 2022April 4, 2021
Net (loss) income$(28,460)$(49,498)
Components of other comprehensive income (loss):
Translation adjustment2 (2)
Net change in derivatives 147 
(Provision for) benefits from income taxes (47)
Total other comprehensive income (loss)2 98 
Total comprehensive (loss) income(28,458)(49,400)
Comprehensive loss (income) attributable to noncontrolling interests589 1,113 
Comprehensive (loss) income attributable to stockholders$(27,869)$(48,287)


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

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SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 2, 2022173,051 $173 $2,714,500 $(215,240)$11,168 $(2,122,212)$388,389 $1,635 $390,024 
Net income (loss)— — — — — (27,871)(27,871)(589)(28,460)
Other comprehensive income— — — — 2 — 2 — 2 
Issuance of restricted stock to employees, net of cancellations1,201 1 — — — — 1 — 1 
Stock-based compensation expense— — 5,427 — — — 5,427 — 5,427 
Purchases of treasury stock(407)— — (7,333)— — (7,333)— (7,333)
Balances at April 3, 2022173,845 $174 $2,719,927 $(222,573)$11,170 $(2,150,083)$358,615 $1,046 $359,661 



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SunPower Corporation
Condensed Consolidated Statements of Equity
(In thousands)
(unaudited)


 Common Stock     
 SharesValueAdditional
Paid-in
Capital
Treasury
Stock
Accumulated Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
Noncontrolling Interests in SubsidiariesTotal Equity
Balances at January 3, 2021170,428 $170 $2,685,920 $(205,476)$8,799 $(2,085,246)$404,167 $2,319 $406,486 
Net income (loss)— — — — — (48,385)(48,385)(1,113)(49,498)
Other comprehensive income— — — — 98 — 98 — 98 
Issuance of restricted stock to employees, net of cancellations1,908 2 — — — — 2 — 2 
Stock-based compensation expense— — 5,437 — — — 5,437 — 5,437 
Bond/debentures conversion4 — 155 — — — 155 — 155 
Purchases of treasury stock(76)— — (2,120)— — (2,120)— (2,120)
Other adjustments— — (89)— — 392 303 — 303 
Balances at April 4, 2021172,264 $172 $2,691,423 $(207,596)$8,897 $(2,133,239)$359,657 $1,206 $360,863 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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SunPower Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
    
