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~~TABLE OF CONTENTS~~
				Page
Part I.

			~~Page~~
~~Part I.~~

	Item 1. Business		4

		Item 1A. Risk Factors		2120

		Item 1B. Unresolved Staff Comments		5354

		Item 2. Properties		5355

		Item 3. Legal Proceedings		5355

		Item 4. Mine Safety Disclosures		5355

Part II.

		Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		5355

		Item 6. Selected Consolidated Financial Data		5457

		Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations		5557

		Item 7A. Quantitative and Qualitative Disclosure About Market Risk		8985

		Item 8. Financial Statements and Supplementary Data		9287

		Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~168~~161

		Item 9A. Controls and Procedures		~~168~~161

		Item 9B. Other Information		~~168~~161

Part III.

		Item 10. Directors, Executive Officers and Corporate Governance		~~168~~161

		Item 11. Executive Compensation		~~169~~162

		Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~169~~162

		Item 13. Certain Relationships and Related Transactions, and Director Independence		~~169~~162

		Item 14. Principal Accountant Fees and Services		~~169~~162

Part IV.

		Item 15. Exhibits, Financial Statement Schedules		~~169~~162

Signatures					~~175~~166

INTRODUCTORY NOTES

Trademarks

The following terms, among others, are our trademarks and may be used in this report: SunPower^®, Maxeon^®, Oasis^®, OasisGEO™, EnergyLink™, InvisiMount^®, Tenesol^®, Greenbotics^®, Customer Cost of Energy™ ("CCOE™"), SunPower Spectrum™, Helix™, Equinox™, Signature™, SolarBridge^®, and The Power of One™. Other trademarks appearing in this report are the property of their respective owners.

Unit of Power

When referring to our solar power systems, our facilities’ manufacturing capacity, and total sales, the unit of electricity in watts for kilowatts ("KW"), megawatts ("MW"), and gigawatts ("GW") is direct current ("DC"), unless otherwise noted as alternating current ("AC").

Levelized Cost of Energy ("LCOE")

LCOE is an evaluation of the life-cycle energy cost and life-cycle energy production of an energy producing system. It allows alternative technologies to be compared to different scales of operation, investment or operating time periods. It captures capital costs and ongoing system-related costs, along with the amount of electricity produced, and converts them into a common metric. Key drivers for LCOE reduction for photovoltaic products include panel efficiency, capacity factors, reliable system performance, and the life of the system.

Customer Cost of Energy ("CCOE")

Our customers are focused on reducing their overall cost of energy by intelligently integrating solar and other distributed generation, energy efficiency, energy management, and energy storage systems with their existing utility-provided energy. The CCOE measurement is an evaluation of a customer’s overall cost of energy, taking into account the cost impact of each individual generation source (including the utility), energy storage systems, and energy management systems. The CCOE measurement includes capital costs and ongoing operating costs, along with the amount of electricity produced, stored, saved, or re-sold, and converts all of these variables into a common metric. The CCOE metric allows a customer to compare different portfolios of generation sources, energy storage, and energy management, and to tailor towards optimization.

Cautionary Statement Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not represent historical facts and the assumptions underlying such statements. We use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "potential," "will," "would," "should," and similar expressions to identify forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, our plans and expectations regarding future financial results, expected operating results, business strategies, the sufficiency of our cash and our liquidity, projected costs and cost reduction measures, development of new products and improvements to our existing products, the impact of recently adopted accounting pronouncements, our manufacturing capacity and manufacturing costs, the adequacy of our agreements with our suppliers, our ability to monetize our solar projects, legislative actions and regulatory compliance, competitive positions, management's plans and objectives for future operations, our ability to obtain financing, our ability to comply with debt covenants or cure any defaults, our ability to repay our obligations as they come due, our ability to continue as a going concern, our ability to complete certain divestiture, spin-off or other strategic transactions, trends in average selling prices, the success of our joint ventures and acquisitions, expected capital expenditures, warranty matters, outcomes of litigation, our exposure to foreign exchange, interest and credit risk, general business and economic conditions in our markets, industry trends, the impact of changes in government incentives, expected restructuring charges, risks related to privacy and data security, and the likelihood of any impairment of project assets, long-lived assets, and investments. These forward-looking statements are based on information available to us as of the date of this Annual Report on Form 10-K and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. Please see "Item 1A. Risk Factors" herein and our other filings with the Securities and Exchange Commission ("SEC") for additional information on risks and uncertainties that could cause actual results to differ. These forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we are under no obligation to, and expressly disclaim any

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responsibility to, update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.

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The following information should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Our fiscal year ends on the Sunday closest to the end of the applicable calendar year. All references to fiscal periods apply to our fiscal quarter or year, which end on the Sunday closest to the calendar month end.

PART I

ITEM 1. BUSINESS

Corporate History

SunPower has been a leader in the solar industry for over 30 years, originally incorporated in California in 1985 and reincorporated in Delaware during 2004 in connection with our initial public offering. In November 2011, our stockholders approved the reclassification of all outstanding former class A common stock and class B common stock into a single class of common stock listed on the Nasdaq Global Select Market under the symbol "SPWR." In fiscal 2011, we became a majority owned subsidiary of Total Solar ~~International~~INTL SAS, formerly known as Total Solar International SAS, Total Gas & Power USA, SAS and Total Energies Nouvelles Activités USA ("Total"), a subsidiary of Total S.A. ("Total S.A.").

Company Overview

We are a leading global energy company dedicated to changing the way our world is powered. We deliver complete solar solutions to residential, commercial, and power plant customers worldwide by offering:

•cutting-edge solar module technology and solar power systems that are designed to generate electricity over a system life typically exceeding 25 years;

•integrated storage and software solutions that enable customers to effectively manage and optimize their CCOE energy usage and expenses;

•installation, construction, and ongoing maintenance and monitoring services; and

•financing solutions that provide customers with a variety of options for purchasing or leasing high efficiency solar products at competitive energy rates.

Our global reach is enhanced by Total S.A.'s long-standing presence in many countries where significant solar installation goals are being established.

Recent Developments

~~Divestment~~Announcement of ~~Microinverter Business~~Separation Transaction

On November 11, 2019, we announced plans to separate into two independent, complementary, strategically aligned and publicly-traded companies – SunPower and Maxeon Solar Technologies, Pte. Ltd. (“Maxeon Solar”). Each company will focus on distinct offerings built on extensive experience across the solar value chain.

•SunPower will continue as the leading North American distributed generation, storage and energy services company.

•Newly-formed Maxeon Solar will be the leading global technology innovator, manufacturer and marketer of premium solar panels.

Concurrent with the transaction, an equity investment of $298 million will be made in Maxeon Solar by long-time partner Tianjin Zhonghuan Semiconductor Co., Ltd. ("TZS"), a premier global supplier of silicon wafers, to help finance the scale-up of A-Series (Maxeon 5) production capacity.

The separation is expected to occur through a spin-off (the "Spin-Off") and distribution of all of the shares of Maxeon Solar held by SunPower to SunPower shareholders, followed by the TZS investment. The Spin-Off is intended to be tax-free to

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SunPower stockholders. After the completion of the transactions, TZS will own approximately 28.848% of the diluted ordinary shares of Maxeon Solar and approximately 71.152% will be owned by SunPower shareholders, as of the record date of the spin-off. SunPower expects to complete the separation and Maxeon Solar capital injection in the second quarter of fiscal 2020. The investment by TZS, and consequently, the separation, is subject to certain conditions, including, among others, obtaining approvals from antitrust regulatory authorities in the Peoples Republic of China, as well as execution of internal reorganization and separation tax plan to impact to the tax-free nature of the transaction for federal income tax purposes and the effectiveness of a Form 20-F filing with the SEC for Maxeon Solar.

In order to effect the Spin-Off, on November 8, 2019, we entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”) with Maxeon Solar. The Separation and Distribution Agreement governs the principal corporate transactions required to effect the separation and the Spin-Off distribution, and provides for the allocation between SunPower and Maxeon Solar of the assets, liabilities, and obligations of the respective companies as of the separation. In addition, the Separation and Distribution Agreement, together with certain Ancillary Agreements (defined below), provide a framework for the relationship between SunPower and Maxeon Solar subsequent to the completion of the Spin-Off.

Pursuant to the Separation and Distribution Agreement, consummation of the distribution is subject to certain conditions being satisfied or waived by us or Maxeon Solar, including, among other things: (1) completion of the transactions to complete the separation; (2) obtaining all necessary corporate approvals; (3) completion of all necessary filings under the U.S. securities laws; (4) receipt by our Board of Directors of one or more opinions from an independent valuation firm confirming the solvency and financial viability of each of us and Maxeon Solar immediately after the consummation of the distribution in a form acceptable to us; (5) receipt of an opinion regarding the qualification of the distribution as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 of the U.S. Internal Revenue Code to our stockholders; (6) if applicable, the receipt of a waiver from the Singapore Securities Industry Council from the applicability of the Singapore Code on Take-overs and Mergers to the distribution; (7) the absence of any legal impediments prohibiting the distribution; and (8) the satisfaction or waiver of certain conditions precedent to the TZS investment set forth in the Investment Agreement (as further described below).

Also on November 8, 2019, we entered into an Investment Agreement (the “Investment Agreement”) with Maxeon Solar, TZS, and, for the limited purposes set forth therein, Total, pursuant to which TZS will purchase from Maxeon Solar ordinary shares that will, in the aggregate, represent approximately 28.848% of the outstanding ordinary shares of Maxeon Solar on a fully diluted basis after giving effect to the Spin-Off for $298 million. Pursuant to the Investment Agreement, we, Maxeon Solar, TZS and, with respect to certain provisions, Total have agreed to certain customary representations, warranties and covenants, including certain representations and warranties as to the financial statements, contracts, liabilities, and other attributes of Maxeon Solar, certain business conduct restrictions and covenants requiring efforts to complete the transactions.

Pursuant to the Investment Agreement, consummation of the TZS investment is subject to certain conditions being satisfied or waived by us or Maxeon Solar on the one hand, and TZS, on the other hand, including, among other things: (1) the completion of the separation and the distribution in accordance with the Separation and Distribution Agreement; (2) Maxeon Solar entering into definitive agreements for a term loan facility in an amount not less than $325 million; (3) Maxeon Solar obtaining certain additional financing in the form of a revolving credit facility of not less than $100 million or, alternatively, making certain working capital adjustment arrangements; (4) Maxeon Solar having no more than $138 million in debt and no less than $50 million in Cash (as defined in the Investment Agreement) immediately prior to the TZS investment; (5) execution of certain ancillary agreements and a shareholders agreement; (6) receipt of required governmental approvals; (7) completion of all necessary filings under the U.S. securities laws; (8) receipt by our Board of Directors of one or more opinions from an independent valuation firm confirming the solvency and financial viability of each of us and Maxeon Solar immediately after the consummation of the distribution in a form acceptable to us; (9) if applicable, the receipt of a waiver from the Singapore Securities Industry Council from the applicability of the Singapore Code on Take-overs and Mergers to the distribution and the investment; and (10) the absence of any legal impediments prohibiting the investment. Moreover, the obligations of us and Maxeon Solar, on the one hand, and TZS, on the other hand, to consummate the investment are subject to certain other conditions, including, among other things, (A) the accuracy of the other party’s representations and warranties (subject to certain materiality qualifiers) and (B) the other party’s performance of its agreements and covenants contained in the investment Agreement in all material respects. In addition, the obligation of TZS to consummate the investment is subject to the absence of any Material Adverse Effect (as defined in the Investment Agreement) on Maxeon Solar occurring from the date of the Investment Agreement through the closing of the Investment, subject, in each case, to certain exclusions set forth in the Investment Agreement.

The Investment Agreement provides certain termination rights for each of us and TZS, and further provides that, if the Investment Agreement is terminated, a termination fee may be payable under specified circumstances, including: (1) if we

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terminate to accept a superior proposal (as described in the Investment Agreement), a fee of $80 million payable by us to TZS; (2) if our Board of Directors recommends an alternative transaction that would constitute a sale of us and TZS terminates the Investment Agreement, a fee of $80 million payable by us to TZS; (3) if, as a result of an intentional breach by us or Maxeon Solar of our respective representations, warranties or covenants and, as a result, either (a) the transactions are not capable of being satisfied by August ~~9, 2018,~~8, 2020 (or such other extended date as contemplated under the Investment Agreement) (the “Outside Date”), (b) any final, non-appealable government order prohibiting the transactions has been issued, or (c) the closing conditions related to representations, warranties and covenants of us and Maxeon Solar are not capable of being satisfied, then a fee of $20 million payable by us to TZS; (4) if certain approvals by the Chinese government are not obtained, then a fee of $35 million payable by TZS to us; or (5) if, as a result of an intentional breach by TZS of its representations, warranties or covenants and, as a result, either (a) the transactions are not capable of being satisfied by the Outside Date, (b) any final, non-appealable government order prohibiting the transactions has been issued, or (c) the closing conditions related to representations, warranties and covenants of TZS are not capable of being satisfied, then a fee of $35 million payable by TZS to us. In addition, under the Investment Agreement, in the event that, within seven months after termination of the Investment Agreement because the TZS investment could not be completed by the Outside Date, (1) we enter into an agreement for or consummate an alternative transaction that would constitute a sale of our company, and prior to the termination of the Investment Agreement a third party had submitted a proposal for a transaction that would constitute a sale of us, then we are obligated to pay TZS a fee of $80 million, or (2) we (a) enter into an agreement for or consummate an alternative transaction that constitutes a sale of (i) 50% or more of Maxeon Solar’s equity or assets or (ii) 50% or more of the business being contributed to Maxeon Solar in the separation and (b) prior to the termination of the Investment Agreement a third party had submitted a proposal for an alternative transaction that constitutes a sale of (i) 50% or more of Maxeon Solar’s equity or assets or (ii) 50% or more of the business being contributed to Maxeon Solar in the separation, then we are obligated to pay TZS a fee of $20 million.

The Separation and Distribution Agreement and Investment Agreement contemplate certain additional agreements be entered into between us, Maxeon Solar and other parties in connection with the Spin-Off and related investment by TZS, including a tax matters agreement, employee matters agreement, transition services agreement, brand framework agreement, cross license agreement, collaboration agreement and supply agreement (collectively, the “Ancillary Agreements”), each as we previously noted in our announcement of the contemplated transaction.

We expect to incur total costs associated with the separation activities of $57.6 million through the completion of the separation. Furthermore, we have also concluded on the legal form of the separation and determined that Maxeon Solar will be the spinnee in the U.S. Accordingly, during the first half of fiscal 2020, we expect to effect certain internal reorganizations of, and transactions among, our wholly owned subsidiaries and operating activities in preparation for the legal form of separation.

Common Stock Offering

On November 25, 2019, we completed an offering of 25,300,000 shares of our common stock at a price of $7.0 per share, which included 3,300,000 shares issued and sold pursuant to the underwriter's exercise in full of its option to purchase additional shares, for gross proceeds of $177.1 million. We received net proceeds of $171.8 million from the offering, after deducting underwriter discounts which were recorded as a reduction of Additional Paid In Capital ("APIC"). We incurred other expenses of $1.1 million for the transaction which was recorded in APIC. We intend to use the net proceeds from the offering for general corporate purposes, including partially funding the repayment of our senior convertible debentures. Refer to "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements— Note 18. Subsequent Events" for further details.

Financing for Safe Harbor Panels Inventory

In September 2019, we entered into the Solar Sail LLC ("Solar Sail") and Solar Sail Commercial Holdings, LLC ("Solar Sail Commercial") joint ventures with Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“Hannon Armstrong”), to finance the purchase of 200 megawatts of panel inventory, in accordance with IRS safe harbor guidance, to preserve the 30% federal Investment Tax Credit (“ITC”) for third-party owned commercial and residential systems. As of December 29, 2019, we had $100.6 million borrowed and outstanding under this agreement. We have the ability to draw up to $112.8 million under this agreement as of December 29, 2019. A portion of the value of the safe harbored panels was funded by equity contributions in the joint venture of $6.0 million each by us and Hannon Armstrong.

The ITC for systems placed into service in 2020 is 26%, and will step down to 22% in 2021 and then remain at 10%

for commercial customers and zero for residential customers in 2022 and beyond. The safe harbor facility is expected to

preserve 30% ITC value for projects placed in service from now through mid-2022, based on forecasted deployment of the panels.

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Sale and Leaseback of Hillsboro Facility

In September 2019, we completed the sale of ~~certain assets and intellectual property related~~our manufacturing facility buildings in Hillsboro, Oregon, to RagingWire Data Centers, Inc., through its affiliate for a purchase price of $63.5 million (the "Sale-Leaseback Transaction”). In connection with the ~~production of microinverters to Enphase Energy, Inc. ("Enphase") in exchange for $25.0 million in cash and~~ ~~7.5~~ ~~million shares of Enphase common stock (the “Closing Shares”), pursuant to an Asset Purchase Agreement (the "Purchase Agreement")~~Sale-Leaseback Transaction, we also entered into ~~on June 12, 2018. We received the Closing Shares and $15.0 million cash payment upon closing, and received the final $10.0 million cash payment~~a lease agreement to lease back a portion of the ~~purchase price on December 10, 2018.~~facility, consisting of the module assembly building for three years. Further, we agreed to complete the decommissioning of certain equipment and structures in the buildings, which was completed in the fourth quarter of fiscal 2019.

Net cash consideration of $39.7 million was received at the closing, net of fees and expenses of $3.8 million, and a holdback amount of $20.0 million for timely completion of decommissioning services. The holdback amount of $20.0 million was received by us in the fourth quarter of fiscal 2019, as the related decommissioning services were completed.

In connection with the sale transaction, we recognized a total gain of $25.2 million, which is included within "Cost of revenue" in our consolidated statements of operations for fiscal 2019. As of December 29, 2019, we have a deferred gain of $3.8 million that represents the excess of fair market value of the building leased back to be recognized over the leaseback term of three years.

~~Acquisition~~Sale of ~~SolarWorld Americas~~Residential Lease Assets

~~On April 16,~~In fiscal 2018, we created SunStrong Capital Holdings, LLC (“SunStrong”) to own and operate a portion of our residential lease assets (“Residential Lease Portfolio”), and subsequently contributed to SunStrong our controlling equity interests in a number of solar project entities that we controlled. As previously disclosed, on November 5, 2018, we entered into a ~~Sale~~Purchase and ~~Purchase~~Sale Agreement (the ~~"Sale~~“PSA”) with HA SunStrong Capital LLC (“HA SunStrong Parent”), a subsidiary of Hannon Armstrong, to sell 49.0% of the SunStrong membership interests. Following the closing of the PSA, we do not have the power to unilaterally make decisions that affect the performance of SunStrong, and ~~Purchase Agreement") pursuant to which~~accordingly, we ~~agreed to purchase all~~deconsolidated SunStrong, thereby deconsolidating majority of ~~SolarWorld AG's shares~~our residential lease assets portfolio.

On September 27, 2019, we sold the remainder of ~~stock in SolarWorld Americas Inc. ("SolarWorld Americas"), and SolarWorld Industries Deutschland GmbH’s partnership~~the residential lease assets still owned by us, that were not previously sold. These residential lease assets were sold under a new assignment of interest ~~in SolarWorld Industries America LP. On August 21, 2018, we terminated the Sale and Purchase Agreement and~~agreement entered into ~~an Asset Purchase Agreement~~ with ~~SolarWorld Americas, pursuant~~SunStrong. SunStrong also assumed debts related to ~~which we agreed to purchase certain~~the residential lease assets sold. We recognized a net loss of ~~SolarWorld Americas in exchange~~$7.2 million on this sale within "Loss on sale and impairment of residential lease assets" on our consolidated statements of operations for ~~consideration of $26.0 million, subject to certain closing and post-closing adjustments and other contingent payments. In connection with the termination of~~fiscal 2019.

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the Sale and Purchase Agreement, we have recognized an expense of $20.0 million for the quarter ended September 30, 2018 in sales, general and administrative expense. On October 1, 2018, we completed the acquisition of certain assets of SolarWorld Americas, including its Hillsboro, Oregon facility and a significant portion of its manufacturing workforce of more than 200 employees. The purchase consideration consisted of $26.0 million in cash and additional contingent consideration of approximately $4.1 million.

~~Formation~~Sale of ~~SunStrong Capital Holdings, LLC ("SunStrong") Joint Venture and Transfer of Interest in Residential Lease~~Commercial Sale-Leaseback Portfolio

On ~~November 5, 2018,~~March 26, 2019, we entered into a ~~joint venture~~Membership Interest Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with ~~HA SunStrong Capital LLC (“HA SunStrong Parent”), an affiliate~~a wholly-owned subsidiary of Hannon Armstrong Sustainable Infrastructure Capital, Inc. ("Hannon Armstrong"), to acquire, operate, finance, and maintain a portfolio of residential rooftop or ground-mounted solar photovoltaic electric generating systems ("Solar Assets").Goldman Sachs Renewable Power LLC. Pursuant to ~~the terms of~~ the Purchase and Sale Agreement, ~~(the “PSA"),~~ we ~~sold~~agreed to ~~HA SunStrong Parent,~~sell, in exchange for cash consideration of ~~$10.0~~up to $86.9 million, ~~membership units representing~~leasehold interests in operating solar photovoltaic electric generating projects (the “Projects”) subject to sale-leaseback financing arrangements with one or more financiers (each a ~~49.0% membership interest~~"Lessor"). The Projects are located at approximately 200 sites across the United States, and represent in ~~SunStrong, formerly our wholly-owned subsidiary that historically held~~aggregate, approximately 233 MW of generating capacity. The portfolio of Projects financed by each Lessor represents a separate asset (a “Portfolio”) for which the price is separately agreed and ~~controlled~~stated in the ~~assets~~Purchase and ~~liabilities comprising our residential lease business (the "Residential Lease Portfolio"). Following~~Sale Agreement. Upon the ~~closing~~sale of the ~~PSA, we~~applicable membership interests, the related assets have been deconsolidated ~~certain entities involved in~~from our Residential Lease Portfolio, as part of our previously announced decision to sell a portion of our interest in the Residential Lease Portfolio, and retained membership units representing a 51% membership interest in SunStrong.balance sheet.

In connection with the ~~joint venture,~~sale transaction, we ~~entered into various agreements including an operating agreement for SunStrong and a management agreement with respect to the Solar Assets, among others.~~

~~In connection with the closing~~received aggregate consideration of ~~the PSA, SunStrong assumed all current and future debt service obligations associated with the subordinated mezzanine loan of $110.5~~$81.3 million and ~~long-term loans to finance solar power systems and leases under~~recognized a total gain of $143.4 million, which is included within "Gain on business divestiture" in our ~~previous residential lease program.~~consolidated statements of operations for fiscal 2019.

On November 28, 2018, SunStrong closed the sale to external investors of its $400 million Solar Asset Backed Notes, Series 2018-1 ("Notes"). The Notes were priced at a fixed interest rate of 5.68 percent per annum and received a rating of A (sf) from KBRA and a Green Bond Assessment of GB1, the highest rating, by Moody’s Investor Services. The anticipated repayment date is in November 2028, with a rated final maturity date in November 2048. The Notes were issued by a special purpose entity, SunStrong 2018-1 Issuer, LLC, an indirectly wholly-owned subsidiary of SunStrong. SunPower received a special distribution of approximately $12.9 million from the proceeds generated by the sale of the Notes.

For additional information, refer to "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4. Business ~~Combination~~Divestitures and ~~Divestitures,~~ ~~Note 7.~~ ~~Leasing,~~ ~~Note 11.~~ ~~Equity Investments,~~ ~~and Note 12.~~ ~~Debt and Credit Sources.~~Sale of Assets."

~~SegmentsOverview~~

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~~In the fourth quarter of~~SegmentsOverview

Consistent with fiscal 2018, in connection with our efforts to improve operational focus and transparency, drive overhead accountability into segment operating results, and increase strategic agility across the value chain from our upstream business' core strength in manufacturing and technology and our downstream business' core strength in offering complete solutions in residential and commercial markets, we reorganized our segment reporting ~~to an~~consists of our upstream and downstream structure. Previously, we operated under three end-customer segments comprised of our (i) Residential Segment, (ii) Commercial Segment, and (iii) Power Plant Segment. Historically, the Residential Segment referred to sales of solar energy solutions to residential end-customers, the Commercial Segment referred to sales of energy solutions to commercial and public entity end-customers, and the Power Plant Segment referred to our large-scale solar products and systems and component sales.

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structures. Under ~~the new~~this segmentation, the SunPower Energy Services Segment ("SunPower Energy Services" or "Downstream") refers to sales of solar energy solutions in the North America region previously included in the legacy Residential Segment and Commercial Segment (collectively previously referred to as "Distributed Generation" or "DG") including direct sales of turn-key engineering, procurement and construction ("EPC") services, sales to our third-party dealer network, sales of energy under power purchase agreements ("PPAs"), storage solutions, cash sales and long-term leases directly to end customers, and sales to resellers. SunPower Energy Services Segment also includes sales of our global Operations and Maintenance ("O&M") services. The SunPower Technologies Segment ("SunPower Technologies" or "Upstream") refers to our technology development, worldwide solar panel manufacturing operations, equipment supply to resellers, commercial and residential end-customers outside of North America ("International DG"), and worldwide power plant project development and project sales. Upon reorganization, some support functions and responsibilities have been shifted to each segment, including financial planning and analysis, legal, treasury, tax and accounting support and services, among others.

The reorganization provides our management with a comprehensive financial overview of our key businesses. The application of this structure permits us to align our strategic business initiatives and corporate goals in a manner that best focuses our businesses and support operations for success.

Our Chief Executive Officer, as the chief operating decision maker (“CODM”), reviews our business, manages resource allocations and measures performance of our activities based on financial information for the SunPower Energy Services Segment and SunPower Technologies Segment.

Reclassifications of prior period segment information have been made to conform to the current period presentation. These changes do not affect our previously reported Consolidated Financial Statements.

SunPower Energy Services

North America Residential Channels

Residential Systems

We offer a complete set of residential solutions that deliver value to homeowners and our dealer partners. We have developed the capability to deliver AC panels with factory-integrated microinverters. The AC system architecture, as compared with DC systems, facilitates direct panel installation, eliminating the need to mount or assemble additional components on the roof or the side of a building, driving down system costs, improving overall system reliability, and providing improved, cleaner design aesthetics. As part of our complete solution approach, we offer our Equinox residential market product, a fully-integrated solar platform utilizing Maxeoncells, AC microinverter, and EnergyLink monitoring hardware to combine solar power production and energy management, allowing residential installers to quickly and easily complete their system installations and to ensure always-on connectivity so homeowners can easily access their data anytime, anywhere. The Equinox platform is also sold with our EnergyLink software analytics, which provides our customers with detailed information about their energy consumption and production, enabling them to further reduce their energy costs.

Concurrent with the sale of certain assets and intellectual property related to the production of microinverters to Enphase on August 9, 2018, we entered into a Master Supply Agreement (the “MSA”) pursuant to which, with certain exceptions, we have agreed to exclusively procure module-level power electronics (“MLPE”) and ~~alternating current (“AC”)~~AC cables from Enphase to meet all of our needs for MLPE and AC cables for the manufacture and distribution of AC modules and discrete MLPE system solutions for the U.S. residential market, including our current Equinox solution and any AC module-based successor products. We have also agreed not to pair any third-party MLPE or AC cables with any of our modules for use in the grid-tied U.S. residential market where an Enphase MLPE is qualified and certified for such module. The initial term of the MSA is through December 31, 2023, and the MSA term will automatically be extended for successive two-year periods unless either party provides written notice of non-renewal.

We offer the SunPower InvisiMount residential mounting system in our product portfolio. The InvisiMount system is designed specifically for use with our panels and reduces installation time through pre-assembled parts and integrated grounding. The InvisiMount system is well-suited for residential sloped roof applications and provides design flexibility and enhanced aesthetics by delivering a unique, "floating" appearance.

We support our hardware development with investments in our proprietary set of advanced monitoring applications (the "SunPower Monitoring System") and our EnergyLink customer portal, which enable customers to gain visibility into their solar

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system production and household energy consumption. This software is available for use on the web or through the SunPower mobile application on smartphones and tablets.

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Residential Sales Channels, Residential Leasing Program, and other Financing Options

We sell our residential solar energy solutions to end customers through a variety of means, including cash sales directly to end customers, sales to resellers, including our third-party dealer network, and sales of our operations and maintenance (“O&M”) services.

We offer financing programs that are designed to offer customers a variety of options to obtain high efficiency solar products and systems, including loans arranged through our third-party lending partners, in some cases for no money down, or by leasing high efficiency solar systems at competitive energy rates. Since its launch in 2011, our residential lease program, in partnership with third-party investors, provides U.S. customers SunPower systems under 20-year lease agreements that include system maintenance and warranty coverage, including warranties on system performance. SunPower residential lease customers have the option to purchase their leased solar systems upon the sale or transfer of their home. These financing options enhance our ability to provide individually-tailored solar solutions to a broad range of residential customers.

As part of our strategic goals to de-lever our balance sheet and simplify our financial statements, we announced during the fourth quarter of 2017 our decision to monetize our interest in more than 400 MW of residential lease assets that historically have been consolidated in our balance sheets. On November 5, 2018, we sold a portion of our interest in certain entities that have historically held the assets and liabilities comprising our residential lease business to an affiliate of Hannon ~~Armstrong Sustainable Infrastructure Capital, Inc.~~Armstrong. On September 27, 2019, we sold the majority of the remainder of our residential lease assets.

Commercial Sales Channels and Financing Options

We sell our commercial solar energy solutions to commercial and public entity end customers through sales to our third-party dealer network

For additional information, refer to "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4. Business ~~Combination~~Divestitures and ~~Divestitures,~~ Sale of Assets, Note 7. ~~Leasing,~~ Solar Services, Note 10. Equity Investments, and Note 11. ~~Equity Investments,~~ ~~and Note 12.~~ Debt and Credit Sources."

Historically, we had the ability to sell portfolios of residential system leases to 8point3 Energy Partners LP ("8point3 Energy Partners"), a joint Yieldco vehicle formed by us and First Solar, Inc. ("First Solar") in which we had an ownership stake. In fiscal 2017, following a review of our strategic alternatives, we decided to explore a divestiture jointly with First Solar. On February 5, 2018, 8point3 Energy Partners entered into an Agreement and Plan of Merger (the “8point3 Merger Agreement”) with CD Clean Energy and Infrastructure V JV, LLC, an equity fund managed by Capital Dynamics, Inc. and certain other co-investors (collectively, “Capital Dynamics” and the transaction, the "Divestiture Transaction"), and we entered into a Support Agreement which obligated us to support the Divestiture Transaction. On June 19, 2018, we completed the sale of our equity interest in 8point3 Energy Partners. As a result of this transaction, we received, after the payment of fees and expenses, merger proceeds of approximately $359.9 million in cash and no longer directly or indirectly own any equity interests in 8point3 Energy Partners.

For additional information on transactions with, and the divestiture of our interest in 8point3 Energy Partners, refer to "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 11. ~~Equity Investments.~~"

North America Commercial Direct

Commercial Roof, Carport, and Ground Mounted Systems

As part of our complete solution product approach, we offer our Helix commercial market product. The Helix system is a pre-engineered, modular solution that combines our industry-leading solar module technology with integrated plug-and-play power stations, cable management systems, and mounting hardware that is built to last and fast to install, enabling customers to scale their solar programs quickly with minimal business disruption. The Helix platform is standardized across rooftop, carport, and ground installations and designed to lower system cost while improving performance. The Helix platform is also bundled with our Smart Energy software analytics, which provides our customers with information about their energy consumption and production, enabling them to further reduce their energy costs.

We also offer a variety of commercial solutions designed to address a wide range of site requirements for commercial rooftop, parking lot, and open space applications, including a portfolio of solutions utilizing framed panels and a variety of internally or externally developed mounting methods for flat roof and high tilt roof applications. Our commercial flat rooftop systems are designed to be lightweight and to interlock, enhancing wind resistance and providing for secure, rapid installations.

We offer parking lot structures designed specifically for SunPower panels, balance of system components, and inverters and in fiscal 2015 expanded our capability to design and install innovative solar structures and systems for carport applications. These systems are typically custom design-build projects that utilize standard templates and design best practices to create a

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solution tailored to unique site conditions. SunPower's highest efficiency panels are especially well suited to stand-alone structures, such as those found in parking lot applications, because our systems require less steel and other materials per unit of power or energy produced as compared with our competitors.

Sales Channels and Financing Options

We sell our commercial solar energy solutions to commercial and public entity end customers through a variety of means, including direct sales of turn-key engineering, procurement and construction ("EPC") services, selling energy to customers under power purchase agreements ("PPAs"), ~~sales to our third-party dealer network~~ and sales of our O&M services.

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Operations & Maintenance

Our solar power systems are designed to generate electricity over a system life typically exceeding 25 years. We offer our customers various levels of post-installation O&M services with the objective of optimizing our customers' electrical energy production over the life of the system. The terms and conditions of post-installation O&M services may provide for remote monitoring of system production and performance, including providing performance reports, preventative maintenance, including solar module cleanings, corrective maintenance, and rapid-response outage restoration, including repair or replacement of all system components covered under warranty or major maintenance agreements.

We incorporate leading information technology platforms to facilitate the management of our solar power systems operating globally. Real-time flow of data from our customers' sites is aggregated centrally where an engine applies advanced solar specific algorithms to detect and report potential performance issues. Our work management system routes any anomalies to the appropriate responders to help ensure timely resolution. Our performance model, PVSim, was developed over the last 2021 years and has been audited by independent engineers. Solar panel performance coefficients are established through independent third-party testing. The SunPower Monitoring System also provides customers real-time performance status of their solar power system, with access to historical or daily system performance data through our customer website (www.sunpowermonitor.com). The SunPower Monitoring System is available through applications on Apple® and Android™ devices. Some customers choose to install "digital signs" or kiosks to display system performance information from the lobby of their facility. We believe these displays enhance our brand and educate the public and prospective customers about solar power.

We typically provide a system output performance warranty, separate from our standard solar panel product warranty, to customers that have subscribed to our post-installation O&M services. In connection with system output performance warranties, we agree to pay liquidated damages in the event the system does not perform to the stated specifications, with certain exclusions. The warranty excludes system output shortfalls attributable to force majeure events, customer curtailment, irregular weather, and other similar factors. In the event that the system output falls below the warrantied performance level during the applicable warranty period, and provided that the shortfall is not caused by a factor that is excluded from the performance warranty, the warranty provides that SunPower will pay the customer an amount based on the value of the shortfall of energy produced relative to the applicable warrantied performance level. For leased systems, we provide a system output performance warranty with similar terms and conditions as that for non-leased systems.

We calculate our expectation of system output performance based on a particular system’s design specifications, including the type of panels used, the type of inverters used, site irradiation measures derived from historical weather data, our historical experience as a manufacturer, EPC services provider, and project developer as well as other unique design considerations such as system shading. The warrantied system output performance level varies by system depending on the characteristics of the system and the negotiated agreement with the customer, and the level declines over time to account for the expected degradation of the system. Actual system output is typically measured annually for purposes of determining whether warrantied performance levels have been met.

Our primary remedy for the system output performance warranty is our ongoing O&M services which enable us to quickly identify and remediate potential issues before they have a significant impact on system performance. We also have remedies in the form of our standard product warranties and third-party original equipment manufacturer warranties that cover certain components, such as inverters, to prevent potential losses under our system output performance warranties or to minimize further losses.

In September 2019, we signed a definitive agreement to sell our O&M business. We expect to complete the sale of our O&M business during the first half of fiscal 2020 subject to the satisfaction of customary conditions precedent, including receipt of certain third-party consents and approvals.

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~~SunPower Energy Services~~ Technology

Balance of System Components

"Balance of system components" are components of a solar power system other than the solar panels, and include mounting structures, charge controllers, grid interconnection equipment, and other devices, depending on the specific requirements of a particular system and project.

Inverters

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Every solar power system needs an inverter to transform the direct current electricity collected from the solar panels into utility-grade AC power that is ready for use. We sell inverters manufactured by third parties, some of which are SunPower-branded. We also have integrated microinverter technology that converts DC generated by a single solar photovoltaic panel into AC directly on the panel. Subsequent to the sale of our microinverter business in August 2018, we exclusively procure microinverters for the manufacture and distribution of AC modules and discrete MLPE system solutions for the U.S. residential market from Enphase. Panels with these factory-integrated microinverters perform better in shaded applications compared to conventional string inverters and allow for optimization and monitoring at the solar panel level, enabling maximum energy production by the solar system.

Smart Energy

We see “Smart Energy” as a way to harness our world’s energy potential by connecting the most powerful and reliable solar systems on the market with an increasingly vast array of actionable data that can help our customers make smarter decisions about their energy use. 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. In order to enhance the portfolio of Smart Energy solutions we offer, we continue to invest in integrated technology solutions to help customers manage and optimize their CCOE measurement.

We have also negotiated several agreements with residential and commercial energy storage providers to integrate storage technology into our residential and commercial solar solutions. By combining storage with energy management, we lower our customers' cost of energy through improvements in self-consumption, rate arbitrage, demand management, and grid and market participation. We continue to work to make combined solar and storage solutions broadly commercially available.

We continue to work with Enphase to develop next generation microinverters for use with our high efficiency solar panels in order to enhance our portfolio of Smart Energy solutions. Panels with these factory-integrated microinverters can convert direct current generated by the solar panel into alternating current, enabling optimization and monitoring at the solar panel level to ensure maximum energy production by the solar system.

SunPower Technologies

Our SunPower ~~Solutions~~

In 2017, SunPower established the SunPower Solutions division to deliver products and services to utility-scale photovoltaic ("PV") customers around the world. SunPower Solutions enables developers, independent power producers and EPCs to benefit from SunPower's extensive experience over the past decade developing, financing, constructing, operating and maintaining solar power plants. In the fourth quarter of fiscal 2018, this division was assignedTechnologies Segment refers to our ~~SunPower Technologies Segment. We remain focused on transitioning from project~~technology development, toworldwide solar panel manufacturing operations, equipment supply ~~through SunPower Solutions.~~

~~The SunPower Solutions division sells SunPower’s high performance P-Series, Maxeon 2 (formally known as E-Series)~~to resellers, commercial and residential end-customers outside of North America ("International DG"), and Maxeon 3 (formally known as X-Series) panels to non-U.S. customers. SunPower’s family of utility power plant PV panels deliver higher efficiency and energy yield with lower degradation than competing panels.

~~Project Development and Financing~~

~~Our project development business refers to sales of our large-scale solar systems, including~~worldwide power plant project development and project sales.

As part of our separation transaction announced on November 11, 2019, we formed Maxeon Solar in the third quarter of 2019 in Singapore to serve as the holding company of businesses to be contributed to Maxeon Solar by SunPower in connection with a spin-off of the following businesses that are currently held by SunPower (collectively, the “Maxeon Business”):

•SunPower’s non-U.S. manufacturing business, including solar cell and module manufacturing facilities located in France, Malaysia, Mexico and the Philippines;

•SunPower’s international sales and ~~EPC services~~distribution business outside of the 50 U.S. states, the District of Columbia and Canada;

•a 20% interest in Huansheng Photovoltaic (Jiangsu) Co., Ltd. (formerly known as Dongfang Huansheng Photovoltaic (Jiangsu) Co., Ltd.) (“Huansheng”), a joint venture to manufacture Performance solar panels (the “Performance Line” or “P-Series”) in China;

•an 80% interest in SunPower Systems International Limited, an international sales company based in Hong Kong;

•a 25% interest in Huaxia CPV Power Co. Ltd., a joint venture to manufacture and deploy low-concentration photovoltaic concentrator technology in Inner Mongolia and other regions in China; and

•a 3.7% interest in Deca Technologies Inc. (“Deca Tech”), a privately held wafer-level interconnect foundry business with headquarters in Tempe, Arizona and manufacturing in the Philippines.

Our Products

Our primary products are the Maxeon Line of interdigitated back contact ("IBC") solar cells and panels, and the Performance Line (P-Series) of shingled solar cells and panels. We believe the Maxeon Line of solar panels are the highest-efficiency solar panels on the market with an aesthetically pleasing design, and the Performance Line of solar panels offer a high-value, cost-effective solution for ~~power plant construction. Our utility-scale~~applications compared to conventional solar ~~power systems are typically purchased by an investor or financing company and operated as central-station solar power plants.~~

panels. The Maxeon Line, which includes E-

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~~We are able to utilize various means to finance our~~Series (Maxeon 2), X-Series (Maxeon 3) and A-Series (Maxeon 5) solar panels, is primarily targeted at residential and commercial customers across the globe. The Performance Line is primarily targeted at the utility-scale power plant ~~development and construction projects, which include arranging tax equity financing structures and utilizing non-recourse project debt facilities in conjunction with project sales.~~market.

We believe that we possess a technological advantage as the leading manufacturer of back-contact, back-junction cells that enables our panels to produce more electricity, last longer and resist degradation more effectively. We believe that our technology allows us to deliver:

~~superior performance, including the ability to generate up to 45% more power per unit area than conventional solar cells;~~

~~superior aesthetics, with our uniformly black surface design that eliminates highly visible reflective grid lines and metal interconnection ribbons;~~

~~superior reliability, as confirmed by multiple independent reports and internal reliability data;~~

~~superior energy production per rated watt of power, as confirmed by multiple independent reports; and~~

~~solar power systems that are designed to generate electricity over a system life typically exceeding 25 years.~~

With industry-leading conversion efficiencies, we continuously improve our Maxeon solar cells and believe they perform better and are tested more extensively to deliver maximum return on investment when compared with the products of our competitors.

~~Solar Panels~~

Solar panels are made using solar cells electrically connected together and encapsulated in a weatherproof panel. Solar cells are semiconductor devices that convert sunlight into direct current electricity. Our solar cells are designed without highly reflective metal contact grids or current collection ribbons on the front of the solar cell, which provides additional efficiency and allows our solar cells to be assembled into solar panels with a more uniform appearance. Our ~~Maxeon 3~~X-Series (Maxeon 3) solar panels, made with our ~~Maxeon Gen 3~~X-Series (Maxeon 3) solar cells, have demonstrated panel efficiencies exceeding 22% in high-volume production. In fiscal 2016, one of our standard production modules set a world record for aperture area efficiency as tested by the National Renewable Energy Laboratory. We believe our ~~Maxeon 3~~X-Series (Maxeon 3) solar panels are the highest efficiency solar panels available for the mass market, ~~and we continue to focus on increasing cell efficiency even as we produce~~incorporating Gen 3 solar cells with average efficiency of over 25% ~~efficiency in a lab setting.~~. Because our solar cells are more efficient relative to conventional solar cells, when our solar cells are assembled into panels, the assembly cost per watt is less because more power is incorporated into a given size panel. Higher solar panel efficiency allows installers to mount a solar power system with more power within a given roof or site area and can reduce per watt installation costs. Our suite of ~~SunPower~~ solar panels provides customers a variety of features to fit their needs, including the SunPower Signature black design which allows the panels to blend seamlessly into the rooftop. ~~We offer panels that can be used both with inverters that require transformers as well as with the highest performing transformer-less inverters to maximize output.~~ Both our ~~Maxeon 3~~X-Series (Maxeon 3) and ~~Maxeon 2~~E-Series (Maxeon 2) panels have proven performance with low levels of degradation, as validated by third-party performance tests. Our latest technology, or A-Series (Maxeon 5), offers solar cell efficiency of up to 25%, roughly in line with our X-Series (Maxeon 3) technology. When fully ramped, we expect A-Series (Maxeon 5) panels to be significantly less expensive to manufacture than E-Series (Maxeon 2) and X-Series (Maxeon 3) technology. We eventually plan to transform all of our legacy E-Series (Maxeon 2) production capacity in Fab 3 to A-Series (Maxeon 5). Due to higher manufacturing equipment throughput, we expect to be able to retrofit Fab 3 with approximately 1.9 gigawatts of A-Series (Maxeon 5) capacity—more than twice that of our legacy E-Series (Maxeon 2) technology.

Since fiscal 2016, we launched a line of solar panels under the P-Series and Performance ~~Series ("P-Series")~~ product ~~name.~~names, which is now referred to as our Performance Line of solar panels. These products utilize a proprietary manufacturing process to assemble conventional silicon solar cells into panels with increased efficiency and reliability compared with conventional panels. ~~Designed~~Performance Line solar panels are produced by Huansheng, a Yixing, China based joint venture in which we will own a 20% equity stake at the time of distribution. Huansheng currently has a capacity to produce approximately 1.9 gigawatts per year of Performance Line solar panels and has indicated that it plans to expand capacity to approximately 5 gigawatts per year by 2021. We have the right to take up to 33% of Huansheng’s capacity for sale directly into global DG markets, and a further 33% for sale into global power plant markets through a marketing joint venture in which we own an 80% stake.

Our proprietary technology platforms, including the Maxeon Line and Performance Line, target distinct market segments, serving both the distributed generation and power plant markets. This ability to address the full market spectrum allows us to benefit from a ~~new set~~range of diverse industry drivers and retain a balanced and diversified customer base.

We believe that our Maxeon Line of IBC technology stands apart from the competition in key metrics that our customers value, including efficiency, energy yield, reliability and ~~global markets,~~aesthetics.

We believe the combination of these characteristics enables the delivery of an unparalleled product and value proposition to our customers. Our A-Series (Maxeon 5) panels deliver 60% more energy in any given amount of roof space over the first 25 years, as compared to conventional panels.

We believe that we ~~expect P-Series~~possess a technological advantage as the leading manufacturer of back-contact, back-junction cells that enables our panels to ~~contribute~~produce more electricity, last longer and resist degradation more effectively. We believe that our technology allows us to deliver:

•superior performance, including the ~~growth~~ability to generate up to 35% more power per unit area than conventional solar cells;

•superior aesthetics, with our uniformly black surface design that eliminates highly visible reflective grid lines and metal interconnection ribbons;

•superior reliability, as confirmed by multiple independent reports and internal reliability data;

•superior energy production per rated watt of ~~both~~power, as confirmed by multiple independent reports; and

•solar power systems that are designed to generate electricity over a system life typically exceeding 25 years.

Table of ~~SunPower’s business segments.~~Contents

~~In 2018,~~With industry-leading conversion efficiencies, we ~~continued the ramp up of~~continuously improve our ~~next-generation~~Maxeon solar cells and panels with our Next Generation Technology ("NGT" or Maxeon 5), which offer efficiency of approximately 25%, roughly in line with our Maxeon 3 solar panels. When fully ramped, we expect the Maxeon 5 panelsbelieve they perform better and are tested more extensively to ~~compete~~deliver maximum return on investment when compared with the mono-PERC solar panels, but with superior levelized cost of energy due to higher performance and durability. During the fourth quarter of 2018, we certified our first Maxeon 5 product, a 72-cell format panel rated at 450 watts, and expect delivery to initial customers in the first quarter of 2019. We eventually plan to transform allproducts of our ~~legacy Maxeon 2 production capacity to Maxeon 5. We are also actively pursuing a variety of partnerships and other options to enable further NGT expansion to gigawatt scale.~~competitors.

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Warranties

SunPower provides a combined 25-year standard solar panel product and power warranty for defects in materials and workmanship. The solar product warranty also warrants that Maxeon ~~2 and Maxeon 3~~ panels will provide 98% of the panel’s minimum peak power ("MPP") rating for the first year, declining due to expected degradation by no more than 0.25% per year for the following 24 years, such that the power output at the end of year 25 will be at least 92% of the panel’s MPP rating. Our ~~P-Series~~Performance panels are warranted to provide 97% of the panel’s MPP rating for the first year, declining due to expected degradation by no more than 0.6% per year for the following 24 years, such that the power output at the end of year 25 will be at least 82.6% of the panel’s MPP rating. Our warranty provides that we will repair or replace or reimburse any defective solar panels during the warranty period. We also pass through long-term warranties from the original equipment manufacturers of certain system components to customers for periods ranging from five to 20 years. In addition, we generally warrant our workmanship on installed systems for periods ranging up to 25 years.

Research and Development

We engage in extensive research and development efforts to improve solar cell efficiency through the enhancement of our existing products, development of new techniques, and by reductions in manufacturing cost and complexity. Our research and development group works closely with our manufacturing facilities, our equipment suppliers and our customers to improve our solar cell design and to lower solar cell, solar panel and system product manufacturing and assembly costs. In addition, we have dedicated employees who work closely with our current and potential suppliers of crystalline silicon, a key raw material used in the manufacture of our solar cells, to develop specifications that meet our standards and ensure the high quality we require, while at the same time controlling costs. Under our Research & Collaboration Agreement with Total, our majority stockholder, we have established a joint committee to engage in long-term research and development projects with continued focus on maintaining and expanding our technology position in the crystalline silicon domain and ensuring our competitiveness. Refer to "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Research and Development."

~~Supplier Relationships,~~ Manufacturing and ~~Panel Assembly~~Suppliers

We purchase polysilicon, ingots, wafers, solar cells, balance of system components, and inverters from various manufacturers on both a contracted and a purchase order basis. We have contracted with some of our suppliers for multi-year supply agreements. Under such agreements, we have annual minimum purchase obligations and in certain cases prepayment obligations. Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations" for further information regarding the amount of our purchase obligations in fiscal ~~2019~~2020 and beyond. Under other supply agreements, we are required to make prepayments to vendors over the terms of the arrangements. As of December ~~30, 2018,~~29, 2019, advances to suppliers totaled ~~$172~~$121.4 million. We may be unable to recover such prepayments if the credit conditions of these suppliers materially deteriorate or if we are ~~otherwise~~ unable to fulfill our obligations under these supply agreements. For further information regarding our future prepayment obligations, refer to "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note ~~10.~~ 9. Commitments and Contingencies—Advances to Suppliers." We currently believe our supplier relationships and various short- and long-term contracts will afford us the volume of material and services required to meet our planned output over the next several years. For more information about risks related to our supply chain, including without limitation risks relating to announced tariffs on solar cells and modules imported into the U.S., refer to "Item 1A. Risk Factors—Risks Related to Our Supply Chain."

We are working with our suppliers and partners along all steps of the value chain to reduce costs by improving manufacturing technologies and expanding economies of scale. Crystalline silicon is the principal commercial material for solar cells and is used in several forms, including single-crystalline, or monocrystalline silicon, multi-crystalline, or polycrystalline silicon, ribbon and sheet silicon, and thin-layer silicon. Our solar cell value chain starts with high purity silicon called polysilicon. Polysilicon is created by refining quartz or sand.

Polysilicon is melted and grown into crystalline ingots and sawed into wafers by business partners specializing in those processes. The wafers are processed into solar cells in our manufacturing facilities located in the Philippines and Malaysia. ~~During fiscal 2017, we completed the construction of the~~Our solar cell manufacturing facility that we own and operate in the Philippines ~~which~~ has ana total rated annual capacity of ~~450~~500 MW. The solar cell manufacturing facility we own and operate in Malaysia has a total rated annual capacity of over ~~700 MW.~~800 MW and is currently being upgraded to 1,900 MW of A-Series (Maxeon 5) capacity.

We use our solar cells to manufacture our ~~Maxeon 3~~X-Series (Maxeon 3) and ~~Maxeon 2~~E-Series (Maxeon 2) solar panels at our solar panel assembly facilities located in Mexico and France, while we source solar cells from third parties for use in our P-Series solar

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panel assembly facility in Mexico and in Hillsboro, Oregon starting in 2019. Our solar panel manufacturing facilities have a combined total rated annual capacity of over 1.4 GW.

We source the materials and components of our solar panels and ~~balance of system components~~systems based on quality, performance, and cost considerations both internally and from third-party suppliers. We typically assemble proprietary components, while we purchase generally available components from third-party suppliers. The balance of system components, along with the EPC cost to construct the project, can comprise as much as two-thirds of the cost of a solar power system. Therefore, we focus on standardizing our products with the goal of driving down installation costs, such as with our Equinox and Helix systems.

Customers

~~Effective in the fourth quarter of 2018, we now operate in two segments: (i) SunPower Energy Services Segment and (ii) SunPower Technologies Segment.~~ Our scope and scale allow us to deliver solar solutions across all segments, ranging from consumer homeowners to the largest commercial and governmental entities in the world. Our customers typically include investors, financial institutions, project developers, electric utilities, independent power producers, commercial and governmental entities, production home builders, residential owners and small commercial building owners. We leverage a combination of direct sales as well as a broad partner ecosystem to efficiently reach our global customer base.

We work with development, construction, system integration, and financing companies to deliver our solar power products and solutions to wholesale sellers, retail sellers, and retail users of electricity. In the United States, commercial and electric utility customers typically choose to purchase solar electricity under a PPA with an investor or financing company that buys the system from us. End-user customers typically pay the investors and financing companies over an extended period of time based on energy they consume from the solar power systems, rather than paying for the full capital cost of purchasing the solar power systems. Our utility-scale solar power systems are typically purchased by an investor or financing company, and operated as central-station solar power plants. In addition, our third-party dealer network and our new homes division have deployed thousands of SunPower rooftop solar power systems to residential customers. See "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Revenue" for our significant customers.

Competition

The market for solar electric power technologies is competitive and continually evolving. In the last year, we faced increased competition, resulting in price reductions in the market and reduced margins, which may continue and could lead to loss of market share. Our solar power products and systems compete with many competitors in the solar power market, including, but not limited to:

•SunPower Energy Services Segment: Canadian Solar Inc., First Solar, Inc., GAF Energy, Hanwha QCELLS Corporation, Hyundai Heavy Industries Co. Ltd., JA Solar Holdings Co., Jinko Solar, Kyocera Corporation, LG Corporation, ~~Jinko~~LONGi Solar, NRG Energy, Inc., Panasonic Corporation, REC Group, Sharp Corporation, SunRun, Inc., Tesla, Inc., Trina Solar Ltd., Vivint, Inc., ~~LONGi Solar, REC Group, Hyundai Heavy Industries Co. Ltd.,~~ and Yingli Green Energy Holding Co. Ltd.

•SunPower Technologies: Canadian Solar Inc., First Solar Inc.

~~SunPower Technologies:~~ , Hanwha QCELLS Corporation, JA Solar Holdings Co., ~~Trina Solar Ltd., Yingli Green Energy Holding Co., Ltd.,~~ Jinko Solar, ~~First~~LG Solar, ~~Inc., Canadian SolarInc.,~~ LONGi Solar, Tongwei Co. Ltd., ~~Array Technologies, Inc., Soltec, NEXTracker, Inc., Convert Italia, Arctech, Inc.~~

Panasonic, and Trina Solar Ltd.

We also face competition from resellers that have developed related offerings that compete with our product and service offerings, or have entered into strategic relationships with other existing solar power system providers. We compete for limited government funding for research and development contracts, customer tax rebates and other programs that promote the use of solar, and other renewable forms of energy with other renewable energy providers and customers.

In addition, universities, research institutions, and other companies have brought to market alternative technologies, such as thin-film solar technology, which compete with our PV technology in certain applications. Furthermore, the solar power market in general competes with other energy providers such as electricity produced from conventional fossil fuels supplied by utilities and other sources of renewable energy such as wind, hydro, biomass, solar thermal, and emerging distributed generation technologies such as micro-turbines, sterling engines and fuel cells.

In the large-scale on-grid solar power systems market, we face direct competition from a number of companies, including those that manufacture, distribute, or install solar power systems as well as construction companies that have expanded into the renewable sector. In addition, we will occasionally compete with distributed generation equipment suppliers.

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We believe that the key competitive factors in the market for solar power systems include:

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•total system price;

•LCOE evaluation;

•CCOE evaluation;

•power efficiency, reliability and performance;

•aesthetic appearance of solar panels and systems;

•speed and ease of installation through modular solutions such as our Helix system;

•strength of distribution relationships;

•availability of third-party financing and investments;

•established sales channels to customers;

•timeliness of new product introductions;

•bankability, strength, and reputation of our company; and

•warranty protection, quality, and customer service.

We believe that we can compete favorably with respect to each of these elements, although we may be at a disadvantage in comparison to larger companies with broader product lines, greater technical service and support capabilities, and financial resources. For more information on risks related to our competition, please see the risk factors set forth under the caption "Item 1A. Risk Factors" including "Risks Related to Our Sales Channels—The increase in the global supply of solar cells and panels, and increasing competition, may cause substantial downward pressure on the prices of such products and cause us to lose sales or market share, resulting in lower revenues, earnings, and cash flows."

Intellectual Property

We rely on a combination of patent, copyright, trade secret, trademark, and contractual protections to establish and protect our proprietary rights. "SunPower" and the "SunPower" logo are our registered trademarks in countries throughout the world for use with solar cells, solar panels, energy monitoring systems, inverters, and mounting systems. We also hold registered trademarks for, among others, “SunPower Equinox,” “SunPower Giving,” “SunPower Horizons,” “SunPower Energy Services,” “SunPower Technologies,” “Bottle the Sun,” “Demand Better Solar,” “EDDiE,” “EnergyLink,” “Equinox Energy Systems and Design,” “Equinox Solar Systems and Design,” “Equinox,” “Experiential Learning. Expanding Opportunities.,” ~~“Equinox,”~~ “Helix,” “InvisiMount,” “Light on Land,” “Maxeon,” “Oasis,” “Oasis Geo,” “Powering a Brighter Tomorrow,” ~~“PowerLight,” “Serengeti,” “Smart Energy,”~~ “Smarter Solar,” “Solar Showdown,” “Sol,” ~~“Solaire,” “Solaire Generation,”~~ “SunTile,~~” “SunPower Electric,” “Supo Solar,~~” “More Energy. For Life.,” “The Planet's Most Powerful Solar,” and “The Power of One” in certain countries. We are seeking and will continue to seek registration of the "SunPower" trademark and other trademarks in additional countries as we believe is appropriate.As of December ~~30, 2018,~~29, 2019, we held registrations for 2632 trademarks in the United States, and had 49 trademark registration applications pending. We also held 68159 trademark registrations and had 1137 trademark applications pending in foreign jurisdictions. We typically require our business partners to enter into confidentiality and non-disclosure agreements before we disclose any sensitive aspects of our solar cells, technology, or business plans. We typically enter into proprietary information agreements with employees, consultants, vendors, customers, and joint venture partners.