Three Months Ended
 April 3, 2022April 4, 2021
Cash flows from operating activities:
Net (loss) income$(28,460)$(49,498)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization4,665 2,849 
Stock-based compensation5,427 5,437 
Non-cash interest expense726 1,505 
(Gain) loss on equity investments(1,315)44,730 
(Gain) loss on sale of investments (1,162)
Deferred income taxes(13,750)(3,901)
Other, net845 (5,280)
Changes in operating assets and liabilities:
       Accounts receivable(12,354)4,114 
       Contract assets(6,519)487 
       Inventories(35,081)(8,271)
       Project assets2,892 9,197 
       Prepaid expenses and other assets(86,502)1,429 
       Operating lease right-of-use assets2,415 2,875 
       Advances to suppliers(2,222)(3,852)
       Accounts payable and other accrued liabilities41,444 (24,152)
       Contract liabilities22,066 (13,461)
       Operating lease liabilities(3,027)(3,429)
Net cash used in operating activities(108,750)(40,383)
Cash flows from investing activities:
Purchases of property, plant, and equipment(8,636)(1,964)
Investment in software development costs(1,521) 
Cash paid for solar power systems (635)
Cash received from sale of investments 1,200 
Cash paid for equity investments(7,000) 
Proceeds from sale of equity investment149,830  
Cash paid for investments in unconsolidated investees(154) 
Net cash provided by (used in) investing activities132,519 (1,399)
Cash flows from financing activities:
Proceeds from bank loans and other debt21,458 71,323 
Repayment of bank loans and other debt(23,944)(35,076)
Repayment of non-recourse residential and commercial financing debt (9,713)
Purchases of stock for tax withholding obligations on vested restricted stock(7,332)(2,118)
Net cash (used in) provided by financing activities(9,818)24,416 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash  
Net increase (decrease) in cash, cash equivalents, and restricted cash13,951 (17,367)
Cash, cash equivalents, and restricted cash, beginning of period148,613 246,804 
Cash, cash equivalents, and restricted cash, end of period$162,564 $229,437 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets, including discontinued operations:
Cash and cash equivalents$142,250 $213,105 
Restricted cash and cash equivalents, current portion681 10,928 
Restricted cash and cash equivalents, net of current portion12,857 5,404 
Cash, cash equivalents, and restricted cash from discontinued operations6,776  
Total cash, cash equivalents, and restricted cash$162,564 $229,437 
Supplemental disclosure of cash flow information:
Property, plant and equipment acquisitions funded by liabilities$922 $1,647 
Right-of-use assets obtained in exchange for lease obligations$877 $11,528 
Cash paid for interest$9,874 $11,437 
Cash paid for income taxes$250 $39 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SunPower Corporation (together with its subsidiaries, “SunPower,” the “Company,” “we,” “us,” or “our”) is a leading solar technology and energy services provider that 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 and businesses. Our sales channels include a strong network of both installing and non-installing dealers and resellers that operate in residential markets as well as a group of talented and driven in-house sales teams engaged in direct sales to end customers. We are invested in growing our business, by focusing on continued innovation, product development, and investments, while enhancing our customer experience and culture. SunPower is a majority-owned subsidiary of TotalEnergies Solar INTL SAS (“Total,” formerly Total Solar International SAS) and TotalEnergies Gaz & Electricité Holdings SAS (“Total Gaz,” formerly Total Gaz Electricité Holdings France SAS), each a subsidiary of TotalEnergies SE (“TotalEnergies SE,” formerly Total SE) (see “Note 3. Transactions with Total and TotalEnergies SE”).

On February 6, 2022, we signed an Equity Purchase Agreement (the “Definitive Agreement”) with TotalEnergies Renewables USA, LLC (“TotalEnergies Renewables”), a Delaware limited liability company and wholly owned subsidiary of TotalEnergies SE, for the sale of our Commercial and Industrial Solutions (“C&I Solutions”) business. Subject to the terms and considerations set forth in the Definitive Agreement, TotalEnergies Renewables will acquire all of the issued and outstanding common stock of our C&I Solutions business for aggregate cash consideration of $190.0 million, which is subject to certain adjustments, including cash, indebtedness, working capital surplus/shortfall, and transaction expenses. We will receive additional consideration of up to $60.0 million in cash if certain legislative action is taken between February 6 and June 30, 2022.

The sale is subject to customary closing conditions, including internal restructuring of certain legal entities before they are ready for sale, and is currently expected to close before the end of the second quarter of fiscal 2022. The pending sale meets the criteria for classification as “discontinued operations” in accordance with the guidance in ASC 205-20. Refer to Note 2. Discontinued Operations for details.

Liquidity

We believe that our cash and cash equivalents will be sufficient to meet our obligations over the next 12 months from the date of issuance of our financial statements, including repayment of our $425.0 million 4.00% senior convertible debentures due 2023 (the “4.00% debentures due 2023”), $100.0 million of which are held by TotalEnergies, which mature on January 15, 2023. The holders of 4.00% debentures due 2023 may exercise their right to convert into our common stock any time prior to their maturity, instead of cash repayment. In order for us to fulfil our obligation to repay the 4.00% debentures due 2023, we could use proceeds of sale of shares of Enphase Energy, Inc (“Enphase”) common stock, cash generated from operations, and proceeds from the pending sale of our C&I Solutions business to TotalEnergies Renewables. The C&I Solutions sale is subject to customary closing conditions, including internal restructuring of certain legal entities before they are ready for sale. We currently expect the sale to be completed during the second quarter of fiscal 2022. In addition, in the past we have generated liquidity by securing other sources of financing, such as accessing the capital markets; as well as implementing other cost reduction initiatives and deferring uncommitted expenditures, to address our liquidity needs. We believe it is probable that these actions will generate sufficient proceeds if needed to satisfy our debt obligations under the 4.00% debentures due 2023. However, we cannot predict, with certainty, the outcome of the actions discussed above to generate liquidity or whether such actions would generate the expected liquidity as currently planned.

In the past we have refinanced and extended the maturity date of certain debts; however, there is no assurance that the 4.00% debentures due 2023 will be refinanced or their maturity extended to sufficiently meet our obligations as they become due or on terms acceptable to us.

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Basis of Presentation and Preparation
    
Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared by us in accordance with generally accepted accounting principles in the United States (“United States” or “U.S.,” and such accounting principles, “U.S. GAAP”) for interim financial information, and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The January 2, 2022 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 2, 2022, as filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022, but does not include all disclosures required by U.S. GAAP. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in SunPower's Annual Report on Form 10-K for the fiscal year ended January 2, 2022. The operating results for the three months ended April 3, 2022 are not necessarily indicative of the results that may be expected for fiscal year 2022, 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. Both the current fiscal year, fiscal 2022, and prior fiscal year, fiscal 2021, are 52-week fiscal years. The first quarter of fiscal 2022 ended on April 3, 2022, while the first quarter of fiscal 2021 ended on April 4, 2021.

Management Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities reported in these condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. Our actual financial results could materially differ from those estimates. Significant estimates in these 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 assets and goodwill 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 goodwill and intangible assets acquired in a business combination; valuation of contingent consideration in a business combination; 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.

Segment Information

As a result of classification of the C&I Solutions business as discontinued operations, we now operate in a single operating segment, providing solar power systems and services to residential customers. While our chief executive officer, as the chief operating decision maker (“CODM”), reviews financial information by different functions and revenue streams, he considers the business on a consolidated basis for purposes of allocating resources and reviewing overall business performance.

Summary of Selected Significant Accounting Policies
    
The following significant accounting policies are updates to our significant accounting policies from our Annual Report on Form 10-K for the fiscal year ended January 2, 2022. Refer to our Annual Report on Form 10-K for the fiscal year ended January 2, 2022 for the full list of our significant accounting policies. There have been no other material changes to our significant accounting policies except as disclosed below.

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Retail installment contract receivables, net

In the fourth quarter of fiscal 2021, we launched SunPower FinancialTM, with an objective to make renewable energy affordable for more homeowners and increase access to underserved populations by offering a new line of financial products featuring expanded eligibility. The offering includes entering into a retail installment contract, together with a sale of the solar power system, offering a long-term loan to our customers at affordable rates to finance their purchase. These residential installment contracts allow us to extend credit to the customers to pay for the solar power systems they purchased, on an installment basis, with a term of typically 20 - 25 years.

Revenue from the sale of solar power systems underlying these retail installment contracts is recognized similar to other contracts, when the solar power system is fully installed and final permit is received from the authority having jurisdiction, as we deem our performance obligation under the contract to be complete at such time, and the customer retains the significant risks and rewards of ownership of the solar power system. Further, in accordance with ASC 606, Revenue from Contracts with Customers, given the long-term nature of these receivables, a significant financing component is deemed to exist. We adjust the transaction price to quantify and defer the significant financing component at contract inception, using the discount rate that would be reflective of a separate financing transaction between the entity and its customer at contract inception. The significant financing component amount is deferred and recognized as revenue over the contract term. We recognize the interest income as revenue given the contracts are entered into in connection with the sales of our solar power systems and within our ordinary business activities.

As of April 3, 2022, the receivables are classified within current and non-current assets, based on the underlying contractual payment terms, as “accounts receivable, net” and “other long-term assets” on our condensed consolidated balance sheet. We are actively looking to refinance the contracts with several third-party financial institutions.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“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 adopted the ASU during the first quarter of fiscal 2022. The adoption did not have any impact on our consolidated financial statements and related disclosures.