We own multiple patents and patent applications that cover aspects of the technology in the solar cells, mounting products, and electrical and electronic systems that we currently manufacture and market. We continue to file for and receive new patent rights on a regular basis. The lifetime of a utility patent typically extends for 20 years from the date of filing with the relevant government authority. We assess appropriate opportunities for patent protection of those aspects of our technology, designs, methodologies, and processes that we believe provide significant competitive advantages to us, and for licensing opportunities of new technologies relevant to our business. As of December ~~30, 2018,~~29, 2019, we held ~~464~~502 patents in the United States, which will expire at various times through 2037, and had ~~246~~237 U.S. patent applications pending. We also held ~~535~~688 patents and

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had ~~592~~563 patent applications pending in foreign jurisdictions. While patents are an important element of our intellectual property strategy, our business as a whole is not dependent on any one patent or any single pending patent application. We additionally rely on trade secret rights to protect our proprietary information and know-how. We employ proprietary processes and

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customized equipment in our manufacturing facilities. We therefore require employees and consultants to enter into confidentiality agreements to protect them.

When appropriate, we enforce our intellectual property rights against other parties. For more information about risks related to our intellectual property, please see the risk factors set forth under the caption "Item 1A. Risk Factors" including "Risks Related to Our Intellectual Property—We depend on our intellectual property, and we may face intellectual property infringement claims that could be time-consuming and costly to defend and could result in the loss of significant rights," "Risks Related to Our Intellectual Property—We rely substantially upon trade secret laws and contractual restrictions to protect our proprietary rights, and, if these rights are not sufficiently protected, our ability to compete and generate revenue could suffer," and "Risks Related to Our Intellectual Property—We may not obtain sufficient patent protection on the technology embodied in the solar products we currently manufacture and market, which could harm our competitive position and increase our expenses."

Backlog

We believe that backlog is not a meaningful indicator of our future business prospects. In our SunPower Energy Services Segment's residential and commercial and international DG markets, we often sell large volumes of solar panels, mounting systems, and other solar equipment to third parties, which are typically ordered by our third-party dealer network and customers under standard purchase orders with relatively short delivery lead-times. Additionally, we often require project financing for development and construction of our SunPower Technologies Segment's solar power plant projects, which require significant investments before the equity is later sold by us to investors. Therefore, our solar power system project backlog would exclude sales contracts signed and completed in the same quarter and contracts still conditioned upon obtaining financing. Based on these reasons, we believe backlog at any particular date is not necessarily a meaningful indicator of our future revenue for any particular period of time.

Regulations

Public Policy Considerations

Different public policy mechanisms have been used by governments to accelerate the adoption and use of solar power. Examples of customer-focused financial mechanisms include capital cost rebates, performance-based incentives, feed-in tariffs, tax credits, and net metering. Some of these government mandates and economic incentives are scheduled to be reduced or to expire, or could be eliminated altogether. Capital cost rebates provide funds to customers based on the cost and size of a customer’s solar power system. Performance-based incentives provide funding to a customer based on the energy produced by their solar power system. Feed-in tariffs pay customers for solar power system generation based on energy produced, at a rate generally guaranteed for a period of time. Tax credits reduce a customer’s taxes at the time the taxes are due. Net metering allows customers to deliver to the electric grid any excess electricity produced by their on-site solar power systems, and to be credited for that excess electricity at or near the full retail price of electricity.

In addition to the mechanisms described above, new market development mechanisms to encourage the use of renewable energy sources continue to emerge. For example, many states in the United States have adopted renewable portfolio standards which mandate that a certain portion of electricity delivered to customers come from eligible renewable energy resources. Some states, such as California and Hawaii, have significantly expanded their renewable portfolio standards in recent years. In certain developing countries, governments are establishing initiatives to expand access to electricity, including initiatives to support off-grid rural electrification using solar power. For more information about how we avail ourselves of the benefits of public policies and the risks related to public policies, please see the risk factors set forth under the caption "Item 1A. Risk Factors" including "Risks Related to Our Sales Channels—The reduction, modification or elimination of government incentives could cause our revenue to decline and harm our financial results," "Risks Related to Our Sales Channels—Existing regulations and policies and changes to these regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and services," and "Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows."

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Environmental Regulations

We use, generate, and discharge toxic, volatile, or otherwise hazardous chemicals and wastes in our research and development, manufacturing, and construction activities. We are subject to a variety of foreign, U.S. federal and state, and local governmental laws and regulations related to the purchase, storage, use, and disposal of hazardous materials. We believe that we have all environmental permits necessary to conduct our business and expect to obtain all necessary environmental permits for future activities. We believe that we have properly handled our hazardous materials and wastes and have appropriately remediated any contamination at any of our premises. For more information about risks related to environmental regulations, please see the risk factors set forth under the caption "Item 1A. Risk Factors" including "Risks Related to Our Operations—Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines."

Information concerning certain limited activities in Iran and Syria

Information concerning ~~TOTAL’s~~the activities of our affiliate Total and its affiliated companies (collectively, the “Total Group”) related to Iran that took place in ~~2018~~2019 provided in this section is disclosed according to Section 13(r) of the Securities Exchange Act of 1934, as amended (“U.S. Exchange Act”). ~~TOTAL~~

In addition, information for 2019 is provided concerning the payments made by Total Group affiliates to, or additional cash flow that operations of Total Group affiliates generate for, governments of any country identified by the United States as state sponsors of terrorism (currently, Iran, North Korea, Syria and Sudan) or any entity controlled by those governments. The Total Group is not present in North Korea. Other than fees related to the renewal of the registration of an international trademark with the world intellectual property organization (which includes North Korea) paid in 2019, Total is not aware of any of its activities in 2019 having resulted in payments to, or additional cash flow for, the government of this country

Total believes that these activities are not ~~sanctionable, including for activities previously disclosed. Total S.A. and any of its subsidiaries and affiliates are collectively referred~~subject to ~~as the Group.~~sanctions.

Iran

The Total Group’s operational activities related to Iran were stopped in 2018 following the withdrawal of the United States from the ~~JCPOA~~Joint Comprehensive Plan of Action (“JCPOA”) in May 2018 and prior to the re-imposition of U.S. secondary sanctions on the oil industry as of November 5, 2018.

Statements in this section concerning affiliates intending or expecting to continue activities described below are subject to such activities continuing to be permissible under applicable international economic sanctions regimes.

a) Exploration & Production

~~Following the suspension~~The Tehran branch office of ~~certain international economic sanctions against Iran on January 16, 2016, the Group commenced various business development activities in Iran.~~ Total E&P South Pars S.A.S. ~~(“TEPSP”)~~ (a wholly-owned affiliate), ~~CNPC International Ltd. (“CNPCI”) (a wholly-owned affiliate~~which opened in 2017 for the purposes of ~~China National Petroleum Company) and Petropars Ltd. (“Petropars”) (a wholly-owned affiliate of NIOC) signed a 20-year risked service contract in July 2017, (the “Risked Service Contract”) for~~ the development and production of phase 11 of the South Pars gas field, (“SP11”).TEPSP (50.1%) was the operator and a partner of the project alongside CNPCI (30%) and Petropars (19.9%). These companies entered into a joint operating agreement in July 2017 (the “JOA”) concerning, among other things, the governance of their obligations under the Risked Service Contract and the designation of TEPSP as the project’s operator.

In 2018, TEPSP continued conducting petroleum operations on behalf of the above-mentioned consortium in accordance with the terms and conditions of the Risked Service Contract and the JOA. In particular, TEPSP: (i) held several meetings with the Iranian authorities, NIOC and other Iranian state owned/controlled entities; (ii) launched tenders for award of service contracts for the purposes of the SP11 project; (iii) negotiated various agreements (such as service and/or supply agreements and bank service agreements); and (iv) performed other activities under the Risked Service Contract and the JOA.

In 2018, TEPSP completed the technical studies, which were started in November 2016, in accordance with the technical services agreement (the “TSA”) between NIOC and TEPSP, acting on behalf of the consortium.

However, as a result of the withdrawal of the U.S. from the JCPOA in May 2018, TOTAL ceased all of its activities related to the SP11 project and finalized its withdrawal from the SP11 project on October 29, 2018, at which time it transferred its participating interest and operatorship of the project to CNPCI.

The MOU entered into between TOTAL and NIOC in January 2016 to assess potential developments in Iran (including South Azadegan) was amended to include North Azadegan and to extend its duration. NIOC provided TOTAL in 2017 with technical data on the Azadegan oil field so that it could assess potential development of this field. Representatives of TOTAL held technical meetings in 2017 with representatives of NIOC and its affiliated companies and carried out a technical review of the Azadegan (South & North) oil field as well as the Iran LNG Project (a project contemplating a 10 Mt/y LNG production facility at Tombak Port on Iran’s Persian Gulf coast), the results of which were partially disclosed to NIOC and relevant affiliated companies. In addition, TOTAL signed an MOU in 2017 with an international company to evaluate jointly the Azadegan oil field opportunity with NIOC. This international company decided in February 2018 to withdraw from this technical cooperation and a MOU termination agreement was formally executed with TOTAL on May 16, 2018. Technical

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~~studies were pursued by TOTAL until March 2018 on the Azadegan area with regular contacts with NIOC. All work and contacts with NIOC on this subject ceased at the end of March 2018.~~

During 2018, in connection with the activities under the aforementioned Risked Service Contract and MOUs, and to discuss other new opportunities, representatives of TOTAL attended meetings with the Iranian oil and gas ministry and several Iranian companies with ties to the government of Iran. In connection with travel to Iran in 2018 by certain employees of the Group, TOTAL made payments to Iranian authorities for visas, airport services, exit fees and similar travel-related charges. In addition, representatives of TOTAL had meetings in France with the Iranian ambassador.

~~Neither revenues nor profits were recognized from any of the aforementioned activities under the aforementioned Risked Service Contract and MOUs in 2018.~~

~~Maersk Oil studied two potential projects with NIOC, prior to the acquisition of Maersk Oil by TOTAL in March 2018. These studies ceased after a meeting with NIOC representatives in May 2018.~~

~~The Tehran branch office of TEPSP, opened in 2017 for the purposes of the SP11 project,~~ ceased all operational activities prior to November 1, ~~2018 and will be closed and de-registered in 2019. Since~~2018. In addition, since November 2018, Total Iran BV maintains a local representative office in Tehran with a few employees solely for non-operational functions. Concerning payments to Iranian entities in ~~2018,~~2019, Total Iran BV and Elf Petroleum Iran collectively made payments of approximately IRR ~~31.7~~1.87 billion (approximately ~~$300,000 (Converted~~€39,500, using the average exchange rate for fiscal ~~year 2018,~~2019, as published by ~~Bloomberg.~~)the Central Bank of Iran) to the Iranian administration for taxes and social security contributions concerning the ~~personnel~~staff of the aforementioned representative office and residual obligations related to various prior risked service contracts. In 2019, similar types of payments are to be made in connection with maintaining the representative office in Tehran, albeit in lower amounts.office. None of these payments ~~has been or is expected to be~~were executed in U.S. dollars.

~~Furthermore,~~Since November 30, 2018, Total E&P UK Limited (“TEP UK”), a wholly-owned affiliate, holds a 1% interest in a joint venture ~~for~~relating to the Bruce field in the United Kingdom (the “Bruce Field Joint Venture”) with Serica Energy (UK) Limited (“Serica”) (98%, operator) and BP Exploration Operating Company Limited (“~~BP”~~BPEOC”) (1%), following the completion of the sale of 42.25% of TEP UK’s ~~interests~~interest in the Bruce ~~field~~Field Joint Venture on November 30, 2018 pursuant to a sale and purchase agreement dated August 2, 2018 entered into between TEP UK and Serica. Upon ~~the~~ closing of the transaction on November 30, 2018, all other prior joint venture partners also sold their interests in the Bruce ~~field~~Field Joint Venture to Serica ~~(BP~~(BPEOC sold 36% retaining a 1% ~~interest;~~interest, BHP Billiton Petroleum Great Britain Limited (“BHP”) sold ~~their full~~its entire interest of 16% ~~interest~~ and Marubeni Oil & Gas (U.K.) Limited ~~((“~~(“Marubeni”) sold ~~their full~~its entire interest of 3.75%).

The Bruce ~~field joint venture~~Field Joint Venture is party to an agreement ~~(the “Bruce Rhum Agreement”)~~ governing certain transportation, processing and operation services provided to another joint venture at the Rhum field in the UK ~~co-owned by~~(the “Bruce Rhum Agreement”). The licensees of the

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Rhum field are Serica (50%, operator) and the Iranian Oil Company UK Ltd (“~~IOC”~~IOC UK”), a subsidiary of NIOC (50%)., an Iranian government-owned corporation. Under the terms of the Bruce Rhum Agreement, the Rhum field owners pay a proportion of the operating costs of the Bruce field facilities calculated on a gas throughput basis. ~~IOC’s~~

In November 2018, the U.S. Treasury Department’s Office of Foreign Asset Control (“OFAC”) granted a conditional license to BPEOC and Serica authorizing provision of services to the Rhum field following the re-imposition of U.S. secondary sanctions. The principal condition of the license is that the ownership of shares in IOC UK by Naftiran Intertrade Company Limited (the trading branch of the NIOC) are transferred into and held in a Jersey-based trust, thereby ensuring that the Iranian government does not derive any economic benefit from the Rhum field so long as U.S. sanctions against these entities remain in place. IOC UK’s interest is managed by an independent management company established by the trust and referred to as the “Rhum Management Company” (“RMC”). Where necessary TEP UK liaises with RMC in relation to the Bruce Rhum Agreement and TEP UK expects to continue liaising with RMC on the same basis in 2020.

In October 2019, OFAC renewed and extended the conditional license to Serica authorizing the provision of services to the Rhum field until February 2021. In addition, OFAC informed that, to the extent that the license remains valid and Serica represents that the conditions set out in the license are met, activities and transactions of non-U.S. persons involving the Rhum filed or the Bruce field, including in relation to the operation of the trust, IOC UK and RMC will not be exposed to U.S. secondary sanctions with respect to Iran.

IOC UK’s share of costs incurred under the Bruce Rhum Agreement have been paid to TEP UK in ~~2018~~2019 by ~~Naftiran Intertrade Company Limited (“NICO”), the trading branch of the National Iranian Oil Company (“NIOC”). NIOC is the parent company of IOC and an Iranian government owned corporation.~~RMC. In ~~2018,~~2019, based upon TEP UK’s 1% interest in the Bruce ~~field~~Field Joint Venture and income from the net cash flow sharing arrangement with Serica, gross revenue to TEP UK from ~~IOC’s~~IOC UK’s share of the Rhum field resulting from the Bruce Rhum Agreement was approximately £8 million. This ~~sum~~amount was used to offset operating costs on the Bruce field and as such, generated no net profit to TEP UK. This arrangement is expected to continue in ~~2019.~~2020.

~~In 2018,~~Early 2019, TEP UK ~~acted~~continued to act as agent for BHP and Marubeni pursuant to the agency agreement entered into in June 2018 between BHP, Marubeni and TEP UK according to which ~~faced difficulty securing banking arrangements allowing them to accept payments from IOC, and, thus,~~TEP UK received payments from ~~IOC~~RMC in relation to BHP and Marubeni’s share of income from the Bruce Rhum Agreement ~~under the terms of an agency agreement entered into in June 2018 between BHP, Marubeni and TEP UK~~ (the “Agency Agreement”). ~~Payments made from IOC~~The payments related to the period before November 30, 2018, prior to BHP and Marubeni divested their respective interest in ~~2018 related~~the Bruce Field Joint Venture to ~~the periods prior to the completion of their divestment to Serica in November 2018. Total~~Serica. In 2019, total payment received on behalf of BHP and Marubeni by TEP UK under this arrangement ~~in 2018~~ was approximately £7£1.1 million. ~~This amount relates to income due to BHP and Marubeni under the Bruce Rhum Agreement for 2017 and 2018.~~ TEP UK transferred all income received under the Agency Agreement to BHP and Marubeni and provided the service on a no profit, no loss basis. The Agency Agreement ~~is expected to be~~was terminated ~~upon~~on June 27, 2019 following receipt of all payments relating to the period up to November 30, 2018.

Prior to the re-imposition of U.S. secondary sanctions on the oil industry as of November 5, 2018, TEP UK liaised directly with IOC concerning its interest in the Bruce Rhum Agreement and it received payments directly for services provided to IOC under the Bruce Rhum Agreement. In October 2018, the U.S. Treasury Department’s Office of Foreign Asset Control (“OFAC”) granted a new conditional license to BP and Serica authorizing the provision of services to the Rhum field, following the reinstatement of U.S. secondary sanctions. The principal condition of the OFAC license is that the Iranian government’s

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shareholding in IOC is transferred into a trust in order that Iran may not derive any benefit from the Rhum field or exercise any control while the U.S. secondary sanctions are in place. A Jersey based trust has been put in place with the trustee holding IOC’s shares in the Rhum field. IOC’s interest is now managed by a new independent management company established by the trust and referred to as the “Rhum Management Company” (“RMC”) and where necessary TEP UK liaises, and expects to continue doing so in 2019, with RMC in relation to the Bruce Rhum Agreement.

TEP UK is also party to an agreement with Serica whereby TEP UK uses reasonable endeavors to evacuate Rhum NGL from the St Fergus Terminal (the “Rhum NGL Agreement”). TEP UK provides this service - subject to Serica having title to all of the Rhum NGL to be evacuated and Serica having a valid license from OFAC for the ~~activity -~~activity. The service is provided on a cost basis, ~~but for which~~and TEP UK charges a monthly handling fee that generates an income of approximately £35,000 per annum relating to ~~IOC’s~~IOC UK’s 50% stake in the Rhum field. After costs, TEP UK realizes little profit from this ~~arrangement.TEP~~arrangement. TEP UK expects to continue this activity in ~~2019.~~2020.

~~Following the acquisition of Maersk Oil in 2018, the undeveloped Yeoman discovery is now wholly owned by the Group, under license P2158 granted to Maersk Oil North Sea UK Limited, recently renamed~~ Total E&P North Sea UK Limited (“TEPNSUK”). Yeoman is situated adjacent to the Pardis discovery in which IOC held an interest, which it sold in October 2018. Prior to this divestment, non-legally binding technical and commercial discussions had taken place between TEPNSUK, IOC and the UK Government’s Oil and Gas Authority during the first half of 2018 regarding a potential joint development of Yeoman and Pardis but no contractual arrangements were implemented in connection with such discussions. Also prior to this divestement, other discussions had taken place between TEPNSUK and IOC on an informal basis regarding a potential farm-in to Pardis by Maersk Oil.

~~Lastly, TOTAL~~ S.A. paid approximately ~~€8,000~~€2,000 to Iranian authorities related to various patents (in 2019. Similar payments are expected to be made in 2020. Section 560.509 of the U.S. Iranian Transactions and Sanctions Regulations provides an authorization for certain transactions in connection with patent, trademark, copyright or other intellectual property protection in the United States or Iran, including payments for such services and payments to persons in Iran directly connected to intellectual property rights, and ~~TOTAL~~Total believes that the activities related to the industrial property rights ~~described in this point 3.1.9.2~~ are consistent with that authorization.) ~~in 2018. Similar payments are expected to be made in 2019 for such patents.~~

b) Other business segments

In ~~2018, TOTAL~~2019, Total S.A. paid fees of approximately €1,500 to Iranian authorities related to the maintenance and protection of trademarks and designs in Iran. Similar payments are expected to be made in ~~2019.~~2020.

~~Trading & Shipping~~

Following the suspension of applicable EU and U.S. economic sanctions in 2016, the Group commenced the purchase of Iranian hydrocarbons through its wholly-owned affiliate TOTSA TOTAL OIL TRADING SA (“TOTSA”). In 2018, the Group continued its trading activities with Iran via TOTSA, which purchased approximately 18 Mb of Iranian crude oil for nearly €1 billion pursuant to term contracts. It is not possible to estimate the gross revenue and net profit related to these purchases because the totality of this crude oil was used to supply the Group’s refineries. In addition, in 2018, approximately 1 Mb of petroleum products were sold to entities with ties to the government of Iran. These activities generated gross revenue of nearly €43 million and a net profit of approximately €1 million. The Group ceased these activities in June 2018.

~~Gas, Renewables & Power~~

Saft Groupe S.A. (“Saft”), a wholly-owned affiliate, in 2018 sold signaling and backup battery systems for metros and railways as well as products for the utilities and oil and gas sectors to companies in Iran, including some having direct or indirect ties with the Iranian government. In 2018, this activity generated gross revenue of approximately €2.5 million and net profit of approximately €0.3 million. Saft ceased this activity in 2018. Saft also attended the Iran Oil Show in 2018, where it discussed business opportunities with Iranian customers, including those with direct or indirect ties with the Iranian government. Saft ceased this activity in 2018.

Total Eren, a company in which Total Eren Holding holds an interest of 68.76% (TOTAL S.A. owns 33.86% of Total Eren Holding), had preliminary discussions during January to March 2018 for possible investments in renewable energy projects in Iran, including meetings with ministries of the Iranian government. These discussions and meetings ceased as of March 2018 and neither revenues nor profits were recognized from this activity in 2018.

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Refining & Chemicals

~~As of May 2018, Hutchinson SA and its affiliates no longer accepted orders from Iranian companies and ceased all activities, in general, with Iran and all Iranian companies prior to August 6, 2018.~~

Le Joint Français, a wholly-owned affiliate of Hutchinson SA, sold vehicular O-ring seals in 2018 to Iran Khodro, a company in which the government of Iran holds a 20% interest and which is supervised by Iran’s Industrial Management Organization. This activity generated gross revenue of approximately €54,056 and net profit of approximately €8,108. Le Joint Français also sold O-ring seals in 2018 to Al Khalsan. This activity generated gross revenue of approximately €29,348 and net profit of approximately €4,402.

Paulstra S.N.C., a wholly-owned affiliate of Hutchinson SA, obtained in 2017 an order from Iran Khodro to sell vehicular anti-vibration systems over a 5-year period. This activity did not generate any gross revenue or net profit in 2018 because Paulstra did not delivery any product to Iran Khodro. The order was terminated in 2018. Paulstra S.N.C. also sold oil seals in 2018 to Iran Khodro. This activity generated gross revenue of approximately €1,078,887 and net profit of approximately €161,833.

Catelsa Caceres, a wholly-owned affiliate of Hutchinson Iberia, itself wholly-owned by Hutchinson SA, sold sealing products to Iran Khodro in 2018. This activity generated gross revenue of approximately €1,449 and net profit of approximately €217.

Hutchinson GMBH, a wholly-owned affiliate of Hutchinson SA, sold hoses for automotive vehicles to Iran Khodro in 2018. This activity generated gross revenue for approximately €257,400 and net profit of approximately €38,610. The last shipments from Hutchinson and its affiliates to Iran Khodro were in August 2018 and last payments were made in October 2018.

In 2019, Hanwha Total Petrochemicals (“HTC”), a South Korean joint venture in which each of Total Holdings UK Limited (a wholly-owned affiliate) ~~holds a 50% interest~~ and its partner Hanwha General Chemicals holds a 50% interest, ~~purchased approximately 17 Mb~~reported some activity in

Table of condensates from NIOC for approximately KRW 1,310 billion (approximately $1.2 billion) from January to July 2018, then HTC has stopped purchasing from NIOC. These condensates are used as raw material for certain of HTC’s steam crackers. HTC also chartered fifteen tankers of condensates with National Iranian Tanker Company (NITC), a subsidiary of NIOC, for approximately KRW 24 billion (approximately $22.3 million).Contents

Iran. In November 2018, South Korea was granted a significant reduction exemption waiver (the “SRE waiver”) allowing it to import Iranian condensate from NIOC for six months. ~~For~~In that context, HTC purchased approximately 13.5 Mb of condensates from NIOC for approximately KRW 1,000 billion (approximately €760 million, using the average exchange rate for fiscal 2019, ~~based on the SRE waiver,~~as published by Bloomberg) from January 2019 to April 2019. HTC ~~is reviewing the feasibility to resume purchases~~stopped purchasing from ~~NIOC.~~NIOC thereafter. These condensates are used as raw material for certain of HTC’s steam crackers.

In 2019, Total Research & Technology Feluy (“TRTF”, a wholly-owned affiliate)~~, Total Marketing Services (“TMS”, a wholly-owned affiliate),~~ and Total Raffinage Chimie (“TRC”), a wholly-owned affiliate) paid ~~in 2018~~ fees ~~totaling approximately €1,000~~related to three patents to Iranian authorities ~~related to various patents. Similar payments are expected to be made by TRTF and TRC in 2019. TMS abandoned its patent rights in Iran in 2018, thus no payments are expected by TMS in 2019.~~for an amount of approximately €1,400.

Marketing & Services

Until December 2012, at which time it sold its entire interest, the Group held a 50% interest in the lubricants retail company Beh Tam (formerly Beh Total) along with Behran Oil (50%), a company controlled by entities with ties to the government of Iran. As part of the sale of the Group’s interest in Beh Tam, TOTAL S.A. agreed to license the trademark “Total” to Beh Tam for an initial 3-year period (renewed for an additional 3 year period) for the sale by Beh Tam of lubricants to domestic consumers in Iran. Royalty payments for 2014 were received by TOTAL S.A. during the first semester of 2018 in the amount of approximately €730,000. There remain outstanding royalty payments for 2015 through 2017 in favor of TOTAL S.A. This licensing agreement was terminated in 2018. In addition, representatives of Total Oil Asia-Pacific Pte Ltd, a wholly-owned affiliate, visited Behran Oil beginning 2018 regarding the potential purchase of 50% of the share capital of Beh Tam. Discussions on this matter ended following the announcement of the re-imposition of U.S. secondary sanctions on the oil industry.

Total Marketing Middle East FZE, a wholly-owned affiliate, sold lubricants to Beh Tam in 2018. The sale in 2018 of approximately 43 t of lubricants and special fluids generated gross revenue of approximately AED 500,000 (approximately $136,000) and net profit of approximately AED 260,000 (approximately $ 71,000) ~~(Converted using the average exchange rate for fiscal year 2018, as published by Bloomberg). The company stopped all transactions with this customer as of August 2018.~~

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2019, Total Marketing France (“TMF”), a ~~company~~ wholly-owned ~~by TMS,~~affiliate), provided ~~in 2018~~ fuel payment cards to the Iranian embassy located in Neuilly-sur-Seine (France) and the Iranian delegation to UNESCO in ~~France for use~~Paris (France), to be used in the Total Group’s service stations. In ~~2018, these activities~~2019, this activity generated gross revenue of approximately ~~€32,000~~€30,300 and net profit of approximately ~~€5,000.~~€2,200. The ~~company~~Total Group expects to continue this activity in ~~2019.~~2020.

~~TMF also sold jet fuel in 2018 to Iran Air~~

In 2019, as part of its ~~airplane~~ refueling activities in ~~France. The sale of approximately 260 cubic meters of jet~~France, Caldeo, a company wholly-owned by TMF, delivered fuel oil to the Iranian embassy in Neuilly-sur-Seine (France). In 2019, this activity generated gross revenue of approximately ~~€130,000~~€1,500 and net profit of approximately ~~€570.~~€14. The ~~company stopped all transactions with~~Total Group expects to continue this ~~customer prior to November 5, 2018.~~activity in 2020.

In 2019, Total Belgium a(a wholly-owned ~~affiliate,~~affiliate) provided ~~in 2018~~ fuel payment cards to the Iranian embassy in Brussels (Belgium) ~~for use~~, to be used in the Total Group’s service stations. In ~~2018, these activities~~2019, this activity generated gross revenue of approximately €11,000 and net profit of ~~approximately~~ €4,000. The ~~company~~Total Group expects to continue this activity in ~~2019.~~2020.

Syria

Since early December 2011, Total has ceased its activities that contribute to oil and gas production in Syria and maintains a local office solely for non-operational functions. In late 2014, the Total Group initiated a downsizing of its Damascus office and reduced its staff to few employees. Following the termination of their employment contracts in May 2019, the Damascus office was closed. In 2019, Total paid approximately €6,500 to the Syrian government as contributions for social security in relation to the aforementioned staff of the Damascus office before it was closed.

Employees

As of December ~~30, 2018,~~29, 2019, we had ~~approximately 6,600~~about 8,400 full-time employees worldwide, of which ~~1,280~~about 2,000 each were located in the United States ~~1,900 were located~~and in the Philippines, ~~1,470~~about 1,700 were located in Malaysia, and ~~1,950~~about 2,500 were located in other countries. Of these employees, ~~4,485~~about 5,300 were engaged in manufacturing, ~~1,075~~about 1,500 in construction projects, ~~260~~about 300 in research and development, ~~355~~about 400 in sales and marketing, and ~~430~~more than 700 in general and administrative services. Although in certain countries, we have works councils and statutory employee representation obligations, our employees are generally not represented by labor unions on an ongoing basis. We have never experienced a work stoppage, and we believe our relations with our employees to be good.

Seasonal Trends and Economic Incentives

Our business is subject to industry-specific seasonal fluctuations including changes in weather patterns and economic incentives, among others. Sales have historically reflected these seasonal trends with the largest percentage of total revenues realized during the last two quarters of our fiscal year. The construction of solar power systems or installation of solar power components and related revenue may decline during cold winter months. In the United States, many customers make purchasing decisions towards the end of the year in order to take advantage of tax credits or for other budgetary reasons. In addition, revenues may fluctuate due to the timing of project sales, construction schedules, and revenue recognition of certain projects, which may significantly impact the quarterly profile of our results of operations. We may also retain certain development projects on our balance sheet for longer periods of time than in preceding periods in order to optimize the economic value we receive at the time of sale in light of market conditions, which can fluctuate after we have committed to projects. Delays in disposing of projects, or changes in amounts realized on disposition, may lead to significant fluctuations to the period-over-period profile of our results of operations and our cash available for working capital needs.

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Available Information

We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") free of charge on our website at www.sunpower.com, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The contents of our website are not incorporated into, or otherwise to be regarded as part of this Annual Report on Form 10-K. Copies of such material may be obtained, free of charge, upon written request submitted to our corporate headquarters: SunPower Corporation, Attn: Investor Relations, 7751 Rio Robles, San Jose, California, 95134. Copies of materials we file with the SEC may also be accessed the SEC's website at www.sec.gov.

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ITEM 1A. RISK FACTORS

Our business is subject to various risks and uncertainties, including those described below and elsewhere in this Annual Report on Form 10-K, which could adversely affect our business, results of operations, and financial condition. Although we believe that we have identified and discussed below certain key risk factors affecting our business, there may be additional risks and uncertainties that are not currently known to us or that are not currently believed by us to be material that may also harm our business, results of operations, and financial condition.

Risks Related to the Spin-Off

Our plan to separate into two independent publicly-traded companies by means of a sponsored spin-off of our international SunPower Technologies business unit is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

On November 11, 2019, we announced plans to separate into two independent publicly-traded through the proposed Spin-Off. In the Spin-Off, we will distribute shares of Maxeon Solar to our stockholders

The Spin-Off, which is currently targeted to be completed in the second quarter of 2020, is subject to certain conditions, including final approval by our Board of Directors, as well as other conditions such as completion of all necessary filings under the U.S. securities laws; receipt by our Board of Directors of one or more opinions from an independent valuation firm confirming the solvency and financial viability of each of SunPower and Maxeon Solar immediately after the completion of thedistribution in a form acceptable to us; receipt of an opinion regarding the qualification of the Distribution as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”) to our stockholders; if applicable, the receipt of a waiver from the Singapore Securities Industry Council from the applicability of the Singapore Code on Take-overs and Mergers to the distribution; the absence of any legal impediments prohibiting the Distribution; and the satisfaction or waiver of certain conditions Investment set forth in the Investment Agreement and as detailed below. In addition, we may not be able to complete the contemplated Spin-Off should TZS decide not to provide its contemplated investment. Pursuant to the Investment Agreement, the investment is subject to certain conditions being satisfied or waived by us or Maxeon Solar, on the one hand, and TZS, on the other hand, including, among other things, the completion of the Spin-Off, as well as other conditions including Maxeon Solar entering into definitive agreements for a term loan facility in an amount not less than $325 million; Maxeon Solar obtaining certain additional financing in the form of a revolving credit facility of not less than $100 million or, alternatively, making certain working capital adjustment arrangements; Maxeon Solar having no more than $138 million in other debt and no less than $50 million in Cash (as defined in the Investment Agreement) immediately prior to the Investment; execution of ancillary agreements and a shareholders agreement; receipt of required governmental approvals; completion of all necessary filings under the U.S. securities laws; receipt by our Board of Directors of one or more opinions from an independent valuation firm confirming the solvency and financial viability of each of us and Maxeon Solar immediately after the consummation of the Distribution in a form acceptable to us; if applicable, the receipt of a waiver from the Singapore Securities Industry Council from the applicability of the Singapore Code on Take-overs and Mergers to the distribution and the investment; and the absence of any legal impediments prohibiting the investment. Maxeon Solar has not yet secured commitment letters for the required term loan facility or revolving credit facility noted above, and there is no guarantee that Maxeon Solar will be able to secure such commitments. The failure to satisfy all of the required conditions could delay the completion of the Spin-Off or the investment for a significant period of time or prevent them from occurring at all.

Unanticipated developments, including changes in the competitive conditions of our markets, possible delays in obtaining various tax opinions or rulings, regulatory approvals or clearances, negotiating challenges, the uncertainty of the financial markets, changes in the law, and challenges in executing the separation, could delay or prevent the completion of the

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Spin-Off, or cause the Spin-Off to occur on terms or conditions that are different or less favorable than expected. Any changes to the Spin-Off or delay in completing the Spin-Off could cause us not to realize some or all of the expected benefits, or realize them on a different timeline than expected. Further, our Board of Directors could decide, either because of a failure of conditions or because of market or other factors, to abandon the Spin-Off. If it does so, not only will we not realize any benefits of the Spin-Off, we may have to pay, in some cases, a breakup fee to TZS of either $20 million or $80 million, depending on the circumstances. No assurance can be given as to whether and when the Spin-Off will occur.

We have incurred significant expenses in connection with the Spin-Off and investment, and expect that the process of completing the Spin-Off will be time-consuming and involve significant additional costs and expenses, which may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the separation is not completed. Executing the Spin-Off will require significant time and attention from our senior management and employees, which could adversely affect our business, financial results, and results of operations. We may also experience increased difficulties in attracting, retaining, and motivating employees during the pendency of the Spin-Off and following its completion, which could harm our businesses. In addition, if the Spin-Off is not completed, we will still be required to pay certain costs and expenses incurred in connection therewith, such as legal, accounting, and other professional fees. And, as noted, in some cases we may have to pay a breakup fee to TZS.

Any of the above factors could cause the Spin-Off (or the failure to execute the Spin-Off) to have a material adverse effect on our business, financial condition and results of operations and the price of our common stock.

The Spin-Off may not achieve some or all of the anticipated benefits.

We may not realize some or all of the anticipated strategic, financial, operational, marketing or other benefits from the Spin-Off. We cannot predict with certainty when the benefits expected from the Spin-Off will occur or the extent to which they will be achieved. If the Spin-Off is completed, our operational and financial profile will change and we will face new risks. As independent, publicly-traded companies, SunPower and Maxeon Solar will be smaller, less-diversified companies with narrower business focuses and may be more vulnerable to changing market conditions, which could materially and adversely affect their respective businesses, financial condition, and results of operations. There is no assurance that following the Spin-Off each separate company will be successful.

In addition, some investors holding our common stock prior to the separation may hold our common stock because of a decision to invest in a company that operates all of our business units, including our SunPower Technologies business unit. If the Spin-Off is completed, shares in each independent company held by those investors will represent an investment in a company with a different profile than that of SunPower, and, as a result, some investors may sell our common stock prior to the Separation or sell the shares of one or both independent companies resulting from the separation. Excess selling could cause the relative market price of our common stock to decrease and be subject to greater volatility following the completion of the Spin-Off. We expect the trading price of our common stock immediately following the ex-dividend date for the Spin-Off to be significantly lower than immediately preceding the ex-dividend date, as the trading price of our common stock will no longer reflect the value of our SunPower Technologies business unit. Further, there can be no assurance that the combined value of the shares of the two publicly-traded companies will be equal to or greater than what the value of our common stock would have been had the proposed Spin-Off not occurred.

The proposed Spin-Off may result in disruptions to, and may negatively impact our relationships with, our customers and other business partners.

Uncertainty related to the Spin-Off may lead customers and other parties with which we currently do business, or may do business in the future, to terminate or attempt to negotiate changes in existing business relationships, or consider entering into business relationships with parties other than us. These disruptions could have a material and adverse effect on our businesses, financial condition and results of operations. The effect of such disruptions could be exacerbated by any delays or unanticipated developments in the completion of the Spin-Off.

Following the Spin-Off, each of SunPower and Maxeon Solar will operate as an independent publicly-traded company with its own business goals, objectives and commercial relationships.

Following the Spin-Off, we and Maxeon Solar will operate as independent publicly-traded companies. Accordingly, our business goals, objectives and commercial relationships will be different from those of Maxeon Solar. In that respect, we may not have exclusive access to next-generation solar cells and panels that may be produced by Maxeon Solar, including Maxeon5 solar cells and A-Series (Maxeon 5) modules, following the applicable exclusivity periods in the supply agreement we will

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enter into with Maxeon, which could have an adverse effect on our business, financial condition and results of operations and our ability to execute our business strategy.

We may have divergent interests with respect to the transition services agreement and other ancillary agreements that we will enter into with Maxeon Solar, which could negatively impact the scope, duration or effectiveness of such agreements in a manner that negatively impacts our and Maxeon Solar’s businesses and operations.

We and Maxeon Solar will enter into a transition services agreement and other ancillary agreements in connection with the Spin-Off pursuant to which SunPower and Maxeon Solar will provide each other, on an interim, transitional basis, various services related to finance, accounting, business technology, human resources information systems, human resources, facilities, document management and record retention, relationship and strategy management and module operations, technical and quality support. Nevertheless, our interests and those of Maxeon Solar could differ with respect to these agreements, which could negatively impact the scope, duration or effectiveness of such agreements. In addition, if we or Maxeon Solar do not satisfactorily perform our obligations under these agreements, the non-performing party may be held liable for any resulting losses suffered by the other party. Also, during the periods of these agreements, our and Maxeon Solar’s management and employees may be required to divert their attention away from our and their respective business in order to provide services pursuant to the agreements, which could adversely affect our and their business. Any of these factors could negatively impact our and Maxeon Solar’s businesses and operations.

If the Spin-Off fails to qualify for tax-free distribution treatment to the stockholders for U.S. federal income tax purposes, then the distribution could result in tax liability to the stockholders.

We expect that for U.S. federal income tax purposes, the distribution should qualify, for our stockholders, as a tax-free distribution under Section 355 of the Code. This expectation is based, among other things, on various factual assumptions we have made. If any of these assumptions are, or become, inaccurate or incomplete, our expectations may change. For instance, this expectation relies on certain significant ownership interests in the resulting companies continuing after the Spin-Off. Whether such ownership continues may be out of SunPower’s control following the completion of the Spin-Off, because none of its stockholders have committed to SunPower to retain their shares of SunPower or Maxeon Solar after the Spin-Off. Additionally, there can be no assurance that the IRS will not challenge any positions we take with respect to the Spin-Off or that a court would not sustain such a challenge.

Although the stockholders are expected to obtain tax-free treatment in the distribution portion of the Spin-Off, the separation is expected to result in a fully taxable event to SunPower, for which SunPower expects to recognize gain which it expects to offset with prior year losses, thus resulting in a significant reduction in our net operating loss carryforwards. We may incur certain non-U.S. tax costs in connection with the separation, including tax expense resulting from separations in multiple non-U.S. jurisdictions that do not legally provide for tax-free separations, which may be material. If the distribution fails to qualify as tax-free under Section 355 of the Code, each SunPower stockholder will generally be required to include in its taxable income as a dividend the fair market value of the Maxeon Solar ordinary shares received by it to the extent of earnings and profits of SunPower and will generally take a fair market value basis in the Maxeon Solar ordinary shares received by it in the distribution.

We may determine to forgo certain transactions in order to avoid the risk of incurring material tax-related liabilities.

As a result of requirements of Section 355 of the Code and/or other applicable tax laws, we may determine to forgo certain transactions that would otherwise be advantageous. In particular, we may determine to continue to operate certain of our business operations for the foreseeable future even if a sale or discontinuance of such business would otherwise be advantageous.

If the Spin-Off is completed, any financing we obtain in the future could involve higher costs.

Following completion of the Spin-Off, any financing that we obtain will be with the support of a reduced pool of diversified assets and a significant amount of outstanding debt, and therefore we may not be able to secure adequate debt or equity financing on desirable terms. The cost to us of financing without our SunPower Technologies business unit as part of our consolidated company may be materially higher than the cost of financing prior to the Spin-Off. If we have credit ratings lower than we currently have, it could be more expensive for us to obtain debt financing than it has been to date.

Certain members of our Board of Directors and management may have actual or potential conflicts of interest because of their ownership of shares of Maxeon Solar and SunPower or their relationships with Maxeon Solar following the Spin-Off.

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Certain members of our Board of Directors and management are expected to own shares of Maxeon Solar and/or options to purchase shares of Maxeon Solar, which could create, or appear to create, potential conflicts of interest when our directors and executive officers are faced with decisions that could have different implications for SunPower and Maxeon Solar. This may create, or appear to create, potential conflicts of interest if these directors are faced with decisions that could have different implications for Maxeon Solar than the decisions have for SunPower.

Our historical financial statements do not reflect the effects of the Spin-Off.

Our historical financial information for periods prior to the completion of the Spin-Off are not necessarily indicative of what our results of operations, financial position and cash flows will be in the future if the Spin-Off is completed and, for periods prior to the Spin-Off, do not reflect many significant changes in our capital structure, funding and operations that will result from the Spin-Off.

Risks Related to Our Sales Channels

Our operating results are subject to significant fluctuations and are inherently unpredictable.

We do not know whether our revenue will continue to grow, or if it will continue to grow sufficiently to outpace our expenses, which we also expect to grow. As a result, we may not be profitable on a quarterly or annual basis. Our revenue and operating results are difficult to predict and have in the past fluctuated significantly from quarter to quarter. The principal reason for these significant fluctuations in our results is that we derive a substantial portion of our total revenues from our large commercial customers, consequently:

•the amount, timing and mix of sales to our large commercial customers often for a single medium or large-scale project, may cause large fluctuations in our revenue and other financial results because, at any given time, a single large-scale project can account for a material portion of our total revenue in a given quarter;

•our inability to monetize our projects as planned, or any delay in obtaining the required government support or initial payments to begin recognizing revenue under the relevant recognition criteria, and the corresponding revenue impact, may similarly cause large fluctuations in our revenue and other financial results;

•our ability to monetize projects as planned is also subject to market conditions, including fluctuations in demand based on the availability of regulatory incentives and other factors, changes in the internal rate of return expected by customers in light of market conditions, the increasing number of power plants being constructed or available for sale and competition for financing, which can make both financing and disposition more challenging and may significantly affect project sales prices;

•market conditions may deteriorate after we have committed to projects, resulting in delays in disposing of projects, or changes in amounts realized on disposition, which may lead to significant fluctuations in the period-over-period profile of our results of operations and our cash available for working capital needs;

•in the event a project is subsequently canceled, abandoned, or is deemed unlikely to occur, we will charge all prior capital costs as an operating expense in the quarter in which such determination is made, which could materially adversely affect operating results;

•a delayed disposition of a project could require us to recognize a gain on the sale of assets instead of recognizing revenue;

•our agreements with these customers may be canceled if we fail to meet certain product specifications or materially breach these agreements;

•in the event of a customer bankruptcy, our customers may seek to terminate or renegotiate the terms of current agreements or renewals; and

•the failure by any significant customer to pay for orders, whether due to liquidity issues or otherwise, could materially and adversely affect our results of operations.

Any decrease in revenue from our large commercial customers whether due to a loss or delay of projects or an inability to collect, could have a significant negative impact on our business. See also "Item 7A. Quantitative and Qualitative Disclosures

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About Market Risk." See also under this section "Risks Related to Our Sales Channels—Revenues from a limited number of customers and large projects are expected to continue to comprise a significant portion of our total revenues and any decrease in revenues from those customers or projects, payment of liquidated damages, or an increase in related expenses, could have a material adverse effect on our business, results of operations and financial ~~condition~~.condition."

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Sales to our residential and light commercial customers are similarly susceptible to fluctuations in volumes and revenue, as well as fluctuations in demand based on the availability of regulatory incentives and other factors. In addition, demand from our commercial and residential customers may fluctuate based on the perceived cost-effectiveness of the electricity generated by our solar power systems as compared to conventional energy sources, such as natural gas and coal (which fuel sources are subject to significant price swings from time to time), and other non-solar renewable energy sources, such as wind. Declining average selling prices immediately affect our residential and light commercial sales volumes, and therefore lead to large fluctuations in revenue.

Further, our revenue mix of materials sales versus project sales can fluctuate dramatically from quarter to quarter, which may adversely affect our margins and financial results in any given period.

Any of the foregoing may cause us to miss our financial guidance for a given period, which could adversely impact the market price for our common stock and our liquidity.

We base our planned operating expenses in part on our expectations of future revenue and a significant portion of our expenses is fixed in the short term. If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would materially adversely affect our operating results for that quarter. See also under this section, “Risks Related to Our Sales Channels—Our business could be adversely affected by seasonal trends and construction cycles,,” “Risks Related to Our Sales Channels—The reduction, modification or elimination of government incentives could cause our revenue to decline and harm our financial results,,” and “~~Risks~~“Risks Related to Our Sales Channels—Existing regulations and policies and changes to these regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and ~~services~~.services.”

Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows.

On ~~January 23,~~February 7, 2018, ~~the President of the United States issued~~safeguard tariffs on imported solar cells and modules went into effect pursuant to Proclamation 9693, which approved recommendations to provide relief to U.S. manufacturers and impose safeguard tariffs on imported solar cells and modules, based on the investigations, findings, and recommendations of the U.S. International Trade Commission (the “International Trade Commission”) ~~pursuant to a Section 201 petition filed by Suniva, Inc., which Solar World Americas Inc. later joined, regarding foreign-manufactured photovoltaic ("PV") solar cells and modules.~~. Modules ~~will be~~are subject to a four-year tariff at a rate of 30% in the first year, declining 5% in each of the three subsequent years, to a final tariff rate of 15% in 2021. Cells are ~~subject~~subjected to a tariff-rate quota, under which the first 2.5 GW of cell imports each year will be exempt from tariffs; and cells imported after the 2.5 GW quota has been reached will be subject to the same 30% tariff as modules in the first year, with the same 5% decline in each of the three subsequent years. The tariff-free cell quota applies globally, without any allocation by country or region. ~~The tariffs went into effect on February 7, 2018.~~

The tariffs could materially and adversely affect our business and results of operations. While solar cells and modules based on interdigitated back contact ("IBC") technology, like our ~~Maxeon 3, Maxeon 2~~X-Series (Maxeon 3), E-Series (Maxeon 2), A-Series (Maxeon 5) and related products, were granted exclusion from these safeguard tariffs on September 19, 2018, our solar products based on other technologies continue to be subject to the safeguard tariffs. Although we are actively engaged in efforts to mitigate the effect of these tariffs, there is no guarantee that these efforts will be successful.

Additionally, the Office of the United States Trade Representative (“USTR”) initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. In notices published June 20, 2018, August 16, 2018, and September 21, 2018, the USTR imposed additional import duties of up to 25% on certain Chinese products covered by the Section 301 remedy. These tariffs include certain solar power system components and finished products, including those purchased from our suppliers for use in our products and used in our business. The United States and China continue to signal the possibility of taking additional retaliatory measures in response to actions taken by the other country, which may result in changes to existing trade agreements and terms including additional tariffs on imports from China or other countries.

~~In the near term, uncertainty~~Uncertainty surrounding the implications of ~~the~~ existing tariffs affecting the U.S. solar market, ~~the escalating~~ trade tensions between China and the United States ~~and whether specific additional solar power products may be impacted,~~ is likely to cause market volatility, price fluctuations, supply shortages, and project delays, any of which could harm our business, and our pursuit of mitigating actions may divert substantial resources from other projects. In addition,

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the imposition of tariffs is likely to result in a wide range of impacts to the U.S. solar industry and the global manufacturing market, as well as our business in particular. Such tariffs could materially increase the price of our solar products and result in

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significant additional costs to us, our resellers, and our resellers’ customers, which could cause a significant reduction in demand for our solar power products and greatly reduce our competitive advantage. With the uncertainties associated with the ~~Section 201~~tariffs and Section 301 trade ~~cases,~~case, events and changes in circumstances indicated that the carrying values of our long-lived assets associated with our manufacturing operations might not be recoverable.

The execution of our growth strategy is dependent upon the continued availability of third-party financing arrangements for our ~~solar power plants,~~projects, including our residential lease program, and our customers, and is affected by general economic conditions and other factors.

Our growth strategy depends on third-party financing arrangements. We often require project financing for development and construction of certain of our ~~solar power plant~~ projects, which require significant investments before the equity is later sold to investors. Many purchasers of our systems projects have entered into third-party arrangements to finance their systems over an extended period of time, while many end-customers have chosen to purchase solar electricity under a power purchase agreement ("PPA") with an investor or financing company that purchases the system from us or our authorized dealers. We often execute PPAs directly with the end-user, with the expectation that we will later assign the PPA to a financier. Under such arrangements, the financier separately contracts with us to acquire and build the solar power system, and then sells the electricity to the end-user under the assigned PPA. When executing PPAs with end-users, we seek to mitigate the risk that financing will not be available for the project by allowing termination of the PPA in such event without penalty. However, we may not always be successful in negotiating for penalty-free termination rights for failure to obtain financing, and certain end-users have required substantial financial penalties in exchange for such rights. These structured finance arrangements are complex and may not be feasible in many situations.

Global economic conditions, including conditions that may make it more difficult or expensive for us to access credit and liquidity, could materially and adversely affect our business and results of operations. Credit markets are unpredictable, and if they become more challenging, we may be unable to obtain project financing for our projects, customers may be unable or unwilling to finance the cost of our products, we may have difficulties in reaching agreements with financiers to finance the construction of our solar power systems, or the parties that have historically provided this financing may cease to do so, or only do so on terms that are substantially less favorable for us or our customers, any of which could materially and adversely affect our revenue and growth in both segments of our business. Our plans to continue to grow our residential lease program may be delayed if credit conditions prevent us from obtaining or maintaining arrangements to finance the program. We are actively arranging additional third-party financing for our residential lease program; however, if we encounter challenging credit markets, we may be unable to arrange additional financing partners for our residential lease program in future periods, which could have a negative impact on our sales. In the event we enter into a material number of additional leases without obtaining corresponding third-party financing, our cash, working capital and financial results could be negatively affected. In addition, a rise in interest rates would likely increase our customers’ cost of financing or leasing our products and could reduce their profits and expected returns on investment in our products. The general reduction in available credit to would-be borrowers or lessees, worldwide economic uncertainty, and the condition of worldwide housing markets could delay or reduce our sales of products to new homebuilders and authorized resellers. For more information, see "Item 8. Financial Statements and Supplementary ~~Data—Notes~~Data-Notes to Consolidated Financial ~~Statements—Note 7.~~ ~~Leasing~~Statements-Note 6. Solar Services."

The availability of financing depends on many factors, including market conditions, the demand for and supply of solar projects, and resulting risks of refinancing or disposing of such projects. It also depends in part on government incentives, such as tax incentives. In the United States, with the expiration of the Treasury Grant under Section 1603 of the American Recovery and Reinvestment Act program, we have needed to identify interested financiers with sufficient taxable income to monetize the tax incentives created by our solar systems. In the long term, as we look toward markets not supported (or supported less) by government incentives, we will continue to need to identify financiers willing to finance residential solar systems without such incentives. Our failure to effectively do so could materially and adversely affect our business and results of operations. In addition, with the recent passage of comprehensive reform of the Code, the impact of revisions to various industry-specific tax incentives, such as accelerated depreciation, and an overall reduction in corporate tax rates may lead to changes in the market and availability of tax equity investors.

The lack of project financing, due to tighter credit markets or other reasons, could delay the development and construction of our solar power plant projects, thus reducing our revenues from the sale of such projects. We may in some cases seek to pursue partnership arrangements with financing entities to assist residential and other customers to obtain financing for the purchase or lease of our systems, which would expose us to credit or other risks. We face competition for financing partners and if we are unable to continue to offer a competitive investment profile, we may lose access to financing partners or they may

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offer financing on less favorable terms than our competitors, which could materially and adversely affect our business and results of operations.

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If we fail to successfully execute our cost reduction roadmap, or fail to develop and introduce new and enhanced products and services, we may be unable to compete effectively, and our ability to generate revenues and profits would suffer.

Our solar panels are ~~currently~~ competitive in the market as compared with lower cost conventional solar cells, such as thin-film, due to our products’ higher efficiency, among other things. Given the general downward pressure on prices for solar panels driven by increasing supply and technological change, a principal component of our business strategy is reducing our costs to manufacture our products to remain competitive. We also focus on standardizing our products with the goal of driving down installation costs. If our competitors are able to drive down their manufacturing and installation costs or increase the efficiency of their products faster than we can, or if competitor products are exempted from tariffs and quotas and ours are not, our products may become less competitive even when adjusted for efficiency. Further, if raw materials costs and other third-party component costs were to increase, we may not meet our cost reduction targets. If we cannot effectively execute our cost reduction roadmap, our competitive position will suffer, and we could lose market share and our margins would be adversely affected as we face downward pricing pressure.

The solar power market is characterized by continually changing technology and improving features, such as increased efficiency, higher power output and enhanced aesthetics. Technologies developed by our direct competitors, including thin-film solar panels, concentrating solar cells, solar thermal electric and other solar technologies, may provide energy at lower costs than our products. We also face competition in some markets from other energy generation sources, including conventional fossil fuels, wind, biomass, and hydro. In addition, other companies could potentially develop a highly reliable renewable energy system that mitigates the intermittent energy production drawback of many renewable energy systems. Companies could also offer other value-added improvements from the perspective of utilities and other system owners, in which case such companies could compete with us even if the cost of electricity associated with any such new system is higher than that of our systems. We also compete with traditional utilities that supply energy to our potential customers. Such utilities have greater financial, technical, operational and other resources than we do. If electricity rates decrease and our products become less competitive by comparison, our operating results and financial condition will be adversely affected.

Our failure to further refine our technology, reduce ~~cost~~costs in our manufacturing process, and develop and introduce new solar power products could cause our products or our manufacturing facilities to become less competitive or obsolete, which could reduce our market share, cause our sales to decline, and cause the impairment of our assets. This risk requires us to continuously develop new solar power products and enhancements for existing solar power products to keep pace with evolving industry standards, competitive pricing and changing customer preferences, expectations, and requirements. It is difficult to successfully predict the products and services our customers will demand. If we cannot continually improve the efficiency and prove the reliability of our solar panels as compared with those of our competitors, our pricing will become less competitive, we could lose market share and our margins would be adversely affected.

As we introduce new or enhanced products or integrate new technology and components into our products, we will face risks relating to such transitions including, among other things, the incurrence of high fixed costs, technical challenges, acceptance of products by our customers, disruption in customers’ ordering patterns, insufficient supplies of new products to meet customers’ demand, possible product and technology defects arising from the integration of new technology and a potentially different sales and support environment relating to any new technology. Our failure to manage the transition to newer products or the integration of newer technology and components into our products could adversely affect our business’s operating results and financial condition. See also under this section, “Risks Related to Our Sales ~~Channels—~~Channels-Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows.”

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The increase in the global supply of solar cells and panels, and increasing competition, may cause substantial downward pressure on the prices of such products and cause us to lose sales or market share, resulting in lower revenues, earnings, and cash flows.

Global solar cell and panel production capacity has been materially increasing overall, and solar cell and solar panel manufacturers currently have excess capacity, particularly in China. Excess capacity and industry competition have resulted in the past, and may continue to result, in substantial downward pressure on the price of solar cells and panels, including SunPower products. Intensifying competition could also cause us to lose sales or market share. Such price reductions or loss of sales or market share could have a negative impact on our revenue and earnings, and could materially adversely affect our business, financial condition and cash flows. In addition, our internal pricing forecasts may not be accurate in such a market environment, which could cause our financial results to be different than forecasted. Uncertainty with respect to Chinese

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government policies, including subsidies or other incentives for solar projects, may cause increased, decreased, or volatile supply and/or demand for solar products, which could negatively impact our revenue and earnings. Finally, the imposition by the U.S. of tariffs and quotas could materially adversely affect our ability to compete with other suppliers and developers in the U.S. market. See also under this section, “Risks Related to Our Sales ~~Channels—~~Channels-If we fail to successfully execute our cost reduction roadmap, or fail to develop and introduce new and enhanced products and services, we may be unable to compete effectively, and our ability to generate revenues and profits would suffer,” and “Risks Related to Our Sales ~~Channels—~~Channels-Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows.”

The reduction, modification or elimination of government incentives could cause our revenue to decline and harm our financial results.

The market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from the utility network or sold to a utility under tariff, depends in large part on the availability and size of government mandates and economic incentives because, at present, the cost of solar power generally exceeds retail electric rates in many locations and wholesale peak power rates in some locations. Incentives and mandates vary by geographic market. Various government bodies in most of the countries where we do business have provided incentives in the form of feed-in tariffs, rebates, and tax credits and other incentives and mandates, such as renewable portfolio standards and net metering, to end-users, distributors, system integrators and manufacturers of solar power products to promote the use of solar energy in on-grid applications and to reduce dependency on other forms of energy. These various forms of support for solar power are subject to change (as, for example, occurred in 2015 with Nevada’s decision to change net energy metering; and in 2017 with California's adoption of new time-of-use rates that reduced the price paid to solar system owners for mid-day electricity ~~production)~~production; and in 2020 with California's adoption of building standards requiring the installation of solar systems on new homes), and are expected in the longer term to decline. Even changes that may be viewed as positive (such as the extension at the end of 2015 of U.S. tax credits related to solar power) can have negative effects if they result, for example, in delaying purchases that otherwise might have been made before expiration or scheduled reductions in such credits. Governmental decisions regarding the provision of economic incentives often depend on political and economic factors that we cannot predict and that are beyond our control. The reduction, modification or elimination of grid access, government mandates or economic incentives in one or more of our customer markets would materially and adversely affect the growth of such markets or result in increased price competition, either of which could cause our revenue to decline and materially adversely affect our financial results.

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Existing regulations and policies and changes to these regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and services.

The market for electric generation products is heavily influenced by federal, state and local government laws, regulations and policies concerning the electric utility industry in the United States and abroad, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation, and changes that make solar power less competitive with other power sources could deter investment in the research and development of alternative energy sources as well as customer purchases of solar power technology, which could in turn result in a significant reduction in the demand for our solar power products. The market for electric generation equipment is also influenced by trade and local content laws, regulations and policies that can discourage growth and competition in the solar industry and create economic barriers to the purchase of solar power products, thus reducing demand for our solar products. In addition, on-grid applications depend on access to the grid, which is also regulated by government entities. We anticipate that our solar power products and their installation will continue to be subject to oversight and regulation in accordance with federal, state, local and foreign regulations relating to construction, safety, environmental protection, utility interconnection and metering, trade, and related matters. It is difficult to track the requirements of individual states or local jurisdictions and design equipment to comply with the varying standards. In addition, the U.S., European Union and Chinese governments, among others, have imposed tariffs or are in the process of evaluating the imposition of tariffs on solar panels, solar cells, polysilicon, and potentially other components. These and any other tariffs or similar taxes or duties may increase the price of our solar products and adversely affect our cost reduction roadmap, which could harm our results of operations and financial condition. Any new regulations or policies pertaining to our solar power products may result in significant additional expenses to us, our resellers and our resellers’ customers, which could cause a significant reduction in demand for our solar power products. See also under this section, “Risks Related to Our Sales ~~Channels—~~Channels-Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows.”

~~We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring may adversely affect our business.~~

We announced a restructuring plan in February 2018 to reduce operating expenses and cost of revenue overhead in light of the known shorter-term impact of U.S. tariffs imposed on PV solar cells and modules pursuant to Section 201 of the Trade Act of 1974 and our broader initiatives to control costs and improve cash flow. While we expect to complete the plan in 2019, additional actions may be costly and disruptive to our business, and we may not be able to obtain the cost savings and benefits that were initially anticipated in connection with our restructuring. Additionally, we may experience a loss of continuity, loss of accumulated knowledge, or inefficiency during transitional periods associated with our restructuring. Reorganization and restructuring can require a significant amount of management and other employees’ time and focus, which may divert attention from operating and growing our business. If we fail to achieve some or all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. For more information about our restructuring plan, see "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 9. ~~Restructuring~~."

As owners and operators of solar power systems that deliver electricity to the grid, certain of our affiliated entities may be considered public utilities for purposes of the Federal Power Act, as amended (the “FPA”), and are subject to regulation by the Federal Energy Regulatory Commission (“FERC”), as well as various local and state regulatory bodies.

Although we are not directly subject to FERC regulation under the FPA, we are considered to be a “holding company” for purposes of Section 203 of the FPA, which regulates certain transactions involving public utilities, and such regulation could adversely affect our ability to grow the business through acquisitions. Likewise, investors seeking to acquire our public utility subsidiaries or acquire ownership interests in their securities may require prior FERC approval to do so. Such approval could result in transaction delays or uncertainties.

Public utilities under the FPA are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity and to comply with various regulations. FERC may grant our affiliated entities the authority to sell electricity at market-based rates and may also grant them certain regulatory waivers, such as waivers from compliance with FERC’s accounting regulations. These FERC orders reserve the right to revoke or revise market-based sales authority if FERC subsequently determines that our affiliated entities can exercise market power in the sale of generation products, the provision of transmission services, or if it finds that any of the entities can create barriers to entry by competitors. In addition, if the entities fail to comply with certain reporting obligations, FERC may revoke their power sales tariffs. Finally, if the entities were deemed to have engaged in manipulative or deceptive practices concerning their power sales transactions, they would be

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subject to potential fines, disgorgement of profits, and/or suspension or revocation of their market-based rate authority. If our affiliated entities were to lose their market-based rate authority, such companies would be required to obtain FERC’s acceptance of a cost-of-service rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules, which would impose cost and compliance burdens on us and have an adverse effect on our results of operations. In addition to the risks described above, we may be subject to additional regulatory regimes at state or foreign levels to the extent we own and operate solar power systems in such jurisdictions.

~~As our sales to residential customers have grown, we have increasingly become subject to substantial financing and consumer protection laws and regulations.~~

As we continue to seek to expand our retail customer base, our activities with customers – and in particular, our financing activities with our residential customers – are subject to consumer protection laws that may not be applicable to our commercial and power plant businesses, such as federal truth-in-lending, consumer leasing, and equal credit opportunity laws and regulations, as well as state and local finance laws and regulations. Claims arising out of actual or alleged violations of law may be asserted against us by individuals or governmental entities and may expose us to significant damages or other penalties, including fines. In addition, our affiliations with third-party dealers may subject us to alleged liability in connection with actual or alleged violations of law by such dealers, whether or not actually attributable to us, which may expose us to significant damages and penalties, and we may incur substantial expenses in defending against legal actions related to third-party dealers, whether or not we are ultimately found liable.

We may incur unexpected warranty and product liability claims that could materially and adversely affect our financial condition and results of operations.

Our current standard product warranty for our solar panels and their components includes a 25-year warranty period for defects in materials and workmanship and for greater than promised declines in power performance. We believe our warranty offering is in line with industry practice. This long warranty period creates a risk of extensive warranty claims long after we have shipped product and recognized revenue. We perform accelerated life cycle testing that exposes our products to extreme stress and climate conditions in both environmental simulation chambers and in actual field deployments in order to highlight potential failures that could occur over the 25-year warranty period. We also employ measurement tools and algorithms intended to help us assess actual and expected performance; these attempt to compare actual performance against an expected performance baseline that is intended to account for many factors (like weather) that can affect performance. Although we conduct accelerated testing of our solar panels and components, they have not and cannot be tested in an environment that exactly simulates the 25-year warranty period and it is difficult to test for all conditions that may occur in the field. Further, there can be no assurance that our efforts to accurately measure and predict panel and component performance will be successful. We have sold products under our warranties since the early 2000s and have therefore not experienced the full warranty cycle.

In our project installations, our current standard warranty for our solar power systems differs by geography and end-customer application and usually includes a limited warranty of 10 years for defects in workmanship, after which the customer may typically extend the period covered by its warranty for an additional fee. We also typically provide a system output performance warranty, separate from our standard solar panel product warranty, to customers that have subscribed to our post-installation O&M services. The long warranty period and nature of the warranties create a risk of extensive warranty claims long after we have completed a project and recognized revenues. Warranty and product liability claims may also result from defects or quality issues in certain technology and components (whether manufactured by us or third parties) that we incorporate into our solar power systems, such as solar cells, panels, inverters, and microinverters, over which we may have little or no control. See also under this section “Risks Related to Our Supply ~~Chain—~~Chain-We will continue to be dependent on a limited number of third-party suppliers for certain raw materials and components for our products, which could prevent us from delivering our products to our customers within required time frames and could in turn result in sales and installation delays, cancellations, penalty payments and loss of market share.” While we generally pass through to our customers the manufacturer warranties we receive from our suppliers, in some circumstances, we may be responsible for repairing or replacing defective parts during our warranty period, often including those covered by manufacturers’ warranties, or incur other non-warranty costs. If a manufacturer disputes or otherwise fails to honor its warranty obligations, we may be required to incur substantial costs before we are compensated, if at all, by the manufacturer. Furthermore, our warranties may exceed the period of any warranties from our suppliers covering components, such as third-party solar cells, third-party panels and third-party inverters, included in our systems. In addition, manufacturer warranties may not fully compensate us for losses associated with third-party claims caused by defects or quality issues in their products. For example, most manufacturer warranties exclude certain losses that may result from a system component’s failure or defect, such as the cost of de-installation, re-installation, shipping, lost electricity, lost renewable energy credits or other solar incentives, personal injury, property damage, and other

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losses. In certain cases, the direct warranty coverage we provide to our customers, and therefore our financial exposure, may exceed our recourse available against cell, panel or other manufacturers for defects in their products. In addition, in the event we seek recourse through warranties, we will also be dependent on the creditworthiness and continued existence of the suppliers to our business. In the past, certain of our suppliers have entered bankruptcy and our likelihood of a successful warranty claim against such suppliers is minimal.

Increases in the defect rate of SunPower or third-party products, including components, could cause us to increase the amount of warranty reserves and have a corresponding material, negative impact on our results of operations. Further, potential future product or component failures could cause us to incur substantial expense to repair or replace defective products or components, and we have agreed in some circumstances to indemnify our customers and our distributors against liability from some defects in our solar products. A successful indemnification claim against us could require us to make significant damage payments. Repair and replacement costs, as well as successful indemnification claims, could materially and negatively impact our financial condition and results of operations.

Like other retailers, distributors and manufacturers of products that are used by customers, we face an inherent risk of exposure to product liability claims in the event that the use of the solar power products into which solar cells, solar panels, and microinverters are incorporated results in injury, property damage or other damages. We may be subject to warranty and product liability claims in the event that our solar power systems fail to perform as expected or if a failure of our solar power systems or any component thereof results, or is alleged to result, in bodily injury, property damage or other damages. Since our solar power products are electricity-producing devices, it is possible that our systems could result in injury, whether by product malfunctions, defects, improper installation or other causes. In addition, since we only began selling our solar cells and solar

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panels in the early 2000s and the products we are developing incorporate new technologies and use new installation methods, we cannot predict the extent to which product liability claims may be brought against us in the future or the effect of any resulting negative publicity on our business. Moreover, we may not have adequate resources to satisfy a successful claim against us. We rely on our general liability insurance to cover product liability claims. A successful warranty or product liability claim against us that is not covered by insurance or is in excess of our available insurance limits could require us to make significant payments of damages. In addition, quality issues can have various other ramifications, including delays in the recognition of revenue, loss of revenue, loss of future sales opportunities, increased costs associated with repairing or replacing products, and a negative impact on our goodwill and reputation, any of which could adversely affect our business, operating results and financial condition.

As our sales to residential customers have grown, we have increasingly become subject to substantial financing and consumer protection laws and regulations.

As we continue to seek to expand our retail customer base, our activities with customers - and in particular, our financing activities with our residential customers - are subject to consumer protection laws that may not be applicable to our other businesses, such as federal truth-in-lending, consumer leasing, telephone and digital marketing, and equal credit opportunity laws and regulations, as well as state and local finance laws and regulations. Claims arising out of actual or alleged violations of law may be asserted against us by individuals or governmental entities and may expose us to significant damages or other penalties, including fines. In addition, our affiliations with third-party dealers may subject us to alleged liability in connection with actual or alleged violations of law by such dealers, whether or not actually attributable to us, which may expose us to significant damages and penalties, and we may incur substantial expenses in defending against legal actions related to third-party dealers, whether or not we are ultimately found liable.

We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring may adversely affect our business.

We announced restructuring plans in February 2018 and December 2019 to realign and optimize workforce requirements in light of recent changes to our business, including the contemplated plan to separate into two public companies through the Spin-Off, to reduce operating expenses and cost of revenue overhead in light of the known shorter-term impact of U.S. tariffs imposed on PV solar cells and modules pursuant to Section 201 of the Trade Act of 1974 and our broader initiatives to control costs and improve cash flow. While we expect to complete the February 2018 and December 2019 plans in 2020 and 2023, respectively, additional actions may be costly and disruptive to our business, and we may not be able to obtain the cost savings and benefits that were initially anticipated in connection with our restructuring. Additionally, we may experience a loss of continuity, loss of accumulated knowledge, or inefficiency during transitional periods associated with our restructurings. Reorganization and restructuring can require a significant amount of management and other employees’ time and focus, which may divert attention from operating and growing our business. If we fail to achieve some or all of the expected benefits of the restructurings, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. For more information about our restructuring plan, see "Item 8. Financial Statements and Supplementary Data-Notes to Consolidated Financial Statements-Note 8. Restructuring."

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cost-of-service rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules, which would impose cost and compliance burdens on us and have an adverse effect on our results of operations. In addition to the risks described above, we may be subject to additional regulatory regimes at state or foreign levels to the extent we own and operate solar power systems in such jurisdictions.

We do not typically maintain long-term agreements with our customers and accordingly we could lose customers without warning, which could adversely affect our operating results.

Our product sales to residential dealers and components customers typically are not made under long-term agreements. We often contract to construct or sell large projects with no assurance of repeat business from the same customers in the future. Although cancellations of our purchase orders to date have been infrequent, our customers may cancel or reschedule purchase orders with us on relatively short notice. Cancellations or rescheduling of customer orders could result in the delay or loss of anticipated sales without allowing us sufficient time to reduce, or delay the incurrence of, our corresponding inventory and operating expenses. In addition, changes in forecasts or the timing of orders from these or other customers expose us to the risks of inventory shortages or excess inventory. These circumstances, in addition to the completion and non-repetition of large projects, declining average selling prices, changes in the relative mix of sales of solar equipment versus solar project installations, and the fact that our supply agreements are generally long-term in nature and many of our other operating costs are fixed, could cause our operating results to fluctuate and may result in a material adverse effect in our business, results of operations, and financial condition. In addition, since we rely partly on our network of international dealers for marketing and other promotional programs, if our dealers fail to perform up to our standards, our operating results could be adversely affected.

Our business could be adversely affected by seasonal trends and construction cycles.

Our business is subject to significant industry-specific seasonal fluctuations. Our sales have historically reflected these seasonal trends, with the largest percentage of our total revenues realized during the second half of each fiscal year. There are various reasons for this seasonality, mostly related to economic incentives and weather patterns. For example, in European countries with feed-in tariffs, the construction of solar power systems may be concentrated during the second half of the calendar year, largely due to the annual reduction of the applicable minimum feed-in tariff and the fact that the coldest winter months in the Northern Hemisphere are January through March. In the United States, many customers make purchasing decisions towards the end of the year in order to take advantage of tax credits. In addition, sales in the new home development market are often tied to construction market demands, which tend to follow national trends in construction, including declining sales during cold weather months.

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The competitive environment in which we operate often requires us to undertake customer obligations, which may turn out to be costlier than anticipated and, in turn, materially and adversely affect our business, results of operations and financial condition.

We are often required, as a condition of financing or at the request of our end customer, to undertake certain obligations such as:

•system output performance warranties;

•system maintenance;

•penalty payments or customer termination rights if the system we are constructing is not commissioned within specified ~~timeframes~~time frames or other construction milestones are not achieved;

•guarantees of certain minimum residual value of the system at specified future dates;

•system put-rights whereby we could be required to buy back a customer’s system at fair value on a future date if certain minimum performance thresholds are not met; and

•indemnification against losses customers may suffer as a result of reductions in benefits received under the solar commercial investment tax credit (“ITC”) ~~under Section 48(c)~~and of the ~~Internal Revenue Code of 1986, as amended (the "Code"), and~~ Treasury grant programs under Section 1603 of the American Recovery and Reinvestment Act (the “Cash Grant”).

Such financing arrangements and customer obligations involve complex accounting analyses and judgments regarding the timing of revenue and expense recognition, and in certain situations these factors may require us to defer revenue or profit recognition until projects are completed or until contingencies are resolved, which could adversely affect our revenues and profits in a particular period.

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Risks Related to Our Liquidity

We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our operations and make adequate capital investments, as planned due to the general economic environment and the continued market pressure driving down the average selling prices of our solar power products, among other factors.

To develop new products, including our ~~Next Generation Technology ("NGT" or Maxeon~~A-Series (Maxeon 5), support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, facilities and capital equipment, research and development, and product and process technology. Our manufacturing and assembly activities have required and will continue to require significant investment of capital and substantial engineering expenditures. In addition, we expect to invest a significant amount of capital to develop solar power systems for sale to customers. Developing and constructing solar power projects requires significant time and substantial initial investment. The delayed disposition of such projects, or the inability to realize the full anticipated value of such projects on disposition, could have a negative impact on our liquidity. See also under this section, “Risks Related to Our Operations-Project development or construction activities may not be successful and we may make significant investments without first obtaining project financing, which could increase our costs and impair our ability to recover our investments" and "Risks Related to Our Sales Channels-Revenues from a limited number of customers and large projects are expected to continue to comprise a significant portion of our total revenues and any decrease in revenues from those customers or projects, payment of liquidated damages, or an increase in related expenses, could have a material adverse effect on our business, results of operations and financial condition," and "Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows."

Our capital expenditures and use of working capital may be greater than we anticipate if sales and associated receipt of cash proceeds are delayed, or if we decide to accelerate increases in our manufacturing capacity internally or through capital contributions to joint ventures. As we ramp our Maxeon 5 technology and begin volume production in 2019, we may pursue scale-up partnerships or other financing options to fund the NGT expansion. In addition, we could in the future make additional investments in certain of our joint ventures or could guarantee certain financial obligations of our joint ventures, which could reduce our cash flows, increase our indebtedness and expose us to the credit risk of our joint venture partners. In addition, if our financial results or operating plans deviate from our current assumptions, we may not have sufficient resources to support our business plan. See also under this section, "Risks Related to Our Liquidity—We have a significant amount of debt outstanding. Our substantial indebtedness and other contractual commitments could adversely affect our business, financial condition and results of operations, as well as our ability to meet our payment obligations under our debentures and our other debt.”

Certain of our customers also require performance bonds issued by a bonding agency, or bank guarantees or letters of credit issued by financial institutions, which are returned to us upon satisfaction of contractual requirements. If there is a

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contractual dispute with the customer, the customer may withhold the security or make a draw under the security, which could have an adverse impact on our liquidity.

On October 29, 2019, we entered into a new Green Revolving Credit Agreement (the “2019 Revolver”) with Crédit Agricole, as lender, with a revolving credit commitment of $55.0 million. The 2019 Revolver contains affirmative covenants, events of default and repayment provisions customarily applicable to similar facilities and has a per annum commitment fee of 0.05% on the daily unutilized amount, payable quarterly. Loans under the 2019 Revolver bear either an adjusted LIBOR interest rate for the period elected for such loan or a floating interest rate of the higher of prime rate, federal funds effective rate, or LIBOR for an interest period of one month, plus an applicable margin, ranging from 0.25% to 0.60%, depending on the base interest rate applied, and each matures on the earlier of April 29, 2021, or the termination of commitments thereunder. Our ~~uncollateralized letter of credit facility with Deutsche Bank, as of December 30, 2018, had an outstanding~~payment obligations under the 2019 Revolver are guaranteed by Total S.A. up to the maximum aggregate principal amount of ~~$18.1~~$55.0 million. ~~Our bilateral letter~~In consideration of ~~credit agreements with The Bank~~the commitments of ~~Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”)~~Total S.A., ~~Credit Agricole Corporate and Investment Bank (“Credit Agricole”), and HSBC Bank USA, National Association had an outstanding amount~~we are required to pay them a guaranty fee of ~~$36.3 million as of December 30, 2018. Any draws under these uncollateralized facilities would require us to immediately reimburse the bank for the drawn amount. A default~~0.25% per annum on any amounts borrowed under the ~~guaranteed letter of credit facility, or the acceleration of our other indebtedness greater than $25.0 million, could cause~~2019 Revolver and to reimburse Total S.A. for any amounts paid by them under the parent guaranty. We have pledged the equity of a wholly-owned subsidiary of the Company that holds our shares of Enphase Energy, Inc. common stock to ~~declare all amounts due and payable~~secure our reimbursement obligation under the 2019 Revolver. We have also agreed to ~~Total S.A. and direct the bank to cease issuing additional letters of credit on our behalf, which could have a material adverse effect on our operations.~~

~~In addition, the Revolver will mature on August 26, 2019 by its terms, and we may be unable to find adequate credit support in replacement, on acceptable terms or at all. In such case,~~limit our ability to ~~obtain adequate amounts~~draw funds under the 2019 Revolver, to no more than 67% of ~~debt financing, through~~the fair market value of the common stock held by our ~~letter~~subsidiary at the time of ~~credit facility or otherwise, may be harmed.~~the draw. As of December 29, 2019, we had no outstanding borrowings under the 2019 Revolver.

We manage our working capital requirements and fund our committed capital expenditures, including the development and construction of our planned solar power projects, through our current cash and cash equivalents, cash generated from operations, and funds available under our ~~revolving credit facilities with Credit Agricole~~2019 Revolver and from our other construction financing providers. AsUpon the termination of ~~December 30, 2018, $300.0 million remained undrawn under~~the 2019 Revolver, we may be unable to find adequate credit support in replacement, on acceptable terms or at all.In such case, our ~~revolving credit facility with Credit Agricole. We have the~~ ability to ~~borrow up to $95.0 million under this revolving credit facility pursuant to the Letter Agreement executed by us and Total S.A. on May 8, 2017 (see "Item 8. Financial Statements—Note 2.~~ ~~Transactions with Total and Total S.A." in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K). As~~obtain adequate amounts of ~~December 30, 2018, we had $75.0 million in additional borrowing capacity under our other limited recourse construction~~debt financing ~~facilities.~~

may be harmed. The lenders under our credit facilities and holders of our debentures may also require us to repay our indebtedness to them in the event that our obligations under other indebtedness or contracts in excess of the applicable threshold amount, are accelerated and we fail to discharge such obligations. If our capital resources are insufficient to satisfy our liquidity requirements, for example, due to cross acceleration of indebtedness, we may seek to sell additional equity investments or debt securities or obtain other debt financings. Market conditions, however, could limit our ability to raise capital by issuing new equity or debt securities on acceptable terms, and lenders may be unwilling to lend funds on acceptable terms. The sale of additional equity investments or convertible debt securities may result in additional dilution to our stockholders. Additional debt would result in increased expenses and could impose new restrictive covenants that may be different from those restrictions contained in the covenants under certain of our current debt agreements and debentures. Financing arrangements, including project financing for our solar power projects and letters of credit facilities, may not be available to us, or may not be available in amounts or on terms acceptable to us. If

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additional financing is not available, we may be forced to seek to sell assets or reduce or delay capital investments, any of which could adversely affect our business, results of operations and financial condition.

If we cannot generate sufficient cash flows, find other sources of capital to fund our operations and projects, make adequate capital investments to remain technologically and price competitive, or provide bonding or letters of credit required by our projects, we may need to sell additional equity investments or debt securities, or obtain other debt financings. If adequate funds from these or and other sources are not available on acceptable terms, our ability to fund our operations, develop and construct solar power projects, develop and expand our manufacturing operations and distribution network, maintain our research and development efforts, provide collateral for our projects, meet our debt service obligations, or otherwise respond to competitive pressures would be significantly impaired. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

We have a significant amount of debt outstanding. Our substantial indebtedness and other contractual commitments could adversely affect our business, financial condition, and results of operations, as well as our ability to meet our payment obligations under the debentures and our other debt.

We currently have a significant amount of debt and debt service requirements. As of December ~~30, 2018,~~29, 2019, we had approximately ~~$0.9~~$1.0 billion of outstanding debt.

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This level of debt could have material consequences on our future operations, including:

•making it more difficult for us to meet our payment and other obligations under the debentures and our other outstanding debt;

•resulting in an event of default if we fail to comply with the financial and other restrictive covenants contained in our debt agreements (with certain covenants becoming more restrictive over time), which event of default could result in all or a significant portion of our debt becoming immediately due and payable;

•reducing the availability of our cash flows to fund working capital, capital expenditures, project development, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

•subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our credit agreement with Credit Agricole;

•limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and

•placing us at a competitive disadvantage compared with our competitors that have less debt or have lower leverage ratios.

In the event, expected or unexpected, that any of our joint ventures is consolidated with our financial statements, such consolidation could significantly increase our indebtedness.

Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flows, which, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flows from operations, or that future borrowings will be available to us under our existing or any future credit facilities or otherwise, in an amount sufficient to enable us to meet our payment obligations under our debentures and our other debt and to fund other liquidity needs. If we are unable to generate sufficient cash flows to service our debt obligations, we may need to refinance or restructure our debt, including our debentures, sell assets, reduce or delay capital investments, or seek to raise additional capital. There can be no assurance that we will be successful in any sale of assets, refinancing, or restructuring effort. See also under this section, "Risks Related to Our ~~Operations—~~Operations-We may in the future be required to consolidate the assets, liabilities, and financial results of certain of our existing or future joint ventures, which could have an adverse impact on our financial position, gross margin and operating results", "Risks Related to Our Sales ~~Channels—~~Channels-Changes in international trade policies, tariffs, or trade disputes could significantly and adversely affect our business, revenues, margins, results of operations, and cash flows," and "Item 8. Financial Statements and Supplementary ~~Data—Notes~~Data-Notes to Consolidated Financial ~~Statements—Note~~Statements-Note 1. Organizationand Summary of Significant Accounting ~~Policies—Liquidity~~Policies-Liquidity.”

Although we are currently in compliance with the covenants contained in our debt agreements, we cannot assure you that we will be able to remain in compliance with such covenants in the future. We may not be able to cure future violations or obtain waivers from our creditors in order to avoid a default. An event of default under any of our debt agreements could have a material adverse effect on our liquidity, financial condition, and results of operations.

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Our current tax holidays in the Philippines and Malaysia will expire within the next several years, and other related international tax developments could adversely affect our results.

We benefit from income tax holiday incentives in the Philippines in accordance with our subsidiary’s registration with the Philippine Economic Zone Authority (“PEZA”), which ~~provide~~provides that we pay no income tax in the Philippines for those operations subject to the ~~ruling (through July 2019).~~ruling. Tax savings associated with the Philippines tax holidays were approximately $4.0 million, $3.4 million, ~~$5.6 million,~~ and ~~$10.0~~$5.6 million in fiscal 2019, 2018, ~~2017,~~ and ~~2016,~~2017, respectively, which provided a diluted net income (loss) per share benefit of $0.03, $0.02, ~~$0.04,~~ and ~~$0.07~~$0.04 in fiscal 2019, 2018, and 2017, ~~and 2016,~~ respectively.

Our income tax holidays were granted as manufacturing lines were placed in service. We plan to apply for extensions and renewals upon expiration; however, while we expect all approvals to be granted, we can offer no assurance that they will be. We believe that if our Philippine tax holidays are not extended or renewed, (a) gross income attributable to activities covered by our PEZA registrations will be taxed at a 5% preferential rate, and (b) our Philippine net income attributable to all other activities will be taxed at the statutory Philippine corporate income tax rate, currently 30%. An increase in our tax liability could materially and adversely affect our business, financial condition and results of operations.

We ~~continued~~continue to qualify for the auxiliary company status in Switzerland where we sell our solar power products. The auxiliary company status entitles us to a tax rate of 11.5% in Switzerland, reduced from approximately 24.2%. Tax savings associated with this ruling were approximately $2.3 million, $1.8 million, ~~$2.4 million,~~ and ~~$1.9~~$2.4 million in fiscal 2019, 2018, and 2017, ~~and 2016,~~

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respectively, which provided a diluted net income (loss) per share benefit of $0.02, $0.01, ~~$0.02,~~ and ~~$0.01~~$0.02 in fiscal 2019, 2018, ~~2017,~~ and ~~2016,~~2017, respectively.

We also benefit from a tax holiday granted by the Malaysian government, subject to certain hiring, capital spending, and manufacturing requirements. ~~We have successfully negotiated with the Malaysian government to modify the requirements of the tax holiday; we are currently in compliance with the modified requirements of the tax holiday.~~ We received approval from the Malaysian government of the extension of our tax holiday for a second five-year term (through June 30, 2021). The Company is in the process of negotiating with the Malaysia government to modify the requirements of the second five-year term because of the planned manufacturing expansion in Malaysia. The current negotiation is not expected to affect the tax holiday status. Tax savings associated with the Malaysia tax holiday were approximately $3.9 million, $7.6 million, ~~$6.8 million,~~ and ~~$2.0~~$6.8 million in fiscal 2019, 2018, ~~2017,~~ and ~~2016~~2017 respectively, which provided a diluted net income (loss) per share benefit of ~~$0.05,~~$0.03, $0.05, and ~~$0.01~~$0.05 in fiscal 2019, 2018, ~~2017,~~ and ~~2016~~2017 respectively. Although we were granted the extension, should we fail to meet certain requirements in the future and are unable to renegotiate the tax ruling further, we could be retroactively and prospectively subject to statutory tax rates and repayment of certain incentives which could negatively impact our business.

More generally, with the finalization of specific actions contained within the Organization for Economic Development and Cooperation’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) study (“Actions”), many OECD countries have acknowledged their intent to implement the Actions and update their local tax regulations. Among the considerations required by the Actions is the need for appropriate local business operational substance to justify any locally granted tax incentives, such as those described above, and that the incentives are not determined to constitute “state aid” which would invalidate the incentive. If we fail to maintain sufficient operational substance or if the countries determine the incentive regimes do not conform with the BEPS regulations being considered for implementation, adverse material economic impacts may result.

A change in our effective tax rate could have a significant adverse impact on our business, and an adverse outcome resulting from examination of our income or other tax returns could adversely affect our results.

A number of factors may adversely affect our future effective tax rates, such as the jurisdictions in which our profits are determined to be earned and taxed; changes in the valuation of our deferred tax assets and liabilities; adjustments to estimated taxes upon finalization of various tax returns; adjustments to our interpretation of transfer pricing standards; changes in available tax credits, grants and other incentives; changes in stock-based compensation expense; the availability of loss or credit carryforwards to offset taxable income; changes in tax laws or the interpretation of such tax laws (for example U.S. and international tax reform); changes in U.S. generally accepted accounting principles (U.S. GAAP); expiration or the inability to renew tax rulings or tax holiday incentives. A change in our effective tax rate due to any of these factors may adversely affect our future results from operations.

On December 22, 2017, the U.S. enacted significant changes to U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for ~~Fiscal Year 2018"~~fiscal year 2018 (previously known as "The Tax Cuts and Jobs Act" and, as enacted, the "Tax Act"). The Tax Act reduced the ~~U.S.~~ federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. The U.S. Department of Treasury has broad authority to issue regulations and interpretive guidance that may significantly impact how we will apply

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the law and impact our results of operations in the period issued. ~~The Tax Act required complex computations not previously provided in U.S. tax law. As such,~~We analyzed the ~~application~~impacts of ~~accounting guidance for such items was previously uncertain. As of December 30, 2018, we have completed~~the “Tax Act” and concluded that our ~~"Tax Act" analysis and it did not have any impact to our expectations of actual~~ cash payments for income tax will not be materially impacted in the foreseeable future.

Changes made to the Code by the Tax Act — in particular, the reduction of the U.S. federal corporate tax rate from 35% to 21% — could affect the cost of capital provided by third-party investors for our projects. In particular, the reduction of the U.S. federal corporate tax rate from 35% to 21% decreases the value of depreciation to potential tax equity investors who may, as a result, require higher cash flow from solar project customers, and investors in SunPower solar energy projects may pay less for the project, in each case to compensate for the lower tax benefit value.

Significant judgment is required to determine the recognition and measurement attributes prescribed in the accounting guidance for uncertainty in income taxes. The accounting guidance for uncertainty in income taxes applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely affect our provision for income taxes. In addition, we are subject to examination of our income tax returns by various tax authorities. We regularly assess the likelihood of adverse outcomes resulting from any examination to determine the adequacy of our provision for income taxes. An adverse determination of an examination could have an adverse effect on our operating results and financial condition. See also “Item 8. Financial Statements and Supplementary ~~Data—Notes~~Data-Notes to Consolidated Financial ~~Statements—Note 14.~~ Statements-Note 13. Income Taxes.”

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Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are evolving (for example, those relating to the Actions currently being undertaken by the OECD and similar actions by the G8 and G20) and U.S. tax reform may lead to further changes in (or departure from) these norms. As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.

Our credit and other agreements contain ~~covenant~~ restrictions that may limit our ability to operate our business.

We may be unable to respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, or obtain additional financing, because our debt agreements, our Affiliation Agreement with Total, foreign exchange hedging agreements and equity derivative agreements contain, and any of our other future similar agreements may contain, ~~covenant~~ restrictions that limit our ability to, among other things:

•incur additional debt, assume obligations in connection with letters of credit, or issue guarantees;

•create liens;

•make certain investments or acquisitions;

•enter into transactions with our affiliates;

•sell certain assets;

•redeem capital stock or make other restricted payments;

•declare or pay dividends or make other distributions to stockholders; and

•merge or consolidate with any person.

Our ability to comply with these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under our other debt instruments, which could permit the holders to accelerate such debt. If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operations.

Risks Related to Our Supply Chain

Our long-term, firm commitment supply agreements could result in excess or insufficient inventory, place us at a competitive disadvantage on pricing, or lead to disputes, each of which could impair our ability to meet our cost reduction roadmap, and in some circumstances may force us to take a significant accounting charge.

If our supply agreements provide insufficient inventory to meet customer demand, or if our suppliers are unable or unwilling to provide us with the contracted quantities, we may be forced to purchase additional supply at market prices, which could be greater than expected and could materially and adversely affect our results of operations. Due to the industry-wide

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shortage of polysilicon experienced before 2011, we purchased polysilicon that we resold to third-party ingot and wafer manufacturers who deliver wafers to us that we then use in the manufacturing of our solar cells. Without sufficient polysilicon, some of those ingot and wafer manufacturers would not have been able to produce the wafers on which we rely. We have historically entered into multiple long-term fixed supply agreements for periods of up to 10 years to match our estimated customer demand forecasts and growth strategy for the next several years. The long-term nature of these agreements, which often provide for fixed or inflation-adjusted pricing, may prevent us from benefiting from decreasing polysilicon costs, has, and may continue to, cause us to pay more at unfavorable payment terms than the current market prices and payment terms available to our competitors, and has in the past, and could again in the future, cause us to record an impairment. In the event that we have inventory in excess of short-term requirements of polysilicon, in order to reduce inventory or improve working capital, we may, and sometimes do, elect to sell such inventory in the marketplace at prices below our purchase price, thereby incurring a loss.

Additionally, because certain of these agreements are “take or pay,” if ~~certain of~~ our ~~agreements~~demand for polysilicon from these suppliers ~~were to decrease in the future,~~decreases, we could be required to purchase polysilicon that we do not need, resulting in either storage costs or payment for polysilicon we nevertheless choose not to accept from such suppliers. ~~Additionally, existing arrangements from prior years have resulted in above current market pricing for purchasing polysilicon, resulting in inventory losses we have realized.~~ Further, we face significant, specific counterparty risk under long-term supply agreements when

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dealing with suppliers without a long, stable production and financial history. In the event any such supplier experiences financial difficulties or goes into bankruptcy, it could be difficult or impossible, or may require substantial time and expense, for us to recover any or all of our prepayments. Any of the foregoing could materially harm our financial condition and results of operations.

We will continue to be dependent on a limited number of third-party suppliers for certain raw materials and components for our products, which could prevent us from delivering our products to our customers within required timeframes and could in turn result in sales and installation delays, cancellations, penalty payments, and loss of market share.

We rely on a limited number of third-party suppliers for certain raw materials and components for our solar cells, panels and power systems, such as polysilicon, inverters and module material. If we fail to maintain our relationships with our suppliers or to build relationships with new suppliers, or if suppliers are unable to meet demand through industry consolidation, we may be unable to manufacture our products or our products may be available only at a higher cost or after a long delay.

To the extent the processes that our suppliers use to manufacture components are proprietary, we may be unable to obtain comparable components from alternative suppliers. In addition, the financial markets could limit our suppliers’ ability to raise capital if required to expand their production or satisfy their operating capital requirements. As a result, they could be unable to supply necessary raw materials, inventory and capital equipment which we would require to support our planned sales operations to us, which would in turn negatively impact our sales volume, profitability, and cash flows. The failure of a supplier to supply raw materials or components in a timely manner, or to supply raw materials or components that meet our quality, quantity and cost requirements, could impair our ability to manufacture our products or could increase our cost of production. If we cannot obtain substitute materials or components on a timely basis or on acceptable terms, we could be prevented from delivering our products to our customers within required ~~timeframes.~~time frames.

Any such delays could result in sales and installation delays, cancellations, penalty payments or loss of revenue and market share, any of which could have a material adverse effect on our business, results of operations, and financial condition.

We utilize construction loans, term loans, sale-leaseback, partnership flip, preferred equity, and other financing structures to fund acquisition, development, construction, and expansion of ~~photovoltaic power plant~~certain solar projects, ~~in the future,~~ and such funds may or may not continue to be available as required to further our plans. Furthermore, such project financing increases our consolidated debt and may be structurally senior to other debt such as our ~~Credit Agricole revolving credit facility~~2019 Revolver and outstanding convertible debentures.

Certain of our subsidiaries and other affiliates are separate and distinct legal entities and, except in limited circumstances, have no obligation to pay any amounts due with respect to our indebtedness or indebtedness of other subsidiaries or affiliates, and do not guarantee the payment of interest on or principal of such indebtedness. Such subsidiaries may borrow funds to finance particular projects. In the event of a default under a project financing which we do not cure, the lenders or lessors generally have rights to the power plant project and related assets. In the event of foreclosure after a default, we may not be able to retain any interest in the power plant project or other collateral supporting such financing. In addition, any such default or foreclosure may trigger cross default provisions in our other financing agreements, including our corporate debt obligations, which could materially and adversely affect our results of operations. In the event of our bankruptcy, liquidation or reorganization (or the bankruptcy, liquidation or reorganization of a subsidiary or affiliate), such subsidiaries’ or other affiliates’ creditors, including trade creditors and holders of debt issued by such subsidiaries or affiliates, will generally be entitled to payment of their claims from the assets of those subsidiaries or affiliates before any assets are made available for distribution to us or the holders of our indebtedness. As a result, holders of our corporate indebtedness will be effectively

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subordinated to all present and future debts and other liabilities (including trade payables) of certain of our subsidiaries. As of December ~~30, 2018,~~29, 2019, our subsidiaries had ~~$6.5~~$9.1 million in subsidiary project financing, which is effectively senior to our corporate debt, such as our ~~Credit Agricole revolving credit facility,~~2019 Revolver, our 4.00% debentures due 2023 and our 0.875% debentures due 2021.

Risks Related to Our Operations

We have significant international activities and customers, and plan to continue these efforts, which subject us to additional business risks, including logistical complexity and political instability.

A substantial portion of our sales are made to customers outside of the United States, and a substantial portion of our supply agreements are with supply and equipment vendors located outside of the United States. We have solar cell and module production lines located at our manufacturing facilities in the Philippines, Mexico, France, and Malaysia.

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Risks we face in conducting business internationally include:

•multiple, conflicting and changing laws and regulations, export and import restrictions, employment laws, environmental protection, regulatory requirements, international trade agreements, and other government approvals, permits and licenses;

•difficulties and costs in staffing and managing foreign operations as well as cultural differences;

•potentially adverse tax consequences associated with current, future or deemed permanent establishment of operations in multiple countries;

•relatively uncertain legal systems, including potentially limited protection for intellectual property rights, and laws, changes in the governmental incentives we rely on, regulations and policies which impose additional restrictions on the ability of foreign companies to conduct business in certain countries or otherwise place them at a competitive disadvantage in relation to domestic companies;

~~one-time transition tax by the U.S. on earnings of certain foreign subsidiaries that were previously tax deferred;~~

•inadequate local infrastructure and developing telecommunications infrastructures;

•financial risks, such as longer sales and payment cycles and greater difficulty collecting accounts receivable;

•currency fluctuations, government-fixed foreign exchange rates, the effects of currency hedging activity, and the potential inability to hedge currency fluctuations;

•political and economic instability, including wars, acts of terrorism, political unrest, boycotts, curtailments of trade and other business restrictions;

•trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries; and

•liabilities associated with compliance with laws (for example, the Foreign Corrupt Practices Act in the U.S. and similar laws outside of the U.S.).

We have a complex organizational structure involving many entities globally. This increases the potential impact of adverse changes in laws, rules and regulations affecting the free flow of goods and personnel, and therefore heightens some of the risks noted above. Further, this structure requires us to effectively manage our international inventory and warehouses. If we fail to do so, our shipping movements may not ~~map~~correspond with product demand and flow. Unsettled intercompany balances between entities could result, if changes in law, regulations or related interpretations occur, in adverse tax or other consequences affecting our capital structure, intercompany interest rates and legal structure. If we are unable to successfully manage any such risks, any one or more could materially and negatively affect our business, financial condition and results of operations.

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If we experience interruptions in the operation of our solar cell production lines, our revenue and results of operations may be materially and adversely affected.

If our solar cell or module production lines suffer problems that cause downtime, we might be unable to meet our production targets, which would adversely affect our business. Our manufacturing activities require significant management attention, a significant capital investment and substantial engineering expenditures.

The success of our manufacturing operations is subject to significant risks including:

•cost overruns, delays, supply shortages, equipment problems and other operating difficulties;

•custom-built equipment may take longer or cost more to engineer than planned and may never operate as designed;

•incorporating first-time equipment designs and technology improvements, which we expect to lower unit capital and operating costs, ~~but which~~ may not be successful;

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•our ability to obtain or maintain third-party financing to fund capital requirements;

•difficulties in maintaining or improving our historical yields and manufacturing efficiencies;

•difficulties in protecting our intellectual property and obtaining rights to intellectual property developed by our manufacturing partners;

•difficulties in hiring and retaining key technical, management, and other personnel;

•impacts that may arise from natural disasters and epidemics; and

•potential inability to obtain, or obtain in a timely manner, financing, or approvals from governmental authorities for operations; and

•tariffs imposed on imported solar cells and modules which may cause market volatility, price fluctuations, supply shortages, and project delays.

Any of these or similar difficulties may unexpectedly delay or increase costs of our supply of solar ~~cells.~~cells, which could adversely impact our business and operating results. For example, in December 2019, a strain of coronavirus was reported to have surfaced in Wuhan, China, resulting in extended holidays and travel restrictions. At this point, the extent to which the coronavirus may impact our supply, operations, or sale of our products is uncertain.

If we do not achieve satisfactory yields or quality in manufacturing our solar products, our sales could decrease and our relationships with our customers and our reputation may be harmed.

The manufacture of solar cells is a highly complex process. Minor deviations in the manufacturing process can cause substantial decreases in yield and in some cases, cause production to be suspended or yield no output. We have from time to time experienced lower than anticipated manufacturing yields. As we expand our manufacturing capacity and qualify additional suppliers, we may initially experience lower yields. If we do not achieve planned yields, our product costs could increase, and product availability would decrease resulting in lower revenues than expected. In addition, in the process of transforming polysilicon into ingots, a significant portion of the polysilicon is removed in the process. In circumstances where we provide the polysilicon, if our suppliers do not have very strong controls in place to ensure maximum recovery and utilization, our economic yield can be less than anticipated, which would increase the cost of raw materials to us.

Additionally, products as complex as ours may contain undetected errors or defects, especially when first introduced. For example, our solar cells or solar panels may contain defects that are not detected until after they are shipped or are installed because we cannot test for all possible scenarios. These defects could cause us to incur significant warranty, non-warranty, and re-engineering costs, divert the attention of our engineering personnel from product development efforts, and significantly affect our customer relations and business reputation. If we deliver solar products with errors or defects, including cells or panels of third-party manufacturers, or if there is a perception that such solar products contain errors or defects, our credibility and the market acceptance and sales of our products could be harmed. In addition, some of our arrangements with customers include termination or put rights for non-performance. In certain limited cases, we could incur liquidated damages or even be

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required to buy back a customer’s system at fair value on specified future dates if certain minimum performance thresholds are not met.

A change in ~~our 1603 U.S. Treasury Department Cash Grant proceeds or~~the solar investment tax ~~credits~~credit could adversely affect our business, revenues, margins, results of operations and cash flows.

We have incorporated into our financial planning and agreements with our customers certain assumptions regarding the future level of U.S. tax incentives, including the ITC, which is administered by the ~~U.S. Treasury Department~~Internal Revenue Service (“~~U.S. Treasury”~~IRS”). The ITC allows qualified applicants to claim an amount equal to ~~30%~~26% of the eligible cost basis for qualifying solar energy property. The U.S. Treasury also made payments under the Cash Grant program in lieu of the ITC for projects which commenced construction prior to December 31, 2011 and completed construction by December 31, 2016. We hold projects and have sold projects to certain customers based on certain underlying assumptions regarding the ~~ITC and Cash Grant, including for our California Valley Solar Ranch and Solar Star projects.~~ ITC.We have also accounted for certain projects and programs in our business using the same assumptions.

Owners of our qualifying projects and our residential lease program have applied or will apply for the ITC and ~~have applied for~~ the ~~Cash Grant. We have structured the~~assumptions regarding expected tax ~~incentive applications,~~benefits, both in timing and amount, ~~to be~~are made in accordance with the guidance provided bythe ~~U.S. Treasury and U.S. Internal Revenue Service (“IRS”).~~IRS. Any changes to the ~~U.S. Treasury or~~ IRS guidance which we relied upon in structuring our projects, failure to comply with the requirements, including the safe harbor ~~protocols,~~guidance, lower levels of incentives granted, or changes in assumptions including the estimated residual values and the estimated fair market value of financed and installed systems for the purposes of ~~Cash Grant and~~the ITC, ~~applications,~~ could

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materially and adversely affect our business and results of operations. ~~While all grants related to our projects have been fully paid by~~If the ~~U.S. Treasury, if the~~ IRS ~~or U.S. Treasury~~ disagrees, as a result of any future review or audit, with the fair market value of, or other assumptions concerning, our solar projects or systems that we have constructed or that we construct in the future, including the systems for which tax incentives have already been paid, it could have a material adverse effect on our business and financial condition. We also have obligations to indemnify certain of our customers and investors for the loss of tax ~~incentives to such customers.~~incentives. We may have to recognize impairments or lower margins than initially anticipated for certain of our projects or our residential lease program. Additionally, if the amount or timing of ~~the Cash Grant or ITC payments~~ITCs received varies from what we have projected, our revenues, margins and cash flows could be adversely affected and we may have to recognize losses, which would have a material adverse effect on our business, results of operations and financial condition.

There are continuing developments in the interpretation and application of how companies should calculate their eligibility and level of ~~Cash Grant and~~ ITC incentives. There have been recent cases in the U.S. district courts that challenge the criteria for a true lease, which could impact whether the structure of our residential lease program qualifies under the ~~Cash Grant and~~ ITC. Additionally, the Office of the Inspector General of the U.S. Treasury has issued subpoenas to a number of significant participants in the rooftop solar energy installation industry. The Inspector General is working with the Civil Division of the U.S. Department of Justice to investigate the administration and implementation of the Cash Grant program, including potential misrepresentations concerning the fair market value of certain solar power systems submitted for Cash Grant. While we have not received a subpoena, we could be asked to participate in the information gathering process. The results of the current investigation could affect the underlying assumption used by the solar industry, including us, in our Cash Grant and ITC applications, which could reduce eligibility and level of incentives and could adversely affect our results of operations and cash flows. If the IRS redetermines the amount of the ~~cash grant awards,~~ITC, investors may be required to make corresponding adjustments to their taxable income or other changes. Such adjustments may provide us with an indication of IRS practice regarding the valuation of residential leased solar assets, and we would consider such adjustments in our accounting for our indemnification obligations to investors who receive ITCs.

Acquisitions of other companies, project development pipelines and other assets, or investments in joint ventures with other companies could materially and adversely affect our financial condition and results of operations, and dilute our stockholders’ equity.

To expand our business and maintain our competitive position, we have acquired a number of other companies and entered into several joint ventures over the past several years, including our acquisitions of Cogenra Solar, Inc. and Solaire Generation, Inc. in fiscal 2015, our acquisition of 100% of the equity voting interest in our former joint venture AUO SunPower Sdn. Bhd. in fiscal 2016, our entry into a manufacturing joint venture in China in 2017, and our SunStrong and Solar Sail joint ventures with Hannon Armstrong and acquisition of SolarWorld Americas in fiscal 2018 and 2019. In the future, we may acquire additional companies, project pipelines, products, or technologies or enter into additional joint ventures or other strategic initiatives.

Acquisitions and joint ventures involve a number of risks that could harm our business and result in the acquired business or joint venture not performing as expected, including:

•insufficient experience with technologies and markets in which the acquired business or joint venture is involved, which may be necessary to successfully operate and/or integrate the business or the joint venture;

•problems integrating the acquired operations, personnel, IT infrastructure, technologies or products with the existing business and products;

•diversion of management time and attention from the core business to the acquired business or joint venture;

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•potential failure to retain or hire key technical, management, sales and other personnel of the acquired business or joint venture;

•difficulties in retaining or building relationships with suppliers and customers of the acquired business or joint venture, particularly where such customers or suppliers compete with us;

•potential failure of the due diligence processes to identify significant issues with product quality and development or legal and financial liabilities, among other things;

•potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities or work councils, which could delay or prevent acquisitions, delay our ability to achieve synergies, or adversely impact our successful operation of acquired companies or joint ventures;

•potential necessity to re-apply for permits of acquired projects;

•problems managing joint ventures with our partners, meeting capital requirements for expansion, potential litigation with joint venture partners and reliance upon joint ventures which we do not control;

•differences in philosophy, strategy, or goals with our joint venture partners;

•subsequent impairment of the acquired assets, including intangible assets; and

•assumption of liabilities including, but not limited to, lawsuits, tax examinations, warranty issues, environmental matters, and liabilities associated with compliance with laws (for example, the FCPA).

Additionally, we may decide that it is in our best interests to enter into acquisitions or joint ventures that are dilutive to earnings per share or that negatively impact margins as a whole. In an effort to reduce our cost of revenue, we have and may continue to enter into acquisitions or joint ventures involving suppliers or manufacturing partners, which would expose us to additional supply chain risks. Acquisitions or joint ventures could also require investment of significant financial resources and require us to obtain additional equity financing, which may dilute our stockholders’ equity, or require us to incur additional indebtedness. Such equity or debt financing may not be available on terms acceptable to us. In addition, we could in the future make additional investments in our joint ventures or guarantee certain financial obligations of our joint ventures, which could reduce our cash ~~grants~~flows, increase our indebtedness and ~~investment tax credits.~~expose us to the credit risk of our joint ventures.

To the extent that we invest in upstream suppliers or downstream channel capabilities, we may experience competition or channel conflict with certain of our existing and potential suppliers and customers. Specifically, existing and potential suppliers and customers may perceive that we are competing directly with them by virtue of such investments and may decide to reduce or eliminate their supply volume to us or order volume from us. In particular, any supply reductions from our polysilicon, ingot or wafer suppliers could materially reduce manufacturing volume.

Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of debt, which could harm our operating results.

We obtain certain of our capital equipment used in our manufacturing process from sole suppliers and if this equipment is damaged or otherwise unavailable, our ability to deliver products on time will suffer, which in turn could result in order cancellations and loss of revenue.

Some of the capital equipment used in the manufacture of our solar power products has been developed and made specifically for us, is not readily available from multiple vendors and would be difficult to repair or replace if it were to become damaged or stop working. If any of these suppliers were to experience financial difficulties or go out of business, or if there were any damage to or a breakdown of our manufacturing equipment, our business would suffer. In addition, a supplier’s failure to supply this equipment in a timely manner, with adequate quality and on terms acceptable to us, could delay our future

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capacity expansion or manufacturing process improvements and otherwise disrupt our production schedule or increase our costs of production.

If we cannot offer residential lease customers an attractive value proposition due to an inability to continue to monetize tax benefits in connection with our residential lease arrangements, an inability to obtain financing for our residential lease program, challenges implementing our third-party ownership model in new jurisdictions, declining costs of retail electricity, or other reasons, we may be unable to continue to increase the size of our residential lease program, which could have a material, adverse effect on our business, results of operations, and financial condition.

Our residential lease program has been eligible for the ~~ITC and Cash Grant.~~ITC. We have relied on, and expect to continue to rely on, financing structures that monetize a substantial portion of those benefits. If we were unable to continue to monetize the tax benefits in our financing structures or such tax benefits were reduced or eliminated, we might be unable to provide financing or pricing that is attractive to our customers. Under current law, the ITC ~~will be~~was reduced from approximately 30% of the cost of the solar system to approximately 26% for solar systems placed into service after December 31, 2019, and ~~then~~will be further reduced to approximately 22% for solar systems placed into service after December 31, 2020, before being reduced permanently to 10% for commercial projects and 0% for residential projects. ~~In addition, Cash Grants are no longer available for new solar systems.~~

Changes in existing law and interpretations by the IRS ~~Treasury,~~ and the courts could reduce the willingness of financing partners to invest in funds associated with our residential lease program. Additionally, benefits under the ~~Cash Grant and~~ ITC programs are tied, in part, to the fair market value of our systems, as ultimately determined by the federal agency administering the benefit program. This means that, in connection with implementing financing structures that monetize such benefits, we need to, among other things, assess the fair market value of our systems in order to arrive at an estimate of the amount of tax benefit expected to be derived from the benefit programs. We incorporate third-party valuation reports that we believe to be reliable into our methodology for assessing the fair market value of our systems, but these reports or other

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elements of our methodology may cause our fair market value estimates to differ from those ultimately determined by the federal agency administering the applicable benefit program. If the amount or timing of ~~Cash Grant payments or~~the ITC received in connection with our residential lease program varies from what we have projected, due to discrepancies in our fair value assessments or otherwise, our revenues, cash flows, and margins could be adversely affected.

Additionally, if any of our financing partners that currently provide financing for our solar systems decide not to continue to provide financing due to general market conditions, changes in tax benefits associated with our solar systems, concerns about our business or prospects, or any other reason, or if they materially change the terms under which they are willing to provide future financing, we will need to identify new financing partners and negotiate new financing terms.

See also under this section, “Risks Related to Our Supply ~~Chain~~—Chain—A change in ~~our 1603 Treasury Cash Grant proceeds or~~the solar investment tax credit could adversely affect our business, revenues, margins, results of operations and cash flows.”

We have to continuously build and improve infrastructure to support our residential lease program, and any failure or delay in implementing the necessary processes and infrastructure could adversely affect our financial results. We establish credit approval limits based on the credit quality of our customers. We may be unable to collect rent payments from our residential lease customers in the event they enter into bankruptcy or otherwise fail to make payments when due. If we experience higher customer default rates than we currently experience or if we lower credit rating requirements for new customers, it could be more difficult or costly to attract future financing. See also under this section, “Risks Related to Our Sales Channels—The execution of our growth strategy is dependent upon the continued availability of third-party financing arrangements for our solar power plants, our residential lease program, and our customers, and is affected by general economic ~~conditions~~.conditions.”

We make certain assumptions in accounting for our residential lease program, including, among others, assumptions in accounting for our residual value of the leased systems. As our residential lease program grows, if the residual value of leased systems does not materialize as assumed, it will adversely affect our results of operations. At the end of the term of the lease, our customers have the option to extend the lease and certain of those customers may either purchase the leased systems at fair market value or return them to us. Should there be a large number of returns, we may incur de-installation costs in excess of amounts reserved.

We believe that, as with our other customers, retail electricity prices factor significantly into the value proposition of our products for our residential lease customers. If prices for retail electricity or electricity from other renewable sources decrease, our ability to offer competitive pricing in our residential lease program could be jeopardized because such decreases would make the purchase of our solar systems or the purchase of energy under our lease agreements and PPAs less economically attractive.

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Our leases are third-party ownership arrangements. Sales of electricity by third parties face regulatory challenges in some states and jurisdictions. Other challenges pertain to whether third-party owned systems qualify for the same levels of rebates or other non-tax incentives available for customer-owned solar energy systems. Reductions in, or eliminations of, this treatment of these third-party arrangements could reduce demand for our residential lease program. As we look to extend the third-party ownership model outside of the United States, we will be faced with the same risks and uncertainties we have in the United States. Our growth outside of the United States could depend on our ability to expand the third-party ownership model, and our failure to successfully implement a third-party ownership model globally could adversely affect our financial results.

Our success depends on the continuing contributions of our key personnel.

We rely heavily on the services of our key executive officers and the loss of services of any principal member of our management team could adversely affect our operations. We have experienced significant turnover in our management team in the recent past, and we are investing significant resources in developing new members of management as we complete our restructuring and strategic transformation. In connection with our separation into two public companies through the Spin-Off, members of SunPower’s management team may accept roles with Maxeon Solar. We also anticipate that over time we will need to hire a number of highly skilled technical, manufacturing, sales, marketing, administrative, and accounting personnel. In recent years, we have conducted several restructurings, which may negatively affect our ability to execute our strategy and business model, and may impair our ability to retain key talent required to provide transition services during such restructurings. The competition for qualified personnel is intense in our industry. We may not be successful in attracting and retaining sufficient numbers of qualified personnel to support our anticipated growth. We cannot guarantee that any employee will remain employed with us for any definite period of time since all of our employees, including our key executive officers, serve at-will and may terminate their employment at any time for any reason.

Project development or construction activities may not be successful, and we may make significant investments without first obtaining project financing, which could increase our costs and impair our ability to recover our investments.

The development and construction of solar power electric generation facilities and other energy infrastructure projects involve numerous risks. We may be required to spend significant sums for preliminary engineering, permitting, legal, and other expenses before we can determine whether a project is feasible, economically attractive or capable of being built. In addition, we will often choose to bear the costs of such efforts prior to obtaining project financing, prior to getting final regulatory approval, and prior to our final sale to a customer, if any.

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Successful completion of a particular project may be adversely affected by numerous factors, including:

•failures or delays in obtaining desired or necessary land rights, including ownership, leases and/or easements;

•failures or delays in obtaining necessary permits, licenses or other governmental support or approvals, or in overcoming objections from members of the public or adjoining land owners;

•unforeseen engineering problems;

•uncertainties relating to ~~land costs for projects;~~

~~unforeseen engineering problems;~~

access to available transmission for electricity generated by our solar power ~~plants;~~systems and delays in interconnection of such systems;

•construction delays and contractor performance shortfalls;

•work stoppages or labor disruptions and compliance with labor regulations;

•cost over-runs;

•availability of products and components from suppliers;

•adverse weather conditions;

•environmental, archaeological and geological conditions; and

•availability of construction and permanent financing.

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If we are unable to complete the development of a solar power ~~plant,~~project, or fail to meet one or more agreed target construction milestone dates, we may be subject to liquidated damages and/or penalties under the EPC agreement or other agreements relating to the power plant, and we typically will not be able to recover our investment in the project. We expect to invest a significant amount of capital to develop projects initially owned by us or ultimately owned by third parties. If we are unable to complete the development of a solar power project, we may write-down or write-off some or all of these capitalized investments, which would have an adverse impact on our net income in the period in which the loss is recognized.

We act as the general contractor for many of our customers in connection with the installations of our solar power systems and are subject to risks associated with construction, cost overruns, delays and other contingencies tied to performance bonds and letters of credit, or other required credit and liquidity support guarantees, any of which could have a material adverse effect on our business and results of operations.