Note 2. DISCONTINUED OPERATIONS

On February 6, 2022, we signed a definitive agreement with TotalEnergies Renewables, a Delaware limited liability company and wholly owned subsidiary of TotalEnergies SE, for the sale of our C&I Solutions business. Subject to the terms and considerations set forth in the definitive agreement, TotalEnergies Renewables will acquire all of the issued and outstanding common stock of our C&I Solutions business for aggregate cash consideration of $190.0 million, which is subject to certain adjustments, including cash, indebtedness, working capital surplus/shortfall, and transaction expenses. We will receive additional consideration of up to $60.0 million in cash if certain legislative action is taken between February 6 and June 30, 2022. The sale is subject to customary closing conditions, including internal restructuring of certain legal entities before they are ready for sale, and is currently expected to close during the second quarter of fiscal 2022.

In accordance with the accounting guidance, the C&I Solutions business is now presented as a discontinued operations as the signing of the definitive agreement has occurred and the sale represents a strategic shift in our business that has major impacts on our current and historical financial results. For all periods presented, the financial results of C&I Solutions are presented as net earnings from discontinued operations on the condensed consolidated statement of operations, as well as assets and liabilities of discontinued operations on the condensed consolidated balance sheets.

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The following table presents the assets and liabilities of C&I Solutions as of April 3, 2022 and January 2, 2022, presented as assets and liabilities of discontinued operations on the condensed consolidated balance sheet:

 April 3, 2022January 2, 2022
Assets
Current assets:
Cash and cash equivalents$1,367 $3,395 
Restricted cash and cash equivalents, current portion2,970 3,466 
Accounts receivable, net21,945 5,522 
Contract assets52,649 55,673 
Inventories32,461 28,561 
Advances to suppliers, current portion2,814 2,813 
Project assets - plants and land, current portion10,173 8,105 
Prepaid expenses and other current assets14,290 13,257 
Total current assets of discontinued operations138,669 120,792 
Restricted cash and cash equivalents, net of current portion2,439 2,439 
Property, plant and equipment, net1,615 1,734 
Operating lease right-of-use assets27,351 27,572 
Other long-term assets9,410 15,781 
Total assets of discontinued operations1
$179,484 $168,318 
Liabilities 
Current liabilities: 
Accounts payable$27,345 $38,541 
Accrued liabilities21,583 16,895 
Operating lease liabilities, current portion844 1,400 
Contract liabilities, current portion44,581 26,559 
Short-term debt2,778 3,101 
Total current liabilities of discontinued operations97,131 86,496 
Operating lease liabilities, net of current portion10,271 10,200 
Contract liabilities, net of current portion8,943 9,096 
Other long-term liabilities21,808 23,365 
Total liabilities of discontinued operations1
$138,153 $129,157 

1 As the sale of the C&I Solutions business is probable and expected to close in the second quarter of fiscal 2022, all assets and liabilities of discontinued operations as of April 3, 2022 are presented as "current assets of discontinued operations" and "current liabilities of discontinued operations" on our condensed consolidated balance sheets.

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The following table presents financial results of C&I Solutions presented as discontinued operations in the condensed consolidated statement of operations in the corresponding periods:

 Three Months Ended
April 3, 2022April 4, 2021
Total revenues$28,454 $66,262 
Total cost of revenues45,030 62,354 
Gross (loss) profit(16,576)3,908 
Operating expenses8,350 5,868 
Operating income (loss)(24,926)(1,960)
Other income (expense), net(1,372)106 
(Loss) earnings before income taxes(26,298)(1,854)
(Provision for) benefits from income taxes343 98 
Net (loss) income from discontinued operations, net of taxes(25,955)(1,756)
Net (income) loss from discontinued operations attributable to noncontrolling interests250 518 
Net (loss) income from discontinued operations attributable to stockholders$(25,705)$(1,238)

The following table presents significant non-cash items and capital expenditures of discontinued operations:

 Three Months Ended
April 3, 2022April 4, 2021
Depreciation and amortization$51 $1,746 
Stock-based compensation$26 $662 
(Gain) loss on sale of investments$ $(1,162)