We act as the general contractor for many of our customers in connection with the installation of our solar power systems. Some customers require performance bonds issued by a bonding agency or letters of credit issued by financial institutions, or may require other forms of liquidity support. Due to the general performance risk inherent in construction activities, it has become increasingly difficult to attain suitable bonding agencies willing to provide performance bonding. Obtaining letters of credit may require collateral. In the event we are unable to obtain bonding, sufficient letters of credit, or other liquidity support, we will be unable to bid on, or enter into, sales contracts requiring such bonding.

Almost all of our EPC contracts are fixed price contracts. We attempt to estimate all essential costs at the time of entering into the EPC contract for a particular project, and these are reflected in the overall price that we charge our customers for the project. These cost estimates are preliminary and may or may not be covered by contracts between us or the subcontractors, suppliers, and any other parties that may become necessary to complete the project. In addition, we require qualified, licensed subcontractors to install most of our systems. Thus, if the cost of materials or skilled labor were to rise dramatically, or if financing costs were to increase, our operating results could be adversely affected.

In addition, the contracts with some of our larger customers obligate us to pay substantial penalty payments for each day or other period beyond an agreed target date that a solar installation for any such customer is not completed, up to and including the return of the entire project sale price. This is particularly true in Europe, where long-term, fixed feed-in tariffs available to investors are typically set during a prescribed period of project completion, but the fixed amount declines over time for projects completed in subsequent periods. We face material financial penalties in the event we fail to meet the completion deadlines, including but not limited to a full refund of the contract price paid by the customers. In certain cases we do not

~~Table of Contents~~

control all of the events which could give rise to these penalties, such as reliance on the local utility to timely complete electrical substation construction.

Furthermore, investors often require that the solar power system generate specified levels of electricity in order to maintain their investment returns, allocating substantial risk and financial penalties to us if those levels are not achieved, up to and including the return of the entire project sale price. Also, our customers often require protections in the form of conditional payments, payment retentions or holdbacks, and similar arrangements that condition its future payments on performance. Delays in solar panel or other supply shipments, other construction delays, unexpected performance problems in electricity generation or other events could cause us to fail to meet these performance criteria, resulting in unanticipated and severe revenue and earnings losses and financial penalties. Construction delays are often caused by inclement weather, failure to timely receive necessary approvals and permits, or delays in obtaining necessary solar panels, inverters or other materials. Additionally, we sometimes purchase land in connection with project development and assume the risk of project completion. All such risks could have a material adverse effect on our business and results of operations.

To expand our business and maintain our competitive position, we have acquired a number of other companies and entered into several joint ventures over the past several years, including our acquisitions of Cogenra Solar, Inc. and Solaire Generation, Inc. in fiscal 2015, our acquisition of 100% of the equity voting interest in our former joint venture AUO SunPower Sdn. Bhd. in fiscal 2016, our entry into a manufacturing joint venture in China in 2017 and our SunStrong joint venture with Hannon Armstrong and acquisition of SolarWorld Americas in fiscal 2018. In the future, we may acquire additional companies, project pipelines, products, or technologies or enter into additional joint ventures or other strategic initiatives.

~~Acquisitions and joint ventures involve a number of risks that could harm our business and result in the acquired business or joint venture not performing as expected, including:~~

insufficient experience with technologies and markets in which the acquired business or joint venture is involved, which may be necessary to successfully operate and/or integrate the business or the joint venture;

~~problems integrating the acquired operations, personnel, IT infrastructure, technologies or products with the existing business and products;~~

~~diversion of management time and attention from the core business to the acquired business or joint venture;~~

~~potential failure to retain or hire key technical, management, sales and other personnel of the acquired business or joint venture;~~

~~difficulties in retaining or building relationships with suppliers and customers of the acquired business or joint venture, particularly where such customers or suppliers compete with us;~~

~~potential failure of the due diligence processes to identify significant issues with product quality and development or legal and financial liabilities, among other things;~~

potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities or work councils, which could delay or prevent acquisitions, delay our ability to achieve synergies, or adversely impact our successful operation of acquired companies or joint ventures;

~~potential necessity to re-apply for permits of acquired projects;~~

problems managing joint ventures with our partners, meeting capital requirements for expansion, potential litigation with joint venture partners and reliance upon joint ventures which we do not control; for example, our ability to effectively manage the SunStrong joint venture with Hannon Armstrong;

~~differences in philosophy, strategy, or goals with our joint venture partners;~~

~~subsequent impairment of the acquired assets, including intangible assets; and~~

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assumption of liabilities including, but not limited to, lawsuits, tax examinations, warranty issues, environmental matters, and liabilities associated with compliance with laws (for example, the FCPA).

Additionally, we may decide that it is in our best interests to enter into acquisitions or joint ventures that are dilutive to earnings per share or that negatively impact margins as a whole. In an effort to reduce our cost of revenue, we have and may continue to enter into acquisitions or joint ventures involving suppliers or manufacturing partners, which would expose us to additional supply chain risks. Acquisitions or joint ventures could also require investment of significant financial resources and require us to obtain additional equity financing, which may dilute our stockholders’ equity, or require us to incur additional indebtedness. Such equity or debt financing may not be available on terms acceptable to us. In addition, we could in the future make additional investments in our joint ventures or guarantee certain financial obligations of our joint ventures, which could reduce our cash flows, increase our indebtedness and expose us to the credit risk of our joint ventures.

~~Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of debt, which could harm our operating results.~~

We could be adversely affected by any violations of the FCPA and foreign anti-bribery laws.

The FCPA generally prohibits companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Other countries in which we operate also have anti-bribery laws, some of which prohibit improper payments to government and non-government persons and entities. Our policies mandate compliance with these anti-bribery laws. We continue to acquire businesses outside of the United States and operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. In addition, due to the level of regulation in our industry, our entry into new jurisdictions through internal growth or acquisitions requires substantial government contact where norms can differ from U.S. standards. While we implement policies and procedures and conduct training designed to facilitate compliance with these anti-bribery laws, thereby mitigating the risk of violations of such laws, our employees, subcontractors and agents may take actions in violation of our policies and anti-bribery laws. Any such violation, even if

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prohibited by our policies, could subject us to criminal or civil penalties or other sanctions, which could have a material adverse effect on our business, financial condition, cash flows, and reputation.

Fluctuations in the demand for our products may cause impairment of our project assets and other long-lived assets or cause us to write off equipment or inventory, and each of these events would adversely affect our financial results.

We have tangible project assets on our Consolidated Balance Sheets related to capitalized costs incurred in connection with the development of solar power systems. Project assets consist primarily of capitalized costs relating to solar power system projects in various stages of development that we incur prior to the sale of the solar power system to a third party. These costs include costs for land and costs for developing and constructing a solar power system. These project assets could become impaired if there are changes in the fair value of these capitalized costs. If these project assets become impaired, we may write-off some or all of the capitalized project assets, which would have an adverse impact on our financial results in the period in which the loss is recognized.

In addition, if the demand for our solar products decreases, our manufacturing capacity could be underutilized, and we may be required to record an impairment of our long-lived assets, including facilities and equipment, which would increase our expenses. In improving our manufacturing processes consistent with our cost reduction roadmap, we could write off equipment that is removed from the manufacturing process. In addition, if product demand decreases or we fail to forecast demand accurately, we could be required to write off inventory or record excess capacity charges, which would have a negative impact on our gross margin. Factory-planning decisions may shorten the useful lives of long-lived assets, including facilities and equipment, and cause us to accelerate depreciation. Each of the above events would adversely affect our future financial results.

~~Table of Contents~~

~~Our success depends on the continuing contributions of our key personnel.~~

We rely heavily on the services of our key executive officers and the loss of services of any principal member of our management team could adversely affect our operations. We have experienced significant turnover in our management team in the recent past, and we are investing significant resources in developing new members of management as we complete our restructuring and strategic transformation. We also anticipate that over time we will need to hire a number of highly skilled technical, manufacturing, sales, marketing, administrative, and accounting personnel. In recent years, we have conducted several restructurings, which may negatively affect our ability to execute our strategy and business model. The competition for qualified personnel is intense in our industry. We may not be successful in attracting and retaining sufficient numbers of qualified personnel to support our anticipated growth. We cannot guarantee that any employee will remain employed with us for any definite period of time since all of our employees, including our key executive officers, serve at-will and may terminate their employment at any time for any reason.

We may not be able to expand our business or manage our future growth effectively.

We may not be able to expand our business or manage future growth. We plan to continue to improve our manufacturing processes and build additional manufacturing production over the next five years, which will require successful execution of:

•expanding our existing manufacturing facilities and developing new manufacturing facilities, which would increase our fixed costs and, if such facilities are underutilized, would negatively impact our results of operations;

•ensuring delivery of adequate polysilicon, ingots, and third-party cells;

•enhancing our customer resource management and manufacturing management systems;

•implementing and improving additional and existing administrative, financial and operations systems, procedures and controls, including the need to centralize, update and integrate our global financial internal control;

•hiring additional employees;

•expanding and upgrading our technological capabilities;

•managing multiple relationships with our customers, suppliers and other third parties;

•maintaining adequate liquidity and financial resources; and

•continuing to increase our revenues from operations.

Improving our manufacturing processes, expanding our manufacturing facilities or developing new facilities may be delayed by difficulties such as unavailability of equipment or supplies or equipment malfunction. Ensuring delivery of adequate polysilicon, ingots, and third-party cells is subject to many market risks including scarcity, significant price fluctuations and competition. Maintaining adequate liquidity is dependent upon a variety of factors including continued revenues from operations, working capital improvements, and compliance with our indentures and credit agreements. If we are unsuccessful in any of these areas, we may not be able to achieve our growth strategy and increase production capacity as planned during the foreseeable future. In addition, we need to manage our organizational growth, including rationalizing reporting structures, support teams, and enabling efficient decision making. For example, the administration of the residential lease program requires processes and systems to support this business model. If we are not successful or if we delay our continuing implementation of such systems and processes, we may adversely affect the anticipated volumes in our residential lease business. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, develop new solar cells and other products, satisfy customer requirements, execute our business plan, or respond to competitive pressures.

4243

Common Stock
Redeemable Noncontrolling Interests Shares Value
Additional
Paid-in
Capital

Treasury
Stock

Accumulated Other
Comprehensive Income (Loss)
Accumulated Deficit
Total
Stockholders’
Equity (Deficit)
Noncontrolling Interests Total Equity (Deficit)
Balances at January 3, 2016 $ 69,104
136,711
$ 137
$ 2,359,917
$ (155,265 ) $ (8,023 ) $ (747,617 ) $ 1,449,149
$ 59,490
$ 1,508,639
Net income (loss) (75,817 ) —
—
—
—
—
(448,635 ) (448,635 ) 3,036
(445,599 )
Cumulative-effect upon adoption of ASC 606 500,820
500,820
500,820
Other comprehensive loss —
—
—
—
—
785
—
785
—
785
Issuance of restricted stock to employees, net of cancellations —
2,836
3
—
—
—
—
3
—
3
Stock-based compensation expense —
—
—
56,110
—
—
—
56,110
—
56,110
Tax benefit from convertible debt interest deduction —
—
—
(2,822 ) —
—
—
(2,822 ) —
(2,822 )
Tax benefit from stock-based compensation —
—
—
(2,810 ) —
—
—
(2,810 ) —
(2,810 )
Contributions from noncontrolling interests 117,120
—
—
—
—
—
—
—
29,215
29,215
Distributions to noncontrolling interests (6,786 ) —
—
—
—
—
—
—
(12,253 ) (12,253 )
Purchases of treasury stock —
(1,039 ) (1 ) —
(21,518 ) —
—
(21,519 ) —
(21,519 )
Balances at January 1, 2017 $ 103,621
138,508
$ 139
$ 2,410,395
$ (176,783 ) $ (7,238 ) $ (695,432 ) $ 1,531,081
$ 79,488
$ 1,610,569
Net loss (152,926 ) —
—
—
—
—
(929,121 ) (929,121 ) (88,821 ) (1,017,942 )
Cumulative-effect upon adoption of ASU 2016-09 and ASU 2016-16 —
—
—
—
—
—
(45,344 ) (45,344 ) —
(45,344 )
Other comprehensive loss —
—
—
—
—
4,230
—
4,230
—
4,230
Issuance of restricted stock to employees, net of cancellations —
1,739
2
—
—
—
—
2
—
2
Stock-based compensation expense —
—
—
32,118
—
—
—
32,118
—
32,118
Contributions from noncontrolling interests 71,928
—
—
—
—
—
—
—
125,500
125,500
Distributions to noncontrolling interests (7,387 ) —
—
—
—
—
—
—
(11,988 ) (11,988 )
Purchases of treasury stock —
(589 ) (1 ) —
(4,756 ) —
—
(4,757 ) —
(4,757 )
Balances at December 31, 2017 $ 15,236
139,658
$ 140
$ 2,442,513
$ (181,539 ) $ (3,008 ) $ (1,669,897 ) $ 588,209
$ 104,179
$ 692,388
Net loss (29,171 ) —
—
—
—
—
(811,091 ) (811,091 ) (77,235 ) (888,326 )

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	Common Stock
	Shares	Value		Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity (Deficit)
Net loss	—	—		—		—		—		22,159		22,159		(29,880)		(7,721)
Cumulative-effect upon adoption of ASC 842	—	—		—		—		—		9,150		9,150		—		9,150
Other comprehensive income	—	—		—		—		(5,362)		—		(5,362)		—		(5,362)
Issuance of restricted stock to employees, net of cancellations	2,461	3				—		—		—		3		—		3
Stock-based compensation expense	—	—		27,788		—		—		—		27,788		—		27,788
Contributions from noncontrolling interests	—	—		—		—		—		—		—		35,791		35,791
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(1,552)		(1,552)
Purchases of treasury stock	(818)	(1)		—		(5,564)		—		—		(5,565)		—		(5,565)
Reduction of non-controlling interests, due to sale of interest in residential lease portfolio¹	—	—		—		—		—		—		—		(51,833)		(51,833)
Issuance of common stock in connection with equity offering, net of underwriter fees and discounts	25,300	25		171,809		—		—		—		171,834		—		171,834
Common stock offering fees				(1,148)								(1,148)				(1,148)
Balances at December 29, 2019	168,121	$	168	$	2,661,819	$	(192,633)	$	(9,512)	$	(2,449,679)	$	10,163	$	11,336	$	21,499

¹See Note 4 "Business ~~Combination~~Divestiture and ~~Divestitures"~~Sale of Assets".

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

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SunPower Corporation

Consolidated Statements of Cash Flows

(In thousands)


	Fiscal Year Ended
	December 29, 2019		December 30, 2018		December 31, 2017
Cash flows from operating activities:
Net loss	$	(7,721)	$	(917,496)	$	(1,170,868)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	80,081		127,204		185,283
Non-cash restructuring charges	5,874		—		—
Stock-based compensation	26,935		26,353		34,674
Non-cash interest expense	9,472		15,346		18,390
Dividend from equity method investee	—		3,947		30,091
Equity in losses (earnings) of unconsolidated investees	7,058		17,815		(25,938)
Mark-to-market (gain) loss on equity investment with readily determinable fair value	(158,288)		6,375		—
Gain on sale of assets	(25,212)		—		—
Gain on business divestiture	(143,400)		(59,347)		—
Gain on sale of investments without readily determinable fair value	(17,275)		(54,196)		(5,346)
Deferred income taxes	5,067		(6,862)		(6,966)
Impairment of equity method investment	—		—		89,564
Impairment of property, plant and equipment	777		369,168		—
Loss on sale and impairment of residential lease assets	33,778		251,984		624,335
Other, net	—		(6,796)		1,298
Changes in operating assets and liabilities:
Accounts receivable	(66,194)		(175)		(1,191)
Contract assets	(38,246)		(43,509)		10,660
Inventories	(128,404)		(39,174)		(38,236)
Project assets	(2,188)		39,512		2,393
Prepaid expenses and other assets	(8,746)		22,763		110,530
Operating lease right-of-use assets	8,530		—		—
Long-term financing receivables, net - held for sale	(473)		(182,937)		(123,674)
Advances to suppliers	50,191		44,417		68,767
Accounts payable and other accrued liabilities	79,394		(127,286)		(216,349)
Contract liabilities	27,531		(30,495)		145,171
Operating lease liabilities	(8,954)		—		—
Net cash used in operating activities	(270,413)		(543,389)		(267,412)
Cash flows from investing activities:
Purchases of property, plant and equipment	(47,395)		(44,906)		(69,791)
Cash paid for solar power systems, leased, net	—		(68,612)		(86,539)
Cash paid for solar power systems	(53,284)		(41,808)		(126,548)
Purchases of marketable securities	—		—		(1,306)


Proceeds from business divestiture, net of cash sold	40,491		23,257		—
Cash paid for acquisitions, net of cash acquired	—		(17,000)		—
Dividend from equity method investee	—		12,952		3,773

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Fiscal Year Ended
December 30, 2018 December 31, 2017 January 1, 2017
Cash flows from operating activities:
Net loss $ (917,496 )
$ (1,170,868 ) $ (521,415 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 127,204

185,283
170,537
Stock-based compensation 26,353

34,674
61,498
Non-cash interest expense 15,346

18,390
1,057
Non-cash restructuring charges —

—
166,717
Gain on settlement of preexisting relationships in connection with acquisition —

—
(203,252 )
Dividend from equity method investees 3,947

30,091
6,949
Equity in (earnings) losses of unconsolidated investees 17,815

(25,938 ) (14,295 )
Excess tax benefit from stock-based compensation —

—
(2,810 )
Gain on sale of equity investments, net (54,196 )
(5,346 ) —
Gain on business divestiture (59,347 )
—
—
Unrealized loss on equity investments with readily determinable fair value 6,375

—
—
Deferred income taxes (6,862 )
(6,966 ) (6,611 )
Impairment of equity method investment —

89,564
90,946
Goodwill impairment —

—
147,365
Impairment of property, plant and equipment 369,168

—
—
Loss (gain) on sale and impairment of residential lease assets 251,984

624,335
(7,263 )
Other, net (6,796 )
1,298
4,793
Changes in operating assets and liabilities:

Accounts receivable (175 )
(1,191 ) (33,465 )
Contract assets (43,509 )
10,660
62,161
Inventories (39,174 )
(38,236 ) (70,448 )
Project assets 39,512

2,393
(3,601 )
Prepaid expenses and other assets 22,763

110,530
3,187
Long-term financing receivables, net (182,937 )
(123,674 ) (172,272 )
Advances to suppliers 44,417

68,767
74,341
Accounts payable and other accrued liabilities (127,286 )
(216,349 ) (18,780 )
Contract liabilities (30,495 )
145,171
(47,622 )
Net cash used in operating activities (543,389 )
(267,412 ) (312,283 )
Cash flows from investing activities:

Purchases of property, plant and equipment (44,906 )
(69,791 ) (187,094 )
Cash paid for solar power systems, leased and to be leased (68,612 )
(86,539 ) (84,289 )
Cash paid for solar power systems (41,808 )
(126,548 ) (38,746 )
Purchases of marketable securities —

(1,306 ) (4,955 )
Cash outflow from sale of residential lease portfolio, net of cash sold (28,004 )
—
—
Proceeds from sales or maturities of marketable securities —

—
6,210
Proceeds from sale of cost method investments 33,402

—
—
Payments to 8point3 Energy Partners LP —

—
(9,838 )
Cash paid for acquisitions, net of cash acquired (17,000 )
—
(24,003 )
Cash paid for intangibles —

—
(521 )
Dividend from equity method investees 12,952

3,773
—
Proceeds from sale of equity method investments 420,306

5,954
—
Proceeds from business divestiture 23,257

—
—
Cash paid for investments in unconsolidated investees (14,687 )
(18,627 ) (11,547 )
Net cash provided by (used in) investing activities 274,900

(293,084 ) (354,783 )
Cash flows from financing activities:

Cash paid for acquisitions —

—
(5,714 )
Proceeds from bank loans and other debt 227,676

339,253
113,645
Repayment of 0.75% debentures due 2018, bank loans and other debt
(535,252 )
(358,317 ) (143,601 )
Proceeds from issuance of non-recourse residential financing, net of issuance costs 192,287

89,612
183,990
Repayment of non-recourse residential financing (17,358 )
(6,888 ) (37,932 )
Contributions from noncontrolling interests and redeemable noncontrolling interests attributable to residential projects 151,204

196,628
146,334
Distributions to noncontrolling interests and redeemable noncontrolling interests attributable to residential projects (21,918 )
(18,228 ) (19,039 )
Proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs 126,020

527,897
738,822
Repayment of non-recourse power plant and commercial financing (31,282 )
(176,069 ) (795,209 )
Contributions from noncontrolling interests attributable to power plant and commercial projects —

800
—
Purchases of stock for tax withholding obligations on vested restricted stock (5,530 )
(4,756 ) (21,517 )
Net cash provided by financing activities 85,847

589,932
159,779
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 2,068

689
735
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents (180,574 )
30,125
(506,552 )
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period¹
544,337

514,212
1,020,764
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period¹
$ 363,763

$ 544,337
$ 514,212

Non-cash transactions:
Assignment of residential lease receivables to third parties $ —

$ 129
$ 4,290
Stock consideration received from business divestiture $ 42,600

$ —
$ —
Acquisition of noncontrolling interests funded by Mezzanine Loan proceeds $ 12,400

$ —
$ —
Costs of solar power systems, leased and to be leased, sourced from existing inventory $ 36,384

$ 57,688
$ 57,422
Costs of solar power systems, leased and to be leased, funded by liabilities $ 3,631

$ 5,527
$ 3,026
Costs of solar power systems under sale-leaseback financing arrangements, sourced from project assets $ 86,540

$ 110,375
$ 27,971
Property, plant and equipment acquisitions funded by liabilities $ 8,214

$ 15,706
$ 43,817
Exchange of receivables for an investment in an unconsolidated investee $ —

$ —
$ 2,890
Acquisition funded by liabilities $ 9,000

$ —
$ 103,354
Contractual obligations satisfied with inventory $ 56,840

$ 34,675
$ —
Assumption of debt by buyer upon sale of equity interest $ 27,321

$ 196,104
$ —
Assumption of mezzanine loan by SunStrong in connection with sale of residential lease assets $ 106,958

$ —
$ —
Assumption of back leverage loans by SunStrong in connection with sale of residential lease assets $ 454,630

$ —
$ —
Retained interest in SunStrong lease portfolio $ 9,750

$ —
$ —
Receivables in connection with sale of residential lease portfolio $ 12,510
$ —
$ —
Supplemental cash flow information:
Cash paid for interest, net of amount capitalized $ 99,204
$ 59,885
$ 35,770
Cash paid for income taxes $ 7,800
$ 12,795
$ 35,414


	Fiscal Year Ended
	December 29, 2019		December 30, 2018		December 31, 2017
Proceeds from sale of assets	59,970		—		—
Proceeds from sale of distribution rights of debt refinancing	1,950		—		—

Cash outflow from sale of residential lease portfolio, net of cash received	(10,923)		(28,004)		—
Proceeds from sale of investments	42,957		453,708		5,954
Cash paid for investments in unconsolidated investees	(12,400)		(14,687)		(18,627)
Net cash provided by (used in) investing activities	21,366		274,900		(293,084)
Cash flows from financing activities:
Proceeds from bank loans and other debt	381,928		227,676		339,253
Repayment of 0.75% debentures due 2018, bank loans and other debt	(271,015)		(535,252)		(358,317)
Proceeds from issuance of non-recourse residential financing, net of issuance costs	72,259		192,287		89,612
Repayment of non-recourse residential financing	(2,959)		(17,358)		(6,888)
Contributions from noncontrolling interests and redeemable noncontrolling interests attributable to residential projects	35,790		151,204		196,628
Distributions to noncontrolling interests and redeemable noncontrolling interests attributable to residential projects	(316)		(21,918)		(18,228)
Proceeds from issuance of non-recourse power plant and commercial financing, net of issuance costs	3,004		126,020		527,897
Repayment of non-recourse power plant and commercial financing	—		(31,282)		(176,069)

Proceeds of common stock equity offering, net of offering costs	171,834		—		—
Contributions from noncontrolling interests attributable to power plant and commercial projects	—		—		800
Payment for prior business combination	(39,000)		—		—
Settlement of contingent consideration arrangement, net of cash received	(1,646)		—		—
Purchases of stock for tax withholding obligations on vested restricted stock	(5,565)		(5,530)		(4,756)
Net cash provided by financing activities	344,314		85,847		589,932
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(373)		2,068		689
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	94,894		(180,574)		30,125
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period¹	363,763		544,337		514,212
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period¹	$	458,657	$	363,763	$	544,337

Non-cash transactions:
Assignment of residential lease receivables to third parties	$	—	$	—	$	129
Stock consideration received from a business divestiture	$	—	$	42,600	$	—
Acquisition of noncontrolling interests funded by Mezzanine Loan proceeds	$	—	$	12,400	$	—


Costs of solar power systems, leased, sourced from existing inventory	$	—	$	36,384	$	57,688
Costs of solar power systems, leased, funded by liabilities	$	—	$	3,631	$	5,527
Costs of solar power systems sourced from existing inventory	$	29,206	$	—	$	—
Costs of solar power systems funded by liabilities	$	2,671	$	—	$	—

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	Fiscal Year Ended
	December 29, 2019		December 30, 2018		December 31, 2017
Costs of solar power systems under sale-leaseback financing arrangements, sourced from project assets	$	—	$	86,540	$	110,375
Property, plant and equipment acquisitions funded by liabilities	$	13,745	$	8,214	$	15,706
Acquisition funded by liabilities	$	—	$	9,000	$	—
Contractual obligations satisfied with inventory	$	1,701	$	56,840	$	34,675
Assumption of debt by buyer upon sale of equity interest	$	—	$	27,321	$	196,104
Right-of-use assets obtained in exchange of lease obligations²	$	111,142	$	—	$	—


Retained interest in SunStrong lease portfolio	$	—	$	9,750	$	—

Derecognition of financing obligations upon business divestiture³	$	590,884	$	—	$	—
Holdback related to sale of commercial sale-leaseback portfolio³	$	1,927	$	—	$	—
Receivables in connection with sale of residential lease assets³	$	2,570	$	12,510	$	—
Assumption of debt by buyer in connection with sale of residential lease assets³	$	69,076	$	561,588	$	—
Aged supplier financing balances reclassified from accounts payable to short-term debt	$	45,352	$	—	$	—

Supplemental cash flow information:
Cash paid for interest, net of amount capitalized	$	32,777	$	99,204	$	59,885
Cash paid for income taxes	$	8,988	$	7,800	$	12,795

¹"Cash, cash equivalents, restricted cash and restricted cash equivalents" balance consisted of ~~"Cash~~"cash and cash equivalents", ~~"Restricted~~"restricted cash and cash equivalents, current portion" and ~~"Restricted~~"restricted cash and cash equivalents, net of current portion" financial statement line items inon the ~~Consolidated Balance Sheets~~consolidated balance sheets for the respective periods.

²Amounts for the year ended December 29, 2019 include the transition adjustment for the adoption of ASC 842 and new Right-of-Use ("ROU") asset additions.

³See Note 4 Business Divestiture and Sale of Assets.

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

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Notes to the Consolidated Financial Statements

Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

SunPower Corporation (together with its subsidiaries, "SunPower," "we," "us," and "our") is a leading global energy company that delivers complete solar solutions to residential, commercial, and power plant customers worldwide through an array of hardware, software, and financing options and through ~~utility-scale~~ solar power ~~system construction and development capabilities,~~solutions, operations and maintenance ("O&M") services, and "Smart Energy" solutions. SunPower's Smart Energy initiative is designed to add layers of intelligent ~~control~~controls to homes, buildings and grids - all personalized through easy-to-use customer interfaces. Of all the solar cells commercially available to the mass market, we believe our solar cells have the highest solar power conversion efficiency, a measurement of the amount of sunlight converted by the solar cell into electricity. SunPower is a majority-owned subsidiary of Total Solar ~~International~~INTL SAS ("Total"), formerly Total Solar International SAS, Total Gas & Power USA, SAS, and Total Energies Nouvelles Activités USA, a subsidiary of Total S.A. ("Total S.A.") (see "Note 2. Transactions with Total and Total ~~S.A"~~S.A").

In the fourth quarter of 2018, in connection with our efforts to improve operational focus and transparency, drive overhead accountability into segment operating results, and increase strategic agility across value chain from our upstream business' core strength in manufacturing and technology and our downstream business' core strength in offering complete solutions in residential and commercial markets,fiscal 2019, we ~~reorganized our segment reporting to an upstream and downstream structure. Previously, we operated under three end-customer segments comprised~~announced the separation of our (i) Residential Segment, (ii) Commercial Segment, and (iii) Power Plan Segment. Historically, the Residential Segment referred to sales of solar energy solutions to residential end-customers, the Commercial Segment referred to sales of energy solutions to commercial and public entity end-customers, and the Power Plant Segment referred to our large-scale solar products and systems and component sales.Maxeon business. Please see Item 1. Business for more details.

Under the new segmentation, SunPower Energy Services Segment ("SunPower Energy Services" or "Downstream") refers to sales of solar energy solutions in the North America region previously included in the legacy Residential Segment and Commercial Segment (collectively previously referred to as "Distributed Generation" or "DG") including direct sales of turn-key engineering, procurement and construction ("EPC") services, sales to our third-party dealer network, sales of energy under power purchase agreements ("PPAs"), storage solutions, cash sales and long-term leases directly to end customers, and sales to resellers. SunPower Energy Services Segment also includes sales of our global Operations and Maintenance ("O&M") services. SunPower Technologies Segment ("SunPower Technologies" or "Upstream") refers to our technology development, worldwide solar panel manufacturing operations, equipment supply to resellers and commercial and residential end-customers outside of North America ("International DG"), and worldwide power plant project development and project sales. Upon reorganization, some support functions and responsibilities, which previously resided within the corporate function, have been shifted to each segment, including financial planning and analysis, legal, treasury, tax and accounting support and services, among others.

Our Chief Executive Officer, as the chief operating decision maker (“CODM”), reviews our business, manages resource allocations and measures performance of our activities among the SunPower Energy Services Segment and SunPower Technologies Segment.

Reclassifications of prior period segment information have been made to conform to the current period presentation. These changes did not materially affect our previously reported Consolidated Financial Statements. See "Note 18. ~~Segment Information" for additional discussion.~~

Liquidity

~~Challenging~~While challenging industry conditions and a competitive environment extended throughout fiscal 2018. Our net losses, resulting in a net use of our available cash, continued in fiscal 2018 and are expected to continue through fiscal 2019. Despite the challenging industry conditions, including uncertainty around the regulatory environment,2019, we believe that our total cash and cash equivalents, including cash expected to be generated from operations, will be sufficient to meet our obligations over the next 12 months from the date of ~~the~~ issuance of ~~our~~these consolidated financial statements. ~~Although~~Also, we have been successful in our ability to divest certain investments and non-core assets, such as the ~~divestiture of our equity interest in 8point3 Energy Partners LP (Note 11.~~ ~~Equity Investments), the sale of certain assets and intellectual property related to the production of microinverters (Note 4.~~ ~~Business Combinations and Divestitures), and the~~ sale of membership interests in our ~~Residential Lease~~Commercial Sale-Leaseback Portfolio, and the sale and leaseback of Hillsboro facility (Note 4. Business ~~Combinations~~Divestiture and

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~~Divestitures~~Assets) ~~and~~. Additionally, we have secured other sources of financing ~~in connection with~~to satisfy our ~~short-term~~ liquidity needs such as ~~well as~~the issuance of common stock through the public offering completed in November 2019 and realizing cash savings resulting from restructuring actions and cost reduction initiatives ~~put in place in the third~~ (Note 14. Common Stock and ~~fourth quarters of fiscal 2016 and the first and second quarter of fiscal 2018, we~~Note 8. Restructuring). We continue to focus on improving our overall operating performance and liquidity, including managing cash ~~flow~~flows and working capital.

WeWhile we have not drawn on it, we also have the ability to enhance our available cash by borrowing up to ~~$95.0~~$55.0 million under ~~a revolving credit facility (the "Revolver") with~~the 2019 Revolver. See Note 11. Debt and Credit Agricole Corporate and Investment Bank ("Credit Agricole") pursuant to a Letter Agreement executed by us and Total S.A. on May 8, 2017 (the "Letter Agreement") through August 26, 2019, the expiration date of the Letter Agreement (see "Note 2. ~~Transactions with Total and Total S.A.~~")Sources.

Although we have historically been able to generate liquidity, we cannot predict, with certainty, the outcome of our actions to generate liquidity as planned.

Basis of Presentation and Preparation

Principles of Consolidation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("United States" or "U.S.," and such accounting principles, "U.S. GAAP") and include the accounts of SunPower, all of our subsidiaries and special purpose entities, as appropriate under consolidation accounting guidelines. Intercompany transactions and balances have been eliminated in consolidation. The assets of the special purpose entities that we establish in connection with certain project financing arrangements for customers are not designed to be available to service our general liabilities and obligations.

~~Reclassifications~~

~~Certain prior period balances have been reclassified to conform to the current period presentation in our consolidated financial statements and the accompanying notes.~~

Fiscal Periods

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. Fiscal 2019, 2018 ~~2017~~ and ~~2016~~2017 are 52-week fiscal years. Our fiscal 2019 ended on December 29, 2019, fiscal 2018 ended on December 30, 2018 and fiscal 2017 ended on December 31, ~~2017 and fiscal 2016 ended on January 1,~~ 2017.

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Management Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires usour management to make estimates and assumptions that affect the amounts reported in ~~the~~these consolidated financial statements and accompanying notes. Significant estimates in these consolidated financial statements include revenue recognition, specifically the nature and timing of satisfaction of performance obligations, standalone selling price of performance obligations and variable consideration; allowances for doubtful accounts receivable; ~~recoverability of financing receivables related to residential leases,~~ inventory and project asset write-downs; stock-based compensation; long-lived asset impairment, specifically estimates for valuation assumptions including discount rates and future cash ~~flows,~~flows; economic useful lives of property, plant and equipment, and intangible ~~assets, and investments;~~assets; fair value of investments, including equity investments for which we apply the fair value option and other financial instruments; residual value of solar power systems, including those subject to residential operating leases; ~~fair value of financial instruments;~~ valuation of contingencies such as accrued warranty; the ~~measurement~~incremental borrowing rate used in discounting of ~~fair value of assets acquired and liabilities assumed in a business combination; the valuation of retained equity interests in divestitures;~~lease liabilities; the fair value of indemnities provided to customers and other ~~parties,~~parties; and income taxes and tax valuation allowances. Actual results could materially differ from those estimates.

Summary of Significant Accounting Policies

Lease Accounting

Effective December 31, 2018, we adopted Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842), as amended ("ASC 842"). For additional information on the changes resulting from the new standard and the impact to our financial results on adoption, refer to the section Recently Adopted Accounting Pronouncements below.

Arrangements with SunPower as a lessee

We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for real estate and are included within operating lease right-of-use ("ROU") assets and operating lease liabilities on the consolidated balance sheets. We elected the practical expedient to combine our lease and related non-lease components for all our leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets also include any lease prepayments made and exclude lease incentives. Many of our lessee agreements include options to extend the lease, which we do not include in our minimum lease terms unless they are reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

Sale-Leaseback Arrangements

We enter into sale-leaseback arrangements under which solar power systems are sold to third parties and subsequently leased back by us over lease terms of up to 25 years.

We classify our initial sale-leaseback arrangements of solar power systems as operating leases or sales-type leases, in accordance with the underlying accounting guidance on leases. We may sell our lessee interests in these arrangements in entirety before the end of the underlying term of the leaseback.

For all sale-leaseback arrangements classified as operating leases, the profit related to the excess of the proceeds compared to the fair value of the solar power systems is deferred and recognized over the term of the lease. Sale-leaseback arrangements classified as finance leases or failed sale, are accounted for under the financing method, the proceeds received from the sale of the solar power systems are recorded as financing liabilities. The financing liabilities are subsequently reduced by our payments to lease back the solar power systems, less interest expense calculated based on our incremental borrowing rate adjusted to the rate required to prevent negative amortization. Refer to Note 4. Business Divestiture and Sale of Assets, for details of the sale of our commercial sale-leaseback portfolio during fiscal 2019.

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Arrangements with SunPower as a lessor

Solar Services

We offer solar services, in partnership with third-party financial institutions, which allows our residential customers to obtain continuous access to SunPower solar power systems under contracts for terms of up to 20 years. Solar services revenue is primarily comprised of revenue from such contracts wherein we provide continuous access to an operating solar system to third parties.

We begin to recognize revenue on solar services when permission to operate ("PTO") is given by the local utility company, the system is interconnected and operation commences. We recognize revenue evenly over the time that we satisfy our performance obligations over the initial term of the solar services contracts. Solar services contracts typically have an initial term of 20 years. After the initial contract term, our customers may request an extension of the term of the contract on prevailing market terms, or request to remove the system. Otherwise, the contract will automatically renew and continue on a month-to-month basis.

We also apply for and receive Solar Renewable Energy Credits ("SRECs") associated with the energy generated by our solar energy systems and sell them to third parties in certain jurisdictions. SREC revenue is estimated net of any variable consideration related to possible liquidated damages if we were to deliver fewer SRECs than contractually committed, and is generally recognized upon delivery of the SRECs to the counterparty.

We typically provide a system output performance warranty, separate from our standard solar panel product warranty, to our solar services customers. In connection with system output performance warranties, we agree to pay liquidated damages in the event the system does not perform to the stated specifications, with certain exclusions. The warranty excludes system output shortfalls attributable to force majeure events, customer curtailment, irregular weather, and other similar factors. In the event that the system output falls below the warrantied performance level during the applicable warranty period, and provided that the shortfall is not caused by a factor that is excluded from the performance warranty, the warranty provides that we will pay the customer an amount based on the value of the shortfall of energy produced relative to the applicable warrantied performance level. Such liquidated damages represent a form of variable consideration and are estimated at contract inception and updated at each reporting period and recognized over time as customers receive and consume the benefits of the solar services.

There are rebate programs offered by utilities in various jurisdictions and are issued directly to homeowners, based on the lease agreements, the homeowners assign these rights to rebate to us. These rights to rebate are considered non-cash consideration, measured based on the utilities' rebates from the installed solar panels on the homeowners' roofs and recognized over the lease term.

Revenue from solar services contracts entered into prior to the adoption of ASC 842 were accounted for as leases under the superseded lease accounting guidance and reported within ‘Residential Leasing’ on the consolidated statement of operations.

Fair Value of Financial Instruments

The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values due to their short-term maturities. Equity investments with readily determinable fair value are carried at fair value based on quoted market prices or estimated based on market conditions and risks existing at each balance sheet date. Equity investments without readily determinable fair value are

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measured at cost less impairment, and are adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. Derivative financial instruments are carried at fair value based on quoted market prices for financial instruments with similar characteristics. The effective portion of derivative financial instruments is excluded from earnings and reported as a component of "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. The ineffective portion of derivatives financial instruments are included in "Other, net" in the Consolidated Statements of Operations. During fiscal 2019, we recorded a fair value adjustment of $2.0 million to our equity investments with Fair Value Option ("FVO"). The fair value adjustment was included within "equity in losses of unconsolidated investees" in our consolidated statements of operations for the year ended December 29, 2019 (see Note 7. Fair Value Measurements).

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Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from non-owner sources. Our comprehensive income (loss) for each period presented is comprised of (i) our net income (loss); (ii) foreign currency translation adjustment of our foreign subsidiaries whose assets and liabilities are translated from their respective functional currencies at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates prevailing during the applicable period; (iii) changes in unrealized gains or losses, net of tax, for the effective portion of derivatives designated as cash flow hedges; and (iv) net income (loss) on long-term pension liability adjustment (see Note ~~13.~~12. Derivative Financial Instruments).

Cash Equivalents

Highly liquid investments with original or remaining maturities of ninety days or less at the date of purchase are considered cash equivalents.

Cash in Restricted Accounts

We maintain cash and cash equivalents in restricted accounts pursuant to various letters of credit, surety bonds, loan agreements, and other agreements in the normal course of business. We also hold debt securities, consisting of Philippine government bonds, which are classified as "Restricted ~~long-term~~short-term marketable securities" on our ~~Consolidated Balance Sheets~~consolidated balance sheets as they are maintained as collateral for present and future business transactions within the country (see Note 6.5. Balance Sheet Components).

Short-Term and Long-Term Investments

We may invest in money market funds and debt securities. In general, investments with original maturities of greater than ninety days and remaining maturities of one year or less are classified as short-term investments, and investments with maturities of more than one year are classified as long-term investments. Investments with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such investments represent the investment of cash that is available for current operations. Despite the long-term maturities, we have the ability and intent, if necessary, to liquidate any of these investments in order to meet our working capital needs within our normal operating cycles. We have classified these investments as ~~available-for-sale~~held-to-maturity securities.

Short-Term and Long-Term Inventories

Inventories are accounted for on a first-in-first-out basis and are valued at the lower of cost or net realizable value. We evaluate the realizability of our inventories, including purchase commitments under fixed-price long-term supply agreements, based on assumptions about expected demand and market conditions. Our assumption of expected demand is developed based on our analysis of bookings, sales backlog, sales pipeline, market forecast, and competitive intelligence. Our assumption of expected demand is compared to available inventory, production capacity, future polysilicon purchase commitments, available third-party inventory, and growth plans. Our factory production plans, which drive materials requirement planning, are established based on our assumptions of expected demand. We respond to reductions in expected demand by temporarily reducing manufacturing output and adjusting expected valuation assumptions as necessary. In addition, expected demand by geography has changed historically due to changes in the availability and size of government mandates and economic incentives.

We evaluate the terms of our long-term inventory purchase agreements with suppliers, including joint ventures, for the procurement of polysilicon, ingots, wafers, and solar cells and establishes accruals for estimated losses on adverse purchase commitments as necessary, such as lower of cost or net realizable value adjustments, forfeiture of advanced deposits and liquidated damages. Obligations related to non-cancellable purchase orders for inventories match current and forecasted sales orders that will consume these ordered materials and actual consumption of these ordered materials are compared to expected demand regularly. We anticipate total obligations related to long-term supply agreements for inventories will be realized

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because quantities are less than our expected demand for our solar power products for the foreseeable future and because the raw materials subject to these long-term supply agreements are not subject to spoilage or other factors that would deteriorate its usability; however, if raw materials inventory balances temporarily exceed near-term demand, we may elect to sell such inventory to third parties to optimize working capital needs. In addition, because the purchase prices required by our long-term polysilicon agreements are significantly higher than current market prices for similar materials, if we are not able to profitably utilize this material in our operations or elect to sell near-term excess, we may incur additional losses. Other market conditions that could affect the realizable value of our inventories and are periodically evaluated by us include historical inventory

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turnover ratio, anticipated sales price, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer concentrations, the current market price of polysilicon as compared to the price in our fixed-price arrangements, and product merchantability, among other factors. If, based on assumptions about expected demand and market conditions, we determine that the cost of inventories exceeds its net realizable value or inventory is excess or obsolete, or we enter into arrangements with third parties for the sale of raw materials that do not allow us to recover our current contractually committed price for such raw materials, we record a write-down or accrual equal to the difference between the cost of inventories and the estimated net realizable value, which may be material. If actual market conditions are more favorable, we may have higher gross margin when products that have been previously written down are sold in the normal course of business Additionally, the Company’s classification of its inventory as either current or long-term inventory requires it to estimate the portion of on-hand inventory that can be realized over the next 12 months. (see Note 6.5. Balance Sheet Components).

~~Solar Power Systems Leased and to be Leased~~

Solar power systems leased to residential customers under operating leases are stated at cost, less accumulated depreciation and are amortized to their estimated residual value over the life of the lease term of up to 20 years.

Solar power systems to be leased represent systems that are under installation or which have not been interconnected, which will be depreciated as solar power systems leased to customers when the respective systems are completed, interconnected and subsequently leased to residential customers under operating leases.

~~Initial direct costs for operating leases are capitalized and amortized over the term of the related customer lease agreements.~~

During fiscal 2018 and 2017, events and circumstances indicated that the carrying value of our solar power systems leased and to be leased might not be recoverable. We determined it was necessary to evaluate the potential for impairment in our ability to recover the carrying amounts of these assets. Estimates and judgments about future cash flows were made using an income approach defined as Level 3 inputs under fair value measurement standards. The income approach, specifically a discounted cash flow analysis, included assumptions for, among others, forecasted lease income, expenses, default rates, residual value of these lease assets and long-term discount rates, some of which require significant judgment by us. In accordance with such evaluation, we recognized a non-cash impairment charge on the Consolidated Statement of Operations. For additional information on the related impairment charge, see "Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 7. ~~Leasing—Impairment of Residential Lease Assets.~~"

Financing Receivables

Leases are classified as either operating or sales-type leases in accordance with the relevant accounting guidelines. Financing receivables are generated by solar power systems leased to residential customers under sales-type leases.

Financing receivables ~~are initially recorded based on the expected~~represent gross minimum lease payments to be received from customers over a period commensurate

with the remaining lease term of up to 20 years and the ~~systems~~system's estimated residual value, net of unearned income and allowance for estimated losses. Initial direct costs for sales-type leases are recognized as cost of sales when the solar power systems are placed in service.

~~Due~~Our evaluation of the recoverability of these financing receivables is based on evaluation of the likelihood, based on

current information and events, and whether we will be able to collect all amounts due according to the ~~homogeneous nature~~contractual terms of ~~our leasing transactions,~~the

underlying lease agreements. In accordance with this evaluation, we manage our financing receivables on an aggregate basis when assessing credit risk. We also consider the credit risk profile for our lease customers to be homogeneous due to the criteria we use to approve customers for our residential leasing program, which among other things, requires a minimum "fair" FICO credit quality. Accordingly, we do not regularly categorize our financing receivables by credit risk.

We recognize an allowance for losses on financing receivables ~~in an~~

based on our estimate of the amount equal to the probable losses net of recoveries. ~~We maintain reserve percentages on past-due receivable aging buckets and base such percentages on several factors, including consideration~~The combination of ~~historical credit losses and information derived from industry benchmarking. We also place doubtful~~the leased solar power

systems discussed in the preceding paragraph together with the lease financing receivables ~~on nonaccrual status and discontinue accrual of interest. Financing receivables over 180 days are determined~~is referred to ~~be delinquent.~~ as the "Residential

Lease Portfolio."

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During fiscal 2018 and 2017, events and circumstances indicated that we might not be able to collect all amounts due according to the contractual terms of the underlying lease agreements. We determined it was necessary to evaluate the potential for allowances in our ability to collect these receivables. Estimates and judgments about future cash flows were made using an income approach defined as Level 3 inputs under fair value measurement standards. The income approach, specifically a discounted cash flow analysis, included assumptions for, among others, forecasted lease income, expenses, default rates,

residual value of these lease assets and long-term discount rates, all of which require significant judgment by us. In accordance with such evaluation, we recognized an allowance for losses on the ~~Consolidated Statement~~consolidated statement of ~~Operations. For~~operations.

During fiscal 2019, we performed a recoverability test for assets in the residential assets by estimating future undiscounted net cash flows expected to be generated by the assets, based on our own specific alternative courses of action under consideration. The alternative courses were either to sell or refinance the assets, or hold the assets until the end of their previously estimated useful lives. Upon consideration of the alternatives, we determined that market value, in the form of indicative purchase price from a third-party investor was available for a portion of our residential assets. As we intend to sell these remaining residential portfolio assets, we used the indicative purchase price from a third-party investor as fair value of the underlying net assets in our impairment evaluation. See Note 6. Solar Services for additional information on the related impairment ~~charge (see Note 7.~~ ~~Leasing—Impairment of Residential Lease Assets)~~.charge.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation, excluding solar power systems leased to residential customers and those associated with sale-leaseback transactions under the financing method, is computed using the straight-line method over the estimated useful lives of the assets as presented below. Solar power systems leased to residential customers ~~and those associated with sale-leaseback transactions under the financing method~~ are depreciated using the straight-line method to their estimated residual values over the lease terms of up to 20 years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining term of the lease. Repairs and maintenance costs are expensed as incurred.

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			Useful Lives in Years
Buildings			20 to 30
Leasehold improvements			1 to 20
Manufacturing equipment			7 to 15
Computer equipment			2 ~~to 7~~to7
Solar power systems			30
Furniture and fixtures			3 to 5

Interest Capitalization

The interest cost associated with major development and construction projects is capitalized and included in the cost of the property, plant and equipment or project assets. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. When no debt is specifically identified as being incurred in connection with a construction project, we capitalize interest on amounts expended on the project at our weighted average cost of borrowed money.

Long-Lived Assets Impairment

We evaluate our long-lived assets, including property, plant and equipment, solar power systems leased and to be leased, and other intangible assets with finite lives, for impairment whenever events or changes in circumstances arise. This evaluation includes consideration of technology obsolescence that may indicate that the carrying value of such assets may not be recoverable. The assessments require significant judgment in determining whether such events or changes have occurred. Factors considered important that could result in an impairment review include significant changes in the manner of use of a long-lived asset or in its physical condition, a significant adverse change in the business climate or economic trends that could affect the value of a long-lived asset, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset, significant under-performance relative to expected historical or projected future operating results, or a current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

For purposes of the impairment evaluation, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. We must exercise judgment in assessing such groupings and levels. We then compare the estimated future undiscounted net cash flows expected to be generated by the asset group (including the eventual disposition of the asset group at residual value) to the asset group’s carrying value to determine if the asset group is recoverable. If our estimate of future undiscounted net cash flows is insufficient to recover the carrying value of the asset group, we record an impairment loss in the amount by which the carrying value of the asset group exceeds the fair value. Fair value is generally measured based on (i) internally developed discounted

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cash flows for the asset group, (ii) third-party valuations, and (iii) quoted market prices, if available. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. For additional information on the impairment charge recorded in ~~the year ended December 30,~~fiscal 2019 and 2018, and the underlying fair value assumptions, see ~~"Note~~Note 6. ~~Balance Sheet Components-Impairment of Property, Plant and Equipment" and "Note 7.~~ ~~Leasing-Impairment of Residential Lease Assets~~Solar Services."

Product Warranties

We generally provide a 25-year standard warranty for the solar panels that we manufacture for defects in materials and workmanship. The warranty provides that we will repair or replace any defective solar panels during the warranty period. In addition, we pass through to ~~customers'~~customers long-term warranties from the original equipment manufacturers of certain system components, such as inverters. Warranties of 25 years from solar panel suppliers are standard in the solar industry, while certain system components carry warranty periods ranging from five to 20 years.

In addition, we generally warrant our workmanship on installed systems for periods ranging up to 25 years and also provide a separate system output performance warranty to customers that have subscribed to our post-installation monitoring and maintenance services which expires upon termination of the post-installation monitoring and maintenance services related to the system. The warrantied system output performance level varies by system depending on the characteristics of the system and the negotiated agreement with the customer, and the level declines over time to account for the expected degradation of the system. Actual system output is typically measured annually for purposes of determining whether warrantied performance levels have been met. The warranty excludes system output shortfalls attributable to force majeure events, customer

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curtailment, irregular weather, and other similar factors. In the event that the system output falls below the warrantied performance level during the applicable warranty period, and provided that the shortfall is not caused by a factor that is excluded from the performance warranty, the warranty provides that we will pay the customer a liquidated damage based on the value of the shortfall of energy produced relative to the applicable warrantied performance level.

We maintain reserves to cover the expected costs that could result from these warranties. Our expected costs are generally in the form of product replacement or repair. Warranty reserves are based on our best estimate of such costs and are recognized as a cost of revenue. We continuously monitor product returns for warranty failures and maintains a reserve for the related warranty expenses based on various factors including historical warranty claims, results of accelerated lab testing, field monitoring, vendor reliability estimates, and data on industry averages for similar products. Due to the potential for variability in these underlying factors, the difference between our estimated costs and our actual costs could be material to our consolidated financial statements. If actual product failure rates or the frequency or severity of reported claims differ from our estimates or if there are delays in our responsiveness to outages, we may be required to revise our estimated warranty liability. Historically, warranty costs have been within our expectations (see Note ~~10.~~ 9. Commitments and Contingencies).

Revenue Recognition

~~Effective January 1, 2018, we adopted Accounting Standards Update No. 2014-09—Revenue from Contracts with Customers (Topic 606), as amended ("ASC 606"). For additional information on the new standard and the impact to our financial results, refer to the section~~ ~~Impact to Previously Reported Consolidated Financial Statements~~ ~~below.~~

Module and Component Sales

We sell our solar panels and balance of system components primarily to dealers, system integrators and distributors, and recognizes revenue at a point in time when control of such products transfers to the customer, which generally occurs upon shipment or delivery depending on the terms of the contracts with the customer. There are no rights of return. Other than standard warranty obligations, there are no significant post-shipment obligations (including installation, training or customer acceptance clauses) with any of our customers that could have an impact on revenue recognition. Our revenue recognition policy is consistent across all geographic areas.

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Solar Power System Sales and Engineering, Procurement, and Construction Services

We design, manufacture and sell rooftop and ground-mounted solar power systems under construction and development ~~agreements.~~ agreements, to our residential and commercial customers. In contracts where we sell completed systems as a single performance obligation, primarily to our joint venture for residential projects, we recognize revenue at the point-in-time when such systems are placed in service. Any advance payments received before control is transferred is classified as "contract liabilities."

Engineering, procurement and construction ("EPC") projects governed by customer contracts that require us to deliver functioning solar power systems are generally completed within three to twelve months from commencement of construction. Construction on large projects may be completed within eighteen to thirty-six months, depending on the size and location. We recognize revenue from EPC services over time as our performance creates or enhances an energy generation asset controlled by the customer. We use an input method based on cost incurred as we believe that this method most accurately reflects our progress toward satisfaction of the performance obligation. Under this method, revenue arising from fixed-price construction contracts is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.

Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to contract performance, such as indirect labor, supplies, and tools. Project material costs are included in incurred costs when the project materials have been installed by being permanently attached or fitted to the solar power system as required by the project’s engineering design. Cost-based input methods of revenue recognition require us to make estimates of net contract revenues and costs to complete the projects. In making such estimates, significant judgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other payments to customers. Significant judgment is also required to evaluate assumptions related to the costs to complete the projects, including materials, labor, contingencies, and other system costs. If the 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 and can be reasonably estimated.

For sales of solar power systems in which we sell a controlling interest in the project to a customer, we recognize all of the revenue for the consideration received, including the fair value of the noncontrolling interest obtained or retained, and in circumstances where we maintain significant influence over the retained noncontrolling interest, we defer any profit associated with our retained equity stake through “Equity in earnings of unconsolidated investees.” The deferred profit is subsequently recognized on a straight-line basis over the useful life of the underlying system. We estimate the fair value of the noncontrolling interest using an income approach based on the valuation of the entire solar project. Further, in situations where we sell membership interests in our project entities to third-party tax equity investors in return for tax benefits (generally federal and/or state investment tax credits and accelerated depreciation), we view the sale of the rights to tax attributes associated with ownership of the underlying solar systems as a distinct performance obligation in the scope of ASC 606 because it is an output of our ordinary activities consistent with the guidance in ASC 606-10-15-3. The sale of the rights to the tax attributes is recognized at a point in time when the customers are eligible to claim the tax benefits, generally at substantial completion of the solar power projects. The fair value of the tax attributes generally begins with an independent third-party appraisal which supports the eligible cost basis for the qualifying solar energy property. In certain circumstances, we have provided indemnification to customers and investors under which we are contractually obligated to compensate these parties for losses they may suffer as a result of reduction in tax benefits received under the investment tax credit and U.S. Treasury Department's cash grant programs. Refer to "Note 10. ~~Commitments and Contingencies" for further details.~~

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

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Changes in estimates for sales of systems and 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. The cumulative effect of revisions to transaction prices or input cost estimates are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated.

Operations and Maintenance

We offer our customers various levels of post-installation operations and maintenance ("O&M") services with the objective of optimizing our customers' electrical energy production over the life of the system. We determine that the post-installation systems monitoring and maintenance qualifies as a separate performance obligation. Post-installation monitoring and maintenance is deferred at the time the contract is executed, based on the estimate of selling price on a standalone basis, and is recognized to revenue over time as customers receive and consume benefits of such services. The non-cancellable term of the O&M contracts are typically 90 days for commercial and residential customers and 180 days for power plant customers.

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We typically provide a system output performance warranty, separate from our standard solar panel product warranty, to customers that have subscribed to our post-installation O&M services. In connection with system output performance warranties, we agree to pay liquidated damages in the event the system does not perform to the stated specifications, with certain exclusions. The warranty excludes system output shortfalls attributable to force majeure events, customer curtailment, irregular weather, and other similar factors. In the event that the system output falls below the warrantied performance level during the applicable warranty period, and provided that the shortfall is not caused by a factor that is excluded from the performance warranty, the warranty provides that we will pay the customer an amount based on the value of the shortfall of energy produced relative to the applicable warrantied performance level. Such liquidated damages represent a form of variable consideration and are estimated at contract inception and updated at each reporting period and recognized over time as customers receive and consume the benefits of the O&M services.

Shipping and Handling Costs

We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer goods and, accordingly, records such costs in cost of revenue.

Taxes Collected from Customers and Remitted to Governmental Authorities

We exclude from our measurement of transaction prices all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of revenue or cost of revenue.

Stock-Based Compensation

We measure and record compensation expense for all stock-based payment awards based on estimated fair values. We provide stock-based awards to our employees, executive officers, and directors through various equity compensation plans including our employee stock option and restricted stock plans. The fair value of restricted stock units is based on the market price of our common stock on the date of grant. We have not granted stock options since fiscal 2008.

We estimate stock option forfeitures at the date of grant. Our estimate of forfeitures is based on our historical activity, which we believe is indicative of expected forfeitures. In subsequent periods if the actual rate of forfeitures differs from our estimate, the forfeiture rates are required to be revised, as necessary. Changes in the estimated forfeiture rates can have a significant effect on stock-based compensation expense since the effect of adjusting the rate is recognized in the period the forfeiture estimate is changed.

We also grant performance share units to executive officers and certain employees that require us to estimate expected achievement of performance targets over the performance period. This estimate involves judgment regarding future expectations of various financial performance measures. If there are changes in our estimate of the level of financial performance measures expected to be achieved, the related stock-based compensation expense may be significantly increased or reduced in the period that our estimate changes.

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Accounting for Business Divestitures

From time to time, we may dispose of significant assets or portions of our business by sale or exchange for other assets. In accounting for such transactions, we apply the applicable accounting guidance under U.S. GAAP pertaining to discontinued operations and disposals of components of an entity. Our assessment includes whether such disposal represents a significant strategic shift in our operations and on the extent of our continuing involvement in relation to that portion of our business. We evaluate the significance of our intended divestiture transactions in relation to our consolidated financial measures to determine whether a disposal of assets or a business qualifies as discontinued operations. For additional details see Note 4. Business Divestitures and Sale of Assets. We recognize disposal related costs that are not part of divestiture consideration as general and administrative expense as they are incurred. These costs typically include transaction and disposal costs, such as legal, accounting, and other professional fees.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense totaled approximately $8.2 million, $6.9 million ~~$6.3 million~~ and ~~$24.9~~$6.3 million, in fiscal 2019, 2018, ~~2017,~~ and ~~2016,~~2017, respectively.

Research and Development ~~Expense~~Expenses

Research and development expense consists primarily of salaries and related personnel costs, depreciation and the cost of solar cell and solar panel materials and services used for the development of products, including experiments and testing. All research and development costs are expensed as incurred. Research and development ~~expense is~~expenses are reported net of contributions under the R&D Agreement with Total (See Note 2. Transactions with Total and Total S.A. for further details) and contracts with governmental agencies because such contracts are considered collaborative arrangements.

Translation of Foreign Currency

SunPower Corporation and certain of our subsidiaries use their respective local currency as their functional currency. Accordingly, foreign currency assets and liabilities are translated using exchange rates in effect at the end of the period.

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Aggregate exchange gains and losses arising from the translation of foreign assets and liabilities are included in “Accumulated other comprehensive loss” in the Consolidated Balance Sheets. Foreign subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities using exchange rates in effect at the end of the period. Exchange gains and losses arising from the remeasurement of monetary assets and liabilities are included in "Other, net" in the ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations. Non-monetary assets and liabilities are carried at their historical values.

We include gains or losses from foreign currency transactions in "Other, net" in the ~~Consolidated Statements~~consolidated statements of ~~Operations~~operations with the other hedging activities described in Note ~~13.~~ 12. Derivative Financial Instruments.

Concentration of Credit Risk

We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. Financial and derivative instruments that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents, restricted cash and cash equivalents, investments, accounts receivable, notes receivable, advances to suppliers, foreign currency option contracts, foreign currency forward contracts, bond hedge and warrant transactions, and purchased options. Our investment policy requires cash and cash equivalents, restricted cash and cash equivalents, and investments to be placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. Similarly, we enter into foreign currency derivative contracts and convertible debenture hedge transactions with high-quality financial institutions and limit the amount of credit exposure to any one counterparty. The foreign currency derivative contracts are limited to a time period of less than 9 months. We regularly evaluate the credit standing of our counterparty financial institutions.

We perform ongoing credit evaluations of our customers’ financial condition whenever deemed necessary and generally we do not require collateral from our leasing customers. We maintain an allowance for doubtful accounts based on the expected collectability of all accounts receivable, which takes into consideration an analysis of historical bad debts, specific customer creditworthiness and current economic trends. Qualified customers under our residential lease program are generally required to have a minimum credit score. We believe that our concentration of credit risk is limited because of our large number of customers, credit quality of the customer base, small account balances for most of these customers, and customer geographic diversification. As of December 29, 2019, one customer accounted for 13.9% of our accounts receivable balance. As of

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December 30, 2018, ~~and December 31, 2017,~~ we had no customers that accounted for at least 10% of accounts receivable. ~~In addition,~~We had two different customers that accounted for 25.2% and 20.5% of our "Construction costs in excess of billing" balance as of December 29, 2019. We had one customer that accounted for ~~approximately 24% and 22%~~24.0% of our ~~"Contract assets"~~"Construction costs in excess of billing" balance as of December 30, 2018, ~~and December 31, 2017,~~ respectively, on the ~~Consolidated Balance Sheets.~~consolidated balance sheets. As of December 29, 2019 and December 30, 2018, our "Construction costs in excess of billing" balance was $47.7 million and $34.3 million, respectively.

We have entered into agreements with vendors that specify future quantities and pricing of polysilicon to be supplied for the next ~~three~~2 years. The purchase prices required by these polysilicon supply agreements are significantly higher than current market prices for similar materials. Under certain agreements, we were required to make prepayments to the vendors over the terms of the arrangements.

Income Taxes

Deferred tax assets and liabilities are recognized for temporary differences between financial statement and income tax bases of assets and liabilities. Valuation allowances are provided against deferred tax assets when we cannot conclude that it is more likely than not that some portion or all deferred tax assets will be realized.

As applicable, interest and penalties on tax contingencies are included in ~~"Benefit~~"(Provision for) benefit from ~~(provision for)~~ income taxes" in the Consolidated Statements of Operations and such amounts were not material for any periods presented. In addition, foreign exchange gains (losses) may result from estimated tax liabilities, which are expected to be settled in currencies other than the U.S. dollar.

The Tax Act and Jobs Act of 2017 (the "Tax Act") also included a provision to tax Global Intangible Low-Taxed Income (“GILTI”), of foreign subsidiaries in excess of a deemed return on their tangible assets. Pursuant to the SEC guidance on accounting for the Tax Act, corporations are allowed to make an accounting policy election to either (i) recognize the tax impact of GILTI as a period cost (the “period cost method”), or (ii) account for GILTI in the corporation’s measurement of deferred taxes (the “deferred method”). In the fourth quarter of the fiscal year 2018, we elected to recognize the tax impact of GILTI as a period cost.

Investments in Equity Interests

Investments in entities in which we can exercise significant influence, but do not own a majority equity interest or otherwise control, are accounted for under the equity method. We record our share of the results of these entities as "Equity in

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earnings (losses) of unconsolidated investees" on the Consolidated Statements of Operations. We monitor our investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the entities and records reductions in carrying values when necessary. The fair value of privately-held investments is estimated using the best available information as of the valuation date, including current earnings trends, undiscounted cash flows, and other company specific information, including recent financing ~~rounds~~rounds.

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, to mitigate volatility in reported earnings that results from

the use of different measurement attributes. 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 on a quarterly basis. 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 (see Note 6. 5. Balance Sheet Components, ~~and~~ Note 8. 7. Fair Value Measurements,andNote 10. Equity Investments).

Noncontrolling Interests

Noncontrolling interests represents the portion of net assets in consolidated subsidiaries that are not attributable, directly or indirectly, to us. Beginning in fiscal 2013, we have entered into facilities with third-party investors under which the investors are determined to hold noncontrolling interests in entities fully consolidated by us. The net assets of the shared entities are attributed to the controlling and noncontrolling interests based on the terms of the governing contractual arrangements. We further determined the hypothetical liquidation at book value method ("HLBV Method") to be the appropriate method for attributing net assets to the controlling and noncontrolling interests as this method most closely mirrors the economics of the governing contractual arrangements. Under the HLBV Method, we allocate recorded income (loss) to each investor based on the change, during the reporting period, of the amount of net assets each investor is entitled to under the governing contractual arrangements in a liquidation scenario.

~~Business Combinations~~

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We record all acquired assets and assumed liabilities, including goodwill, other intangible assets, and in-process research and development, at fair value. The initial recording of goodwill, other identifiable intangible assets, and in-process research and development, requires certain estimates and assumptions concerning the determination of the fair values and useful lives. The judgments made in the context of the purchase price allocation can materially impact our future results of operations. Accordingly, for significant acquisitions, we obtain assistance from third-party valuation specialists. The valuations calculated from estimates are based on information available at the acquisition date (see Note 4. ~~Business Combinations and Divestiture~~ ~~and Note 5.~~ ~~Other Intangible Assets~~). We charge acquisition related costs that are not part of the consideration to general and administrative expense as they are incurred. These costs typically include transaction and integration costs, such as legal, accounting, and other professional fees.

We initially record receipts of net assets or equity interests between entities under common control at their carrying amounts in the accounts of the transferring entity. Financial statements and financial information presented for prior years are retrospectively adjusted to effect the transfer as of the first date for which the entities were under common control. If the carrying amounts of the assets and liabilities transferred differ from the historical cost of the parent of the entities under common control, then amounts recognized in our financial statements reflect the transferred assets and liabilities at the historical cost of the parent of the entities under common control. Financial statements and financial information presented for prior years are also retrospectively adjusted to furnish comparative information as though the assets and liabilities had been transferred at that date.

Recently Adopted Accounting Pronouncements

In ~~February~~October 2018, the Financial Accounting ~~Standards~~Standard Board ("FASB") issued ~~Accounting Standards Update ("ASU") No. 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,~~ to permit companies to reclassify disproportionate tax effects in accumulated other comprehensive income ("AOCI") caused by the Tax Act to retained earnings. Companies may adopt the new guidance using one of two transition methods: retrospective to each period in which the income tax effects of the Tax Act related to items remaining in AOCI are recognized, or at the beginning of the period of adoption. We adopted this ASU in the fourth quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815)~~ to target improvements to accounting for hedging activities. The improvements include (i) alignment of risk management activities and financial reporting, and (ii) other simplifications in the application of hedge accounting guidance. The new guidance is effective for us no later than the first quarter of fiscal 2019 and requires a modified retrospective approach to adoption. We elected early adoption of this ASU in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation - Stock Compensation(Topic 718)~~ ~~to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. We~~

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~~adopted this ASU in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.~~

~~In March 2017, the FASB issued ASU No. 2017-07,~~ ~~Compensation - Retirement Benefits(Topic 715)~~ to provide final guidance on the presentation of net periodic pension and postretirement benefit cost. The amendment requires the bifurcation of net benefit cost. The service cost component will be presented with other employee compensation costs in operating income or capitalized in assets. The other components will be recorded separately outside of operations and will not be eligible for capitalization. The guidance is required to be applied on a retrospective basis for the presentation of the service cost component and the other components of net benefit cost and on a prospective basis for the capitalization of only the service cost component of net benefit cost. We adopted this ASU in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

~~In February 2017, the FASB issued ASU 2017-05,~~ ~~Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)~~ to clarify the scope and application of the sale or transfer of nonfinancial assets to noncustomers, including partial sales and also to define what constitutes an “in substance nonfinancial asset” which can include financial assets. The new guidance eliminates several accounting differences between transactions involving assets and transactions involving businesses. Further, the guidance aligns the accounting for derecognition of a nonfinancial asset with that of a business. We adopted this ASU in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

~~In January 2017, the FASB issued ASU No. 2017-01,~~ ~~Business Combinations (Topic 805)~~ to clarify the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance was effective for us no later than the first quarter of fiscal 2018 and required a prospective approach to adoption. We adopted this ASU in the first quarter of fiscal 2018. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10)~~ ("ASU 2016-01") to require equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). In February 2018, the FASB issued ASU No. 2018-03, ~~Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10)~~, which provided clarifications to ASU 2016-01. We adopted this ASU in the first quarter of fiscal 2018 on a prospective basis for our equity investments without readily determinable fair value and elected the cost less impairment (if any) method, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer (the "measurement alternative method"). This election is reassessed on a required recurring basis. The adoption of this ASU did not have a material impact on our consolidated financial statements and disclosures.

In May 2014, the FASB issued ASC 606. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted ASC 606 on January 1, 2018, using the full retrospective method, which required us to restate each prior period presented. We implemented key system functionality and internal controls to enable the preparation of financial information upon adoption.

The most significant impact of ASC 606 relates to the sales of solar power systems that include the sale or lease of related real estate previously accounted for under the guidance for real estate sales ASC 360-20, ~~Property, Plant, and Equipment.~~ ASC 360-20 required us to evaluate whether such arrangements had any forms of continuing involvement that may have affected the revenue or profit recognition of the transactions, including arrangements with prohibited forms of continuing involvement requiring us to reduce the potential profit on a project sale by our maximum exposure to loss. The adoption of ASC 606, which supersedes the real estate sales guidance under ASC 360-20, generally results in the earlier recognition of revenue and profit than our historical practice under ASC 360-20. For sales arrangements in which we obtain or retain an interest in the project sold to the customer, we recognize all the revenue for the consideration received, including the fair value of the noncontrolling interests obtained or retained, and defers any profits associated with the interest retained through "Equity in earnings (losses) of unconsolidated investees." We then recognize any deferred profit on a straight-line basis over the useful life of the underlying system, with any remaining amount recognized upon the sale of the noncontrolling interest to a third party. Following the adoption of ASC 606, the revenue recognition for our other sales arrangements, including the sales of components, sales and construction of solar systems, and O&M services, remained materially consistent. The revenue recognition for residential leasing and sale-leaseback arrangements remained consistent as they follow other U.S. GAAP guidance.

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~~As part of our adoption of ASC 606 in the first quarter of fiscal 2018, we elected to apply the following practical expedients:~~

~~We have not restated contracts that begin and are completed within the same annual reporting period;~~

For completed contracts that have variable consideration, we used the transaction price at the date upon which the contract was completed rather than estimating variable consideration amounts in the comparative reporting periods;

~~We have excluded disclosures of transaction prices allocated to remaining performance obligations and when we expect to recognize such revenue for all periods prior to the date of initial application;~~

~~We have not retrospectively restated our contracts to account for those modifications that were entered into before January 3, 2016, the earliest reporting period impacted by ASC 606;~~

We have expensed costs as incurred for costs to obtain a contract when the amortization period would have been one year or less. These costs are included in selling, general, and administrative expenses; and

We have not assessed a contract asset or contract liability for a significant financing component if the period between the customer's payment and our transfer of goods or services is one year or less.

~~Refer to~~ ~~Impact to Previously Reported Consolidated Financial Statements~~ below for the impact of adoption of the standard on the consolidated financial statements as of December 31, 2017 and January 1, 2017, and for the fiscal years ended December 31, 2017 and January 1, 2017.

~~Impact to Previously Reported Consolidated Financial Statements~~

~~Adoption of ASC 606 impacted our previously reported results as follows:~~

December 31, 2017
(In thousands) As Reported Adoption of ASC 606
As Adjusted⁽¹⁾
Accounts receivable, net $ 215,479
$ (10,513 ) $ 204,966
Costs and estimated earnings in excess of billings 18,203
(18,203 ) —
Contract assets —
35,074
35,074
Prepaid expenses and other current assets 152,444
(6,235 ) 146,209
Property, plant and equipment, net 1,148,042
(197 ) 1,147,845
Solar power systems leased and to be leased, net 428,149
(58,931 ) 369,218
Long-term financing receivables, net 338,877
(8,205 ) 330,672
Other long-term assets 80,146
466,552
546,698
Accrued liabilities 267,760
(35,989 ) 231,771
Billings in excess of costs and estimated earnings 8,708
(8,708 ) —
Contract liabilities, current portion —
101,723
101,723
Customer advances, current portion 54,999
(54,999 ) —
Customer advances, net of current portion 69,062
(69,062 ) —
Contract liabilities, net of current portion —
133,390
133,390
Other long-term liabilities 954,646
(112,304 ) 842,342
Accumulated deficit (2,115,188 ) 445,291
(1,669,897 )

⁽¹⁾Under the new segmentation, we reflected employee departments’ changes between segments, including those that moved from corporate functions into the business units, and the associated impact on headcount related expenses to the comparative periods presented. This resulted in a shift of such expenses between Cost of Revenue and Operating Expenses in our reported consolidated financial statements that are not reflected in the table above. See “Note 18. ~~Segment and Geographical Information~~”.

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Fiscal Year Ended December 31, 2017
(In thousands except per share) As Reported Adoption of ASC 606
As Adjusted⁽¹⁾
Revenue:
Solar power systems, components, and other $ 1,667,376
$ (72,435 ) $ 1,594,941
Residential leasing 204,437
(5,331 ) 199,106
Cost of revenue:
Solar power systems, components, and other 1,749,377
(67,902 ) 1,681,475
Residential leasing 137,707
(3,415 ) 134,292
Gross profit (loss) (15,271 ) (6,449 ) (21,720 )
Interest expense (89,754 ) (534 ) (90,288 )
Other, net (10,941 ) (76,704 ) (87,645 )
Other expense, net (98,595 ) (77,238 ) (175,833 )
Loss before income taxes and equity in earnings of unconsolidated investees (1,117,064 ) (83,686 ) (1,200,750 )
Equity in earnings of unconsolidated investees 20,211
5,727
25,938
Net loss (1,092,910 ) (77,958 ) (1,170,868 )
Net loss attributable to stockholders (851,163 ) (77,958 ) (929,121 )

Basic and diluted net loss per share attributable to stockholders $ (6.11 )
$ (0.56 )
$ (6.67 )

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Fiscal Year Ended January 1, 2017
(In thousands except per share) As Reported Adoption of ASC 606
As Adjusted⁽¹⁾
Revenue:
Solar power systems, components, and other $ 2,294,608
$ 32,813
$ 2,327,421
Residential leasing 264,954
(39,738 ) 225,216
Cost of revenue:
Solar power systems, components, and other 2,173,364
(5,065 ) 2,168,299
Residential leasing 196,232
(29,370 ) 166,862
Gross profit (loss) 189,966
27,510
217,476
Gain on sale and impairment of residential lease assets

—
(7,263 ) (7,263 )
Interest expense (60,735 ) (538 ) (61,273 )
Other, net (9,039 ) 2,081
(6,958 )
Other expense, net (102,181 ) 1,543
(100,638 )
Loss before income taxes and equity in earnings of unconsolidated investees (564,595 ) 36,203
(528,392 )
Equity in earnings of unconsolidated investees 28,070
(13,775 ) 14,295
Net loss (543,844 ) 22,429
(521,415 )
Net loss attributable to stockholders (471,064 ) 22,429
(448,635 )

Basic and diluted net loss per share attributable to stockholders $ (3.41 )
$ 0.16

$ (3.25 )

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Fiscal Year Ended December 31, 2017
(In thousands) As Reported Adoption of ASC 606 As Adjusted
Net loss $ (1,092,910 ) $ (77,958 ) $ (1,170,868 )
Adjustments to reconcile net loss to net cash used in operating activities, net of effect of acquisitions:
Depreciation and amortization 188,698
(3,415 ) 185,283
Impairment of equity method investment 8,607
80,957
89,564
Equity in earnings of unconsolidated investees (20,211 ) (5,727 ) (25,938 )
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable (458 ) (733 ) (1,191 )
Costs and estimated earnings in excess of billings 14,577
(14,577 ) —
Contract assets —
10,660
10,660
Project assets 19,153
(16,760 ) 2,393
Prepaid expenses and other assets 158,868
(48,338 ) 110,530
Long-term financing receivables, net (123,842 ) 168
(123,674 )
Accounts payable and other accrued liabilities (192,096 ) (24,253 ) (216,349 )
Billings in excess of costs and estimated earnings (68,432 ) 68,432
—
Customer advances 113,626
(113,626 ) —
Contract liabilities —
145,171
145,171
Net cash used in operating activities (267,412 ) —
(267,412 )
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents 30,125
—
30,125
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 514,212
—
514,212
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period 544,337
—
544,337

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Fiscal Year Ended January 1, 2017
(In thousands) As Reported Adoption of ASC 606 As Adjusted
Net loss $ (543,844 ) $ 22,429
$ (521,415 )
Adjustments to reconcile net loss to net cash used in operating activities, net of effect of acquisitions:
Equity in earnings of unconsolidated investees (28,070 ) 13,775
(14,295 )
Depreciation and amortization 174,209
(3,672 ) 170,537
Loss on sale and impairment of residential lease assets —
(7,263 ) (7,263 )
Changes in operating assets and liabilities, net of effect of acquisitions:
Costs and estimated earnings in excess of billings 6,198
(6,198 ) —
Contract assets —
62,161
62,161
Project assets 33,248
(36,849 ) (3,601 )
Prepaid expenses and other assets 48,758
(45,571 ) 3,187
Long-term financing receivables, net (172,542 ) 270
(172,272 )
Accounts payable and other accrued liabilities (12,146 ) (6,634 ) (18,780 )
Billings in excess of costs and estimated earnings (38,204 ) 38,204
—
Customer advances (16,969 ) 16,969
—
Contract liabilities —
(47,622 ) (47,622 )
Net cash used in operating activities (312,283 ) —
(312,283 )
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents (506,553 ) —
(506,553 )
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 1,020,764
—
1,020,764
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period 514,212
—
514,212

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~In October 2018, the FASB issued ASU 2018-17,~~ ~~Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities~~, which broadens the scope of the private company alternative to include all common control arrangements that meet specific criteria (not just leasing arrangements) and also eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. This ASU is effective for us n~~o later than the first quarter of 2020 on a retrospective basis with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented.~~ ~~We are evaluating the potential impact of this ASU on our consolidated financial statements and disclosures.~~

~~In October 2018, the FASB issued~~ ASU 2018-16,Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which permits the use of the Overnight Index Swap Rate based on the Secured Overnight Financing Rate as a fifth U.S. benchmark interest rate for purposes of hedge accounting. The new guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years and should be applied prospectively for qualifying new or ~~redesignated~~re-designated hedging relationships entered into after ~~January 1, 2019.~~December 31, 2018. We ~~are currently evaluating the impact of~~adopted the new guidance on ~~our consolidated financial statements.~~

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles~~—~~Goodwill and Other~~—~~Internal-Use Software (Subtopic 350-40)~~ requiring a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets. This ASU is effective for us no later than the first quarter of 2020 with earlyDecember 31, 2018. The adoption ~~permitted. This ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are evaluating the potential~~did not have an impact ~~of this standard~~ on our consolidated financial ~~statements and disclosures.~~statements.

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~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)~~ ~~to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for us no~~ ~~later than the first quarter of 2020 with early adoption permitted. We are evaluating the potential impact of this standard on our consolidated financial statements and disclosures.~~

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which changes the fair value measurement disclosure requirements of ASC 820. ~~This ASU is effective~~The guidance adds and clarifies certain disclosure requirements for ~~us no later than~~fair value measurements with the ~~first quarter~~objective of ~~2020 with early~~improving the effectiveness of disclosures in the notes to financial statements. The adoption ~~permitted. We are evaluating the potential~~did not have an impact ~~of this standard~~ on our consolidated financial ~~statements and disclosures.~~statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350)~~ to simplify the subsequent measurement of goodwill by eliminating Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. Goodwill impairment loss is now measured at the amount by which a reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. This ASU is effective for us no later than the first quarter of fiscal 2020. Early adoption is permitted beginning in the first quarter of fiscal 2017. The adoption of this new ASU will not impact our consolidated financial statements and related disclosure, as we no longer have goodwill.

In February 2016, the FASB issued ~~ASU No. 2016-02,~~ ASC 842, which supersedes the existing guidance for lease accounting, Leases (Topic ~~842), as amended ("~~840). ASC ~~842") to replace existing lease guidance and require all~~842 requires lessees to recognize a ~~right-of-use asset~~lease liability and a ~~liability~~ROU asset for virtually all of their leases (other than leases that meet the ~~obligation to make payments for all leases (except for~~definition of a short-term leases) on their balance sheet. All leases in scope will be classified as either operating or financing. Operating and financing leases will require the recognition of an asset and liability to be measured at the present value of the lease payments.lease). ASC 842 ~~also makes a distinction between operating~~is effective for fiscal years beginning after December 15, 2018, and ~~financing leases for purposes of reporting expenses on the income statement.~~interim periods within those fiscal years. In July 2018, the FASB issued several ASUs to clarify and improve certain aspects of the new lease standard including, among many other things, the rate implicit in the lease, lessee reassessment of lease classification, variable payments that depend on an index or rate, methods of transition including an optional transition method to continue recognizing and disclosing leases entered into prior to the adoption date under ~~current GAAP ("~~ASC ~~840").~~840. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors, related to sales taxes and other similar taxes collected from lessees, certain lessor costs paid by lessees to third parties, and related to recognition of variable payments for contracts.

~~This ASU will be effective for us in the first quarter of 2019 and~~

On December 31, 2018, we ~~expect to adopt~~adopted ASC 842 using the optional ~~transition~~transitional method for all leases that existed at or commenced before that date. We elected to apply the practical expedients in ASC 842-10-65-1 (f) and (g), and therefore:

1)did not reassess expired contracts for presence of lease components therein and if it was already concluded that such contracts had lease components, then the classification of the respective lease components therein have not been re-assessed;

2)did not re-assess initial direct costs for any existing leases;

3)used hindsight for determining the lease term for all ~~available practical expedients. We continue~~leases whereon ASC 842 has been applied;

4)elected to ~~make progress with our project plan, which includes evaluating contracts, developing policies,~~not separate the lease and ~~implementing~~non-lease components;

5)elected to not apply the recognition and measurement requirements of the new ~~controls and enhancing~~guidance to short-term leases;

6)did not assess whether existing ~~controls~~or expired land easements that ~~will be necessary~~were not previously assessed under legacy guidance on leases are or contain a lease under the new ~~standard.~~guidance;

The adoption of ASC 842 had a material impact on our consolidated balance sheet as the standard requires us to recognize an ROU asset and lease liability on our consolidated balance sheet as of December 31, 2018, for all existing leases other than those to which we have applied the short-term lease practical expedient.

Upon adoption, we ~~expect~~made the following changes to our accounting policies:

•Solar leases ~~will~~ no longer meet the criteria for lease accounting as our contracts do not allow the customer to direct the use of the underlying solar system. Instead, we will account for these arrangements entered into on or after December 31, 2018 as ~~service contract~~contracts with customers pursuant to ASC Topic 606 and ~~be recognized~~recognize revenue ratably based on contractual lease cash flows over the lease ~~term.~~term;

~~Real estate and other~~•All operating lease arrangements, ~~will be monitored and accounted pursuant to ASC 842.~~other than short term leases, are now recorded on the balance sheet as a ROU asset with a corresponding lease liability;

~~Arrangements~~

Further, arrangements that involve the lease-back of solar systems sold to a financier will continue to be accounted for as a failed sale and result in the recording of a financing ~~liability pursuant~~liability.

Impact to ~~ASC 842.~~Consolidated Financial Statements

~~We are in~~

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The below table shows the ~~final stages of completing our review of historical lease contracts to quantify the expected~~ impact of adoption of ASC 842 on our consolidated financial ~~statements.~~statements as of December 31, 2018:


(In thousands)	December 31, 2018		Adoption of ASC 842		December 31, 2018
Assets:
Prepaid expenses and other current assets	$	131,183	$	(4,433)	$	126,750
Operating lease right-of-use assets	—		81,525		81,525
Other long-term assets	162,033		(14,028)		148,005
Current Liabilities:
Accrued liabilities	235,252		(2,455)		232,797
Operating lease liabilities	—		11,499		11,499
Contract liabilities, current portion	104,130		(2,079)		102,051
Non-current liabilities:
Operating lease liabilities, net of current portion	—		70,132		70,132
Contract liabilities, net of current portion	99,509		(19,928)		79,581

Other long-term liabilities	839,136		(3,256)		835,880
Equity:
Accumulated deficit	$	(2,480,988)	$	9,151	$	(2,471,837)

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments(ASU 2016-13) and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. The amendment applies to entities which hold financial assets and net investments in leases that are not accounted for at fair value through net income as well as loans, debt securities, accounts receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Topic 326 is effective for us no later than the first quarter of fiscal 2020 with early adoption permitted. Based on ~~our~~the current ~~evaluation~~composition of our ~~entire population of contracts impacted by ASC 842 upon adoption, we expect to record~~financial instruments, current market conditions, foreseeable and supportable forecasts, and historical credit loss experience, the impact on our ~~Consolidated Balance Sheets, right-of-use assets~~consolidated financial statements and ~~lease liabilities~~related disclosures is not expected to be material.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for us no later than the first quarter of ~~approximately $75.0 million~~fiscal 2020 with early adoption permitted. No material impact is expected on our consolidated financial statements and disclosures, upon adoption.

In August 2018, the FASB issued ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40) requiring a customer in a cloud computing arrangement that is a service contract to ~~$95.0 million~~follow the internal-use software guidance in ~~relation~~ASC 350-40 to ~~sale-leaseback~~determine which implementation costs to capitalize as assets. This ASU is effective for us no later than the first quarter of fiscal 2020 with early adoption permitted. This ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. No material impact is expected on our consolidated financial statements and disclosures, upon adoption.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, which broadens the scope of the private company alternative to include all common control arrangements that meet specific criteria (not just leasing arrangements) and ~~real-estate lease commitments. In addition, we expect to record an~~also eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. This ASU is effective for us no later than the first quarter of fiscal 2020 on a retrospective basis with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. No material impact is expected on our ~~accumulated deficit, net~~consolidated financial statements and disclosures, upon adoption.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which 1) clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606; 2) adds unit-of-account guidance in Topic 808 to align with the guidance in Topic 606; and 3) requires that in a transaction with a collaborative arrangement participant that is not directly related to

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sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. This ASU is effective for us no later than the first quarter of ~~approximately $5.0 million~~fiscal 2020 on a retrospective basis to ~~$15.0 million from~~ the ~~recognition~~date of ~~previously deferred profit under sale-lease back arrangements.~~

~~We continue to assess~~initial application of Topic 606 with early adoption permitted. Although we are evaluating the potential impact of this ASU on our consolidated financial statements and disclosures, we are not expecting material impacts.

In December 2019, the FASB issued ASU No. 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. ASU 2019-12 is effective for us no later than the first quarter of fiscal 2021. 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 are currently evaluating the impacts of the ~~new standard, including the areas described above, and anticipate that this standard will have a material impact~~provisions of ASU 2019-12 on our ~~Consolidated Balance Sheets~~financial statements and disclosures. ~~However, we do not know or cannot reasonably estimate quantitative information, beyond that discussed above, related to the impact of the new standard on the financial statements at this time.~~

Note 2. TRANSACTIONS WITH TOTAL AND TOTAL S.A.

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 (the "Private Placement Agreement"), 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 December ~~30, 2018,~~29, 2019, through the increase of our total outstanding common stock due to the secondary offering of common stock completed on November 25, 2019, exercise of warrants and issuance of restricted and performance stock units, Total's ownership of our outstanding common stock was approximately ~~56%~~47%.

Supply Agreements

In November 2016, we and Total entered into a ~~four-year,~~four-year, up to 200 megawatt ("MW") supply agreement to support the solarization of certain Total facilities. The agreement covers the supply of 150 MW of ~~Maxeon 2 (formally known as E-Series)~~E-Series (Maxeon 2) panels with an option to purchase up to another 50 MW of P-Series solar panels. In March 2017, we received a prepayment totaling $88.5 million. The prepayment is secured by ~~certain~~some of our assets located in the United States and in Mexico.

We recognize revenue for the solar panels supplied under this arrangement consistent with our revenue recognition policy for solar power components at a point in time when control of such products transfers to the customer, which generally occurs upon shipment or delivery depending on the terms of the ~~contracts.~~contracts. In the second quarter of fiscal 2017, we started to supply Total with solar panels under the supply agreement and as of December ~~30, 2018,~~29, 2019, we had ~~$18.4~~$18.8 million of ~~"Contract~~"contract liabilities, current portion" and ~~$45.3~~$35.4 million of ~~"Contract~~"contract liabilities, net of current portion" on our ~~Consolidated Balance Sheets~~consolidated balance sheets related to the aforementioned supply agreement (see Note ~~10.~~9.Commitments and Contingencies").

In March 2018, we and Total, each through certain affiliates, entered into an agreement whereby we agreed to sell 3.42 MW of photovoltaic ("PV") modules to Total for a development project in Chile. This agreement provided for payment from Total in the amount of approximately $1.3 million, 10% of which was paid upon execution of the agreement.

~~Amended and Restated Credit Support Agreement~~

~~In June 2016,~~On January 7, 2019, we and Total, ~~S.A.~~each through certain affiliates, entered into an Amended and Restated Credit Support Agreement (the "Credit Support Agreement"), which amended and restated the Credit Support Agreement dated April 28, 2011, by and between us and Total S.A., as amended. Under the Credit Support Agreement, Total S.A.agreement whereby we agreed to ~~enter into one or more guarantee agreements (each a "Guaranty") with banks providing letter~~sell 3.7 MW of ~~credit facilities~~PV modules to ~~us. At any time until December 31, 2018,~~ Total S.A. will, at our request, guarantee the payment to the applicable issuing bank of our obligation to reimburse a draw on a letter of credit and pay interest thereon in accordance with the letter of credit facility between such bank and us. Such letters of credit must be issued no later than December 31, 2018 and expire no later than March 31, 2020. Total S.A. is required to issue and enter into a Guaranty requested by us, subject to certain terms and conditions. In addition, Total will not be required to enter into the Guaranty if, after giving effect to our request for a ~~Guaranty, the sum of (a) the aggregate amount available to be drawn under all guaranteed letter of credit facilities, (b)~~ground-mounted PV installation in Dubai. This agreement provided for payment from Total in the amount of ~~letters~~approximately $1.4 million, 10% of credit available to be issued under any guaranteed facility, and (c) the aggregate amount of draws (including accrued but unpaid interest) on any letters of credit issued under any guaranteed facility that have not yet been reimbursed by us, would exceed $500.0 million in the aggregate. Such maximum amounts of credit support available to us can be reduced upon the occurrence of specified events.

In consideration for the commitments of Total S.A. pursuant to the Credit Support Agreement, we are required to pay Total S.A. a guaranty fee for each letter of credit that is the subject of a Guaranty under the Credit Support Agreement andwhich was ~~outstanding for all or part~~received after execution of the preceding calendar quarter. The Credit Support Agreement will terminate following December 31, 2018, after the later of the satisfaction of all obligations thereunder and the termination or expiration of each Guaranty provided thereunder.agreement.

~~In addition to the Credit Support Agreement,~~On March 4, 2019, we and Total, ~~S.A.~~each through certain affiliates, entered into an agreement whereby we agreed to sell 10 MW of PV modules to Total for commercial rooftop PV installations in Dubai. This agreement provided for payment from Total in the ~~Letter~~amount of approximately $3.2 million, 10% of which was received in April 2019.

In December 2019, we and Total, each through certain affiliates, entered into an agreement whereby we agreed to sell 93 MW of PV modules to Total for commercial PV modules in France. This agreement provided for payment from Total in the amount of approximately $38.4 million, 10% of which was received in December 2019.

In December 2019, we entered into and closed 4 Membership Interest Purchase and Project Development Agreements which Total Strong, LLC., a joint venture between Total and Hannon Armstrong, to sell our membership interests in 4 project companies. We recognized revenue of $6.2 million for sales to this joint venture, which is included within "Solar power systems, components, and other" on our consolidated statements of operations for fiscal 2019.

Affiliation Agreement in May 2017 to facilitate the issuance by Total S.A. of one or more guaranties of our payment obligations of up to $100.0 million (the "Support Amount") under the Revolver with Credit Agricole, as "administrative agent," and the other lenders party thereto; See "Note 12. ~~Debt and Credit Sources~~" for additional information on the Revolver with Credit Agricole. In consideration for the commitments of Total S.A. pursuant to the Letter Agreement, we are required to pay a guarantor commitment fee of 0.50% per annum for the unutilized Support Amount and a guaranty fee of 2.35% per annum of the Guaranty outstanding. The maturity date of the Letter Agreement is August 26, 2019.

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~~Affiliation Agreement~~

We and Total have entered into an Affiliation Agreement that governs the relationship between Total and us (the "Affiliation Agreement"). Until the expiration of a standstill period specified in the Affiliation Agreement (the "Standstill Period"), and subject to certain exceptions, Total, Total S.A., 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 the outstanding voting power of us and imposes certain limitations on the Total Group's ability to transfer 40% or more of the outstanding shares or voting power of us to a single person or group that is not a direct or indirect subsidiary of Total S.A. During the Standstill Period, no member of the Total Group may, among other things, solicit proxies or become a participant in an election contest relating to the election of directors to our Board of Directors.

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

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

~~Research & Collaboration Agreement~~

We and Total have entered into a Research & Collaboration Agreement (the "R&D Agreement") that establishes a framework under which the parties engage in long-term research and development collaboration ("R&D Collaboration"). The R&D Collaboration encompasses a number of different projects, with a focus on advancing our technology position in the crystalline silicon domain, as well as ensuring our industrial competitiveness. The R&D Agreement enables a joint committee to identify, plan and manage the R&D Collaboration.

Upfront Warrant

In February 2012, we issued a warrant (the "Upfront Warrant") to Total S.A. to purchase 9,531,677 shares of our common stock with an exercise price of $7.8685, subject to adjustment for customary anti-dilution and other events. The Upfront Warrant, which iswas governed by ~~the~~a Private Placement Agreement and a Compensation and Funding Agreement, dated February 28, 2012, as amended, iswas exercisable at any time for seven years after its issuance, provided that, so long as at least ~~$25.0~~$25.0 million in aggregate of our convertible debt remains outstanding, such exercise ~~will~~would not cause any "person," including Total S.A., to, directly or indirectly, including through one or more wholly-owned subsidiaries, become the "beneficial owner" (as such terms are defined in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934, as amended) (the "Exchange Act"), of more than 74.99% of the voting power of our common stock at such time, a circumstance which would trigger the repurchase or conversion of our existing convertible debt. The Upfront Warrant expired by its terms on February 27, 2019.

~~0.75% Debentures Due 2018~~

~~In May 2013, we issued~~ ~~$300.0 million~~ ~~in principal amount of the 0.75% debentures due 2018. An aggregate principal amount of~~ ~~$200.0 million~~ of the 0.75% debentures due 2018 were acquired by Total. The 0.75% debentures due 2018 were convertible into shares of our common stock at any time based on an initial conversion price equal to $24.95 per share, which provided Total the right to acquire up to 8,017,420 shares of our common stock. The applicable conversion rate could adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 0.75% debentures due 2018. On June 1, 2018, we redeemed the 0.75% debentures due 2018 at maturity in full for cash with proceeds from the Term Credit Agreement. On June 19, 2018, we completed the sale of our equity interest in the 8point3 Group, the proceeds of which were used to repay the loan under the Term Credit Agreement.

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0.875% Debentures Due 2021

In June 2014, we issued $400.0 million in principal amount of our 0.875% senior convertible debentures due 2021 (the "0.875% debentures due 2021"). An aggregate principal amount of $250.0 million of the 0.875% debentures due 2021 were acquired by Total. The 0.875% debentures due 2021 are convertible into shares of our common stock at any time based on an initial conversion price equal to $48.76 per share, which provides Total the right to acquire up to 5,126,775 shares of our common stock. The applicable conversion rate may adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 0.875% debentures due 2021.

4.00% Debentures Due 2023

In December 2015, we issued $425.0 million in principal amount of our 4.00% senior convertible debentures due 2023 (the "4.00% debentures due 2023"). An aggregate principal amount of $100.0 million of the 4.00% debentures due 2023 were acquired by Total. The 4.00% debentures due 2023 are convertible into shares of our common stock at any time based on an initial conversion price equal to $30.53 per share, which provides Total the right to acquire up to 3,275,680 shares of our common stock. The applicable conversion rate may adjust in certain circumstances, including a fundamental change, as described in the indenture governing the 4.00% debentures due 2023.

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Joint Solar Projects with Total and its Affiliates

We enter into various EPC and 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 December ~~30, 2018,~~29, 2019, we had ~~$0.02 million~~an insignificant amount of "Contract assets" and ~~$3.8~~$6.7 million which consisted of "Accounts receivable, net" and "Prepaid expenses and other current assets" on our ~~Consolidated Balance Sheets~~consolidated balance sheets related to projects in which Total and its affiliates have a direct or indirect material interest.

InDuring fiscal 2018, in connection with a co-development solar project ~~between~~in Japan among us, Total, and an independent third party, we sold 25% of ~~our~~ ownership interests in the co-development solar project to ~~Total. The~~Total, for an immaterial amount ~~received from Total was immaterial for fiscal 2018.~~of proceeds. We sold ~~an additional~~the remaining 25% of ~~our~~ ownership interest to Total during the fourth quarter of 2018 and will supply PV in late 2019 to the solar project. However, recent amendments to the feed-in-tariff rules in Japan have had a significant impact on the co-development solar project’s ability to secure financing and we are currently exploring alternatives to monetize our investment in the ~~co-development~~three months ended September 29, 2019, for proceeds of $4.6 million, and recognized a gain of $2.9 million, which is included within "other, net" in our consolidated statements of operations for fiscal 2019. Development service revenue of $6.4 million was also recognized during fiscal 2019. We have also agreed to supply solar ~~project.~~panels under this arrangement with sales beginning in October 2019 and expected to occur through November 2020 and recognized revenue consistent with our revenue recognition policy from solar power components.

In connection with a co-development solar project in Chile between us and Total, ~~Total paid $0.3 million to us for development fees for fiscal 2018.~~

~~In connection with a co-development project between us and Total, Total paid $0.5 million to us in exchange for~~we sold all of our 50% ownership ~~interest~~interests in the co-development project ~~for fiscal 2017.~~

~~During the fourth quarter of 2017, we sold our remaining noncontrolling interests in a co-development project entity~~ to Total ~~which was accounted~~in fiscal 2019, for ~~as equity method investment, resulting in~~proceeds of $14.1 million, and recognized a gain of ~~$5.3~~$11.0 million, which is included within "other, net" in ~~"Other income (expense), net"~~our consolidated statements of ~~the Consolidated Statements~~operations for fiscal 2019. In connection with its assistance in obtaining a solar module supply related to this project, we incurred charges of ~~Operations.~~$4.9 million that will be paid directly to Total in fiscal 2020.

Related-Party Transactions with Total and its Affiliates:

The following ~~related party~~related-party balances and amounts are associated with transactions entered into with Total and its ~~Affiliates:~~

As of
(In thousands) December 30, 2018 December 31, 2017
Accounts receivable $ 3,823
$ 2,366
Contract assets $ 18
$ 154
Contract liabilities, current portion¹
$ 18,408
$ 12,744
Contract liabilities, net of current portion¹
$ 45,258
$ 68,880

¹Affiliates. Refer to Note 10. Equity Investments for related-party transactions with unconsolidated entities in which we have a direct equity investment.


	As of
(In thousands)	December 29, 2019		December 30, 2018
Accounts receivable and other	$	6,707	$	3,823
Contract assets	110		18
Accounts payable	4,921		—
Contract liabilities, current portion¹	18,786		18,408
Contract liabilities, net of current portion¹	35,427		45,258

¹Refer to Note 9. Commitments and Contingencies - Advances from Customers.


	Fiscal Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Revenue:
Solar power systems, components, and other	$	48,064	$	28,094	$	42,968
Cost of revenue:
Solar power systems, components, and other	33,320		16,382		30,400
Other income:
Other, net	13,941		—		—
Research and development expense:
Offsetting contributions received under the R&D Agreement	—		(93)		(138)
Interest expense:
Guarantee fees incurred under the Credit Support Agreement	329		5,312		6,325
Interest expense incurred on the 0.75% debentures due 2018	—		547		1,500
Interest expense incurred on the 0.875% debentures due 2021	2,188		2,188		2,188
Interest expense incurred on the 4.00% debentures due 2023	4,000		4,000		4,000

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Fiscal Year Ended
(In thousands) 2018 2017 2016
Revenue:
EPC, O&M, and components revenue $ 28,094
$ 42,968
$ 64,719
Cost of revenue:
EPC, O&M, and components cost of revenue $ 16,382
$ 30,400
$ 60,799
Research and development expense:
Offsetting contributions received under the R&D Agreement $ (93 ) $ (138 ) $ (557 )
Interest expense:
Guarantee fees incurred under the Credit Support Agreement $ 5,312
$ 6,325
$ 7,130
Interest expense incurred on the 0.75% debentures due 2018 $ 547
$ 1,500
$ 1,500
Interest expense incurred on the 0.875% debentures due 2021 $ 2,188
$ 2,188
$ 2,188
Interest expense incurred on the 4.00% debentures due 2023 $ 4,000
$ 4,000
$ 4,000

Note 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following tables represent ~~a disaggregation of~~disaggregated revenue from contracts with customers for ~~the~~ fiscal ~~year~~2019, 2018, ~~2017~~ and ~~2016~~2017 along with the reportable segment for each category:


	Fiscal Year Ended
(In thousands)	SunPower Technologies										SunPower Energy Services								Total Revenue
Category	December 29, 2019		December 30, 2018		December 31, 2017		December 29, 2019		December 30, 2018		December 31, 2017		December 29, 2019		December 30, 2018		December 31, 2017
Module and component sales	$	415,081	$	532,590	$	408,303	$	617,456	$	477,652	$	428,799	$	1,032,537	$	1,010,242	$	837,102
Solar power systems sales and EPC services	429,282		147,756		470,851		323,740		213,345		211,850		753,022		361,101		682,701
Operations and maintenance	—		—		—		49,590		49,089		43,643		49,590		49,089		43,643
Residential leasing	—		125		4,687		10,405		305,528		225,914		10,405		305,653		230,601
Solar services¹	—		—		—		18,671		—		—		18,671		—		—
Revenue	$	844,363	$	680,471	$	883,841	$	1,019,862	$	1,045,614	$	910,206	$	1,864,225	$	1,726,085	$	1,794,047

Fiscal Year
(In thousands)
SunPower Technologies SunPower Energy Services Total Revenue
Category 2018 2017 2016 2018 2017 2016 2018 2017 2016
Module and component sales $ 532,590
$ 408,303
$ 313,652
$ 477,652
$ 428,799
$ 476,483
$ 1,010,242
$ 837,102
$ 790,135
Solar power systems sales and EPC services 147,756
470,851
1,238,494
213,345
211,850
207,813
361,101
682,701
1,446,307
Operations and maintenance
—
—
—
49,089
43,643
36,208
49,089
43,643
36,208
Leasing¹

125
4,687
1,491
305,528
225,914
278,496
305,653
230,601
279,987
Revenue $ 680,471
$ 883,841
$ 1,553,637
$ 1,045,614
$ 910,206
$ 999,000
$ 1,726,085
$ 1,794,047
$ 2,552,637

¹~~Leasing revenue is~~Upon adoption of ASC 842, revenues from residential leasing are being accounted for ~~in accordance with the lease accounting guidance.~~under ASC 606 and recorded under 'Solar services' (see Note 1)

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.~~ contract, and we recognize revenue for operations and maintenance and solar services over 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.

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 and~~ 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 onin our ~~Consolidated Statements~~consolidated statements of ~~Operations.~~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 years ended December ~~30, 2018~~29, 2019 and December ~~31, 2017~~30, 2018 as well as the number of projects that comprise such changes. For purposes of the following table, only projects with changes in estimates that have an impact on revenue and or cost of at least $1.0 million during the periods were presented. Also, included in the table is the net change

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in estimate as a percentage of the aggregate revenue for such projects.

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	Fiscal Year Ended										Fiscal Year Ended
(In thousands, except number of projects)	December 30, 2018			December 31, 2017			January 1, 2017			(In thousands, except number of projects)	December 29, 2019			December 30, 2018			December 31, 2017
Increase (decrease) in revenue from net changes in transaction prices	$	—		$	—		$	(743	)
Increase in revenue from net changes in transaction prices										Increase in revenue from net changes in transaction prices	$	5,391		$	—		$	—
Increase (decrease) in revenue from net changes in input cost estimates	(1,045		)	—			5,768			Increase (decrease) in revenue from net changes in input cost estimates	6,233			(1,045)			—
Net increase (decrease) in revenue from net changes in estimates	$	(1,045	)	$	—		$	5,025		Net increase (decrease) in revenue from net changes in estimates	$	11,624		$	(1,045)		$	—

Number of projects	1			—			6			Number of projects	5			1			—

Net change in estimate as a percentage of aggregate revenue for associated projects	—		%	—		%	—		%	Net change in estimate as a percentage of aggregate revenue for associated projects	11.6		%	—		%	—		%

For the years ended December 30, 2018 and December 31, 2017, there were no material adjustments to revenue as a result of changes in transaction prices or input cost estimates. For the year ended January 1, 2017, revenue increased by $5.0 million from net changes in transaction prices and input cost estimates.

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. ~~Contract liabilities exclude deferred revenue related to our residential lease program which are accounted for under the lease accounting guidance.~~ Refer to ~~"Note 6.~~ Note 5. Balance Sheet Components" for further details.

During the year ended December 29, 2019, the increase in contract assets of $38.2 million was primarily driven by unbilled receivables for the sale of PPAs for $31.2 million in fiscal 2019 and commercial projects where certain milestones had not yet been reached, but the criteria for revenue had been met. During the year ended December 30, 2018, the increase in contract assets of $43.5 million was primarily driven by unbilled receivables for commercial projects where certain milestones had not yet been reached, but the criteria to recognize revenue had been met. During the year ended December 29, 2019, the increase in contract liabilities of $2.3 million was primarily due to addition of customer advances. During the year ended December 30, 2018, the decrease in contract liabilities of $31.5 million was primarily due to the attainment of milestones billings for a variety of projects. During the year ended December 29, 2019, we recognized revenue of $59.6 million that was included in contract liabilities as of December 30, 2018. During the year ended December 30, 2018, we recognized revenue of $94.4 million that was included in contract liabilities as of December 31, 2017. ~~During the year ended December 31, 2017, we recognized revenue of $58.7 million that was included in contract liabilities as of January 1, 2017.~~

The following table represents our remaining performance obligations as of December ~~30, 2018~~29, 2019 for ~~our sales of solar power systems, including projects under sales contracts subject to conditions precedent, and~~ EPC agreements for ~~developed~~ projects that we are constructing or expect to construct. We expect to recognize ~~$62.3~~$176.4 million of revenue ~~for such contracts~~ upon transfer of control of the projects.

Project

Revenue Category

EPC Contract/Partner Developed Project

Expected Year Revenue Recognition Will Be Completed

Percentage of Revenue Recognized¹

Various Distribution Generation Projects

Solar power systems sales and EPC services

Various

2020

72.3%

Project Revenue Category EPC Contract/Partner Developed Project Expected Year Revenue Recognition Will Be Completed Percentage of Revenue Recognized
Joint Base Anacostia Bolling (JBAB) Solar power systems sales and EPC services Constellation 2019 98.9%
Miyagi Osato Solar Park Solar power systems sales and EPC services SB Energy and TOTAL Solar 2019 85.0%
Various Distribution Generation Projects¹
Solar power systems sales and EPC services Various 2020 87.4%

¹Denotes average percentage of revenue recognized.

As of December ~~30, 2018,~~29, 2019, we have entered into contracts with customers for ~~the future sale~~sales of modules and components for an aggregate transaction price of ~~$466.6~~$450.1 million, the substantial majority of which we expect to recognize ~~as revenue through 2019. As of December 30, 2018, we had entered into O&M contracts of utility-scale PV solar power systems. We expect to recognize $10.6 million of revenue during~~over the ~~non-cancellable term of these O&M contracts over an average period of three~~next 12 months.

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Note 4.BUSINESS ~~COMBINATION~~DIVESTITURE AND ~~DIVESTITURES~~SALE OF ASSETS

~~Formation~~Sale of ~~SunStrong Capital Holdings, LLC ("SunStrong") Joint Venture and Transfer of Interest in~~ Residential Lease ~~Portfolio~~Assets

We offer a solar lease program, in partnership with tax-equity investors, which provides U.S. residential customers SunPower systems under 20-year lease agreements that include system maintenance and warranty coverage. The residential leases are classified as either operating or sales-type leases (the “Residential Lease Portfolio”) in accordance with the relevant accounting guidelines. The arrangement with the tax equity investor is facilitated through the sale equity interests in a solar project company that has ownership of the residential lease assets. We retain controlling equity interests in the solar project company and the tax-equity investor acquires non-controlling equity interests with the intention of monetizing the tax attributes that will be generated by the residential lease assets. On July 10,In fiscal 2018, we created SunStrong Capital Holdings, LLC (“SunStrong”) to own and operate a portion of our residential lease assets and subsequently contributed to SunStrong our controlling equity interests in ~~the aforementioned~~a number of solar project ~~companies.~~

entities that we controlled. As ~~part of our~~ previously ~~announced decision to sell a portion of our interest in our Residential Lease Portfolio,~~disclosed, on November 5, 2018, we entered into a Purchase and Sale agreement (the “PSA”) with HA SunStrong Capital LLC (“HA SunStrong Parent”), a subsidiary of Hannon Armstrong Sustainable Infrastructure Capital, Inc (“Hannon Armstrong”), to sell 49.0% of the SunStrong membership ~~interests in SunStrong for cash proceeds of $10.0 million (the "Transaction").~~interests. Following the closing of the PSA, we also entered into an Amended and Restated Limited Liability Company Operating Agreement (the "Operating Agreement") with HA SunStrong Parent that results in the operation of SunStrong as a joint venture entity. In addition, we have been retained by SunStrong to provide management services, asset management services and O&M services. The services that will be provided are priced consistently with market rates for such services and the agreements are terminable by SunStrong for convenience.

In evaluating the accounting treatment for the transaction described above, we concluded that the Residential Lease Portfolio meets the definition of a business and then proceeded to assess whether SunPower has a controlling financial interest in SunStrong in accordance with the relevant consolidation accounting guidance. We have offered SunStrong certain substantive, non-standard indemnifications 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 indemnifications is limited to the consideration received for the solar power systems. While our retention of certain indemnification obligations on behalf of SunStrong may require us to absorb losses that are not proportionate with our equity interests, we do not have the power to unilaterally make decisions that affect the performance of ~~SunStrong. Under the Operating Agreement, we~~SunStrong, and HA SunStrong Parent are given equal governing rights and all major decisions, including among others, approving or modifying the budget, terminating service providers, incurring indebtedness, refinancing any existing loans, declaring distributions, commencing or settling any claims, require unanimous consent. Therefore, we concluded that we do not control SunStrong nor are we the primary beneficiary of SunStrong. Accordingly,accordingly, we deconsolidated SunStrong, ~~and~~ thereby ~~deconsolidated~~deconsolidating majority of our residential lease assets portfolio. On September 27, 2019, we sold the ~~Residential Lease Portfolio including the associated non-recourse financing debt of $561.6 million as~~majority of the ~~date~~remainder of ~~sale. We have accounted~~residential lease assets still owned by us, that were not previously sold. Refer to Note 6 for ~~our retained investment in SunStrong as an equity method investment and have estimated the fair value~~discussion of the ~~retained interest at $9.6 million. We computed the fair value for our retained investment consistent with the methodology and assumptions that market participants would use in their estimates~~remainder of fair value. Determining the fair value involves significant estimates and assumptions. We used the income approach to estimate the fair value of our retained investment in Residential Lease Portfolio. The income approach is based on the discounted cash flow method that uses the estimates for forecasted future financial performance, including assumptions for, among others, forecasted contractual lease income, lease expenses, residual value of theseresidential lease assets ~~and long-term discount rates, and forecasted default rates over the~~still owned by us. These residential lease ~~term and discount rates, some~~assets were sold under a new assignment of which require significant judgment by management. These estimates are developed based on historical data and various internal estimates. Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk uniqueinterest agreement entered into with SunStrong. SunStrong also assumed debts related to the ~~subject cash flows. In addition to the cash proceeds noted above, we are entitled to additional cash and non-cash consideration that is described below.~~residential lease assets sold.

On ~~August 10, 2018,~~April 12, 2019, SunStrong Capital Acquisition 3, LLC, aour wholly-owned subsidiary ~~of SunStrong~~ (“Mezzanine Loan 13 Borrower”), and SunStrong Capital Lender 3 LLC, a wholly-owned subsidiary of Hannon Armstrong, entered into a mezzanine loan agreement under which Mezzanine Loan 13 Borrower borrowed a subordinated, mezzanine loan of ~~$110.5~~$37.3 million (the “Mezzanine Loan 1”3”) ~~and incurred issuance costs~~. As of ~~$1.4~~September 27, 2019, we have drawn $27.3 million ~~related to~~under the ~~loan. On August 31, 2018, we repaid a principal amount of $2.1 million that resulted in an adjusted~~ Mezzanine Loan ~~1 balance, net of issuance costs, of $107.0 million. In connection with the closing~~3. As part of the ~~PSA,~~Transaction, SunStrong assumed all current and future debt service obligations associated with Mezzanine Loan 1.3. The assumption of such debt, although a non-cash transaction for us, was considered as future proceeds receivable, and reflected in the determination of the loss recognized upon ~~deconsolidation of the Residential Lease Portfolio.~~deconsolidation.

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On November 5, 2018, SunStrong Capital Acquisition OF, LLC, a wholly-owned subsidiary of SunStrong (“Mezzanine Loan 2 Borrower”), and SunStrong Capital Lender 2 LLC, a subsidiary of Hannon Armstrong, entered into a loan agreement under which, Mezzanine Loan 2 Borrower may borrow a subordinated, mezzanine loan of up to $32.0 million (the “Mezzanine Loan 2”). The borrowing facilities provided by the Mezzanine Loan 2 have been determined in consideration of the residential lease assets for which we have either completed construction or have the obligation to complete construction after November 5, 2018. On November 20, 2018, Mezzanine Loan 2 Borrower borrowed approximately $24.6 million and distributed $19.6 million of the proceeds to us. The remaining proceeds of $5.0 million represents additional consideration that is held in a reserve by SunStrong and the proceeds will be distributed to us upon completion of our contractual obligations by the second quarter of 2019. Mezzanine Loan 2 Borrower is expected to draw an additional approximately $5.6 million against the Mezzanine Loan 2 of which approximately $4.0 million is associated with residential lease assets for which construction was completed. On December 21, 2018, we received $4.6 million as a special distribution from SunStrong. The remaining amount of $1.0 million represents additional consideration related to residential lease assets for which we will provide construction services after the close of the Transaction.

On November 5, 2018, the proceeds generated from the sale of future solar renewable energy credits, along with equity interests held by SunStrong in the underlying solar project companies, were pledged to secure a warehousing loan from Credit Agricole Corporate and Investment Bank (“Credit Agricole”). Borrowed Sunshine II, LLC, (“CA Loan Borrower”) ~~formerly one of~~, our wholly-owned ~~subsidiaries,~~subsidiary, entered into a loan agreement with Credit Agricole on January ~~5, 2018~~31, 2019 under which the CA Loan Borrower may borrow a subordinated loan of up to ~~$170.0 million. The~~$55.0 million (the “CA warehouse loan”). As of September 27, 2019, we had drawn $46.1 million under the CA Loan Borrower expects to draw an additional amount of approximately $17.5 million of which approximately $11.8 million is associated with residential lease assets for which construction was completed. On November 29, 2018, we received $4.1 million and on December 27, 2018, we received $7.7 million as a special distribution from SunStrong. The remaining amount of approximately $5.7 million represents additional consideration related to residential lease assets for which we will provide construction services after the close of the Transaction.

warehouse loan.