Note 3. TRANSACTIONS WITH TOTAL AND TOTALENERGIES SE

In June 2011, Total completed a cash tender offer to acquire 60% of our then outstanding shares of common stock at a price of $23.25 per share, for a total cost of approximately $1.4 billion. In December 2011, we entered into a Private Placement Agreement with Total, under which Total purchased, and we issued and sold, 18.6 million shares of our common stock for a purchase price of $8.80 per share, thereby increasing Total's ownership to approximately 66% of our outstanding common stock as of that date. As of April 3, 2022, ownership of our outstanding common stock by TotalEnergies SE and its affiliates was approximately 51%. Subsequent to the spin-off of Maxeon Solar Technologies, Ltd. (“Maxeon Solar”) completed on August 26, 2020 (the “Spin-Off”), Total received a pro rata distribution of ordinary shares of Maxeon Solar, and its percentage ownership of shares of SunPower did not change.

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").

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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 eleven 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 eleven 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, which has been filled as of December 31, 2021. 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. As previously disclosed, on March 31, 2022, one independent director and one Total designee resigned from the Board, and the Board reverted to nine members as of such date.

Cooperation Agreement

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

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

The Cooperation Agreement remains in effect until December 31, 2023, unless otherwise terminated. The obligations of the agreement will be transferred with the definitive agreement for the sale of our C&I Solutions business to TotalEnergies Renewables.

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. The pending sale of our C&I Solutions business, and the resulting classification as discontinued operations in these condensed consolidated financial statements, does not qualify as a fundamental change under the indenture.

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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)April 3, 2022January 2, 2022
Accounts receivable$489 $238 

Three Months Ended
(In thousands)April 3, 2022April 4, 2021
Interest expense:
Interest expense incurred on the 4.00% debentures due 2023
$1,000 $1,000 

Note 4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table represents disaggregated revenue from contracts with customers for the three months ended April 3, 2022 and April 4, 2021:

Three Months Ended
(In thousands)April 3, 2022April 4, 2021
Solar power systems sales$271,644 $166,327 
Component sales59,877 50,732 
Light commercial sales14,196 15,718 
Services and other4,560 7,359 
Total revenues$350,277 $240,136 
We recognize revenue from contracts with customers when we have completed our performance obligations under an identified contract. The revenue is recognized in an amount that reflects the consideration for the corresponding performance obligations for the goods and services transferred.

Contract Assets and Liabilities

Contract assets consist of unbilled receivables which represent revenue that has been recognized in advance of billing the customer, which is common for our residential cash and loan customers. 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 5. 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)April 3, 2022January 2, 2022
Contract assets$41,653 $31,925 
Contract liabilities85,186 80,990 

During the three months ended April 3, 2022, we recognized revenue of $34.3 million that was included in contract liabilities as of January 2, 2022. During the three months ended April 4, 2021, we recognized revenue of $28.5 million that was included in contract liabilities as of January 3, 2021.

As of April 3, 2022, we have entered into contracts with customers for sales of solar power systems, and components for an aggregate transaction price of $450.9 million, the substantial majority of which we expect to recognize over the next 12 months.

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Note 5. BALANCE SHEET COMPONENTS

Accounts Receivable, Net
As of
(In thousands)April 3, 2022January 2, 2022
Accounts receivable, gross1
$131,872 $135,912 
Less: allowance for credit losses(15,181)(14,375)
Less: allowance for sales returns(337)(269)
     Accounts receivable, net$116,354 $121,268 

1 A lien exists on $83.8 million of our consolidated accounts receivable, gross, as of April 3, 2022 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 11. Debt and Credit Sources.

Allowance for Credit Losses
Three Months Ended
(In thousands)April 3, 2022April 4, 2021
Balance at beginning of period$14,375 $13,850 
Provision for credit losses 1,300 1,220 
Write-offs(494)(826)
Balance at end of period$15,181 $14,244 

Inventories
As of
(In thousands)April 3, 2022January 2, 2022
Photo-voltaic modules$134,417 $130,671 
Microinverters30,926 24,040 
Energy Storage Systems42,660 26,849 
Other solar power system component materials 37,609 32,872 
Inventories1 2
$245,612 $214,432 

1 A lien exists on $212.1 million of our gross inventory as of April 3, 2022 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 11. 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)April 3, 2022January 2, 2022
Deferred project costs$76,069 $52,165