Tax-equity investors are required to make contributions to the solar project companies upon achievement of certain condition precedents. Contributions of approximately ~~$5.6~~$6.7 million ~~will be~~ distributed to us as the developer of the Residential Lease ~~Portfolio. During the period from the date of sale and for the year ended December 30, 2018, cash proceeds of $4.2 million were received. The remaining proceeds of $1.4 million represents~~Portfolio represent additional consideration related to residential lease assets for which we will provide construction services after the close of the Transaction. In addition, ~~on December 21, 2018,~~ we ~~received $3.2~~are eligible to receive $2.1 million as a special distribution from SunStrong for transferring our rights to the future solar renewable energy credits ("SREC") associated with the residential lease assets. The tax-equity investor contribution and the special SREC distribution was reflected in the determination of the loss recognized upon deconsolidation of ~~the Residential Lease Portfolio.~~residential lease portfolio.

~~Other costs and expenses associated~~In December 2019, we entered into an arrangement with ~~the Transaction~~Hannon Armstrong to sell our rights over incremental proceeds resulting from refinancing of ~~$2.9 million include professional services including legal, advisory and banking support. We have also recorded a liability of $5.3 million associated with our~~ certain ~~warranty obligations for defects in materials and workmanship related to installed systems contributed~~debts that were transferred to SunStrong.

On November 28, 2018, SunStrong closed its $400.0 million Solar Asset Backed Notes, Series 2018-1 ("Notes"). The Notes were priced at a fixed interest rate of 5.68% per annum and have an anticipated repayment date in November 2028 and rated final maturity date in November 2048. The Notes were issued by a special purpose entity, SunStrong 2018-1 Issuer, LLC, an indirectly wholly-owned subsidiary of SunStrong. On December 4, 2018, we We received a ~~special cash distribution~~consideration of ~~$12.9 million.~~

~~In connection with~~$2.0 million from this transaction. Further, during the fourth quarter of fiscal 2019, we recorded an adjustment of $1.3 million resulting from realization of estimated receivables recorded at the time of completion of the sale in September 2019. These transactions collectively resulted in a gain on sale of $3.3 million in fourth quarter of fiscal 2019. Inclusive of these items, we recognized a ~~$62.3~~$7.2 million net loss on the sale within "Loss on sale and impairment of residential lease assets" in our ~~Consolidated Statements~~consolidated statements of ~~Operations for~~operations during fiscal year 2019.

Summarized financial information related to the ~~year ended December 30, 2018.~~

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~~The assets, liabilities and equity of the~~transferred Residential Lease Portfolio on the disposal date ~~were as follows:~~

(In thousands) At Disposal Date
Cash and equivalents¹
$ 16,333
Restricted cash and equivalents, current portion¹
9,127
Accounts receivable, net 23,430
Prepaid expenses and other current assets 26,097
Restricted cash and equivalents, net of current portion ¹
65,947
Property, plant and equipment, net 871
Solar power systems leased and to be leased, net 262,756
Long term financing receivables, net - held for sale 388,180
Other long-term assets 17,633
Total assets 810,374

Accounts payable —
Accrued liabilities 1,726
Contract liabilities, current portion 1,660
Contract liabilities, net of current portion 25,477
Short-term debt 8,969
Long-term debt 445,661
Other long-term liabilities 11,164
Redeemable noncontrolling interests in subsidiaries 15,375
Noncontrolling interests in subsidiaries 61,865
Total liabilities and equity 571,897
Net assets related to sale $ 238,477

~~The net consideration recognized from the sale~~ is as follows:

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(In thousands)
Proceeds from sale of membership interest in SunStrong ¹
$ 10,000
Assumption of Mezzanine Loan 1 by SunStrong 106,958
Net proceeds from first draw on Mezzanine Loan 2 ¹
19,560
Special distributions and tax-equity contribution ¹
36,190
Construction service and Mezzanine Loan 2 reserve proceeds 13,596
Other costs and expenses related to sale ¹
(2,879 )
Net consideration recognized from sale $ 183,425


(In thousands)	At Disposal Date
Cash and cash equivalents	$	634
Restricted cash and cash equivalents, current portion	11,058
Accounts receivable, net	1,239
Restricted cash and cash equivalents, net of current portion	4,706
Property, plant and equipment, net	84,208
Solar power systems, leased, net	12,261
Long-term financing receivables net	17,907
Other long-term assets	5,960
Total assets	137,973

Accounts payable	1,236
Accrued liabilities and other current liabilities	34
Contract liabilities, current portion	163
Contract liabilities, net of current portion	3,024
Short-term debt	1,085
Long-term debt	44,246
Other long-term liabilities	1,809
Noncontrolling interests in subsidiaries	51,834
Total liabilities	103,431
Net assets	$	34,542

¹~~Cash~~

Net consideration ~~received, net of other costs and expenses, and cash, cash equivalents and restricted cash sold, is reflected~~recognized was as ~~a cash outflow from the sale of our equity interest in the residential lease portfolio on the Consolidated Statements of Cash Flows.~~follows:


(In thousands)
Assumption of Mezzanine Loan 3	$	23,744
Special distribution from Mezzanine 3 and Credit Agricole Loans	5,897
Accounts receivable from SunStrong Capital Holdings ("SSCH") for SREC distributions	2,146
Other costs and expenses	(254)
Net consideration recognized	$	31,533

~~The net~~

Net loss on sale for the year ended December ~~30, 2018~~29, 2019 was as follows:


(In thousands)
Net consideration recognized	$	31,533
Net assets disposed	(34,542)
Warranty obligations incurred	(870)
Obligations to complete leases under construction	(6,650)
Other items	3,286
Net loss on sale	$	(7,243)

Sale and Leaseback of Hillsboro Facility

In September 2019, we completed the sale of our manufacturing facility buildings and land in Hillsboro, Oregon, to RagingWire Data Centers, Inc., through an affiliate, for a purchase price of $63.5 million (the "Sale-Leaseback Transaction”). As part of the Sale-Leaseback Transaction, we also leased back a portion of the facility, specifically, the module assembly building, for three years. Further, we also agreed to complete the decommissioning services in the building, which was completed in in the fourth quarter of fiscal 2019.

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Net cash consideration of $39.7 million was received at the closing, net of fees and expenses of $3.8 million, and a holdback amount of $20.0 million for timely completion of the decommissioning services. The holdback amount of $20.0 million was received in full in the fourth quarter of fiscal 2019.

In accounting for this transaction, we applied the guidance in ASC 610-20, Derecognition of nonfinancial assets and in-substance nonfinancial assets, which directs us to apply the guidance in ASC 606 Revenue from contracts with customers, for recognition and measurement. In accordance with the guidance, sale of the building and provision of decommissioning services were considered distinct performance obligations and total consideration was allocated to these performance obligations based on their respective standalone selling prices.

During the fiscal year, we recognized net gain of $25.2 million, which is included within "cost of revenue: solar power systems, components, and other" on our consolidated statements of operations for the year ended December 29, 2019. As of December 29, 2019, we have a deferred gain of $3.8 million that represents the excess of fair market value of the building leased back to be recognized over the leaseback term of three years.

Sale of Commercial Sale-Leaseback Portfolio

We entered into sale-leaseback arrangements under which solar power systems were sold to third parties and subsequently leased back by us over lease terms of up to 25 years. Separately, we entered into sales of energy under power purchase agreements ("PPAs") with end customers, who host the leased solar power systems and buy the electricity directly from us under PPAs with terms of up to 25 years. At the end of the lease term, we have the option to purchase the systems at fair value or may be required to remove the systems and return them to the third parties.

On March 26, 2019, we and our wholly-owned subsidiary entered into a Membership Interest Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with a wholly-owned subsidiary of Goldman Sachs Renewable Power LLC. Pursuant to the Purchase and Sale Agreement, we agreed to sell, in exchange for cash consideration of up to $86.9 million, membership interests owned by us in certain holding company subsidiaries (the “HoldCos”) that, in turn, own, directly or indirectly, the membership interests in one or more limited liability companies (together with other related subsidiaries, the “Related Subsidiaries”) that own leasehold interests in operating solar photovoltaic electric generating projects (the “Projects”) subject to sale-leaseback financing arrangements with one or more financiers (each a "Lessor"). The Projects are located at approximately 200 sites across the United States, and represent in aggregate, approximately 233 MW of generating capacity. The portfolio of Projects financed by each Lessor represents a separate asset (a “Portfolio”) for which the price is separately agreed and stated in the Purchase and Sale Agreement. Upon the sale of the applicable membership interests, the related assets were deconsolidated from our balance sheet.

In connection with the sale transaction, we received total consideration of $81.3 million and recognized a total gain of $143.4 million, which is included within "Gain on business divestitures" in our consolidated statements of operations for the year ended December 29, 2019. We have also incurred approximately $1.2 million of transaction costs related to the above transactions during fiscal 2019, which were expensed as incurred.

The assets and liabilities of the portfolios sold were as follows:

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(In thousands)	At Disposal Date
Restricted cash and cash equivalents, current portion	$	43,641
Accounts receivable, net	7,959
Prepaid expenses and other current assets	957
Restricted cash and cash equivalents, net of current portion	1,746
Operating lease right-of-use assets	46,109
Property, plant and equipment	477,816
Total assets	578,228

Accounts payable	1,071
Accrued Liabilities	1,641
Operating lease liabilities, current	2,443
Operating lease liabilities, non-current	38,803
Other long-term liabilities¹	600,675
Total liabilities	644,633
Net liabilities sold	$	(66,405)

¹Constitutes the financing liability on sale-lease arrangements on the property, plant and equipment sold.

Net gain on sale is presented in the following ~~table.~~table:


	Twelve Months Ended
(In thousands)	December 29, 2019
Cash received from sale	$	81,262
Other intangible assets	3,000
Net liabilities sold	66,405
Holdback receivables	2,425
Net retained obligations	(9,692)
Net gain on sale	$	143,400

119

(In thousands)
Net consideration recognized from sale $ 183,425
SunPower retained equity 9,649
Net assets related to sale (238,477 )
Warranty obligation (5,308 )
Obligations to complete leases under construction (11,616 )
Net loss on sale $ (62,327 )

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~~Acquisition of SolarWorld Americas Inc.~~

On April 16, 2018, we entered into a Sale and Purchase Agreement (the "Sale and Purchase Agreement") pursuant to which we agreed to purchase all of SolarWorld AG's shares of stock in SolarWorld Americas Inc. ("SolarWorld Americas"), and SolarWorld Industries Deutschland GmbH’s partnership interest in SolarWorld Industries America LP. On August 21, 2018, we terminated the Sale and Purchase Agreement and entered into an Asset Purchase Agreement with SolarWorld Americas, pursuant to which we agreed to purchase certain assets of SolarWorld Americas in exchange for consideration of $26.0 million in cash, subject to certain closing and post-closing adjustments and other contingent payments. In connection with the termination of the Sale and Purchase Agreement, we have recognized an expense of $20.0 million for the quarter ended September 30, 2018 in sales, general and administrative expense. On October 1, 2018, we completed the acquisition of certain assets of SolarWorld Americas, including its Hillsboro, Oregon facility and a significant portion of its manufacturing workforce of more than 200 employees. The acquisition will provide us with U.S. manufacturing capability to serve the U.S. market demand and SolarWorld Americas provides a platform for us to implement our commercial P-Series solar panel manufacturing technology and selected R&D activities.

The acquisition was accounted for under the acquisition method of accounting, with SunPower identified as the acquirer. The purchase consideration consisted of $26.0 million in cash paid according to the following schedule: (i) $2.0 million upon entering into the Sale and Purchase Agreement, (ii) $15.0 million upon closing, and (iii) $9.0 million six months following closing. In addition, the acquisition agreement provides for additional purchase consideration based on the residual asset value as of 120 days post-close (the "RAV Payment") and earn-out payments should any funds be received in association with the outcome of anti-dumping and countervailing duties trade cases (the "AD/CVD"). Recovery of any funds related to the AD/CVD trade cases, net of legal fees, shall be distributed to us and SolarWorld Americas pursuant to the terms of the Asset Purchase Agreement. Accordingly, we recorded contingent liabilities totaling $4.1 million for the estimated fair value of the RAV and AD/CVD earn-out payments. We also recorded a contingent asset of $3.2 million representing the estimated fair value of the contingent consideration we are entitled to as of the acquisition date.

Concurrent with the close of the Asset Purchase Agreement, we and SolarWorld Americas also entered into (i) supply agreement under which SolarWorld Americas agreed to purchase a minimum purchase commitment of 18 MW of solar cells for a period of three months following closing, and (ii) module facility lease agreement for a period of three months for the purpose of manufacturing SolarWorld Americas solar products. Based on the expected revenue from the solar cells sales and rental lease income from SolarWorld Americas and the unavoidable costs associated with these contracts including among others, payroll, direct materials and utilities, we determined the contracts to be below market-based terms and recorded an onerous contact liability of $7.9 million as of the acquisition date.

The operating results of SolarWorld Americas, which have been included in our consolidated financial statements since the closing date of the acquisition, have not been significant. The aggregate amount of consideration paid was allocated to SolarWorld America's net tangible assets based on their estimated fair values as of October 1, 2018. We engaged a third-party valuation expert to assist in determining the fair value of SolarWorld's tangible assets and contingent consideration. Tangible assets consist of land, building, site improvements and manufacturing equipment. The fair values of the tangible assets were determined using a combination of cost and market approaches based on estimated replacement costs, recent and comparable transactions and adjustments for economic obsolescence, customization and marketability. The fair values of the contingent consideration were determined using an income approach based on a real option method to value the RAV Payment and a scenario-based method which considered the estimated probability-weighted recovery and discount rate that captures a market participant's view of the risk associated with the expected payments for the AD/CVD earn-out payment.

Of the total purchase price of $30.1 million, consisting of cash consideration of $26.0 million and contingent consideration of $4.1 million described above, $37.4 million was attributed to property, plant and equipment, $3.1 million was attributed to contingent assets related to the AD/CVD Trade cases and the remaining $10.4 million was primarily attributed to the net liabilities assumed. No goodwill was recognized in connection with the transaction.

~~Divestment of Microinverter Business~~

On August 9, 2018, we completed the sale of certain assets and intellectual property related to the production of microinverters to Enphase Energy, Inc. ("Enphase") in exchange for $25.0 million in cash and 7.5 million shares of Enphase common stock (the “Closing Shares”), pursuant to an Asset Purchase Agreement (the "Purchase Agreement") entered into on June 12, 2018. We received the Closing Shares and $15.0 million cash payment upon closing, and received the final $10.0 million cash payment of the purchase price on December 10, 2018.

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In connection with the closing of the Purchase Agreement, we and Enphase entered into a master supply agreement ("MSA") under which we will exclusively procure module-level power electronics and related equipment for use in the U.S. residential market from Enphase for a period of five years. The MSA contains certain minimum volume and pricing commitments and exclusivity provisions, the breach of which would entitle Enphase to certain liquidated damages. The initial term of the MSA is through December 31, 2023, and the MSA term shall automatically be extended for successive two-year periods unless either party provides written notice of non-renewal. The MSA also includes customary provisions relating to requirements forecasting, warranty, liability, and quality assurance provisions. In accordance with our consideration of the terms of this arrangement and analysis of market pricing for products covered by the MSA, we believe the MSA is consistent with market-based terms observed in the module-level power electronics market.

In addition, in connection with the closing of the Purchase Agreement, we and Enphase also entered in a Stockholders Agreement to establish certain of our rights and obligations related to the Closing Shares, including our right to appoint one person to the Enphase board of directors, a six-month lock up period, certain additional transfer restrictions on the Closing Shares, registration rights, and voting, standstill and other undertakings by us.

~~Upon closing of this transaction, we recognized a gain which is summarized in the following table:~~

As of
(In thousands) August 9, 2018
Cash consideration $ 25,000
Closing shares 42,600
Less transaction costs (1,743 )
Total consideration 65,857
Assets sold (6,510 )
Gain on business divestiture $ 59,347

We utilized the quoted price in active markets for the acquired Enphase common stock (a Level 1 input under the fair value measurement standards) to value the Closing Shares. For the year ended December 30, 2018, we recognized a $59.3 million gain on business divestiture included on our Consolidated Statements of Operations.

~~Note 5.~~ ~~OTHER INTANGIBLE ASSETS~~

~~The following table present details of our acquired other intangible assets, net:~~

(In thousands) Gross Accumulated
Amortization Net
As of December 30, 2018:
Patents and purchased technology¹
$ 42,893
$ (30,311 ) $ 12,582
$ 42,893
$ (30,311 ) $ 12,582

As of December 31, 2017:
Patents and purchased technology $ 52,313
$ (26,794 ) $ 25,519
$ 52,313
$ (26,794 ) $ 25,519

¹In connection with the divestment of our microinverter business on August 9, 2018, we disposed patents and purchased technology with gross amount of $10.2 million and net book value of $4.1 million. Refer to "Note 4. ~~Business Combinations and Divestiture" for further details on the transaction.~~

Aggregate amortization expense for intangible assets totaled $9.6 million and $19.7 million and $13.0 million for fiscal year 2018, 2017 and 2016, respectively. Aggregate impairment loss for intangible assets amounted to zero, zero and $4.7 million for fiscal year 2018, 2017 and 2016, respectively.

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~~As of December 30, 2018, the estimated future amortization expense related to intangible assets with finite useful lives is as follows:~~

(In thousands) Amount
Fiscal Year
2019 $ 7,819
2020 4,749
Thereafter 14
Total future amortization expense $ 12,582

Note 6.5. BALANCE SHEET COMPONENTS

Accounts Receivable, Net


	As of
(In thousands)	December 29, 2019		December 30, 2018
Accounts receivable, gross¹	$	247,258	$	193,980
Less: allowance for doubtful accounts	(19,975)		(16,906)
Less: allowance for sales returns	(807)		(1,469)
Accounts receivable, net	$	226,476	$	175,605

As of
(In thousands) December 30, 2018
December 31, 2017
Accounts receivable, gross^1,2,3
$ 193,980
$ 242,327
Less: allowance for doubtful accounts⁴
(16,906 ) (35,387 )
Less: allowance for sales returns (1,469 ) (1,974 )
Accounts receivable, net $ 175,605
$ 204,966

¹~~Includes short-term financing receivables held for sale associated with solar power systems leased~~There is a lien on our accounts receivable of ~~$1.3~~ $75.4 million ~~and $19.1 million~~ out of our consolidated accounts receivable, gross, as of December ~~30,~~29, 2019 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 11. Debt and Credit Sources.


(In thousands)	Balance at Beginning of Period		Charges (Releases) to Expenses / Revenues	Additions (Deductions)		Balance at End of Period
Allowance for doubtful accounts:
Year ended December 29, 2019	$	16,906	1,024	$	2,045	$	19,975
Year ended December 30, 2018	28,895		12,519	(24,508)		16,906
Year ended December 31, 2017	20,380		15,609	(7,094)		28,895
Allowance for sales returns:
Year ended December 29, 2019	1,469		(662)	—		807
Year ended December 30, 2018	1,974		(505)	—		1,469
Year ended December 31, 2017	2,433		(459)	—		1,974

Accounts Receivable Factoring

In December 2018 and ~~December 31, 2017, respectively (see "Note 7.~~ ~~Leasing").~~

²~~We pledged accounts receivable of zero and $1.7 million as of December 30, 2018 and~~ ~~December 31, 2017~~May 2019, ~~respectively, to third-party investors as security for our contractual obligations.~~

³~~On December 10, 2018,~~ we entered into ~~a one-year~~ factoring ~~arrangement and sold to BPI France our Euro denominated accounts receivable~~arrangements with two separate third-party factor agencies related to our ~~French~~accounts receivable from customers ~~for an amount~~in Europe. As a result of ~~approximately $26.3 million. Under this arrangement, we provided the bank full recourse for any loss should customers fail~~these factoring arrangements, title of certain accounts receivable balances was transferred to ~~pay when payment is due. The advance payment amount under this program is limited at face value of the sold invoices. We have~~third-party vendors, and both arrangements were accounted for ~~this arrangement~~ as a sale of financial assets, asunder ASU 2014-11 Transfer and Servicing (Topic 860), given effective control over these financial assets has been ~~surrendered and are~~surrendered. As a result, these financial assets have been excluded from our ~~Consolidated Balance Sheet. Total cost associated with this arrangement was $0.1~~consolidated balance sheets.

During the year ended December 29, 2019 and December 30, 2018, we sold accounts receivable invoices amounting to $119.4 million and $26.3 million, respectively. As of December 29, 2019 and December 30, 2018, total uncollected accounts receivable from end customers under both arrangements were $11.6 million and $21.0 million, respectively. Transaction fees incurred for these arrangements were not material during the year ended December ~~30, 2018. As~~29, 2019.

Inventories


	As of
(In thousands)	December 29, 2019		December 30, 2018
Raw materials	$	54,936	$	58,378
Work-in-process	62,993		86,639
Finished goods	240,328		163,129
Inventories^{1 2}	$	358,257	$	308,146

¹A lien of $37.1 million exists on our gross inventory as of December ~~30, 2018, uncollected accounts receivable from~~29, 2019 in connection with a Loan and Security Agreement entered into on March 29, 2019. See Note 11. Debt and Credit Sources.

²Also refer to long-term inventory for Safe Harbor program under the ~~end customers under this arrangement were $21.0 million.~~caption "Other long-term assets"

⁴~~For the year ended~~ ~~December 30, 2018, we recognized an allowance for losses of$4.7 million on the short-term financing receivables associated with solar power systems leased~~ ~~(see "Note 7.~~ ~~Leasing"). For the year ended December 31, 2017, the Company recognized an allowance for losses of $5.8 million on the short-term financing receivables associated with solar power systems leased.~~

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(In thousands)

Balance at Beginning of Period Charges (Releases) to Expenses / Revenues Deductions Balance at End of Period
Allowance for doubtful accounts:
   Year ended December 30, 2018 $ 28,895
$ 12,519
$ (24,508 ) $ 16,906
   Year ended December 31, 2017 20,380
15,609
(7,094 ) 28,895
   Year ended January 1, 2017 15,505
7,319
(2,445 ) 20,380
Allowance for sales returns:
   Year ended December 30, 2018 1,974
(505 ) —
1,469
   Year ended December 31, 2017 2,433
(459 ) —
1,974
   Year ended January 1, 2017 1,907
526
—
2,433
Valuation allowance for deferred tax assets:
   Year ended December 30, 2018 448,723
(43,800 ) —
404,923
   Year ended December 31, 2017 297,530
151,193
—
448,723
   Year ended January 1, 2017 83,370
214,160
—
297,530

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Table of Contents

~~Inventories~~

As of
(In thousands)
December 30, 2018 December 31, 2017
Raw materials
$ 58,378
$ 59,288
Work-in-process
86,639
111,164
Finished goods
163,129
182,377
Inventories
$ 308,146
$ 352,829

Prepaid Expenses and Other Current Assets


	As of
(In thousands)	December 29, 2019		December 30, 2018
Deferred project costs	$	29,652	$	30,394
VAT receivables, current portion	7,986		9,506
Deferred costs for solar power systems	29,631		17,805
Derivative financial instruments	1,002		729
Other receivables	37,140		48,062
Prepaid taxes	718		853
Other current assets	411		—
Other prepaid expenses	14,704		23,834
Prepaid expenses and other current assets	$	121,244	$	131,183

As of
(In thousands) December 30, 2018 December 31, 2017
Deferred project costs¹
$ 30,394
$ 33,534
VAT receivables, current portion 9,506
11,561
Deferred costs for solar power systems to be leased 17,805
25,076
Derivative financial instruments 729
2,612
Other receivables 48,062
49,015
Prepaid taxes 853
426
Other prepaid expenses 23,568
23,434
Other current assets 266
551
Prepaid expenses and other current assets $ 131,183
$ 146,209

¹~~As of December 30, 2018 and~~ ~~December 31, 2017, we had pledged deferred project costs of~~ ~~zero, and $2.9 million, respectively, to third-party investors as security for our contractual obligations.~~

~~Project Assets - Plants and Land~~

As of
(In thousands) December 30, 2018 December 31, 2017
Project assets — plants $ 10,334
$ 90,879
Project assets — land 666
12,184
Project assets — plants and land $ 11,000
$ 103,063
Project assets — plants and land, current portion $ 10,796
$ 103,063
Project assets — plants and land, net of current portion $ 204
$ —

~~As a result of our evaluation of our ability to recover the costs incurred to date for our solar development assets, we wrote off~~ ~~$24.7 million~~ of costs in the first quarter of 2018. Such charges were recorded as a component of cost of revenue for the twelve months ended December 30, 2018. While we considered all reasonably available information, the estimate includes significant risks and uncertainties as the pricing environment in the solar industry is currently volatile with increased uncertainty brought about by the tariffs~~imposed pursuant to the Section 201 trade case. For the year ended~~ ~~December 30, 2018~~, we completed an arrangement with a customer to sell our remaining U.S. power plant development portfolio. Based on the various performance obligations in the arrangement and our estimates of variable considerations we are entitled to upon achievement of certain performance milestones, we recognized the majority of the gross profit of $21.1 million for the year ended ~~December 30, 2018, when control over the assets transferred to the customer.~~

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Property, Plant and Equipment, Net


	As of
(In thousands)	December 29, 2019		December 30, 2018
Manufacturing equipment	$	144,614	$	112,904
Land and buildings	137,723		161,299
Leasehold improvements	103,393		119,597
Solar power systems¹	30,518		544,139
Computer equipment	93,312		98,274
Furniture and fixtures	9,471		10,594
Construction-in-process	15,730		9,678
Property, plant and equipment, gross	534,761		1,056,485
Less: accumulated depreciation	(211,035)		(216,614)
Property, plant and equipment, net	$	323,726	$	839,871

As of
(In thousands) December 30, 2018 December 31, 2017
Manufacturing equipment $ 112,904
$ 406,026
Land and buildings 161,299
197,084
Leasehold improvements 119,597
297,522
Solar power systems²
544,139
451,678
Computer equipment 98,274
111,183
Furniture and fixtures 10,594
12,621
Construction-in-process 9,678
14,166
Property, plant and equipment, gross 1,056,485
1,490,280
Less: accumulated depreciation (216,614 ) (342,435 )
Property, plant and equipment, net¹
$ 839,871
$ 1,147,845

¹~~Includes~~As a ~~non-cash impairment charge of $369.2 million recorded in fiscal 2018 associated with SunPower Technologies segment, which excludes all solar power systems as these are part~~result of the ~~SunPower Energy Services segment.~~

²~~Includes $519.6 million~~adoption of ASC 842, all of our residential lease arrangements entered into on or after December 31, 2018 are excluded from the scope of the lease accounting guidance and ~~$419.0 million of solar~~are accounted for as service contracts in accordance with ASC 606. The related assets are recorded as "solar power ~~systems associated with sale-leaseback transactions under the financing method~~systems" within "Property, plant and equipment, net" as of December ~~30, 2018 and December 31, 2017, respectively, which are depreciated using the straight-line method to their estimated residual values over the lease terms of up to~~ ~~25 years~~ ~~(see "Note 7.~~ ~~Leasing").~~29, 2019.

Property, Plant and Equipment, Net, by Geography


	As of
(In thousands)	December 29, 2019		December 30, 2018
United States	$	56,507	$	575,451
Philippines	92,598		104,639
Malaysia	145,246		126,056
Mexico	18,862		21,566
Europe	10,469		12,043
Other	44		116
Property, plant and equipment, net, by geography¹	$	323,726	$	839,871

As of
(In thousands) December 30, 2018 December 31, 2017
United States $ 575,451
$ 488,970
Philippines 104,639
325,601
Malaysia 126,056
233,824
Mexico 21,566
80,560
Europe 12,043
18,767
Other 116
123
Property, plant and equipment, net, by geography¹
$ 839,871
$ 1,147,845

¹~~Property, plant and equipment, net by geography is based~~Based on the physical location of the assets.

~~Impairment of Property, Plant and Equipment~~

In the second quarter of fiscal 2018, we announced our proposed plan to change our corporate structure into upstream and downstream business units, and long-term strategy to upgrade our integrated back connectivity ("IBC") technology to next generation technology (“NGT” or Maxeon 5). Accordingly, we expect to upgrade the equipment associated with our manufacturing operations for the production of Maxeon 5 over the next several years. Because of these planned changes that will impact the utilization of our manufacturing assets and continued pricing challenges in the industry, we determined that indicators of impairment existed and therefore performed a recoverability test by estimating future undiscounted net cash flows expected to be generated from the use of these asset groups. Based on the test performed, we determined that our estimate of future undiscounted net cash flows was insufficient to recover the carrying value of the upstream business unit’s assets and consequently performed an impairment analysis by comparing the carrying value of the asset group to its estimated fair value.

In estimating the fair value of the long-lived assets, we made estimates and judgments that we believe reasonable market participants would make, using Level 3 inputs under ASC 820. The impairment evaluation utilized a discounted cash flow analysis inclusive of assumptions for forecasted profit, operating expenses, capital expenditures, remaining useful life of our manufacturing assets, a discount rate, as well as market and cost approach valuations performed by a third-party valuation specialist, all of which require significant judgment by us.

~~In accordance with such evaluation, we recognized a non-cash impairment charge of $369.2 million for the year ended~~ ~~December 30, 2018~~. The total impairment loss was allocated to the long-lived assets of the group on a pro rata basis using the relative carrying amounts of those assets, except that the loss allocated to an individual long-lived asset of the group did not reduce the carrying amount of that asset below its determined fair value. As a result, non-cash impairment charges of $355.1

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million, $12.8 million and $1.2 million were allocated to "Cost of revenue", "Research and development" and "Sales, general and administrative", respectively, on our Consolidated Statements of Operations for the year ended ~~December 30, 2018. Further, the $355.1 million non-cash impairment charge within "Cost of revenue" was allocated to our SunPower Technology segment in fiscal 2018.~~

Other Long-term Assets


	As of
(In thousands)	December 29, 2019		December 30, 2018
Equity investments with readily determinable fair value	$	173,908	$	36,225
Equity investments without readily determinable fair value	8,536		8,810
Equity investments with fair value option	17,500		8,831
Equity method investments	26,658		34,828
Long-term inventory¹	48,214		—
Other	56,039		73,339
Other long-term assets	$	330,855	$	162,033

As of
(In thousands) December 30, 2018 December 31, 2017
Equity investments with readily determinable fair value $ 36,225
$ —
Equity investments without readily determinable fair value 8,810
35,840
Equity method investments¹
43,659
450,000
Other²
73,339
60,858
Other long-term assets $ 162,033
$ 546,698

¹~~On June 19, 2018, we completed the sale~~ Entire balance consists of our equity interest in the 8point3 Group. As of December 30, 2018 and December 31, 2017, our investment in the 8point3 Group had a carrying value of zero and $382.7 million, respectively (see "Note 11. finished goods for Solar Sail. Refer to Note 10. Equity Investments~~").~~ for further discussion regarding Solar Sail.

²~~As of December 30, 2018 and December 31, 2017, we had pledged deferred project costs of zero and $6.4 million, respectively, to third-party investors as security for our contractual obligations.~~

Accrued Liabilities


	As of
(In thousands)	December 29, 2019		December 30, 2018
Employee compensation and employee benefits	$	47,901	$	44,337
Deferred revenue¹	767		4,251
Interest payable	10,161		11,786
Short-term warranty reserves	30,979		38,161
Restructuring reserve	6,601		6,310
VAT payables	6,393		8,325
Derivative financial instruments	1,962		1,161
Legal expenses	13,111		12,442
Taxes payable	32,191		19,146
Liability due to supply agreement	28,031		28,045
Other	25,793		61,288
Accrued liabilities	$	203,890	$	235,252

As of
(In thousands) December 30, 2018 December 31, 2017
Employee compensation and employee benefits $ 44,337
$ 53,225
Deferred revenue¹
4,251
5,805
Interest payable 11,786
15,396
Short-term warranty reserves 38,161
25,222
Restructuring reserve 6,310
3,886
VAT payables 8,325
8,691
Derivative financial instruments 1,161
1,452
Legal expenses 12,442
48,503
Taxes payable 19,146
21,307
Liability due to supply agreement 28,045
21,389
Other 61,288
26,895
Accrued liabilities $ 235,252
$ 231,771

¹Consists of advance consideration received from customers under the residential lease program for leases entered into prior to December 31, 2018, which iscontinue to be accounted for in accordance with the superseded lease accounting guidance.

Other Long-term Liabilities


	As of
(In thousands)	December 29, 2019		December 30, 2018
Deferred revenue¹	$	40,246	$	55,764
Long-term warranty reserves	107,466		134,105
Long-term sale-leaseback financing	—		583,418
Unrecognized tax benefits	20,067		16,815
Long-term pension liability	5,897		2,567
Derivative financial instruments	373		152
Long-term liability due to supply agreement	—		28,198
Other	30,251		18,117
Other long-term liabilities	$	204,300	$	839,136

As of
(In thousands) December 30, 2018 December 31, 2017
Deferred revenue¹
$ 55,764
$ 105,221
Long-term warranty reserves 134,105
156,082
Long-term sale-leaseback financing 583,418
479,597
Unrecognized tax benefits 16,815
19,399
Long-term pension liability 2,567
4,465
Derivative financial instruments 152
1,174
Long-term liability due to supply agreement 28,198
57,611
Other 18,117
18,793
Other long-term liabilities $ 839,136
$ 842,342

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Accumulated Other Comprehensive Loss


	As of
(In thousands)	December 29, 2019		December 30, 2018
Cumulative translation adjustment	$	(12,250)	$	(11,121)
Net unrealized gain (loss) on derivative financial instruments	(1,238)		(145)
Net gain on long-term pension liability adjustment	3,976		7,066
Deferred taxes	—		50
Accumulated other comprehensive loss	$	(9,512)	$	(4,150)

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As of
(In thousands) December 30, 2018 December 31, 2017
Cumulative translation adjustment $ (11,121 ) $ (6,631 )
Net unrealized gain (loss) on derivatives (145 ) (541 )
Net gain on long-term pension liability adjustment 7,066
4,164
Deferred taxes 50
—
Accumulated other comprehensive loss $ (4,150 ) $ (3,008 )
Note 6. SOLAR SERVICES

~~Note 7.~~ ~~LEASING~~

~~Residential Lease Program~~

~~We offer a solar~~Upon adoption of ASC 842 on December 31, 2018, all arrangements under our residential lease program entered into on or after December 31, 2018 are accounted for as contracts with customers in accordance with ASC 606. The disclosure below relates to the residential lease arrangements entered into before December 31, 2018, which ~~provides U.S. residential customers with SunPower systems under 20-year lease agreements that include system maintenance~~we continue to retain and ~~warranty coverage. Leases~~ are ~~classified as either operating or sales-type leases~~accounted for in accordance with the ~~relevant~~superseded lease accounting ~~guidelines.~~guidance.

Operating Leases

The following table summarizes "Solar power systems leased and to be leased, net" under operating leases on our ~~Consolidated Balance Sheets~~consolidated balance sheets as of December ~~30, 2018~~29, 2019 and December ~~31, 2017:~~30, 2018:


	As of
(In thousands)	December 29, 2019		December 30, 2018
Solar power systems leased and to be leased, net¹:
Solar power systems leased	$	116,948	$	139,343
Solar power systems to be leased	—		12,158
	116,948		151,501
Less: accumulated depreciation and impairment²	(62,610)		(58,944)
Solar power systems leased and to be leased, net	$	54,338	$	92,557

As of
(In thousands) December 30, 2018 December 31, 2017
Solar power systems leased and to be leased, net^1,2:

Solar power systems leased $ 139,343
$ 749,697
Solar power systems to be leased 12,158
26,830
151,501
776,527
Less: accumulated depreciation and impairment³
(58,944 ) (407,309 )
Solar power systems leased and to be leased, net $ 92,557
$ 369,218

¹Solar power systems leased and to be leased, net, are physically located exclusively in the United States.

²~~As of December 30, 2018 and December 31, 2017, we had pledged solar assets with an aggregate book value of~~ ~~zero~~ and $112.4 million, respectively, to third-party investors as security for our contractual obligations. The book value of pledged assets represents assets legally held by the respective flip partnerships.

³For the year ended December 29, 2019 and December 30, 2018, we recognized a non-cash impairment charge of $4.0 million and $74.9 million, respectively, on solar power systems leased and to be leased.

The following table presents our minimum future rental receipts on operating leases placed in service as of December ~~30, 2018:~~29, 2019:


(In thousands)	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total
Minimum future rentals on operating leases placed in service¹	$	735	$	590	$	593	$	595	$	598	$	8,928	$	12,039

(In thousands) Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 Thereafter Total
Minimum future rentals on operating leases placed in service¹
$ 1,224
$ 1,186
$ 1,189
$ 1,193
$ 1,197
$ 18,359
$ 24,348

¹~~Minimum future rentals on operating leases placed in service does~~Does not include contingent rentals that may be received from customers under agreements that include performance-based incentives.

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Sales-Type Leases

As of December ~~30, 2018~~29, 2019 and December ~~31, 2017,~~30, 2018, our net investment in sales-type leases presented within ~~"Accounts~~"accounts receivable, net" and ~~"Long-term~~"long-term financing receivables, net" on our ~~Consolidated Balance Sheets~~consolidated balance sheets was as follows:


	As of
(In thousands)	December 29, 2019		December 30, 2018
Financing receivables, held for sale:
Minimum lease payments receivable	$	3,569	$	43,939
Unguaranteed residual value	680		4,450
Unearned income	(1,393)		(8,859)
Allowance for estimated losses	(2,856)		(18,656)
Net financing receivables, held for sale	$	—	$	20,874
Net financing receivables - current, held for sale	$	—	$	1,282
Net financing receivables - non-current, held for sale	$	—	$	19,592

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As of
(In thousands) December 30, 2018 December 31, 2017
Financing receivables, held for sale¹:

Minimum lease payments receivable²
$ 43,939
$ 690,249
Unguaranteed residual value 4,450
73,344
Unearned income (8,859 ) (115,854 )
Allowance for estimated losses (18,656 ) (297,972 )
Net financing receivables, held for sale $ 20,874
$ 349,767
Net financing receivables - current, held for sale $ 1,282
$ 19,095
Net financing receivables - non-current held for sale $ 19,592
$ 330,672

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¹~~As of December 30, 2018 and December 31, 2017, we had pledged financing receivables of~~ ~~zero~~ and $113.4 million, respectively, to third-party investors as security for our contractual obligations. The book value of pledged assets represents assets legally held by the respective flip partnerships.

²~~Net of allowance for doubtful accounts amounting to $0.0 million and $6.1 million, as of~~ ~~December 30, 2018~~ ~~and December 31, 2017, respectively.~~

As of December ~~30, 2018,~~29, 2019, future maturities of net financing receivables for sales-type leases were as follows:


(In thousands)	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total
Scheduled maturities of minimum lease payments receivable¹	$	204	$	180	$	181	$	182	$	183	$	2,639	$	3,569

(In thousands) Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 Thereafter Total
Scheduled maturities of minimum lease payments receivable¹
$ 2,126
$ 2,129
$ 2,137
$ 2,146
$ 2,155
$ 33,246
$ 43,939

¹~~Minimum future rentals on sales-type leases placed in service does~~Does not include contingent rentals that may be received from customers under agreements that include performance-based incentives.

Impairment ~~and Sale~~ of Residential Lease Assets

~~In December 2017, the Board of Directors approved a future sale of a portion~~On November 5, 2018, we sold 49% of our ~~Residential Lease Portfolio that resulted~~membership interest in ~~the sale of partial equity interests in~~ SunStrong, formerly our wholly owned subsidiary that historically held and controlled the assets and liabilities comprising our residential lease business. Following the closing, we deconsolidated certain solar project entities that held our residential lease assets and retained membership units representing a 51% membership interest in SunStrong. Further, on September 27, 2019, we sold an additional solar project entity that held residential lease assets to ~~Hannon Armstrong on November 5, 2018 - See~~SunStrong (Refer Note 4. 4 Business ~~Combinations~~Divestitures and ~~Divestitures~~ ~~for further details.~~ Sale of Manufacturing Facility).

We ~~continue~~continued to retain certain residential lease assets subject to leasing arrangements on our consolidated ~~financial statements~~balance sheet as of December ~~30, 2018, which we~~29, 2019, primarily relating to leases that are fully self-funded and not financed by tax equity investors. We expect to sell these to SunStrong in ~~2019,~~fiscal 2020 and ~~these assets have been tested~~continue to test them for impairment as described below.

We evaluate our long-lived assets, including property, plant and equipment, solar power systems leased and to be leased, and other intangible assets with finite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors considered important that could result in an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of use of acquired assets, and significant negative industry or economic trends. Our impairment evaluation of long-lived assets includes an analysis of estimated future undiscounted net cash flows expected to be generated by the assets over their remaining estimated useful lives. If our estimate of future undiscounted net cash flows is insufficient to recover the carrying value of the assets over the remaining estimated useful lives, it records an impairment loss in the amount by which the carrying value of the assets exceeds the fair value. Fair value is generally measured based on either quoted market prices, if available, or discounted cash flow analysis.

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Financing receivables are generated by solar power systems leased to residential customers under sales-type leases. Financing receivables represent gross minimum lease payments to be received from customers over a period commensurate with the remaining lease term and the system's estimated residual value, net of unearned income and allowance for estimated losses. Our evaluation of the recoverability of these financing receivables is based on evaluation of the likelihood, based on current information and events, and whether we will be able to collect all amounts due according to the contractual terms of the underlying lease agreements. In accordance with this evaluation, we recognize an allowance for losses on financing receivables based on our estimate of the amount equal to the probable losses net of recoveries. The combination of the leased solar power systems discussed in the preceding paragraph together with the lease financing receivables is referred to as the "Residential Lease Portfolio."

In conjunction with our efforts to generate more available liquid funds and simplify our balance sheets, we made the decision to sell a portion of our interest in the Residential Lease Portfolio and engaged an external investment banker to assist with our related marketing efforts in the fourth quarter of fiscal 2017. As a result of these events, in the fourth quarter of fiscal 2017, we determined it was necessary to evaluate the potential for impairment in our ability to recover the carrying amount of our Residential Lease Portfolio.

In proceeding with the impairment evaluation, we determined that financing receivables related to sales-type leases, which were previously classified as held for investment, qualified as held for sale based on our decision to sell our interest in the Residential Lease Portfolio. Accordingly, we recognized an allowance for estimated losses for the amount by which cost exceeded fair value. In addition, we reviewed the cash flows we would expect to derive from the underlying asset that we recover from the lessees (unguaranteed residual value). Due to our planned sale of our Residential Lease Portfolio and based on the indication of value received, we determined that the decline in estimated residual value was other than temporary.

We performed a recoverability test for assets in the residential assets ~~subject to operating leases~~ by estimating future undiscounted net cash flows expected to be generated by the assets, based on our own specific alternative courses of action under consideration. The alternative courses were either to sell or refinance the assets, ~~subject to operating leases,~~ or hold the assets until the end of their previously estimated useful lives. Upon consideration of the alternatives, we ~~considered~~determined that market value, in the ~~probability~~form of ~~selling the~~indicative purchase price from a third-party investor was available for a portion of our residential assets. As we intend to sell these assets ~~subject to operating leases and factored~~in fiscal 2020, we used the indicative ~~value obtained~~purchase price from a prospective purchaser together with the probability of retaining the assets and the estimated future undiscounted net cash flows expected to be generated by holding the assets until the end of their previously estimated useful lives in the recoverability test. Based on the evaluation performed, we determined thatthird-party investor as ~~of December 31, 2017, the estimate of future undiscounted net cash flows was insufficient to recover the carrying~~fair value of the underlying net assets ~~subject to operating leases, and consequently performed an~~in our impairment ~~analysis by comparing the carrying value of the assets to their estimated fair value.~~evaluation.

We computed the fair value for the financing receivables associated with sales-type leases and long-lived assets subject to operating leases using consistent methodology and assumptions that market participants would use in their estimates of fair value. The estimates and judgments about future cash flows were made using an income approach defined as Level 3 inputs under fair value measurement standards. The impairment evaluation was based on the income approach (specifically a discounted cash flow analysis) and included assumptions for, among others, forecasted contractual lease income, lease expenses, residual value of these lease assets, long-term discount rates, and forecasted default rates over the lease term and discount rates, some of which require significant judgment by us.

~~We updated the impairment evaluation discussed above to include new leases that were placed in service since the last evaluation was performed.~~ In accordance with ~~such~~the impairment evaluation, we recognized a non-cash impairment charge of ~~$189.7~~$28.4 million included in ~~"Loss~~"loss on sale and impairment of residential lease assets" on the ~~Consolidated Statement~~consolidated statement of ~~Operations~~operations for the year ended December 29, 2019. We recognized a non-cash impairment charge of $189.7 million as "loss on sale and impairment of residential lease assets" on the consolidated statement of operations for the year ended December 30, 2018. Due to the fact that the Residential Lease Portfolio assets are held in partnership flip structures with noncontrolling interests, we allocated a portion of the impairment charge related to such noncontrolling interests through the hypothetical liquidation at book value ("HLBV") method. The allocation method applied to the noncontrolling interests and redeemable noncontrolling interests resulted in a net gain of $9.6 million and a net gain of $150.6 million for the year ended December 30, 2018 and December 31, 2017, respectively. As a result, the net impairment charges attributable to our stockholders totaled $180.1 million and $473.7 million for the year ended December 30, 2018 and December 31, 2017, respectively, and were recorded within the SunPower Energy Services Segment.

The impairment evaluation ~~includes uncertainty because it~~ requires us to make assumptions and to apply judgment to estimate future cash flows and assumptions. If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, and if and when a divestiture transaction occurs, the details and timing of which are subject to change as the final terms are negotiated between us and the intended purchaser, we may be exposed to additional impairment charges in the future, which could be material to the results of operations.

Sale of residential lease assets

On July 10, 2018, we created SunStrong to own and operate a portion of our residential lease assets and subsequently contributed to SunStrong our controlling equity interests in the aforementioned solar project companies. Further, on November 5, 2018, we entered into the PSA HA SunStrong Parent, a subsidiary of Hannon Armstrong, to sell 49.0% membership interests in SunStrong for cash proceeds of $10 million. Refer to our annual consolidated financial statements in Form 10-K for fiscal year ended December 31, 2018 for details of the transaction.

On November 5, 2018, SunStrong Capital Acquisition OF, LLC, a wholly-owned subsidiary of SunStrong (“Mezzanine Loan 2 Borrower”), and SunStrong Capital Lender 2, LLC, a subsidiary of Hannon Armstrong, entered into a loan agreement under which, Mezzanine Loan 2 Borrower may borrow a subordinated, mezzanine loan of up to $32.0 million (the “Mezzanine Loan 2”). The borrowing facilities provided by the Mezzanine Loan 2 were determined in consideration of the residential lease assets for which we had either completed construction or had the obligation to complete construction after November 5, 2018.

On May 31, 2019, the Mezzanine Loan 2 agreement was amended to increase the facility size to $49 million. The change was made based on the revised cash flow projections from the Residential Lease Portfolio due to improved operating performance of those assets subsequent to the sale to SunStrong. On May 31, 2019, the Mezzanine Loan 2 Borrower drew an additional $10.5 million under the revised arrangement, which was distributed to the Company as a special distribution in accordance with the agreement, resulting in an additional gain of $8.4 million, arising out of revised operating performance of

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~~Sale-Leaseback Arrangements~~

~~We enter into sale-leaseback arrangements under which solar power systems are sold to third parties and subsequently leased back by us over~~the underlying residential lease ~~terms of up to 25 years. Separately,~~assets. Also, during the quarter ended June 30, 2019, we enter into sales of energy under power purchase agreements ("PPAs") with end customers, who host the leased solar power systems and buy the electricity directly from us under PPAs with terms of up to 25 years. At the endclosed one of the ~~lease term, we have~~open funds that was sold as part of the ~~option to purchase the systems at fair value or may be required to remove the systems and return them~~original transaction, updated our estimates on special distributions receivable from SunStrong with respect to the ~~third parties.~~

We have classified our sale-leaseback arrangements of solar power systems not involving integral equipment as operating leases for which the deferred profit on the sale of these systems is recognized over the term of the lease. As of December 30, 2018, future minimum lease obligations associated with these systems were $65.9 million, which will be recognized over the minimum lease terms. Future minimum payments to be received from customers under PPAs associated with the solar power systems under sale-leaseback arrangements classified as operating leases will also be recognized over the lease terms of up to 25 yearswarehousing loan and ~~are contingent upon the amounts of energy produced by the solar power systems.~~

Certain sale-leaseback arrangements of solar power systems involve integral equipment, as defined under the accounting guidance for such transactions, as we have continuing involvement with the solar power systems throughout the lease due to purchase option rights in the arrangements. As a result of such continuing involvement, we account for each of these transactions as a financing. Under the financing method, the proceeds ~~received~~generated from the sale of future solar renewable energy credits, resulting in a gain of $1.9 million. The changes to the ~~solar power systems are~~estimates were driven by updated lease characteristics and other underlying assumptions on closure of the fund and final draw of investment from the tax equity investors. Both gains were recorded within "Loss on sale and impairment of residential lease assets" line item on the consolidated statements of operations.

On September 27, 2019, we sold the majority of the remainder of our remaining residential lease assets still owned by us, ~~as financing liabilities. The financing liabilities are subsequently reduced by our payments to~~that were not previously sold. These residential lease ~~back the solar power systems, less~~assets were sold under a new assignment of interest ~~expense calculated based on our incremental borrowing rate adjusted~~agreement entered into with SunStrong. SunStrong also assumed debts related to the ~~rate required to prevent negative amortization. The solar power systems under the sale-leaseback arrangements remain on our Consolidated Balance Sheets~~residential lease assets sold. See Note 4. Business Divestiture and ~~are classified within "Property, plant and equipment, net" (see "Note 6.~~ ~~Balance Sheet Components"). As~~Sale of ~~December 30, 2018, future minimum lease obligations~~Assets for the sale-leaseback arrangements accounted for under the financing method were $509.9 million, which will be recognized over the lease terms of up to 30 years. During fiscal 2018 and 2017, we had net financing proceeds of $32.3 million, and $259.6 million respectively, in connection with these sale-leaseback arrangements. As of December 30, 2018 and December 31, 2017, the carrying amount of the sale-leaseback financing liabilities presented within "Other long-term liabilities" on our Consolidated Balance Sheets was $583.4 million and $479.6 million, respectively. See "Note 6. ~~Balance Sheet Components" for additional~~more details.

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Note 8. 7. FAIR VALUE MEASUREMENTS

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

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Measurements are inputs that are observable for assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1.

•Level 3 — Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure certain assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during any presented period. ~~We did not have any assets or liabilities measured at fair value on a recurring basis requiring Level 3 inputs as of December 30, 2018 or December 31, 2017.~~

The following table summarizes our assets and liabilities measured and recorded at fair value on a recurring basis as of December ~~30, 2018~~29, 2019 and December ~~31, 2017:~~30, 2018:


	December 29, 2019														December 30, 2018
(In thousands)	Total Fair Value		Level 3		Level 2		Level 1		Total Fair Value		Level 3		Level 2		Level 1
Assets
Prepaid expenses and other current assets:
Derivative financial instruments (Note 12)	$	1,002	$	—	$	1,002	$	—	$	729	$	—	$	729	$	—
Other long-term assets:
Equity investments with fair value option ("FVO")	17,500		17,500		—		—		8,831		8,831		—		—
Equity investments with readily determinable fair value	173,908		—		—		173,908		36,225		—		—		36,225
Total assets	$	192,410	$	17,500	$	1,002	$	173,908	$	45,785	$	8,831	$	729	$	36,225
Liabilities
Accrued liabilities:
Derivative financial instruments (Note 12)	$	—	$	—	$	1,962	$	—	$	1,161	$	—	$	1,161	$	—
Other long-term liabilities:
Derivative financial instruments (Note 12)	—		—		373		—		152		—		152		—
Total liabilities	$	2,335	$	—	$	2,335	$	—	$	1,313	$	—	$	1,313	$	—

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December 30, 2018 December 31, 2017
(In thousands) Total Fair Value Level 2 Level 1 Total Fair Value Level 2
Assets
Prepaid expenses and other current assets:
Derivative financial instruments (Note 13) $ 729
$ 729
$ —
$ 2,579
$ 2,579
Other long-term assets:
Marketable equity investments (Note 11) 36,225
—
36,225
—
—
Total assets $ 36,954
$ 729
$ 36,225
$ 2,579
$ 2,579
Liabilities
Accrued liabilities:
Derivative financial instruments (Note 13) $ 1,161
$ 1,161
$ —
$ 1,452
$ 1,452
Other long-term liabilities:
Derivative financial instruments (Note 13) 152
152
—
1,174
1,174
Total liabilities $ 1,313
$ 1,313
$ —
$ 2,626
$ 2,626
Equity investments with fair value option ("FVO")

~~Other~~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, to mitigate volatility in reported earnings that results from the use of different measurement attributes (see Note 10). 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 on a quarterly basis. 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 considers estimated future financial performance, including assumptions for, among others, forecasted contractual lease income, lease expenses, residual value of these lease assets and ~~liabilities, including~~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 year ended December 29, 2019. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the year ended December 29, 2019.


(In thousands)	Beginning balance as of December 30, 2018	FV Adjustment¹	Additional investment [see Note]	Other adjustments	Balance as of December 29, 2019
Equity investments with FVO	$8,831	$(1,954)	$10,000	$623	$17,500

¹During the year ended December 29, 2019, we recorded a fair value adjustment of $2.0 million to our ~~accounts receivable, accounts payable and accrued liabilities, are~~ equity investments with FVO. The fair value adjustment was included within "equity in losses of unconsolidated investees" in our consolidated statements of operations for the year ended December 29, 2019.

Level 3 significant unobservable inputs sensitivity

The following table summarizes the significant unobservable inputs used in Level 3 valuation of our investments carried at ~~cost, which generally approximates~~ fair value ~~due~~ as of December 29, 2019. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.

2019

Assets:

Fair value

Valuation Technique

Unobservable input

Range (Weighted Average)

Other long-term assets:

Equity investments

17,500

Discounted cash flows

Discount rate
Residual value

10.5%-13% (1)
7.5% (1)

Total assets

17,500

(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 our 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 businessto Enphase Energy, Inc. ("Enphase") on August 9, 2018, we received 7.5 million shares of Enphase common stock (NASDAQ: ENPH). The common stock received was recorded as an equity investment with readily determinable fair value (Level 1), with changes in fair value recognized in net income in accordance with ASU 2016-01 Recognition and Measurement of Financial Assets and Liabilities. For fiscal 2019 and 2018, we recorded a gain of $158.3 million and a loss of $6.4 million, respectively, within "other, net" in our consolidated statement of operations. During the ~~short-term nature~~year ended December 29, 2019, we sold 1 million of shares of Enphase common stock for cash proceeds of $20.6 million. (see Note. 11 for pledge of these ~~financial assets and liabilities.~~shares)

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

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We measure certain investments and non-financial assets (including property, plant and equipment, and other intangible assets) at fair value on a non-recurring basis in periods after initial measurement in circumstances when the fair value of such asset is impaired below its recorded cost. As of December 29, 2019 and December 30, 2018, there were no such items recorded at fair value, with the exception of our ~~property, plant and equipment (see "Note 6.~~ ~~Balance Sheet Components"),~~ residential lease assets (see "Note 7. ~~Leasing~~6. Solar Services"),.

Equity Method Investments

Our investments accounted for under the equity method are described in Note 10. Equity Investments. We monitor these investments, which are included within "other long-term assets" on our consolidated balance sheets, for impairment and ~~certain non-marketable equity investments.~~ record reductions in the carrying values when necessary. Circumstances that indicate an other-than-temporary decline include Level 3 measurements such as the valuation ascribed to the issuing company in subsequent financing rounds, decreases in quoted market prices, and declines in the results of operations of the issuer.

As of December ~~31, 2017, we did not have any other significant assets or liabilities that were measured at fair value on a non-recurring basis in periods subsequent to initial recognition.~~

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~~Held-to-Maturity Debt Securities~~

Our debt securities, classified as held-to-maturity, are Philippine government bonds that we maintain as collateral for business transactions within the Philippines. These bonds have various maturity dates29, 2019 and ~~are classified as "Restricted long-term marketable securities" on our Consolidated Balance Sheets. As of~~ December 30, 2018, ~~and December 31, 2017, these bonds~~we had ~~a carrying value of $6.0~~$26.7 million and ~~$6.2~~$34.8 million, ~~respectively. We record such held-to-maturity~~respectively, in investments ~~at amortized cost based on our ability and intent to hold~~accounted for under the securities until maturity. We monitor for changes in circumstances and events that would affect our ability and intent to hold such securities until the recorded amortized costs are recovered. No other-than-temporary impairment loss was incurred during any periods presented. The held-to-maturity debt securities were categorized in Level 2 of the fair value hierarchy.equity method (see Note 10. Equity Investments).

Equity ~~Investments~~

~~The following discusses our marketable equity~~ investments ~~non-marketable equity investments and equity method investments.~~

~~Marketable Equity Investments~~

~~In connection with the divestment of our microinverter businessto Enphase on August 9, 2018, we received 7.5 million shares of Enphase common stock (see "Note 4.~~ ~~Business Combinations and Divestiture" for further details). The common stock was recorded as an equity investment with~~without readily determinable fair value (Level 1), with changes in fair value recognized in net income in accordance with ASU 2016-01. For the year ended December 30, 2018, we recognized an unrealized loss of $6.4 million within "Other, net" under other income (expense), net, on our Consolidated Statement of Operations.

~~Non-Marketable Equity Investments~~

~~Our non-marketable~~These equity investments are securities in privately-held companies without readily determinable market values. Prior to January 1, 2018, we accounted for ~~the non-marketable equity~~these investments without readily determinable fair value at cost less impairment. On January 1, 2018, we adopted ASU 2016-01 and elected to adjust the carrying value of ~~our non-marketable~~such equity securities to cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. ~~Non-marketable equity securities~~Equity investments without readily determinable fair value are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods using a combination of observable and unobservable inputs including valuation ascribed to the issuing company in subsequent financing rounds, volatility in the results of operations of the issuers and rights and obligations of the securities we hold. Other than the $2.0 million fair value adjustment recorded in fiscal 2019, there was no impairment in any of the other periods presented.

Restricted marketable securities

Our debt securities, classified as held-to-maturity, are Philippine government bonds that we maintain as collateral for business transactions within the Philippines. These bonds have various maturity dates and are classified as "Restricted short-term marketable securities" and "Restricted long-term marketable securities" on our consolidated balance sheets as of December 29, 2019 and December 30, 2018, respectively. The Philippine Branch is required by the Philippine SEC to maintain a certain amount of deposits to ensure that it will be able to secure its liabilities as a foreign corporation's branch. Security bond deposits to the Philippine SEC are determined based on applicable regulations. The amounts are based on local audited statutory financial statement amounts, and the minimum deposits are updated within six months after the end of the year. As of December ~~30, 2018~~29, 2019 and~~December 31, 2017, we had~~ ~~$8.8 million and $35.8 million, respectively, in investments accounted for under the measurement alternative method.~~

~~Equity Method Investments~~

~~Our investments accounted for under the equity method are described in Note 11.~~ ~~Equity Investments~~. We monitor these investments, which are included within "Other long-term assets" in our Consolidated Balance Sheets, for impairment and record reductions in the carrying values when necessary. Circumstances that indicate an other-than-temporary decline include Level 3 measurements such as the valuation ascribed to the issuing company in subsequent financing rounds, decreases in quoted market prices, and declines in the results of operations of the issuer.

We adopted ASC 606 on January 1, 2018, using the full retrospective method, which required us to restate each prior period presented. Our carrying value in the 8point3 Group materially increased upon adoption which required us to amend our historical evaluations of the potential for other-than-temporary impairment on our investment in the 8point3 Group. In accordance with such updated evaluations, we recognized impairment losses on the 8point3 investment balance during the first and fourth quarters of fiscal 2017 using a combination of Level 1 and Level 3 measurements. In June 2018, we completed our divestiture of the 8point3 Group (see "Note 11. ~~Equity Investments"). As of~~ December 30, 2018, ~~and December 31, 2017, we~~these bonds had ~~$43.7~~a carrying value of $6.2 million and ~~$450.0~~$6.0 million, ~~respectively,~~respectively. We record such held-to-maturity investments at amortized cost based on our ability and intent to hold the securities until maturity. We monitor for changes in ~~investments accounted for under~~circumstances and events that would affect our ability and intent to hold such securities until the ~~equity method (see "Note 11.~~ ~~Equity Investments").~~recorded amortized costs are recovered. NaN other-than-temporary impairment loss was incurred during any periods presented. The held-to-maturity debt securities were categorized in Level 2 of the fair value hierarchy.

Other financial assets and liabilities, including our accounts receivable, accounts payable and accrued liabilities, are carried at cost, which generally approximates fair value due to the short-term nature of these financial assets and liabilities.

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Note 8. RESTRUCTURING

~~Note 9.~~ ~~RESTRUCTURING~~

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 recent changes to our business, including the Spin-Off. In connection with the restructuring plan, which includes actions implemented in the fourth quarter of 2019 and is expected to be completed by mid-2023, we expect 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 in the SunPower Technologies business unit and corporate have largely been informed and are expected to exit our company following the Spin-Off and completion of transition services. As the SunPower Energy Services business unit refines its focus on distributed generation, storage, and energy services, 80 to 90 employees exited or are expected to exit during the fourth fiscal quarter of 2019 and the first half of 2020. We expect to incur restructuring charges totaling approximately $16 million to $22 million, consisting primarily of severance benefits (between $8 million and $11 million) and retention benefits (between $8 million and $11 million) primarily associated with the retention of employees impacted by the Spin-Off transaction and certain key research and development employees. A substantial portion of such charges have been and are expected to be incurred in the fourth quarter of fiscal 2019 and the first quarter of fiscal 2020, and we expect between $14 million and $19 million of the charges to be cash. Cumulative costs incurred were $7.4 million as of December 29, 2019, which relate to severance and benefits costs.

February 2018 Restructuring Plan

During the first quarter of fiscal 2018, we adopted a restructuring plan and began implementing initiatives to reduce operating expenses and cost of revenue overhead in light of the known shorter-term impact of U.S. tariffs imposed on PV solar cells and modules pursuant to Section 201 of the Trade Act of 1974 and our broader initiatives to control costs and improve cash flow. In connection with the plan, ~~which is~~we expected ~~to be completed by mid-2019, we expect~~ between 150 and 250 non-manufacturing employees to be affected, representing approximately 3% of our global workforce, with a portion of those employees exiting from us as part of a voluntary departure program. The changes to our workforce ~~will vary~~varied by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. We ~~expect~~expected to incur restructuring charges totaling between $20 million to $30 million, consisting primarily of severance benefits (between $11 million and $16 million) and real estate lease termination and other associated costs (between $9 million and $14 million). We ~~expect~~expected between $12 million and $20 million of the charges to be paid in cash. ~~The actual timing and costs of the~~This restructuring plan ~~may differ from our current expectations and estimates. A substantial portion of such charges were incurred in fiscal 2018.~~is substantially complete. Cumulative costs incurred were ~~$12.4~~$19.0 million as of December ~~30, 2018.~~

~~December 2016 Restructuring Plan~~

~~During~~29, 2019. Of the fourth quarter of fiscal 2016, we adopted a restructuring plan to reduce costs and focus on improving cash flow, primarily related to the closure of our Philippine-based Fab 2 manufacturing facility. There were $2.2 million of charges related to this plan recorded during fiscal 2018 and cumulative costs, ~~incurred were $195.0~~$5.9 million ~~as of December 30, 2018. The restructuring activities were substantially complete as of July 1, 2018,~~relate to non-cash impairment charges, $11.8 million relate to severance and ~~any remaining~~benefits costs, $0.6 million relate to ~~be incurred are not expected to be material.~~

~~August 2016 Restructuring Plan~~

During the third quarter of fiscal 2016, we adopted a restructuring plan in response to expected near-term challenges primarily relating to realigning our Power Plant business unit. In connection with the realignment, we incurred restructuring charges consisting primarily of severance benefits, asset impairments, lease and related termination costs, and $0.7 million relate to other ~~associated~~ costs. In fiscal 2018, we incurred net charges of $2.9 million. The realignment was substantially complete as of December 30, 2018, and we do not expect a significant number of employees to be affected by remaining actions. Cumulative costs incurred were $38.1 million as of December 30, 2018.

Legacy Restructuring Plans

Prior to fiscal ~~2016,~~2018, we implemented approved restructuring plans, related to all segments, to reduce costs and focus on improving cash flow, to realign our legacy power plant business unit, to align with changes in the global solar market, ~~which included the consolidation of our Philippine manufacturing operations,~~ as well as actions to accelerate operating cost reduction and improve overall operating efficiency. These restructuring activities were substantially complete as of ~~the second quarter of 2017,~~December 30, 2018, and any remaining costs to be incurred are not expected to be material. Cumulative costs incurred were ~~$143.7~~$376.8 million as of December ~~30, 2018.~~29, 2019. Of the cumulative costs, $228.2 million relate to non-cash impairment charges, $100.8 million relate to severance and benefits, $8.1 million relate to lease and related termination costs, and $39.7 million relate to other costs.

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

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	Fiscal Year										Fiscal Year Ended
(In thousands)	2018			2017			2016			(In thousands)	December 29, 2019	December 30, 2018		December 31, 2017
December 2019 Restructuring Plan:										December 2019 Restructuring Plan:

Severance and benefits										Severance and benefits	7,355	—		—

Other costs¹										Other costs¹	41	—		—
Total December 2019 Restructuring Plan										Total December 2019 Restructuring Plan	7,396	—		—

February 2018 Restructuring Plan:										February 2018 Restructuring Plan:
Non-cash asset impairment charges										Non-cash asset impairment charges	5,874	—		—
Severance and benefits	$	12,130		$	—		$	—		Severance and benefits	(333)	12,130		—
Lease and related termination costs										Lease and related termination costs	554	—		—
Other costs¹	257			—			—			Other costs¹	556	257		—
Total February 2018 Restructuring Plan	12,387			—			—			Total February 2018 Restructuring Plan	6,651	12,387		—
December 2016 Plan:

Legacy Restructuring Plan:										Legacy Restructuring Plan:
Non-cash impairment charges	—			147			148,791			Non-cash impairment charges	—	—		147
Severance and benefits	(799		)	5,643			15,901			Severance and benefits	83	1,866		5,415
Lease and related termination costs	6			707			—			Lease and related termination costs	—	6		709
Other costs¹	2,987			13,824			7,819			Other costs¹	(20)	3,238		14,774
Total December 2016 Plan	2,194			20,321			172,511
August 2016 Plan:
Non-cash impairment charges	—			—			17,926
Severance and benefits	2,665			(242		)	15,591
Lease and related termination costs	—			2			557
Other costs¹	254			989			364
Total August 2016 Plan	2,919			749			34,438
Legacy Restructuring Plans:
Non-cash impairment charges	—			—			—
Severance and benefits	—			14			350
Lease and related termination costs	—			—			(171		)
Other costs¹	(3		)	(39		)	62
Total Legacy Plan	(3		)	(25		)	241
Total Legacy Restructuring Plan										Total Legacy Restructuring Plan	63	5,110		21,045
Total restructuring charges	$	17,497		$	21,045		$	207,190		Total restructuring charges	14,110	$	17,497	21,045

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

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The following table summarizes the restructuring reserve activities during the year ended December ~~30, 2018:~~29, 2019:


	Fiscal Year
(In thousands)	2018		Charges (Benefits)		(Payments) Recoveries		2019
December 2019 Restructuring Plan:

Severance and benefits	—		7,355		(1,533)		5,822

Other costs¹	—		41		(41)		—
Total 2019 Restructuring Plan	—		7,396		(1,574)		5,822

February 2018 Restructuring Plan:
Non-cash asset impairment charges	—		5,874		—		—
Severance and benefits	5,449		(333)		(4,820)		296
Lease and related termination costs	—		554		(554)		—
Other costs¹	—		556		(557)		—
Total February 2018 Restructuring Plan	5,449		6,651		(11,804)		296

Legacy Restructuring Plans	861		63		(441)		483
Total restructuring reserve activities	$	6,310	$	14,110	$	(13,819)	$	6,601

Fiscal Year
(In thousands) 2017 Charges (Benefits) (Payments) Recoveries 2018
February 2018 Restructuring Plan:
Severance and benefits $ —
$ 12,130
$ (6,681 ) $ 5,449
Other costs¹
—
257
(257 ) —
Total February 2018 Restructuring Plan —
12,387
(6,938 ) 5,449
December 2016 Restructuring Plan:
Severance and benefits 1,862
(799 ) (1,063 ) —
Lease and related termination costs —
6
(6 ) —
Other costs¹
54
2,987
(3,041 ) —
Total December 2016 Restructuring Plan 1,916
2,194
(4,110 ) —
August 2016 Restructuring Plan:
Severance and benefits 1,735
2,665
(3,788 ) 612
Other costs¹
39
254
(230 ) 63
Total August 2016 Restructuring Plan 1,774
2,919
(4,018 ) 675

Legacy Restructuring Plans 196
(3 ) (7 ) 186
Total restructuring reserve activities $ 3,886
$ 17,497
$ (15,073 ) $ 6,310

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

Note ~~10.~~ 9. COMMITMENTS AND CONTINGENCIES

Facility and Equipment ~~Lease Commitments~~Leases

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We lease certain facilities under non-cancellable operating leases from third parties. ~~As of December 30, 2018, future minimum lease payments for facilities under operating leases were $51.9 million, to be paid over the remaining contractual terms of up to 29.3 years.~~ We also lease certain buildings ~~machinery and equipment~~ under non-cancellable capital leases. AsOperating leases are subject to renewal options for periods ranging from 1 year to 10 years.

We have disclosed quantitative information related to the lease contracts we have entered into as a lessee by aggregating the information based on the nature of asset such that the assets of similar characteristics and lease terms are shown within one single financial statement line item.

The table below presents the summarized quantitative information with regard to lease contracts we have entered into:


	Fiscal Year Ended
(In thousands)	December 29, 2019
Operating leases:
Operating lease expense	$	16,942
Sublease gain	(276)
Rent expense	$	16,666



Cash paid for amounts included in the measurement of lease liabilities
Cash paid for operating leases	20,515


Right-of-use assets obtained in exchange for lease obligations¹	111,142
Weighted-average remaining lease term (in years) - operating leases	7.4

Weighted-average discount rate - operating leases	9		%

¹Amounts for the year ended December ~~30, 2018,~~29, 2019, include the transition adjustment for the adoption of ASC 842 and new ROU asset addition. See Note 1. Organization and Summary of Significant Accounting Policies.

The future minimum lease payments ~~for assets under capital leases were $2.8 million,~~ to be paid ~~over~~under non-cancellable leases in effect at December 29, 2019, are as follows (in thousands):


As of December 29, 2019	Operating leases
2020	$	14,085
2021	13,924
2022	12,521
2023	9,302
2024	5,668
Thereafter	24,979
Total lease payments	80,479
Less: imputed interest	(24,927)
Total	$	55,552

As of December 29, 2019, we have additional operating leases that have not yet commenced with future minimum lease payments amounting to $29.8 million. These operating leases will commence in the ~~remaining contractual~~first quarter of fiscal 2020 with lease terms of ~~up to 4.3~~18 years.

Purchase Commitments

We purchase raw materials for inventory and manufacturing equipment from a variety of vendors. During the normal course of business, in order to manage manufacturing lead times and help assure adequate supply, we enter into agreements with contract manufacturers and suppliers that either allow them to procure goods and services based on specifications defined by us, or that establish parameters defining our requirements. In certain instances, these agreements allow us the option to cancel, reschedule or adjust our requirements based on our business needs before firm orders are placed. Consequently, purchase commitments arising from these agreements are excluded from our disclosed future obligations under non-cancellable and unconditional commitments.

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We also have agreements with several suppliers, including some of our ~~non-consolidated~~unconsolidated investees, for the procurement of polysilicon, ingots, and wafers, as well as certain module-level power electronics and related equipment, which specify future quantities and pricing of products to be supplied by ~~three vendors~~1 vendor for periods of up to 2 years and provide for certain consequences, such as forfeiture of advanced deposits and liquidated damages relating to previous purchases, in the event that we terminate the arrangements or ~~fails~~fail to satisfy our obligations under the agreements.

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Future purchase obligations under non-cancellable purchase orders and long-term supply agreements as of December ~~30, 2018~~29, 2019 are as follows:


(In thousands)	Fiscal 2019		Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Thereafter		Total¹		(In thousands)	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total¹
Future purchase obligations	$	438,428	$	374,930	$	38,650	$	35,425	$	32,550	$	—	$	919,983	Future purchase obligations	$	506,845	$	79,225	$	37,706	$	33,148	$	710	$	6,082	$	663,716

¹Total future purchase obligations were composed of ~~$206.7~~$154.7 million related to non-cancellable purchase orders and ~~$713.3~~$509.1 million related to long-term supply agreements.

We expect that all obligations related to non-cancellable purchase orders for manufacturing equipment will be recovered through future cash flows of the solar cell manufacturing lines and solar panel assembly lines when such long-lived assets are placed in service. Factors considered important that could result in an impairment review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of use of acquired assets, and significant negative industry or economic trends. Obligations related to non-cancellable purchase orders for inventories match current and forecasted sales orders that will consume these ordered materials and actual consumption of these ordered materials is regularly compared to expected demand. We anticipate total obligations related to long-term supply agreements for inventories, some of which (in the case of polysilicon) are at purchase prices significantly above current market prices for similar materials, will be recovered because the quantities required to be purchased are expected to be utilized in the manufacture and profitable sale of solar power products in the future based on our long-term operating plans. Additionally, in order to reduce inventory and improve working capital, we have periodically elected to sell polysilicon inventory in the marketplace at prices below our purchase price, thereby incurring a loss. The terms of the 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.

Advances to Suppliers

As noted above, we have entered into agreements with various vendors, some of which are structured as "take or pay" contracts, that specify future quantities and pricing of products to be supplied. Certain agreements also provide for penalties or forfeiture of advanced deposits in the event we terminate the arrangements. Under certain agreements, we were required to make prepayments to the vendors over the terms of the arrangements. As of December ~~30, 2018~~29, 2019 and December ~~31, 2017,~~30, 2018, advances to suppliers totaled ~~$171.6~~$121.4 million and ~~$216.0~~$171.6 million, respectively, of which ~~$37.9~~$107.4 million and ~~$30.7~~$37.9 million, respectively, is classified as ~~Advances~~"Advances to suppliers, current ~~portion in~~portion" on our ~~Consolidated Balance Sheets.~~consolidated balance sheets. One supplier accounted for ~~99.6%~~100% and ~~99.0%~~99.6% of total advances to suppliers as of December 29, 2019 and December 30, 2018, ~~and December 31, 2017,~~ respectively.

Advances from Customers

We have entered into agreements with customers who have made advance payments for solar power systems. These advances are applied as shipments of product occur or upon completion of certain project milestones.

The estimated utilization of advances from customers included within "Contract liabilities, current portion" and "Contract liabilities, net of current portion" on our ~~Consolidated Balance Sheets~~consolidated balance sheets as of December ~~30, 2018~~29, 2019 is as follows:


(In thousands)	Fiscal 2020		Fiscal 2021		Fiscal 2022		Fiscal 2023		Fiscal 2024		Thereafter		Total
Estimated utilization of advances from customers	$	53,553	$	35,443	$	173	$	—	$	—	$	—	$	89,169

(In thousands) Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 Thereafter Total
Estimated utilization of advances from customers $ 68,093
$ 34,143
$ 11,139
$ —
$ —
$ —
$ 113,375

We have entered into other agreements with customers who have made advance payments for solar power products and systems. These advances will be applied as shipments of product occur or upon completion of certain project milestones. In November 2016, we and Total entered into a four-year, up to 200-MW supply agreement to support the solarization of Total facilities (see "Note 2. ~~Transactions with Total and Total S.A.~~"); in March 2017, we received a prepayment totaling $88.5 million. As of December 30, 2018, the advance payment from Total was $63.7 million, of which $18.4 million was classified as short-term in our Consolidated Balance Sheets, based on projected shipment dates.

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Product Warranties

The following table summarizes accrued warranty ~~activity~~activities for fiscal 2019, 2018 ~~2017~~ and ~~2016:~~2017:


	Fiscal Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Balance at the beginning of the period	$	172,266	$	181,303	$	161,209
Accruals for warranties issued during the period	27,717		31,628		29,689
Settlements and adjustments during the period	(61,538)		(40,665)		(9,595)
Balance at the end of the period	$	138,445	$	172,266	$	181,303

Fiscal Year Ended
(In thousands) 2018 2017 2016
Balance at the beginning of the period $ 181,303
$ 161,209
$ 164,127
Accruals for warranties issued during the period 31,628
29,689
14,575
Settlements and adjustments during the period (40,665 ) (9,595 ) (17,493 )
Balance at the end of the period $ 172,266
$ 181,303
$ 161,209

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 ~~allocates~~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 consolidated balance sheets (see Note 5. Balance Sheet Components).

Project Agreements with Customers

Project agreements entered into with our commercial and power plant customers often require us to undertake obligations including: (i) system output performance warranties, (ii) penalty payments or customer termination rights if the system we are constructing is not commissioned within specified time frames or other milestones are not achieved, and (iii) system put-rights whereby we could be required to buy back a customer's system at fair value on specified future dates if certain minimum performance thresholds are not met for specified periods. Historically, our systems have performed significantly above their performance warranty thresholds, and there have been no cases in which we have had to buy back a system. As of December 29, 2019 and December 30, 2018, ~~and December 31, 2017,~~ we had ~~$3.3~~$7.5 million and ~~$6.4~~$3.3 million, respectively, classified as ~~"Accrued~~"accrued liabilities," and ~~$6.5~~$2.8 million and ~~$3.1~~$6.5 million, respectively, classified as ~~"Other~~"other long-term liabilities" inon our ~~Consolidated Balance Sheets~~consolidated balance sheets for such obligations.

Future Financing Commitments

We are required to provide certain funding under agreements with unconsolidated investees, subject to certain ~~conditions (see "Note 11.~~ ~~Equity Investments").~~conditions. As of December ~~30, 2018,~~29, 2019, we have $2.9 million of future financing obligations related to these ~~agreements as follows:~~agreements. These financing obligations are due in 2020.

(In thousands) Amount
Year:
2019 $ 4,140
2020 2,900
$ 7,040

Liabilities Associated with Uncertain Tax Positions

Total liabilities associated with uncertain tax positions were ~~$16.8~~$20.1 million and ~~$19.4~~$16.8 million as of December ~~30, 2018~~29, 2019 and December ~~31, 2017,~~30, 2018, respectively. These amounts are included within ~~"Other~~"other long-term liabilities" inon our ~~Consolidated Balance Sheets~~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 ~~iour~~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 have provided Hannon Armstrong, indemnifications related to cash flow

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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 indemnifications is limited to total amount of debt provided by from Hannon Armstrong to SunStrong. In each of these circumstances, payment by us is typically subject to the other party making a claim to us that is contemplated by and valid under the indemnification provisions of the particular contract, which provisions are typically contract-specific, as well as bringing the claim under the procedures specified in the particular contract. These procedures usually allow us to challenge the other party's claims or, in case of breach of intellectual property representations or covenants, to control the defense or settlement of any third-party claims brought against the other party. Further, our obligations under these agreements may be limited in terms of activity (typically to replace or correct the products or terminate the agreement with a refund to the other party), duration or amount. In some instances, we may have recourse against third parties or insurance covering certain payments made by us.

In certain circumstances, we have provided indemnification to customers and investors under which we are contractually obligated to compensate these parties for losses they may suffer as a result of reductions in benefits received under ITCs and U.S. Treasury Cash Grant programs. We apply for ITCs and Cash Grant incentives based on guidance provided by the Internal Revenue Service ("IRS") and the U.S. Treasury, which include assumptions regarding the fair value of the qualified solar power systems, among others. Certain of our development agreements, sale-leaseback arrangements, and financing arrangements with tax equity investors, incorporate assumptions regarding the future level of incentives to be received, which in some instances may be claimed directly by our customers and investors. Generally, such obligations would arise as a result of reductions to the value of the underlying solar power systems as assessed by the IRS. At each balance sheet date, we assess and recognize, when applicable, the potential exposure from these obligations based on all the information available at that time, including any audits undertaken by the IRS. The maximum potential future payments that we could have to make under this obligation would depend on the difference between the eligible basis claimed on the tax filing for the solar energy systems sold or transferred to indemnified parties and the values that the IRS may ~~redetermine~~re-determine as the eligible basis for the systems for purposes of claiming ITCs or Cash Grants. We use the eligible basis for tax filing purposes determined with the assistance of independent third-party appraisals to determine the ITCs that are passed-through to and claimed by the indemnified parties. We continue to retain certain indemnities, specifically, around ITCs and Cash Grants and California property taxes, even after the underlying portfolio of assets is sold to a third party. For ~~sales~~ 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,." ~~and reduce the revenue recognized in the related transaction.~~ 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. ~~Changes to any such indemnification liabilities provided are recorded as adjustments to revenue.~~

As ofboth December 29, 2019 and December 30, 2018, ~~and December 31, 2017,~~ our provision was $8.3 million and $4.2 million ~~and $12.8 million,~~ respectively, primarily for tax related indemnifications. On June 19, 2018, we completed the sale of our equity interest in the 8point3 Group. In connection with the transaction, we released approximately $8.3 million of tax related indemnifications previously recorded as a result of the ASC 606 adoption effective January 1, 2018.

Defined Benefit Pension Plans

We maintain defined benefit pension plans for certain of our non-U.S. employees. Benefits under these plans are generally based on an employee’s years of service and compensation. Funding requirements are determined on an individual country and plan basis and are subject to local country practices and market circumstances. The funded status of the pension plans, which represents the difference between the benefit obligation and fair value of plan assets, is calculated on a plan-by-plan basis. The benefit obligation and related funded status are determined using assumptions as of the end of each fiscal year. We recognize the overfunded or underfunded status of our pension plans as an asset or liability on our ~~Consolidated Balance Sheets.~~consolidated balance sheets. As of December ~~30, 2018~~29, 2019 and December ~~31, 2017,~~30, 2018, the underfunded status of our pension plans presented within ~~"Other~~"other long-term liabilities" on our ~~Consolidated Balance Sheets~~consolidated balance sheets was ~~$2.6~~$5.9 million and ~~$4.5~~$2.6 million, respectively. The impact of transition assets and obligations and actuarial gains and losses are recorded within ~~"Accumulated~~"accumulated other comprehensive loss" and are generally amortized as a component of net periodic cost over the average remaining service period of participating employees. Total other comprehensive loss related to our benefit plans was ~~$2.9~~$3.1 million for the year ended December ~~30, 2018.~~29, 2019.

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Legal Matters

~~Class Action and Derivative Suits~~

On August 16, 2016, a class action lawsuit was filed against us and certain of our officers and directors (the "Defendants") in the United States District Court for the Northern District of California on behalf of a class consisting of those who acquired our securities from February 17, 2016 through August 9, 2016 (the "Class Period"). On December 9, 2016, the court appointed a lead plaintiff. Following the withdrawal of the original lead plaintiff, on August 21, 2017, the court appointed an investor group as lead plaintiff. An amended complaint was filed on October 17, 2017. The complaint alleged violations of Sections 10(b) and 20(a) of the Exchange Act, and Securities and Exchange Commission ("SEC") Rule 10b-5. The complaints were filed following the issuance of our August 9, 2016 earnings release and revised guidance and generally allege that throughout the Class Period, the Defendants made materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects. On April 18, 2018, the court dismissed the complaint for failure to state a claim, with leave to amend. On May 8, 2018, a second amended complaint was filed. On October 9, 2018, the court dismissed the complaint for failure to state a claim, with no further opportunity to amend. The deadline to appeal was November 9, 2018. The plantiff did not appeal, and the matter is resolved.

Four shareholder derivative actions have been filed in federal court, purporting to be brought on our behalf against certain of our current and former officers and directors based on the same events alleged in the securities class action lawsuits described above. We are named as a nominal defendant. The plaintiffs assert claims for alleged breaches of fiduciary duties, unjust enrichment, and waste of corporate assets for the period from February 2016 through the present and generally allege that the defendants made or caused us to make materially false and/or misleading statements and failed to disclose material adverse facts about our business, operations, and prospects. The plaintiffs also claim that the alleged conduct is a breach of our Code of Business Conduct and Ethics, and that the defendants, including members of our Audit Committee, breached their fiduciary duties by failing to ensure the adequacy of our internal controls, and by causing or allowing us to disseminate false and misleading statements in our SEC filings and other disclosures. The securities class action lawsuits and the federal derivative actions have all been related by the court and assigned to one judge. The derivative cases have been dismissed.

Shareholder derivative actions purporting to be brought on our behalf were brought in the Superior Court of California for the County of Santa Clara against certain of our current and former officers and directors based on the same events alleged in the securities class action and federal derivative lawsuits described above and alleging breaches of fiduciary duties. The state court cases have been dismissed.

~~Other Litigation~~

We are ~~also~~ a party to various ~~other~~ 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.

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Note ~~11.~~ 10. EQUITY INVESTMENTS

Our equity investments consist of ~~equity method investments,~~ equity investments with readily determinable fair value, ~~and equity~~ investments without readily determinable fair value,.

~~Equity Method Investments~~

~~Huaxia CPV (Inner Mongolia) Power Co., Ltd. ("CCPV")~~

In December 2012, we entered into an agreement with Tianjin Zhonghuan Semiconductor Co. Ltd., Inner Mongolia Power Group Co. Ltd. and Hohhot Jinqiao City Development Company Co., Ltd. to form CCPV, a jointly owned entity to manufacture and deploy our low-concentration PV ("LCPV") concentrator technology in Inner Mongolia and other regions in China. CCPV is based in Hohhot, Inner Mongolia. The establishment of the entity was subject to approval of the Chinese government, which was received in the fourth quarter of fiscal 2013. In December 2013, we made a $16.4 million equity ~~investment in CCPV, for a 25% equity ownership.~~

We have concluded that we are not the primary beneficiary of CCPV because, although we are obligated to absorb losses and have the right to receive benefits, we alone do not have the power to direct the activities of CCPV that most significantly

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~~impact its economic performance. We account for our investment in CCPV using the equity method because we are able to exercise significant influence over CCPV due to our board position.~~

~~Diamond Energy Pty Ltd. ("Diamond Energy")~~

~~In October 2012, we made a~~ ~~$3.0 million~~ ~~equity investment in Diamond Energy, an alternative energy project developer and clean electricity retailer headquartered in Melbourne, Australia, in exchange for a~~ ~~25%~~ ~~equity ownership.~~

We have concluded that we are not the primary beneficiary of Diamond Energy because, although we are obligated to absorb losses and has the right to receive benefits, we alone do not have the power to direct the activities of Diamond Energy that most significantly impact its economic performance. Weinvestments accounted for ~~our investment in Diamond Energy~~ using ~~the equity method because we are able to exercise significant influence over Diamond Energy due to our board position.~~

On December 21, 2018, we completed the sale of our equity interest in Diamond Energy. As a result of this transaction, we received, after the payment of fees and expenses, merger proceeds of approximately $2.5 million in cash and no longer directly or indirectly owns any equity interests in Diamond Energy. In connection with the sale, we recognized a $2.2 million loss on disposal within "Other, net" in "Other income (expense), net" of our Consolidated Statements of Operations for the year ended December 30, 2018.

~~8point3 Energy Partners ("8point3 Group")~~

In June 2015, 8point3 Energy Partners, a joint YieldCo vehicle formed by us and First Solar, (together with us, the "Sponsors") to own, operate and acquire solar energy generation assets, consummated its initial public offering ("IPO").

We concluded that we were not the primary beneficiary of the 8point3 Group or any of its individual subsidiaries because, although the Sponsors were both obligated to absorb losses or have the right to receive benefits, we alone did not have the power to direct the activities of the 8point3 Group that most significantly impact its economic performance. In making this determination, we considered, among other factors, the equal division between the Sponsors of management rights in the 8point3 Group and the corresponding equal influence over its significant decisions, the role and influence of the independent directors on the board of directors of the general partner of 8point3 Energy Partners, and how both Sponsors contributed to the activities that most significantly impacted the 8point3 Group's economic performance. We accounted for our investment in the 8point3 Group using the equity method because we determined that, notwithstanding the division of management and ownership interests between the Sponsors, we exercised significant influence over the operations of the 8point3 Group.

During the year ended December 30, 2018, we received $16.2 million in dividend distributions from the 8point3 Group. During the year ended December 31, 2017, we received $30.1 million in dividend distributions from the 8point3 Group.

Under previous guidance for leasing transactions, we treated the portion of the portfolio of residential lease assets originally sold to the 8point3 Group in connection with the IPO transaction, composed of operating leases and unguaranteed sales-type lease residual values, as a borrowing and reflected the cash proceeds attributable to this portion of the residential lease assets as liabilities recorded within “Accrued liabilities” and “Other long-term liabilities” in our Consolidated Balance Sheets. Upon adoption of ASC 606 on January 1, 2018, we deconsolidated the portfolio of residential leases and as a result, the operating leases and the unguaranteed sales-type lease residual values that were sold to the 8point3 Group.

On June 19, 2018, we completed the sale of our equity interest in the 8point3 Group. As a result of this transaction, we received, after the payment of fees and expenses, merger proceeds of approximately $359.9 million in cash and no longer directly or indirectly owns any equity interests in the 8point3 Group. In connection with the sale, we recognized a $34.4 million gain within "Other, net" in "Other income (expense), net" of our Consolidated Statements of Operations for the year ended December 30, 2018.

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~~Dongfang Huansheng Photovoltaic (Jiangsu) Co., Ltd. ("Dongfang")~~

In March 2016, we entered into an agreement with Dongfang Electric Corporation and Tianjin Zhonghuan Semiconductor Co., Ltd. to form Dongfang Huansheng Photovoltaic (Jiangsu) Co., Ltd., a jointly owned solar cell manufacturing facility to manufacture our P-Series modules in China. The joint venture is based in Yixing City in Jiangsu Province, China. In March 2016, we made an initial $9.2 million investment for a 15% equity ownership interest in the joint venture, which was accounted for under the cost method. In February 2017, we invested an additional $9.0 million which included an investment of $7.7 million and reinvested dividends of $1.3 million, bringing our equity ownership to 20% of the joint venture. In February and April 2018, we invested an additional $6.3 million and $7.0 million (net of $0.7 million of dividends reinvested), respectively, maintaining our equity ownership at 20% of the joint venture.

We have concluded that we are not the primary beneficiary of the joint venture because, although we are obligated to absorb losses and has the right to receive benefits, we alone do not have the power to direct the activities of the joint venture that most significantly impact its economic performance. We account for our investment in the joint venture using the equity method because we are able to exercise significant influence over the joint venture due to our board position.

~~SunStrong Capital Holdings, LLC ("Sunstrong")~~

On November 5, 2018, HA SunStrong Capital LLC (“HA SunStrong Parent”), a subsidiary of Hannon Armstrong, acquired 49% equity interests in SunStrong, a previously wholly owned subsidiary of the company for cash proceeds of $10 million. See "Note 4. ~~Business Combinations and Divestitures" for additional details.~~

We have concluded that we are not the primary beneficiary of SunStrong because although we are obligated to absorb losses and have the right to receive benefits, we alone do not have the power to direct the activities of SunStrong that most significantly impact its economic performance. We account for our investment in the joint venture using the equity method because we are able to exercise significant influence over the joint venture due to our board position. See "Note 4. ~~Business Combinations and Divestitures," "Note 6.~~ ~~Balance Sheet Components," Note 7.~~ ~~Leasing," and "Note 12.~~ ~~Debt and Credit Sources" for additional details.~~

~~Equity Investments with Readily Determinable Fair Value~~

~~Enphase Energy, Inc.~~

In August 2018, we completed the sale to Enphase of certain assets and intellectual property related to the production of microinverters and received, as a portion of the total consideration in the transaction, 7.5 million shares of Enphase common stock, roughly equivalent to a 7.7% equity ownership interest in Enphase. We also received the right to appoint one person to the Enphase board of directors, subject to certain conditions.

We have concluded that we are not the primary beneficiary of Enphase because, although we are obligated to absorb losses and have the right to receive benefits, we alone do not have the power to direct the activities of Enphase that most significantly impact its economic performance. We account for our investment in Enphase at fair value through net income. See "Note 4. ~~Business Acquisitions and Divestitures" for additional details.~~

~~Equity Investments without Readily Determinable Fair Value~~

~~Tendril Networks, Inc. ("Tendril")~~

In November 2014, we invested in Tendril by purchasing $20.0 million of its preferred stock. In the first half of fiscal 2017, we invested an additional $3.0 million in Tendril by purchasing $1.5 million of its preferred stock in February 2017 and then again in April 2017. Our total investment in Tendril constitutes a minority stake and is accounted for under the measurement alternative method because the preferred stock is deemed not to be in-substance common stock. In connection with the initial investment, we acquired warrants to purchase up to approximately 14 million shares of Tendril common stock exercisable through November 23, 2024. The number of shares of Tendril common stock that may be purchased pursuant to the warrants is subject to our and Tendril's achievement of certain financial and operational milestones and other conditions.

In connection with the initial investment in Tendril, we also entered into commercial agreements with Tendril under a master services agreement and related statements of work. Under these commercial agreements, Tendril will use up to $13.0 million of our initial investment to develop, jointly with us, certain solar software solution products. Our reassessment of our

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~~total investment in Tendril concluded that our investment constituted a minority stake and remained accounted for under the measurement alternative method.~~

On November 30, 2018, we completed the sale of our equity interest in Tendril. As a result of this transaction, we received, after the payment of fees and expenses, sale proceeds of approximately $28.8 million in cash and no longer directly or indirectly owns any equity interests in Tendril. In connection with the sale, we recognized a $5.8 million gain within "Other, net" in "Other income (expense), net" of our Consolidated Statements of Operations for the year ended December 30, 2018.

~~Equity Investments in Project Entities~~

We have from time to time maintained noncontrolling interests in our development project entities, which may be accounted for as either equity method investments or measurement alternative method securities, depending on whether we exercise significant influence over the investee. Our involvement in these entities primarily takes two forms, (i) we may take a noncontrolling interest in an early-stage project and maintain that investment over the development cycle, often in situations in which our products are also sold to the entity under separate agreements, or (ii) we may retain a noncontrolling interest in a development project after a controlling interest is sold to a third party. In either form, we may maintain our investment for all or part of the operational life of the project or may seek to subsequently dispose of our investment. For sales of solar power systems where we maintain an equity interest in the project sold to the customer, we recognize all of the consideration received, including the fair value ~~of the noncontrolling interest we obtained, as revenue~~option, and ~~defer any profits associated with our retained equity stake through "Equity in earnings (losses) of unconsolidated investees."~~

~~During fiscal 2018, we sold our remaining noncontrolling interests in the Boulder Solar I project, which was previously accounted for as~~ equity method ~~investment, resulting in a gain of $15.6 million within "Other income (expense), net" of our Consolidated Statements of Operations.~~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 ~~Consolidated Statements~~consolidated statements of ~~Operations. Unrealized~~operations. Mark-to-market gains and losses on equity investments with readily determinable fair value are reflected as ~~"Other,~~"other, net" under other income (expense), net in our consolidated statements of ~~our Consolidated Statements of Operations.~~operations. The carrying value of our equity investments, classified as ~~"Other~~"other long-term assets" inon our ~~Consolidated Balance Sheets,~~consolidated balance sheets, are as follows:


	As of
(In thousands)	December 29, 2019		December 30, 2018
Equity investments with readily determinable fair value:
Enphase Energy, Inc.	$	173,908	$	36,225
Total equity investments with readily determinable fair value	173,908		36,225
Equity investments without readily determinable fair value:
Project entities	2,677		2,951
Other equity investments without readily determinable fair value	5,859		5,859
Total equity investments without readily determinable fair value	8,536��		8,810
Equity investments with fair value option:
SunStrong Capital Holdings, LLC	8,000		8,831
SunStrong Partners, LLC	9,500		—
8point3 Solar Investco 3 Holdings, LLC	—		—
Total equity investment with fair value option	17,500		8,831
Equity method investments
Huansheng Corporation	26,533		32,784
Project entities	125		2,044
Total equity method investments	26,658		34,828
Total equity investments	$	226,602	$	88,694

As of
(In thousands) December 30, 2018 December 31, 2017
Equity method investments:
Dongfang $ 32,784
$ 24,562
SunStrong Capital Holdings, LLC 8,831
—
8point3 —
382,678
Diamond Energy —
4,256
Project entities 2,044
38,504
Total equity method investments 43,659
450,000
Equity investments with readily determinable fair value:
Enphase 36,225
—
Total equity investments with readily determinable fair value 36,225
—
Equity investments without readily determinable fair value:
Tendril —
22,922
Project entities 2,951
7,059
Other equity investments without readily determinable fair value 5,859
5,859
Total equity investments without readily determinable fair value 8,810
35,840
Total equity investments $ 88,694
$ 485,840

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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. Under ASC 810, Consolidation, an entity that holds a variable interest in a VIE and meets certain requirements would be considered to be the primary beneficiary of the VIE and is required to consolidate the VIE in its consolidated financial statements. In order to be considered the primary beneficiary of a VIE, an entity must hold a variable interest in the VIE and have both:

•The power to direct the activities that most significantly impact the economic performance of the VIE; and

•The right to receive benefits from, or the obligation to absorb losses of the VIE that could be potentially significant to the VIE.

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:

•A VIE that must be consolidated because we are the primary beneficiary or the investee is not a VIE and we hold the majority voting interest with no significant participative rights available to the other partners; or

•A VIE that does not require consolidation because we are not the primary beneficiary or the investee is not a VIE and we do not hold the majority voting interest.

As part of the above analysis, if it is determined that we have the power to direct the activities that most significantly impact the investees' economic performance, we consider whether or not we have the obligation to absorb losses or rights to receive benefits of the VIE that could potentially be significant to the VIE.

Unconsolidated VIEs

On November 5, 2018, we sold a portion of our interest in certain entities that have historically held the assets and liabilities comprising our residential lease business to an affiliate of Hannon Armstrong. The Residential Lease Portfolio is held by SunStrong, which owns and operates those assets. The SunStrong partnership is planned to scale as new residential lease assets are contributed to the partnership.

In furtherance of our long-term strategic goals, in June 2019, we entered into a joint venture with Hannon Armstrong and SunStrong to form SunStrong Partners, LLC (“SunStrong Partners”), a jointly owned entity formed to own, operate, and control residential lease assets. Bank of America Merrill Lynch ("BAML") provided cash equity and a multi-draw term loan, with additional equity provided by us, Hannon Armstrong, and SunStrong. In June 2019, we made a $9.5 million equity investment in SunStrong Partners, in exchange for a 47.5% equity ownership.

Further, in June 2019, we entered into a joint venture with Hannon Armstrong and SunStrong to form 8point3 Solar Investco 3 Holdings, LLC ("8point3 Holdings"), a jointly owned entity to own, operate and control a separate portfolio of existing residential lease assets, that was purchased from Capital Dynamics. Hannon Armstrong provided all of the necessary initial capital contribution to 8point3 Holdings that was used to purchase this portfolio and Hanon Armstrong owns 45.1% of the equity in 8point3 Holdings. In connection with the formation of this joint venture, we received a 44.9% of the equity interest for a minimal value. SunStrong owns the remaining 10% of the equity in 8point3 Holdings.

With respect to our interest in the SunStrong and SunStrong Partners, we have offered certain substantive, non-standard indemnifications to the investees or third party tax equity investors, 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 any cash flow losses from leases that do not generate the promised savings to homeowners or tax equity investors. The maximum exposure to loss arising from the indemnifications for SunStrong is limited to consideration received for the solar power systems. The maximum exposure to loss arising from the indemnifications for SunStrong Partners is limited to $250 million. Our retention of these indemnification obligations may require us to absorb losses that are not proportionate with our equity interests. As such, we determined that the investees are variable interest entities.

Based on the assessment of the required criteria for consolidation, we determined that we do not have the power to unilaterally make decisions that affect the performance of these investees. Under the respective operating and governance

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agreements, we and Hannon Armstrong are given equal governing rights and all major decisions, including among others, approving or modifying the budget, terminating service providers, incurring indebtedness, refinancing any existing loans, declaring distributions, commencing or settling any claims. Therefore, we concluded that these investees are under joint control and we are not the primary beneficiary of these investees.

We have elected the FVO in accordance with the guidance in ASC 825, Financial Instruments, for our investments in SunStrong Capital Holdings, LLC, SunStrong Partners, and 8point3 Solar Investco 3 Holdings, LLC. Refer to Note 7. Fair Value Measurements.

Summarized Financial Information of Unconsolidated VIEs

The following summary of unaudited financial information of the unconsolidated VIEs, is derived from the unaudited financial statements of such VIEs. The following table presents summarized financial statements for SunStrong, a significant investee, based on unaudited information provided to us by the investee:¹

Fiscal Year Ended

(In thousands)

December 29, 2019

Summarized statements of operations information:

Revenue

72,595

Gross loss

(16,786)

Net income

1,374


	As of
(In thousands)	December 29, 2019	December 30, 2018
Summarized balance sheet information:
Current assets	225,576	103,413
Long-term assets	1,049,451	868,185
Current liabilities	125,601	85,154
Long-term liabilities	847,365	660,065

¹Note that amounts are reported one quarter in arrears as permitted by applicable guidance.

Consolidated VIEs

Our sale of solar power systems to residential and commercial customers in the United States are eligible for ITC. Under the current law, the ITC was reduced from approximately 30% of the cost of the solar power systems to approximately 26% for solar power systems placed into service after December 31, 2019, and then will be further reduced to approximately 22% for solar power systems placed into service after December 31, 2020, before being reduced permanently to 10% for commercial projects and 0% for residential projects. Internal Revenue Services (“IRS”) guidance on the current law provides for the ability to safe harbor the ITC on qualifying solar power systems, allowing preservation of the current ITC rates for projects that are completed after the scheduled reduction in rates assuming other required criteria as prescribed by the IRS are met.

In September 2019, we entered the Solar Sail LLC ("Solar Sail") and Solar Sail Commercial Holdings, LLC ("Solar Sail Commercial") joint ventures with Hannon Armstrong Sustainable Infrastructure Capital, Inc. (“Hannon Armstrong”), to finance the purchase of 200 megawatts of panel inventory in accordance with IRS safe harbor guidance, to preserve the 30% federal ITC for third-party owned commercial and residential systems. The companies expect to increase the volume in later years, for which Hannon Armstrong has extended a secured financing of up to $112.8 million as of December 29, 2019 (Refer Note 11, Debt and Credit Sources for other terms and conditions of this facility). The portion of the value of the safe harbored panels was funded by equity contributions in the joint venture of $6.0 million each by SunPower and Hannon Armstrong.

Based on the relevant accounting guidance summarized above, we determined that Solar Sail and Solar Sail Commercial are VIEs and after performing the assessment of required criteria for consolidation, we determined that we are the primary beneficiary of Solar Sail and Solar Sail Commercial as we have power to direct the activities that significantly impact the entity’s economic performance and we have exposure to significant profits or losses, and as such, we consolidate both of these entities.

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Total revenue of the consolidated investee was 0 for fiscal 2019. The assets of our consolidated investees are restricted for use only by the particular investee and are not available for our general operations.

Related-Party Transactions with Investees

Related-party transactions with investees are as follows:


	As of					As of
(In thousands)	December 30, 2018		December 31, 2017		(In thousands)	December 29, 2019		December 30, 2018
Accounts receivable	$	19,062	$	1,275	Accounts receivable	$	23,900	$	19,062
Accounts payable	7,982		3,764		Accounts payable	62,811		7,982
Accrued liabilities	22,364		4,161		Accrued liabilities	11,219		22,364
Contract liabilities	—		175		Contract liabilities	29,599		—
Other long-term liabilities	—		29,245


	Fiscal Year Ended							Fiscal Year Ended
(In thousands)	2018		2017		2016		(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Payments made to investees for products/services	$	80,150	$	—	$	337,831	Payments made to investees for products/services	$	295,415	$	80,150	$	—
Revenues and fees received from investees for products/services¹	9,717		31,459		317,314		Revenues and fees received from investees for products/services¹	109,512		9,717		31,459

142

(In thousands) Balance Sheet Classification December 30, 2018 December 31, 2017
Assets:
Derivatives designated as hedging instruments:
Foreign currency forward exchange contracts Prepaid expenses and other current assets $ —
$ 61
$ —
$ 61
Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts Prepaid expenses and other current assets $ 729
$ 2,518
$ 729
$ 2,518

Liabilities:
Derivatives designated as hedging instruments:
Interest rate contracts Other long-term liabilities $ 152
$ 715
$ 152
$ 715

Derivatives not designated as hedging instruments:
Foreign currency forward exchange contracts Accrued liabilities $ 1,161
$ 1,452
Interest rate contracts Other long-term liabilities —
459
$ 1,161
$ 1,911

December 30, 2018
Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Rights to Offset
(In thousands) Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral Net Amounts
Derivative assets $ 729
$ —
$ 729
$ 729
$ —
$ —
Derivative liabilities $ 1,313
—
1,313
729
—
584

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	December 30, 2018
							Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Rights to Offset
(In thousands)	Gross Amounts Recognized		Gross Amounts Offset		Net Amounts Presented		Financial Instruments		Cash Collateral		Net Amounts
Derivative assets	$	729	$	—	$	729	$	729	$	—	$	—
Derivative liabilities	1,313		—		1,313		729		—		584

December 31, 2017
Gross Amounts Not Offset in the Consolidated Balance Sheets, but Have Rights to Offset
(In thousands) Gross Amounts Recognized Gross Amounts Offset Net Amounts Presented Financial Instruments Cash Collateral Net Amounts
Derivative assets $ 2,579
$ —
$ 2,579
$ 603
$ —
$ 1,976
Derivative liabilities 2,626
—
2,626
603
—
2,023

The following table summarizes the pre-tax amount of unrealized gain or loss recognized in ~~"Accumulated~~"accumulated other comprehensive income" ("OCI") in ~~"Stockholders'~~"stockholders' equity" on our ~~Consolidated Balance Sheets:~~consolidated balance sheets:


	Fiscal Year
(In thousands)	2019		2018		2017
Derivatives designated as cash flow hedges:
Loss in OCI at the beginning of the period	$	(164)	$	(561)	$	1,203
Unrealized gain (loss) recognized in OCI (effective portion)	737		414		(905)
Less: Gain reclassified from OCI to revenue (effective portion of FX trades)	(1,836)		(35)		(1,137)
Less: Loss reclassified from OCI to interest expense (effective portion of interest rate swaps)	5		18		278
Net gain (loss) on derivatives	(1,094)		397		(1,764)
Loss in OCI at the end of the period	$	(1,258)	$	(164)	$	(561)

Fiscal Year
(In thousands) 2018 2017 2016
Derivatives designated as cash flow hedges:
Gain (loss) in OCI at the beginning of the period $ (561 ) $ 1,203
$ 5,942
Unrealized gain (loss) recognized in OCI (effective portion) 414
(905 ) 2,626
Less: Gain reclassified from OCI to revenue (effective portion of FX trades) (35 ) (1,137 ) (7,587 )
Less: Loss reclassified from OCI to interest expense (effective portion of interest rate swaps) 18
278
222
Net gain (loss) on derivatives 397
(1,764 ) (4,739 )
Gain (loss) in OCI at the end of the period $ (164 ) $ (561 ) $ 1,203

The following table summarizes the amount of gain or loss recognized in ~~"Other,~~"other, net" onin our ~~Consolidated Statements~~consolidated statements of ~~Operations~~operations in the ~~years~~year ended December 29, 2019, December 30, 2018 and December 31, ~~2017 and January 1,~~ 2017:


	Fiscal Year
(In thousands)	2019		2018		2017
Derivatives designated as cash flow hedges:
Gain recognized in "Other, net" on derivatives (ineffective portion and amount excluded from effectiveness testing)	$	392	$	—	$	254
Derivatives not designated as hedging instruments:
Gain (loss) recognized in "Other, net"	$	42	$	(2,904)	$	1,635

Fiscal Year
(In thousands) 2018 2017 2016
Derivatives designated as cash flow hedges:
Gain (loss) recognized in "Other, net" on derivatives (ineffective portion and amount excluded from effectiveness testing) $ —
$ 254
$ (1,069 )
Derivatives not designated as hedging instruments:
Gain (loss) recognized in "Other, net" $ (2,904 ) $ 1,635
$ (6,964 )

Foreign Currency Exchange Risk

Designated Derivatives Hedging Cash Flow Exposure

Our cash flow exposure primarily relates to anticipated third-party foreign currency revenues and expenses and interest rate fluctuations. ~~To protect financial performance, we~~We derive a portion of our revenues in foreign currencies, predominantly in Euros, as part of our ongoing business operations. In addition, a portion of our assets are held in foreign currencies. We enter into foreign currency forward contracts and at times, option contracts designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than ~~their~~our functional ~~currencies.~~ currency. Our foreign currency forward and option contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures.

As of December 29, 2019 and December 30, 2018, ~~we had no designated outstanding cash flow hedge forward contracts. As of December 31, 2017,~~ we had designated outstanding cash flow hedge forward contracts with ~~an aggregate~~a notional value of ~~$2.1 million.~~$48.9 million and 0, respectively. As of December 29, 2019 and December 30, 2018, we also had designated outstanding cash flow hedge option contracts with a notional value of $142.9 million and 0, respectively. We designate either gross external or intercompany revenue up to our net economic exposure. These derivatives have a maturity of ~~a month~~

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six months or less and consist of foreign currency forward and option contracts. The effective portion of these cash flow hedges is reclassified into revenue when third-party revenue is recognized in our ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations.

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Non-Designated Derivatives Hedging Transaction Exposure

Derivatives not designated as hedging instruments consist of forward and option contracts used to hedge re-measurement of foreign currency denominated monetary assets and liabilities primarily for intercompany transactions, receivables from customers, and payables to third parties. Changes in exchange rates between our subsidiaries' functional currencies and the currencies in which these assets and liabilities are denominated can create fluctuations in our reported consolidated financial position, results of operations and cash flows. As of December 29, 2019, to hedge balance sheet exposure, we held forward contracts with an aggregate notional value of $17.5 million. These foreign currency forward contracts have maturity of one month or less. As of December 30, 2018, to hedge balance sheet exposure, we held forward contracts with an aggregate notional value of $11.4 million. ~~The maturity dates of these~~These contracts ~~are~~matured in January 2019. As of December 31, 2017, to hedge balance sheet exposure, we held forward contracts with an aggregate notional value of $8.2 million. The maturity dates of these contracts ranged from January 2, 2018 to January 30, 2018.

Interest Rate Risk

We also enter into interest rate swap agreements to reduce the impact of changes in interest rates on our project specific non-recourse floating rate debt. As of December ~~30, 2018~~29, 2019 and December ~~31, 2017,~~30, 2018, we had interest rate swap agreements designated as cash flow hedges with aggregate notional values of $6.1 million and $6.7 ~~million and $58.1 million, respectively, and interest rate swap agreements not designated as cash flow hedges with aggregate notional values of zero and $21.1~~ million, respectively. These swap agreements allow us to effectively convert floating-rate payments into fixed rate payments periodically over the life of the agreements. These derivatives have a maturity of more than 12 months. The effective portion of these swap agreements designated as cash flow hedges is reclassified into interest expense when the hedged transactions are recognized in our ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations. We analyze our designated interest rate swaps quarterly to determine if the hedge transaction remains effective or ineffective. We may discontinue hedge accounting for interest rate swaps prospectively if certain criteria are no longer met, the interest rate swap is terminated or exercised, or if we elect to remove the cash flow hedge designation. If hedge accounting is discontinued, and the forecasted hedged transaction is considered possible to occur, the previously recognized gain or loss on the interest rate swaps will remain in accumulated other comprehensive loss and will be reclassified into earnings during the same period the forecasted hedged transaction affects earnings or is otherwise deemed improbable to occur. All changes in the fair value of non-designated interest rate swap agreements are recognized immediately in current period earnings.

Credit Risk

Our option and forward contracts do not contain any credit-risk-related contingent features. We are exposed to credit losses in the event of nonperformance by the counterparties to these option and forward contracts. We enter into derivative contracts with high-quality financial institutions and limit the amount of credit exposure to any single counterparty. In addition, we continuously evaluate the credit standing of our counterparties.

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Note ~~14.~~ 13. INCOME TAXES

~~On December 22, 2017,~~In the U.S. enacted the Tax Act which significantly changed U.S. tax law. The Tax Act lowered our U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on deferred foreign income. The Tax Act also created a new minimum “base erosion and anti-abuse tax” on certain foreign payments made by a U.S. parent company, and the “global intangible low-taxed income” rules which tax foreign subsidiary income earned over a 10% rate of routine return on tangible business assets.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which allows the Company to record provisional amounts for the Tax Act during a measurement period not to extend beyond one year ~~of the enactment date. As a result, in 2017, we have previously provided a reasonable estimate of the effects of the Tax Act in our financial statements. During the quarter~~ ended December ~~30, 2018, we completed our analysis based on legislative updates currently available and reported the changes to the provisional amounts previously recorded which did not impact~~29, 2019, our income tax ~~provision. We also confirmed that the Tax Act does not impact our expectations~~provision of ~~actual cash payments for~~$26.6 million on a profit before income taxes and equity in ~~the foreseeable future.~~

earnings (losses) of unconsolidated investees of $26.0 million was primarily due to tax expense in foreign jurisdictions that were profitable. In the year ended December 30, 2018, our income tax provision of $1.0 million on a loss before income taxes and equity in earnings of unconsolidated investees of $898.7 million was primarily due to ~~the related~~ tax expense in foreign jurisdictions that were profitable, offset by tax benefit related to release of valuation allowance in a foreign jurisdiction, and by a release of tax ~~reserve~~reserves due to lapse of statutes of limitation. The income tax benefit of $3.9 million in the year ended December 31, 2017 on a loss before income taxes and equity in earnings of unconsolidated investees of $1,200.8 million, was primarily due to the related tax effects of the carryback of fiscal 2016 net operating losses to fiscal 2015 domestic tax returns, partially offset by tax expense in profitable jurisdictions.

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The geographic distribution of income (loss) from continuing operations before income taxes and equity earnings (losses) of unconsolidated investees and the components of provision for income taxes are summarized below:


	Fiscal Year
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Geographic distribution of income (loss) from continuing operations before income taxes and equity in earnings of unconsolidated investees:
U.S. loss	$	(84,071)	$	(778,316)	$	(1,242,000)
Non-U.S. income (loss)	110,040		(120,355)		41,250
Income (loss) before income taxes and equity in earnings (loss) of unconsolidated investees	$	25,969	$	(898,671)	$	(1,200,750)
Provision for income taxes:
Current tax (expense) benefit
Federal	$	(328)	$	(1,155)	$	6,816
State	(370)		(553)		6,575
Foreign	(24,588)		(4,100)		(12,074)
Total current tax (expense) benefit	(25,286)		(5,808)		1,317
Deferred tax (expense) benefit
Federal	(100)		—		—
State	—		—		1,450
Foreign	(1,245)		4,798		1,177
Total deferred tax (expense) benefit	(1,345)		4,798		2,627
(Provision for) benefit from income taxes	(26,631)		$	(1,010)	$	3,944

Fiscal Year
(In thousands) 2018 2017 2016
Geographic distribution of income (loss) from continuing operations before income taxes and equity in earnings of unconsolidated investees:
U.S. income (loss) $ (778,316 ) $ (1,242,000 ) $ (660,029 )
Non-U.S. income (loss) (120,355 ) 41,250
131,637
Income (loss) before income taxes and equity in earnings (loss) of unconsolidated investees $ (898,671 ) $ (1,200,750 ) $ (528,392 )
Provision for income taxes:
Current tax benefit (expense)
Federal $ (1,155 ) $ 6,816
$ (6,842 )
State (553 ) 6,575
9,254
Foreign (4,100 ) (12,074 ) (19,073 )
Total current tax expense (5,808 ) 1,317
(16,661 )
Deferred tax benefit (expense)
Federal —
3,286
State —
1,450
6,819
Foreign 4,798
1,177
(762 )
Total deferred tax benefit (expense) 4,798
2,627
9,343
Benefit from (provision for) income taxes $ (1,010 ) $ 3,944
$ (7,318 )

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The (provision for) benefit from ~~(provision for)~~ for income taxes differs from the amounts obtained by applying the statutory U.S. federal tax rate to income before taxes as shown below:


	Fiscal Year
(In thousands)	December 29, 2019			December 30, 2018			December 31, 2017
Statutory rate	21		%	21		%	35		%
Tax benefit (expense) at U.S. statutory rate	$	(5,454)		$	188,721		$	420,263
Foreign rate differential	(4,077)			(28,502)			(12,282)
State income taxes, net of benefit	(370)			(395)			(482)
Section 956 and Subpart F	(4,774)			(1,516)			(1,264)
Tax credits (investment tax credit and other)	2,684			4,727			8,132
Change in valuation allowance	(4,027)			(105,363)			(143,804)
Unrecognized tax benefits	(3,245)			2,345			2,430
Non-controlling interest income	(4,482)			(22,763)			17,705
Global intangible low-taxed income (“GILTI”)	(1,278)			(36,455)			—
Section 163L interest	(1,299)			(1,432)			(2,691)


Effects of tax reform	—			—			(302,899)
Other, net	(309)			(377)			18,836
Total	$	(26,631)		$	(1,010)		$	3,944

Fiscal Year
(In thousands) 2018 2017 2016
Statutory rate 21 % 35 % 35 %
Tax benefit (expense) at U.S. statutory rate $ 188,721
$ 420,263
$ 184,891
Foreign rate differential (28,376 ) 6,178
24,932
State income taxes, net of benefit (450 ) (450 ) (329 )
Return to provision adjustments —
—
10,784
Tax credits (investment tax credit and other) 4,727
8,132
6,396
Change in valuation allowance (105,363 ) (143,804 ) (178,231 )
Unrecognized tax benefits 2,345
2,430
(42,697 )
Non-controlling interest income (22,763 ) 17,705
17,183
Global intangible low-taxed income (“GILTI”) (36,455 ) —
—
Goodwill impairment —
—
(20,236 )
Intercompany profit deferral —
—
(4,933 )
Effects of tax reform —
(302,899 ) —
Other, net (3,396 ) (3,611 ) (5,078 )
Total $ (1,010 ) $ 3,944
$ (7,318 )


	As of
(In thousands)	December 29, 2019		December 30, 2018
Deferred tax assets:
Net operating loss carryforwards	$	245,617	$	225,489
Tax credit carryforwards	52,358		55,527
Reserves and accruals	62,108		241,194
Stock-based compensation stock deductions	3,923		9,316
Basis difference on third-party project sales	58,109		50,648
Identified intangible assets	6,749		—
Other	17,629		2,081
Total deferred tax assets	$	446,493	$	584,255
Valuation allowance	(344,117)		(404,923)
Total deferred tax assets, net of valuation allowance	$	102,376	$	179,332
Deferred tax liabilities:

Other intangible assets and accruals	(2,331)		—
Fixed asset basis difference	(20,302)		(151,192)
Investment in Enphase	(37,640)		—
Other	(30,731)		(14,882)
Total deferred tax liabilities	$	(91,004)	$	(166,074)
Net deferred tax asset	$	11,372	$	13,258

As of
(In thousands) December 30, 2018 December 31, 2017
Deferred tax assets:
Net operating loss carryforwards $ 225,489
$ 160,778
Tax credit carryforwards 55,527
57,072
Reserves and accruals 241,194
194,566
Stock-based compensation stock deductions 9,316
11,160
Basis difference on third-party project sales 50,648
242,290
Other 2,081
2,410
Total deferred tax assets 584,255
668,276
Valuation allowance (404,923 ) (448,723 )
Total deferred tax assets, net of valuation allowance 179,332
219,553
Deferred tax liabilities:
Outside basis difference on investment in 8point3 Energy Partners —
(53,460 )
Other intangible assets and accruals —
(8,257 )
Fixed asset basis difference (151,192 ) (140,939 )
Other (14,882 ) (8,252 )
Total deferred tax liabilities (166,074 ) (210,908 )
Net deferred tax asset $ 13,258
$ 8,645

As of December ~~30, 2018,~~29, 2019, we had federal net operating loss carryforwards of ~~$779.9~~$839.8 million for tax ~~purposes;~~purposes of ~~which, $81.6~~which$133.4 million was generated in fiscal ~~year~~ 2018 and thereafter and can be carried forward indefinitely under the Tax Cuts and Job Acts of 2017 (“The Tax Act”). The remaining federal net operating loss carry forward of ~~$698.3~~$706.4 million, which were generated prior to 2018, will expire at various dates from 2031 to 2037. As of December ~~30, 2018,~~29, 2019, we had California state net operating loss carryforwards of approximately ~~$777.7~~$876.1 million for tax purposes, of which $5.2 million relate to debt issuance and will benefit equity when realized. These California net operating loss carryforwards will expire at various dates from 2029 to ~~2038.~~2039. We also had credit carryforwards of approximately ~~$73.9~~$68.2 million for federal tax purposes, of which ~~$19.2~~$16.6 million relate to debt issuance and will benefit equity when realized. We had California credit carryforwards of $9.0 million for state tax purposes, of which

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~~$4.7~~ $4.7 million relate to debt issuance and will benefit equity when realized. These federal credit carryforwards will expire

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at various dates from 2019 to ~~2038,~~2039, and the California credit carryforwards do not expire. Our ability to utilize a portion of the net operating loss and credit carryforwards is dependent upon our being able to generate taxable income in future periods or being able to carryback net operating losses to prior year tax returns. Our ability to utilize net operating losses may be limited due to restrictions imposed on utilization of net operating loss and credit carryforwards under federal and state laws upon a change in ownership.

We are subject to tax holidays in the Philippines where we manufacture our solar power products. Our current income tax holidays were granted as manufacturing lines were placed in service. Tax holidays in the Philippines reduce our tax rate to 0% from 30% ~~(through July 2019)~~. Tax savings associated with the Philippines tax holidays were approximately $4.0 million, $3.4 million ~~$5.6 million~~ and ~~$10.0~~$5.6 million in fiscal ~~years~~2019, 2018 ~~2017~~ and ~~2016,~~2017, respectively, which provided a diluted net income (loss) per share benefit of $0.03, $0.02 ~~$0.04~~ and ~~$0.07,~~$0.04, respectively.

We qualify for the auxiliary company status in Switzerland where we sell our solar power products. The auxiliary company status entitles us to a reduced tax rate of 11.5% in Switzerland from approximately 24.2%. Tax savings associated with this ruling were approximately $2.3 million, $1.8 million ~~$2.4 million~~ and ~~$1.9~~$2.4 million in fiscal ~~years~~2019, 2018 ~~2017~~ and ~~2016,~~2017, respectively, which provided a diluted net income (loss) per share benefit of $0.02, $0.01 ~~$0.02~~ and ~~$0.01,~~$0.02, respectively.

We are subject to tax holidays in Malaysia where we manufacture our solar power products. Our current tax holidays in Malaysia were granted to its former joint venture AUOSP (now a wholly-owned subsidiary). Tax holidays in Malaysia reduce our tax rate to 0% from 24%. Tax savings associated with the Malaysia tax holiday were approximately $3.9 million, $7.6 million, ~~$6.8 million,~~ and ~~$2.0~~$6.8 million in fiscal 2019, 2018, ~~2017,~~ and ~~2016,~~2017, respectively, which provided a diluted net income (loss) per share benefit of ~~$0.05,~~$0.03, $0.05, and ~~$0.01,~~$0.05, respectively.

A material amount of our total revenue is generated from customers located outside of the United States, and a substantial portion of our assets and employees are located outside of the United States. Because of the one-time transition tax related to the Tax Cuts and Jobs Act enacted in 2017, a significant portion of the accumulated foreign earnings were deemed to have been repatriated, and accordingly taxed, and were no longer subject to the U.S. federal deferred tax liability. Although a portion of the accumulated foreign earnings may still be subject to foreign income tax or withholding tax liability upon repatriations, the accumulated foreign earnings are intended to be indefinitely reinvested in our foreign subsidiaries; therefore, no such foreign taxes have been provided. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

In June 2019, the U.S. Court of Appeals for the Ninth Circuit overturned the 2015 U.S. tax court decision in Altera Co v. Commissioner, regarding the inclusion of stock-based compensation costs under cost sharing agreements. In July 2019, Altera Corp., a subsidiary of Intel Inc., requested en banc review of the decision from the Ninth Circuit panel and the request was denied in November 2019. In February 2020, Altera Corp. petitioned the U.S. Supreme Court for review. While a final decision remains outstanding, we quantified and recorded the impact of the case of $5.8 million as reduction to deferred tax asset, fully offset by a reduction to valuation allowance of the same amount, without any income tax expense impact. If the Altera Ninth Circuit opinion is reversed by the U.S. Supreme Court, we would anticipate unwinding the reduction to both deferred tax asset and valuation allowance impact as aforementioned. We will continue to monitor the effects of the case’s outcome on our tax provision and related disclosures once more information becomes available. We will continue to monitor the effects of the case’s outcome on our tax provision and related disclosures once more information becomes available.

Valuation Allowance

Our valuation allowance is related to deferred tax assets in the United States, Malta, South Africa, Mexico, and Spain and was determined by assessing both positive and negative evidence. When determining whether it is more likely than not that deferred assets are recoverable, with such assessment being required on a jurisdiction by jurisdiction basis, we believe that sufficient uncertainty exists with regard to the realizability of these assets such that a valuation allowance is necessary. Factors considered in providing a valuation allowance include the lack of a significant history of consistent profits, the lack of consistent profitability in the solar industry, the limited capacity of carrybacks to realize these assets, and other factors. Based on the absence of sufficient positive objective evidence, we are unable to assert that it is more likely than not that we will generate sufficient taxable income to realize net deferred tax assets aside from the U.S. net operating losses that can be carried back to prior year tax ~~returns.~~returns. Should we achieve a certain level of profitability in the future, we may be in a position to reverse the valuation allowance which would result in a non-cash income statement benefit. The change in valuation allowance for fiscal 2019, 2018 and 2017 ~~and 2016~~ was $60.8 million, $43.8 million and $151.2 million, ~~and $214.2 million,~~ respectively.

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Unrecognized Tax Benefits

Current accounting guidance contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

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A reconciliation of the beginning and ending amounts of unrecognized tax benefits during fiscal 2019, 2018, ~~2017,~~ and ~~2016~~2017 is as follows:


	Fiscal Year
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Balance, beginning of year	$	103,884	$	105,959	$	82,253
Additions for tax positions related to the current year	2,517		2,404		2,478
Additions for tax positions from prior years	1,624		451		22,151
Reductions for tax positions from prior years/statute of limitations expirations	(416)		(2,468)		(1,460)
Foreign exchange (gain) loss	(668)		(2,462)		537
Balance at the end of the period	$	106,941	$	103,884	$	105,959

Fiscal Year
(In thousands) 2018 2017 2016
Balance, beginning of year $ 105,959
$ 82,253
$ 41,058
Additions for tax positions related to the current year 2,404
2,478
35,768
Additions for tax positions from prior years 451
22,151
7,322
Reductions for tax positions from prior years/statute of limitations expirations (2,468 ) (1,460 ) (2,063 )
Foreign exchange (gain) loss (2,462 ) 537
168
Balance at the end of the period $ 103,884
$ 105,959
$ 82,253

Included in the unrecognized tax benefits at fiscal 2019 and 2018 ~~and 2017~~ is ~~$14.7~~$38.2 million and ~~$17.6~~$36.7 million, respectively, that if recognized, would result in a reduction of our effective tax rate. The amounts differ from the long-term liability recorded of ~~$16.8~~$20.1 million and ~~$19.4~~$16.8 million as of fiscal ~~2018~~2019 and ~~2017,~~2018, respectively, due to accrued interest and ~~penalties. Certain components of the~~penalties, as well as unrecognized tax benefits of French and Italian entities that are recorded against deferred tax asset ~~balances.~~balances without valuation allowance.

We believe that events that could occur in the next 12 months and cause a change in unrecognized tax benefits include, but are not limited to, the following:

•commencement, continuation or completion of examinations of our tax returns by the U.S. or foreign taxing authorities; and

•expiration of statutes of limitation on our tax returns.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Uncertainties include, but are not limited to, the impact of legislative, regulatory and judicial developments, transfer pricing and the application of withholding taxes. We regularly assess our tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which we do business. We determined that an estimate of the range of reasonably possible change in the amounts of unrecognized tax benefits within the next 12 months cannot be made.

Classification of Interests and Penalties

We accrue interest and penalties on tax contingencies ~~which are classified~~and classify them as ~~"Provision~~"provision for income taxes" in our ~~Consolidated Statements~~consolidated statements of ~~Operations.~~operations. Accrued interest as of December 29, 2019 and December 30, 2018 ~~and December 31, 2017~~ was approximately ~~$2.1~~$2.9 million and ~~$1.8~~$2.1 million, respectively. Accrued penalties were not material for any of the periods presented.

Tax Years and Examination

We file tax returns in each jurisdiction in which we are registered to do business. In the United States and many of the state jurisdictions, and in many foreign countries in which we file tax returns, a statute of limitations period exists. After a statute of limitations period expires, the respective tax authorities may no longer assess additional income tax for the expired period. Similarly, we are no longer eligible to file claims for refund for any tax that we may have overpaid. The following table summarizes our major tax jurisdictions and the tax years that remain subject to examination by these jurisdictions as of December ~~30, 2018:~~29, 2019:

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Tax Jurisdictions		Tax Years
United States		2010 and onward
California		~~2011~~2002 and onward
Switzerland		~~2013~~2014 and onward
Philippines		2009 and onward
France		2016 and onward
Italy		2015 and onward
~~Italy~~	~~2014 and onward~~

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Additionally, certain pre-2010 U.S. corporate tax returns and ~~pre-2011~~pre-2002 California tax returns are not open for assessment but the tax authorities can adjust net operating loss and credit carryovers that were generated.

We are under tax examinations in various jurisdictions. We do not expect the examinations to result in a material assessment outside of existing reserves. If a material assessment in excess of current reserves results, the amount that the assessment exceeds current reserves will be a current period charge to earnings.

Note ~~15.~~ 14. COMMON STOCK

Common Stock

Voting Rights - Common Stock

All common stock holders are entitled to ~~one~~1 vote per share on all matters submitted to be voted on by our stockholders, subject to the preferences applicable to any preferred stock outstanding.

Dividends - Common Stock

All common stock holders are entitled to receive equal per share dividends when and if declared by the Board of Directors, subject to the preferences applicable to any preferred stock outstanding. Certain of our debt agreements place restrictions on us and our subsidiaries’ ability to pay cash dividends.

Common Stock Offering

In November 2019, we completed an offering of 25,300,000 shares of our common stock at a price of $7.00 per share, which included 3,300,000 shares issued and sold pursuant to the underwriter's exercise in full of its option to purchase additional shares, for gross proceeds of $177.1 million. We received net proceeds of $171.8 million from the offering, after deducting underwriter fees and discounts. We incurred other expenses of $1.1 million for the transaction which was recorded in APIC. In addition, we incurred incremental organizational costs in connection with the offering of $1.3 million which was recorded in the consolidated statement of operations.

Shares Reserved for Future Issuance Under Equity Compensation Plans

We had shares of common stock reserved for future issuance as follows:

(In thousands)

December 29, 2019

December 30, 2018

Equity compensation plans

12,117

11,183

(In thousands) December 30, 2018 December 31, 2017
Equity compensation plans 11,183
¹

8,824

¹On November 13, 2018, we filed post-effective amendments to registration statements in order to deregister shares of common stock that are no longer required to be registered for issuance under our stock incentive plans. Other than with respect to the SunPower Corporation 2015 Omnibus Incentive Plan, no further awards have been issued under the prior plans and no awards remain outstanding as of December ~~30, 2018.~~29, 2019. See "Note ~~17.~~16. Stock-Based Compensation" for additional information.

Note ~~16.~~ ~~NET LOSS~~15. NET INCOME (LOSS) PER SHARE

We calculate basic net ~~loss~~income (loss) per share by dividing earnings allocated to common stockholders by the basic ~~weighted average~~weighted-average number of common shares outstanding for the period.

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

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


	Fiscal Year Ended
(In thousands, except per share amounts)	December 29, 2019		December 30, 2018		December 31, 2017
Basic net income (loss) per share:
Numerator:
Net income (loss) attributable to stockholders	$	22,159	$	(811,091)	$	(929,121)
Denominator:
Basic weighted-average common shares	144,796		140,825		139,370

Basic net income (loss) per share	$	0.15	$	(5.76)	$	(6.67)

Diluted net income (loss) per share¹
Numerator:
Net income (loss) attributable to stockholders	$	22,159	$	(811,091)	$	(929,121)


Net income (loss) available to common stockholders	$	22,159	$	(811,091)	$	(929,121)
Denominator:
Basic weighted-average common shares	144,796		140,825		139,370
Effect of dilutive securities:
Restricted stock units	2,729		—		—


Dilutive weighted-average common shares:	147,525		140,825		139,370

Dilutive net income (loss) per share	$	0.15	$	(5.76)	$	(6.67)

Fiscal Year Ended
(In thousands, except per share amounts) 2018 2017 2016
Numerator:
Net loss attributable to stockholders $ (811,091 ) $ (929,121 ) $ (448,635 )
Denominator¹:

Basic and diluted weighted-average common shares 140,825
139,370
137,985

Basic and diluted net loss per share attributable to stockholders $ (5.76 ) $ (6.67 ) $ (3.25 )

¹As a result of our net loss attributable to stockholders for fiscal 2019, 2018, ~~2017~~ and ~~2016,~~2017, the inclusion of all potentially dilutive stock options, restricted stock units, and common shares under noted warrants and convertible debt would be anti-dilutive. Therefore, those stock options, restricted stock units and shares were excluded from the computation of the weighted-average shares for diluted net loss per share for such periods.

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


	Fiscal Year Ended
(In thousands)	December 29, 2019	December 30, 2018	December 31, 2017
Restricted stock units	929	5,699	3,917
Upfront warrants (held by Total)	—	9,532	364
4.00% debentures due 2023	13,922	13,922	13,922
0.75% debentures due 2018	—	4,975	12,026
0.875% debentures due 2021	8,203	8,203	8,203

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Fiscal Year Ended
(In thousands) 2018
2017 2016
Stock options —
—
141
Restricted stock units 5,699
3,917
4,997
Upfront Warrants (held by Total) 9,532
364
3,721
4.00% debentures due 2023 13,922
13,922
13,922
0.75% debentures due 2018 4,975
12,026
12,026
0.875% debentures due 2021 8,203
8,203
8,203

Note ~~17.~~ 16. STOCK-BASED COMPENSATION

The following table summarizes the consolidated stock-based compensation expense by line item in our ~~Consolidated Statements~~consolidated statements of ~~Operations:~~operations:


	Fiscal Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Cost of SunPower Energy Services revenue	2,389		2,369		$	2,599
Cost of SunPower Technologies revenue	1,993		2,626		2,889
Research and development	3,199		5,497		6,448
Sales, general and administrative	19,354		17,724		22,738
Total stock-based compensation expense	$	26,935	$	28,216	$	34,674

Fiscal Year
(In thousands) 2018 2017 2016
Cost of SunPower Energy Services revenue $ 2,369
$ 2,599
$ 5,956
Cost of SunPower Technologies revenue 2,626
2,889
11,133
Research and development 5,497
6,448
11,896
Sales, general and administrative 17,724
22,738
32,514
Total stock-based compensation expense $ 28,216
$ 34,674
$ 61,499

The following table summarizes the consolidated stock-based compensation expense by type of award:


	Fiscal Year Ended
(In thousands)	December 29, 2019		December 30, 2018		December 31, 2017
Restricted stock units	$	27,770	$	27,922	$	34,548
Change in stock-based compensation capitalized in inventory	(835)		294		126
Total stock-based compensation expense	$	26,935	$	28,216	$	34,674

Fiscal Year
(In thousands) 2018 2017 2016
Restricted stock units $ 27,922
$ 34,548
$ 58,562
Change in stock-based compensation capitalized in inventory 294
126
2,937
Total stock-based compensation expense $ 28,216
$ 34,674
$ 61,499

As of December ~~30, 2018,~~29, 2019, the total unrecognized stock-based compensation related to outstanding restricted stock units was ~~$47.9~~$45.8 million, which we expect to recognize over a weighted-average period of ~~2.6~~2.5 years.

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Equity Incentive Programs

Stock-based Incentive Plans

During fiscal ~~2018, we have three~~2019, SunPower had one stock incentive plans: (i) the Third Amended and Restated 2005 SunPower Corporation Stock Incentive Plan ("2005 Plan"); (ii) the PowerLight Corporation Common Stock Option and Common Stock Purchase Plan ("PowerLight Plan"); and (iii)plan: the SunPower Corporation 2015 Omnibus Incentive Plan ("2015 Plan"). The PowerLight Plan, which was adopted by PowerLight’s Board of Directors in October 2000, was assumed by us by way of the acquisition of PowerLight in fiscal 2007. The 2005 Plan was adopted by our Board of Directors in August 2005, and was approved by shareholders in November 2005. The 2015 ~~Plan, which subsequently replaced the 2005~~ Plan was adopted by our Board of Directors in February 2015 and was approved by ~~shareholders~~stockholders in June 2015. On November 13, 2018, we filed post-effective amendments to registration statements associated with the 2005 Plan and the PowerLight Plan, among others, to deregister shares no longer required to be registered for issuance under those plans, as no new awards had been made and all options had been exercised or had expired.

The 2015 Plan allows for the grant of options, as well as grant of stock appreciation rights, restricted stock grants, restricted stock units and other equity rights. The 2015 Plan also allows for tax withholding obligations related to stock option exercises or restricted stock awards to be satisfied through the retention of shares otherwise released upon vesting.

The 2015 Plan includes an automatic annual increase mechanism equal to the lower of three percent of the outstanding shares of all classes of our common stock measured on the last day of the immediately preceding fiscal year, 6 million shares, or such other number of shares as determined by our Board of Directors. In fiscal 2015, our Board of Directors voted to reduce the stock incentive plan’s automatic increase from 3% to 2% for 2016. As of December ~~30, 2018,~~29, 2019, approximately ~~11.2~~12.1 million shares were available for grant under the 2015 Plan.

Incentive stock options, nonstatutory stock options, and stock appreciation rights may be granted at no less than the fair value of the common stock on the date of grant. The options and rights become exercisable when and as determined by our Board of Directors, although these terms generally do not exceed ten years for stock options. We have not granted stock options since fiscal ~~2008~~. 2008. All previously granted stock options have been exercised or expired and accordingly no options remain outstanding. Under the 2015 Plan, the restricted stock grants and restricted stock units typically vest in equal installments annually over three or four years.

The majority of shares issued are net of the minimum statutory withholding requirements that we pay on behalf of our employees. During fiscal 2019, 2018, ~~2017,~~ and ~~2016,~~2017, we withheld 0.8 million, 0.7 million ~~0.6 million~~ and ~~1.0~~0.6 million shares, respectively, to satisfy the employees' tax obligations. We pay such withholding requirements in cash to the appropriate taxing authorities. Shares withheld are treated as common stock repurchases for accounting and disclosure purposes and reduce the number of shares outstanding upon vesting.

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Restricted Stock Units and Stock Options

The following table summarizes our non-vested restricted stock units' activities:


	Restricted Stock Units
	Shares (in thousands)	Weighted-Average Grant Date Fair Value Per Share¹
Outstanding as of December 31, 2017	7,293	$	11.83
Granted	4,449	7.77
Vested²	(2,266)	14.45
Forfeited	(1,816)	10.10
Outstanding as of December 30, 2018	7,660	9.11
Granted	5,430	6.82
Vested²	(2,460)	9.65
Forfeited	(1,304)	8.28
Outstanding as of December 29, 2019	9,326	7.75

Restricted Stock Units

Shares
(in thousands)

Weighted-Average
Grant Date Fair
Value Per Share¹
Outstanding as of January 1, 2017 6,147
$ 21.85
Granted 4,863
6.76
Vested²
(1,738 ) 25.87
Forfeited (1,979 ) 18.15
Outstanding as of December 31, 2017 7,293
11.83
Granted 4,449
7.77
Vested²
(2,266 ) 14.45
Forfeited (1,816 ) 10.10
Outstanding as of December 30, 2018 7,660
9.11


¹	~~We estimate the fair value of our restricted stock awards and units at our stock price on the grant date.~~


²	~~Vestedrestricted stock awards include shares withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements.~~

¹We estimate the fair value of our restricted stock awards and units at our stock price on the grant date.

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~~Table~~²Vestedrestricted stock awards include shares withheld on behalf of ~~Contents~~employees to satisfy the minimum statutory tax withholding requirements.

There were no0 options outstanding and exercisable as of December ~~30, 2018.~~29, 2019. The intrinsic value of the options exercised in fiscal 2019, 2018, and 2017 were 0, 0, and ~~2016 were zero,~~ $1.7 thousand, ~~and zero,~~ respectively. There were no stock options granted in fiscal 2019, 2018, ~~2017,~~ and ~~2016.~~2017.

Note ~~18.~~ 17. SEGMENT AND GEOGRAPHICAL INFORMATION

In the fourth quarter of fiscal 2018, in connection with a reorganization of our business to better align and focus resources towards an upstream and downstream business unit structure, we changed our segment reporting from three end-customer segments to upstream and downstream segments: (i) SunPower Technologies and (ii)Our SunPower Energy Services ~~(see Note 1.~~ ~~Organization~~Segment ("SunPower Energy Services" or "Downstream") refers to sales of solar energy solutions in the North America region previously included in the legacy Residential Segment and ~~Summary~~Commercial Segment including direct sales of ~~Significant Accounting Policies~~turn-key engineering, procurement and construction ("EPC"). services, sales to our third-party dealer network, sales of energy under power purchase agreements ("PPAs"), storage solutions, cash sales and long-term leases directly to end customers, and sales to resellers. SunPower Energy Services Segment also includes sales of our global O&M services. Our SunPower Technologies Segment ("SunPower Technologies" or "Upstream") refers to our technology development, worldwide solar panel manufacturing operations, equipment supply to resellers and commercial and residential end-customers outside of North America ("International DG"), and worldwide power plant project development and project sales. Upon reorganization, some support functions and responsibilities, which previously resided within the corporate function, have been shifted to each segment, including financial planning and analysis, legal, treasury, tax and accounting support and services, among others.

Our Chief Executive Officer, as the chief operating decision maker (“CODM”), reviews our business, manages resource allocations and measures performance of our activities between the SunPower Energy Services Segment and the SunPower Technologies Segment.

Reclassifications of prior period segment information have been made to conform to the current period presentation. ~~These changes did not materially affect our previously reported Consolidated Financial Statements.~~

Adjustments Made for Segment Purposes

~~Intersegment Gross Margin~~Adjustments Based on International Financial Reporting Standards (“IFRS”)

~~To increase efficiencies and the competitive advantage of our technologies, SunPower Technologies sells solar modules~~to SunPower Energy Services based on transfer prices determined based on management's assessment of market-based pricing terms. Such intersegment sales and related costs are eliminated at the corporate level to derive our consolidated financial results.

8point3 Energy Partners

We ~~include~~included adjustments related to the sales of projects contributed to 8point3 ~~Energy Partners~~ based on the difference between the fair ~~market~~ value of the consideration received and the net carrying value of the projects contributed, of which, a portion iswas deferred in proportion to our retained equity ~~interest~~stake in ~~8point3 Energy Partners. Prior to the adoption of ASC 606,~~8point3. The deferred profit was subsequently recognized over time. Under GAAP, these sales were recognized under either real estate, lease, or consolidation accounting guidance depending upon the nature of the individual asset contributed, with outcomes ranging from no, partial, or full profit recognition. ~~We adopted ASC 606~~Under IFRS, profit was recognized on ~~January 1, 2018, using~~sales related to the ~~full retrospective method, which required us to restate each prior period presented. We recorded a material amount of deferred profit associated with~~residential lease portfolio, while for other projects sold, profit was deferred until these

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projects reached commercial operations. Equity in earnings of unconsolidated investees also included the impact of our share of 8point3’s earnings related to ~~8point3 Energy Partners in 2015, the majority~~sales of ~~which had previously been deferred~~projects receiving sales recognition under real estate accounting. Accordingly, our carrying value in the 8point3 Group materially increased upon adoption which required us to evaluate our investment in 8point3 Energy Partners for other-than-temporary impairment ("OTTI"). In accordance with such evaluation, we recognized an OTTI charge on the 8point3 investment balance in fiscal 2017.IFRS but not GAAP. On June 19, 2018, we sold our equity interest in the 8point3 Group.

Legacy utility and power plant projects

We ~~include~~included adjustments related to the revenue recognition of certain ~~legacy~~ utility and power plant projects based on ~~the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations~~percentage-of-completion accounting and, when relevant, the allocation of revenue and margin to our project development efforts at the time of initial project sale. Prior to the adoption of ASC 606, such projects were accounted for under real estate accounting guidance, under which no separate allocation to our project development efforts occurs and the amount of revenue and margin that is recognized may be limited in circumstances where we have certain forms of continuing involvement in the project. Under ~~ASC 606,~~IFRS, such projects are accounted for when the customer obtains control of the promised goods or services which generally results in earlier recognition of revenue and profit than ~~previous~~ U.S. GAAP. Over the life of each project, cumulative revenue and gross ~~profit~~margin will eventually be equivalent under both ~~ASC 606~~GAAP and ~~segment treatments once these projects are completed.~~IFRS; however, revenue and gross margin will generally be recognized earlier under IFRS.

~~Sale-leaseback~~Legacy sale-leaseback transactions

We include adjustments related to the revenue recognition on certain legacy sale-leaseback transactions entered into before December 31, 2018, based on the net proceeds received from the buyer-lessor. Under U.S. GAAP, these transactions ~~are~~were accounted for under the financing method in accordance with ~~real estate~~the applicable accounting guidance. Under such guidance, no revenue or profit is recognized at the inception of the transaction, and the net proceeds from the buyer-lessor are recorded as a financing liability. Imputed interest is recorded on the liability equal to our incremental borrowing rate adjusted solely to prevent negative amortization. Under IFRS, such revenue and profit is recognized at the time of sale to the buyer-lessor if certain criteria are met. Upon adoption of IFRS 16, Leases, on December 31, 2018, IFRS is aligned with GAAP.

~~Impairment~~Mark-to-market gain (loss) on equity investments

We recognize adjustments related to the fair value of ~~property, plant~~equity investments with readily determinable fair value based on the changes in the stock price of these equity investments at every reporting period. Under GAAP, realized and ~~equipment~~

Inunrealized 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 Total S.A. Further, we elected the second quarter of fiscal 2018, we announced our proposed plan to change our corporate structure into upstream and downstream business units, and our long-term strategy to upgrade our existing integrated back connectivity, or IBC, technology to our NGT, or Maxeon 5. Accordingly, we expect to upgrade the equipment associated with our manufacturing operationsFair Value Option (“FVO”) for ~~the production of Maxeon 5 over the next several years. In connection with these planned changes that will impact the utilization~~some of our ~~manufacturing assets as well as continued pricing challenges in the industry,~~equity method investments, and we determined indicators of impairment existed and therefore performed a recoverability test by estimating future undiscounted net cash flows expected to be generated from the use of these assets groups. Based on the test performed, we determined that our estimate of future undiscounted net cash flows was insufficient to recoveradjust the carrying value of ~~the upstream business unit’s assets~~those investments based on their fair market value calculated periodically. Such option is not available under IFRS, and ~~consequently performed an impairment analysis by comparing the carrying value~~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 ~~the asset group to~~ its ~~estimated fair value. In accordance with such evaluation, we recognized~~status as a ~~non-cash impairment charge on~~consolidated subsidiary of Total S.A. and better reflects our ~~property, plant and equipment. Such asset impairment is excluded from our segment results as it is non-cash in nature and not reflective of~~ ongoing ~~segment~~ results.

~~Impairment~~Other Adjustments

Intersegment gross margin

To increase efficiencies and the competitive advantage of our technologies, SunPower Technologies sells solar modulesto SunPower Energy Services based on transfer prices determined based on management's assessment of market-based pricing terms. Such intersegment sales and related costs are eliminated at the corporate level to derive our consolidated financial results.

Loss on sale and impairment of residential lease assets

In the fourth quarter of fiscal 2017, we made the decision to sell or refinance our interest in ~~our~~the Residential Lease Portfolio and as a result of this triggering event, determined it was necessary to evaluate the ~~recoverability of~~potential for impairment in our ability to recover the carrying amount of the Residential Lease Portfolio. In accordance with such evaluation, we recognized a non-cash impairment charge on our solar power systems leased and to be leased and an allowance for losses related to financing receivables. In connection with the impairment loss, the carrying values of our solar power systems leased and to be leased were reduced which resulted in lower depreciation charges. ~~Such asset impairment and its corresponding depreciation savings are excluded from the Company’s segment results as they are non-cash in nature and not reflective of ongoing segment results.~~

In the fourth quarter of fiscal 2018, we entered into a joint venture with HA SunStrong Capital LLC (“HA SunStrong Parent”), an affiliate of Hannon Armstrong Sustainable Infrastructure Capital, Inc., to acquire, own, manage, operate, finance, and maintain a portfolio of residential rooftop or ground-mounted solar photovoltaic electric generating systems ("Solar Assets"). Pursuant to the terms of the Purchase and Sale Agreement (the “PSA"), we sold ~~to HA SunStrong Parent, in exchange for consideration of $10.0 million,~~ membership units representing a ~~49.0%~~49% membership interest in SunStrong Capital Holdings, LLC (“SunStrong”), formerly our wholly-owned subsidiary. Following the closing of the PSA, we deconsolidated certain entities that have historically held the assets and liabilities comprising our residential lease business ~~(the "Residential Lease Portfolio"), as part of our previously announced decision to sell a portion of our interest in the Residential Lease Portfolio,~~ and retained ~~membership units representing~~ a 51% membership ~~interest in SunStrong.~~interest. The loss on divestment and the remaining unsold residential lease ~~asset~~assets impairment with its corresponding depreciation savings are excluded from our segment results as they are non-cash in nature and not reflective of ongoing operating results. Additionally, in the third quarter of fiscal 2019, in continuation with our intention to deconsolidate all the residential lease assets owned by us, we sold the remainder of residential lease assets still owned by us, that were not previously sold. Gain/loss from such activity is excluded from the company’s non-GAAP results as it is non-cash in nature and not reflective of ongoing operating results.

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Impairment of property, plant, and equipment

We evaluate property, plant and equipment for impairment whenever certain triggering events or changes in circumstances arise. This evaluation includes consideration of technology obsolescence that may indicate that the carrying value of such assets may not be recoverable. In accordance with such evaluation, the company recognizes a non-cash impairment charge when the asset group’s fair value is lower than its carrying value. Such impairment charge is excluded from the company’s non-GAAP results as it is non-recurring in nature and not reflective of ongoing operating results. Any such non-recurring impairment charge recorded by our equity method or other unconsolidated investees is also excluded from our non-GAAP results as it is not reflective of their ongoing operating results.

Construction revenue on solar services contracts

Upon adoption of ASC 842 in the first quarter of fiscal 2019, revenue and cost of revenue on solar services contracts with residential customers are recognized ratably over the term of those contracts, beginning when the projects are placed in service. For segment reporting purposes, we recognize revenue and cost of revenue upfront based on the expected cash proceeds to align with the legacy lease accounting guidance. We believe it is appropriate to recognize revenue and cost of revenue upfront based on total expected cash proceeds as it better reflects our ongoing results as such method aligns revenue and costs incurred most accurately in the same period.

Cost of above-market polysilicon

As described in "Note ~~10.~~ 9. Commitments and Contingencies," we have entered into multiple long-term, fixed-price supply agreements to purchase polysilicon for periods of up to ten years. The prices in select legacy supply agreements, which include a cash portion and a non-cash portion attributable to the amortization of prepayments made under the agreements, significantly exceed current market prices. Additionally, in order to reduce inventory and improve working capital, we have periodically elected to sell polysilicon inventory in the marketplace at prices below our purchase price, thereby incurring a loss. ~~Starting in the first quarter of fiscal 2017, we have excluded~~We exclude the impact of our above-market cost of polysilicon, including the effect of above-market polysilicon on product costs, losses incurred on sales of polysilicon to third parties, and inventory reserves and project asset impairments recorded ~~as a result of above-market polysilicon,~~ from our ~~segment~~non-GAAP results as they are not reflective of ongoing operating results.

Stock-based compensation

~~We incur stock-based~~Stock-based compensation ~~expense related~~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 ~~exclude~~believe that this ~~expense from~~adjustment for stock-based compensation provides investors with a basis to measure our ~~segment results.~~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.

Amortization of intangible assets

We incur amortization ~~expense on~~of intangible assets as a result of acquisitions, which ~~include~~includes patents, ~~project assets,~~ purchased technology, project pipeline assets, and in-process research and ~~development and trade names.~~development. We believe that it is appropriate to exclude ~~this expense~~these amortization charges from our ~~segment results.~~non-GAAP financial measures as they arise from prior acquisitions, are not reflective of ongoing operating results, and do not contribute to a meaningful evaluation of our past operating performance.

Depreciation of idle equipment

In the fourth quarter of 2017, we changed the deployment plan for our next generation of solar cell technology, and revised our depreciation estimates to reflect the use of certain assets over their shortened useful ~~life.~~lives. Such asset depreciation is excluded from our non-GAAP financial measures as it is non-cash in nature and not reflective of ongoing operating results. Excluding this data provides investors with a basis to compare our performance against the performance of other companies without such charges.

Business process improvements

During the second quarter of fiscal 2019, we initiated a project to improve our manufacturing and related processes to improve gross margin in coming years, and engaged third party experts to consult on business process improvements.

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Management believes it is appropriate to exclude these consulting expenses from our non-GAAP financial measures as they non-recurring in nature, and are not reflective of our ongoing operating results.

Gain on business divestiture

In ~~the third quarter of~~ fiscal ~~2018,~~2019, we entered into a transaction pursuant to which ~~the Company~~we sold membership interest in certain ~~assets and intellectual property related~~of our subsidiaries that own leasehold interests in projects subject to ~~the production of microinverters for purchase consideration comprised of both cash and stock.~~sale-leaseback financing arrangements. In connection with this sale, ~~the Company~~we recognized a gain relating to this business divestiture. ~~Management believes~~We believe that it is appropriate to exclude this gain from ~~the Company’s Non-GAAP financial measures~~our segment results as it is ~~non-cash in nature and~~ not reflective of ongoing operating results.

~~Unrealized loss on equity investments~~Transaction-related costs

In connection with the divestment of the Company's microinverters business in the third quarter of fiscal 2018, the Company received a portion of the consideration in the form of common stock. The Company recognizes 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 GAAP, unrealized gains and losses due to changes in stock prices for these securities are recorded in earnings while under International Financial Reporting Standards ("IFRS"), an election can be made to recognizematerial transactions such gains and losses in other comprehensive income. Such an election was made by Total S.A., a foreign registrant which reports under the IFRS. Management believes that excluding the unrealized gain or loss on the equity investments is consistent with the Company's reporting process as ~~part of its status as a consolidated subsidiary of Total S.A. and better reflects the Company's ongoing segment results.~~

~~Acquisition-related and other costs~~

~~In connection with~~ the acquisition or divestiture of ~~certain assets of SolarWorld Americas, Inc. ("SolarWorld Americas"), which closed on October 1, 2018, the Company incurred~~a business, we incur transaction costs including legal and accounting fees. ~~In addition to the legal and accounting fees incurred. Management believes~~We believe that it is appropriate to exclude these costs from ~~the Company’s Non-GAAP financial measures~~our segment results as they would not have otherwise been incurred as part of ~~its~~our business operations and are therefore not reflective of ongoing operating results.

Business reorganization costs

In connection with the reorganization of our business into an upstream and downstream, ~~business unit structure,~~and subsequent announcement of the separation transaction to separate the Company into two independent, and publicly-traded companies, we incurred and expect to continue ~~incurring expenses~~to incur in ~~the~~ upcoming quarters, ~~associated with reclassifying prior period segment information, reorganization of corporate functions~~non-recurring charges on third-party legal and ~~responsibilities~~consulting expenses to close the ~~business units, updating accounting policies and processes and implementing systems to fulfill the requirements of the master supply agreement between the segments. Management~~separation transaction. The company believes that it is appropriate to exclude these from ~~the Company’s Non-GAAP financial measures~~company's non-GAAP results as ~~they would not have otherwise been incurred as part of its business operations and are therefore~~it is not reflective of ongoing operating results.

Non-cash interest expense

We incur non-cash interest expense related to the amortization of items such as original issuance discounts on ~~certain of~~ our ~~convertible~~ debt. We exclude non-cash interest expense because the expense does not reflect our financial results in the period incurred. We believe that this adjustment for non-cash interest expense ~~from~~provides investors with a basis to evaluate our ~~segment results.~~performance, including compared with the performance of other companies, without non-cash interest expense.

Restructuring ~~expense~~expenses

We incur restructuring ~~expense~~expenses related to reorganization plans aimed towards realigning resources consistent ~~with~~ our global strategy and improving ~~our~~its 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 company's non-GAAP results as it is not reflective of ongoing operating results.

Litigation

We may be involved in various litigations, claims and proceedings that result in payments or recoveries from such proceedings. We exclude ~~this expense~~such gains or losses on litigation because the gains or losses do not reflect our underlying financial results in the period incurred. The company believes that it is appropriate to exclude these from our ~~segment~~non-GAAP results as it is not reflective of ongoing operating results.

~~IPO-related costs~~

~~We incurred legal, accounting, advisory, valuation, and other costs related to the IPO of 8point3 Energy Partners. We exclude these costs from our segment results.~~

~~Other~~

~~We combine amounts previously disclosed under separate captions into “Other” when amounts do not have a significant impact on the presented fiscal periods.~~

Segment and Geographical Information

The following tables present segment results for fiscal 2019, 2018 ~~2017~~ and ~~2016~~2017 for revenue, gross margin, and adjusted EBITDA, each as reviewed by the CODM, and their reconciliation to our consolidated GAAP results, as well as information about significant customers and revenue by geography based on the destination of the shipments, and property, plant and equipment, net by segment.

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2018 2017 2016
(In thousands): SunPower Energy Services SunPower Technologies SunPower Energy Services SunPower Technologies SunPower Energy Services SunPower Technologies
Revenue from external customers:
North America Residential $ 673,758
$ —
$ 531,291
$ —
$ 639,174
$ —
North America Commercial 422,762
—
596,729
—
415,247
—
Operations and maintenance 47,447
—
42,233
—
37,127
—
International DG —
322,028
—
209,346
—
153,894
Module sales —
186,712
—
173,617
—
107,412
Development services and legacy power plant —
162,227
—
575,342
—
1,350,006
Intersegment revenue —
388,539
—
466,949
—
446,537
Total segment revenue as reviewed by CODM $ 1,143,967
$ 1,059,506
$ 1,170,253
$ 1,425,254
$ 1,091,548
$ 2,057,849
Segment gross profit as reviewed by CODM $ 142,087
$ 19,050
$ 126,049
$ 135,574
$ 209,075
$ 201,741
Adjusted EBITDA $ 151,095
$ 27,980
$ 109,863
$ 145,696
$ 141,885
$ 243,039

Reconciliation of Segment Revenue to Consolidated GAAP Revenue
Fiscal Year Ended
(In thousands):
2018 2017 2016
Total segment revenue as reviewed by CODM
$ 2,203,473
2,595,507
3,149,397
Adjustments to segment revenue:
Intersegment elimination
(388,539 ) (466,949 ) (446,537 )
8point3 Energy Partners
8,588
(7,198 ) (29,614 )
Utility and power plant projects
4,145
(54,659 ) (13,981 )
Sale of operating lease assets
—
—
(28,096 )
Sale-leaseback transactions
(101,582 ) (272,654 ) (78,532 )
Consolidated GAAP revenue
$ 1,726,085
$ 1,794,047
$ 2,552,637

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	Fiscal Year Ended
	December 29, 2019						December 30, 2018						December 31, 2017
(In thousands):	SunPower Energy Services		SunPower Technologies		SunPower Energy Services		SunPower Technologies		SunPower Energy Services		SunPower Technologies
Revenue from external customers:
North America Residential	$	792,031	$	—	$	788,766	$	—	$	660,305
North America Commercial	304,348		—		307,754		—		467,715
Operations and maintenance	51,627		—		47,447		—		42,233
Module sales	—		752,239		—		508,740				382,963
Development services and legacy power plant	—		91,822		—		162,227				575,342
Intersegment revenue	—		470,015		—		388,539				466,949
Total segment revenue as reviewed by CODM	$	1,148,006	$	1,314,076	$	1,143,967	$	1,059,506	$	1,170,253	$	1,425,254
Segment gross profit as reviewed by CODM	$	121,173	$	171,405	$	142,087	$	19,050	$	126,049	$	135,574
Adjusted EBITDA	$	8,561	$	137,454	$	151,095	$	27,980	$	109,863	$	145,696


Reconciliation of Segment Revenue to Consolidated GAAP Revenue	Fiscal Year Ended
(In thousands):	December 29, 2019		December 30, 2018		December 31, 2017
Total segment revenue as reviewed by CODM	$	2,462,082	$	2,203,473	$	2,595,507
Adjustments to segment revenue:
Intersegment elimination	(470,015)		(388,539)		(466,949)
8point3 Energy Partners	—		8,588		(7,198)
Legacy utility and power plant projects	303		4,145		(54,659)
Legacy sale-leaseback transactions	—		(101,582)		(272,654)
Construction revenue on solar services contracts	(128,145)		—		—
Consolidated GAAP revenue	$	1,864,225	$	1,726,085	$	1,794,047

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Reconciliation of Segment Gross Profit to Consolidated GAAP Gross Profit Fiscal Year Ended
(In thousands): 2018 2017 2016
Segment gross profit $ 161,137
$ 261,623
$ 410,816
Adjustments to segment gross profit:
Intersegment elimination (25,386 ) (25,151 ) (18,045 )
8point3 Energy Partners 8,337
2,656
23,157
Utility and power plant projects 1,244
(41,746 ) (6,064 )
Sale of operating lease assets —
—
(8,554 )
Sale-leaseback transactions (242 ) (31,094 ) (11,352 )
Impairment of property, plant and equipment (355,107 ) —
—
Impairment of residential lease assets¹
14,847
—
—
Arbitration ruling —
—
5,852
Cost of above-market polysilicon (87,228 ) (166,906 ) (148,265 )
Stock-based compensation expense (4,996 ) (5,489 ) (17,090 )
Amortization of intangible assets (8,966 ) (10,206 ) (7,680 )
Depreciation of idle equipment (721 ) (2,300 ) —
Non-cash interest expense —
(32 ) (956 )
Consolidated GAAP gross profit $ (297,081 ) $ (18,645 ) $ 221,819

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Reconciliation of Segment Gross Profit to Consolidated GAAP Gross Profit	Fiscal Year Ended
(In thousands):	December 29, 2019		December 30, 2018		December 31, 2017
Segment gross profit	$	292,578	$	161,137	$	261,623
Adjustments to segment gross profit:
Intersegment elimination	(12,951)		(25,386)		(25,151)
8point3 Energy Partners	—		8,337		2,656
Legacy utility and power plant projects	(993)		1,244		(41,746)

Legacy sale-leaseback transactions	4,763		(242)		(31,094)
Business process improvements	(3,370)		—		—

Impairment of property, plant and equipment, and equity method investment	511		(355,107)		—
Construction revenue on solar services contracts	(20,018)		—		—
Loss on sale and impairment of residential lease assets	1,192		14,847		—
Cost of above-market polysilicon	(126,805)		(87,228)		(166,906)
Litigation	2,515		—		—
Stock-based compensation expense	(4,382)		(4,996)		(5,489)
Amortization of intangible assets	(7,135)		(8,966)		(10,206)
Depreciation of idle equipment	—		(721)		(2,300)
Non-cash interest expense	—		—		(32)
Consolidated GAAP gross profit (loss)	$	125,905	$	(297,081)	$	(18,645)

157

Reconciliation of Segments EBITDA to Loss before income taxes and equity in earnings (losses) of unconsolidated investees Fiscal Year Ended
(In thousands): 2018 2017 2016
Segment adjusted EBITDA $ 179,075
$ 255,559
$ 384,924
Adjustments to segment adjusted EBITDA:
8point3 Energy Partners 8,485
(78,990 ) (25,127 )
Utility and power plant projects 1,244
(41,746 ) (6,602 )
Sale of operating lease assets —
—
(8,607 )
Sale-leaseback transactions (18,802 ) (39,318 ) (11,699 )
Impairment of property, plant and equipment (369,168 ) —
—
Impairment of residential lease assets¹
(227,507 ) (473,709 ) —
Cost of above-market polysilicon (87,228 ) (166,906 ) (148,265 )
Stock-based compensation expense (28,215 ) (34,674 ) (61,498 )
Amortization of intangible assets (8,966 ) (19,048 ) (17,369 )
Depreciation of idle equipment (721 ) (2,300 ) —
Arbitration ruling —
—
5,852
IPO-related costs —
82
304
Acquisition-related and other costs (17,727 ) —
—
Gain on business divestiture 59,347
—
—
Restructuring expense (17,497 ) (21,045 ) (207,189 )
Goodwill Impairment —
—
(57,765 )
Unrealized loss on equity investments (6,375 ) —
—
Non-cash interest expense (68 ) (128 ) (1,057 )
Equity in earnings (losses) of unconsolidated investees 17,815
(25,938 ) (14,295 )
Net loss attributable to noncontrolling interests (106,406 ) (241,747 ) (72,780 )
Cash interest expense, net of interest income (86,394 ) (79,965 ) (57,734 )
Depreciation (120,367 ) (164,970 ) (156,464 )
Corporate (67,866 ) (65,907 ) (73,052 )
Business reorganization costs (1,330 ) —
—
Other —
—
31
Loss before income taxes and equity in earnings (losses) of unconsolidated investees $ (898,671 ) $ (1,200,750 ) $ (528,392 )

¹For the year ended December 30, 2018 and December 31, 2017, we recorded in aggregate a loss on sale and impairment of residential lease assets of $252.0 million and $624.3 million, respectively. As a result of the partnership flip structures with noncontrolling interests where these assets are held in, we allocated an insignificant portion of the impairment charge to the noncontrolling interest using the HLBV method. The net impairment charges attributable to us totaled $227.5 million and $473.7 million for the year ended December 30, 2018 and December 31, 2017, respectively. During fiscal 2018, we also recorded $14.8 million of depreciation savings as a result of the impairment charge recognized in the prior period.

Fiscal Year
(As a percentage of total revenue): 2018 2017 2016
Significant Customers: Business Segment
Actis GP LLP Power Plant * 13 % n/a
8point3 Energy Partners Power Plant * *
10 %
Southern Renewable Partnerships, LLC Power Plant n/a *
15 %

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Reconciliation of Segments EBITDA to Loss before income taxes and equity in earnings (losses) of unconsolidated investees	Fiscal Year Ended
(In thousands):	December 29, 2019		December 30, 2018		December 31, 2017
Segment adjusted EBITDA	$	146,015	$	179,075	$	255,559
Adjustments to segment adjusted EBITDA:
8point3	—		8,485		(78,990)
Legacy utility and power plant projects	(993)		1,244		(41,746)
Business process improvements	(3,370)		—		—
Legacy sale-leaseback transactions	(5,680)		(18,802)		(39,318)
Mark-to-market gain (loss) on equity investment with readily available fair value	156,345		(6,375)		—
Impairment of property, plant and equipment, and equity method investment	(4,053)		(369,168)		—
Construction revenue on solar services contracts	7,012		—		—
Loss on sale and impairment of residential lease assets	(25,636)		(227,507)		(473,709)
Cost of above-market polysilicon	(126,805)		(87,228)		(166,906)
Litigation	2,509		—		—
Stock-based compensation expense	(26,934)		(28,215)		(34,674)
Amortization of intangible assets	(7,135)		(8,966)		(19,048)
Depreciation of idle equipment	—		(721)		(2,300)
Gain on business divestiture	143,400		59,347		—
Transaction-related costs	(5,293)		(17,727)		82
Business reorganization costs	(23,567)		(1,330)
Restructuring charges	(14,110)		(17,497)		(21,045)
Non-cash interest expense	(33)		(68)		(128)
Equity in losses of unconsolidated investees	7,058		17,815		(25,938)
Net loss attributable to noncontrolling interests	(29,880)		(106,406)		(241,747)
Cash interest expense, net of interest income	(40,207)		(86,394)		(79,965)
Depreciation and amortization	(74,445)		(120,367)		(164,970)
Corporate	(48,230)		(67,866)		(65,907)
Income (loss) before income taxes and equity in loss of unconsolidated investees	$	25,968	$	(898,671)	$	(1,200,750)


		Fiscal Year Ended
(As a percentage of total revenue):	Business Segment	December 29, 2019		December 30, 2018		December 31, 2017
Significant Customers:
Actis GP LLP	SunPower Technologies	—	%	—	%	13	%


	Fiscal Year Ended
(As a percentage of total revenue):	December 29, 2019		December 30, 2018		December 31, 2017
Revenue by geography:
United States	57	%	68	%	79	%
Japan	5	%	5	%	6	%
Rest of World	38	%	27	%	15	%
	100	%	100	%	100	%

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Fiscal Year
(As a percentage of total revenue): 2018 2017 2016
Revenue by geography:
United States 68 % 79 % 85 %
Japan 5 % 6 % 6 %
Rest of World 27 %
15 % 9 %
100 % 100 % 100 %


	Fiscal Year Ended
(In thousands):	December 29, 2019		December 30, 2018		December 31, 2017
SunPower Energy Services	$	36,184	$	512,953	$	445,241
SunPower Technologies	285,424		323,941		698,553
Corporate	2,118		2,977		4,051
Property, plant and equipment, net	$	323,726	$	839,871	$	1,147,845

Fiscal Year
(In thousands): 2018 2017
SunPower Energy Services $ 512,953
$ 445,241
SunPower Technologies 323,941
698,553
Corporate 2,977
4,051
Property, plant and equipment, net $ 839,871
$ 1,147,845

~~Note 19.~~ NOTE 18. SUBSEQUENT ~~EVENT~~EVENTS

In January 2020, we purchased $33.9 million of aggregated principal amount of our debentures due 2021 in open market transactions for approximately $32.7 million, net. The purchases and early retirements resulted in a gain from extinguishment of debt of approximately $1.1 million, which represented the difference between the book value of the convertible notes, net of the remaining unamortized discount prior to repurchase and the reacquisition price of the convertible notes upon repurchase.

On January 13, 2020, certain subsidiaries of SunStrong entered into a loan agreement with Wells Fargo National Association, as administrative agent, Credit Suisse Securities (USA) LLC, as arranger, and the lenders party thereto, to borrow a senior loan of $216.2 million, a portion of the proceeds of which were used to pay off the warehouse loans previously borrowed from Credit Agricole. Concurrently, certain other subsidiaries of SunStrong entered into a subordinated mezzanine loan agreement with Hannon Armstrong to borrow $72.8 million, the proceeds of which refinanced two mezzanine loans previously borrowed from Hannon Armstrong. The Company received a special distribution of $7.0 million from SunStrong, of which $4.0 million was applied against prior receivables from the loans that were refinanced, and the remaining amount of $3.0 million was recorded as a gain on the above refinancing transactions.

From the January 15, 2020 through February 3, 2020, Total Gaz Electricité Holdings France SAS (“Total Gaz”), an affiliate of Total S.A, purchased 2,952,091 shares of our common stock, in a series of open market transactions.

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SELECTED UNAUDITED QUARTERLY FINANCIAL DATA

Consolidated Statements of Operations:


	Three Months Ended¹
(In thousands, except per share data)	December 29, 2019		September 29, 2019		June 30, 2019		March 31, 2019		December 30, 2018		September 30, 2018		July 1, 2018		April 1, 2018

Revenue	$	603,761	$	475,958	$	436,281	$	348,225	$	456,837	$	428,263	$	449,097	$	391,888
Gross margin	$	95,139	$	48,251	$	19,800	$	(37,285)	$	(7,571)	$	9,877	$	(309,961)	$	10,574
Net income (loss)	$	5,977	$	(19,208)	$	110,074	$	(104,565)	$	(172,146)	$	(113,911)	$	(483,843)	$	(147,597)
Net income (loss) attributable to stockholders	$	5,440	$	(15,017)	$	121,459	$	(89,724)	$	(158,174)	$	(89,826)	$	(447,117)	$	(115,974)
Basic net loss per share attributable to stockholders	$	0.04	$	(0.11)	$	0.85	$	(0.63)	$	(1.12)	$	(0.64)	$	(3.17)	$	(0.83)
Diluted net loss per share attributable to stockholders	$	0.03	$	(0.11)	$	0.75	$	(0.63)	$	(1.12)	$	(0.64)	$	(3.17)	$	(0.83)

160

Three Months Ended¹
(In thousands, except per share data) December 30, 2018 September 30, 2018 July 1, 2018 April 1, 2018 December 31, 2017 October 1, 2017 July 2, 2017 April 2, 2017
Revenue $ 456,837
$ 428,263
$ 449,097
$ 391,888
$ 651,134
$ 485,836
$ 327,981
$ 329,095
Gross margin $ (7,571 ) $ 9,755
$ (310,215 ) $ 10,248
$ (13,593 ) $ 21,289
$ 16,167
$ (45,584 )
Net income (loss) $ (172,146 ) $ (113,911 ) $ (483,843 ) $ (147,597 ) $ (753,566 ) $ (70,838 ) $ (109,577 ) $ (236,886 )
Net income (loss) attributable to stockholders $ (158,174 ) $ (89,826 ) $ (447,117 ) $ (115,974 ) $ (572,651 ) $ (46,229 ) $ (90,515 ) $ (219,725 )
Basic and diluted net loss per share attributable to stockholders $ (1.12 ) $ (0.64 ) $ (3.17 ) $ (0.83 ) $ (4.10 ) $ (0.33 ) $ (0.65 ) $ (1.58 )

¹¹~~Previously reported information for fiscal year 2017 has been restated for the adoption of Accounting Standards Codification (ASC) Topic 606,~~ ~~Revenue from Contracts with Customers. For further discussion of this standard, see Note 1 to the Consolidated Financial Statements.~~

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ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A:CONTROLSAND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures," as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure control and procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December ~~30, 2018~~29, 2019 at a reasonable assurance level.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) ("COSO"). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December ~~30, 2018~~29, 2019 based on the criteria described in Internal Control-Integrated Framework issued by COSO. Management reviewed the results of its assessment with our Audit Committee.

The effectiveness of the Company's internal control over financial reporting as of December ~~30, 2018~~29, 2019 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B: OTHER INFORMATION

None.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE