Cost Method Investment and Collaborative Arrangement

12 Months Ended

Dec. 30, 2017

Investments, All Other Investments [Abstract]

Cost Method Investment

Cost Method Investment and Collaborative Arrangement

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

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

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

We assessed this investment for impairment as of December 30, 2017 by applying a fair value analysis using a revenue multiple approach. This yielded a fair value for our ownership stake of $2.3 million, which was less than its carrying value at the date of assessment. We determined that this impairment was other-than-temporary and adjusted the carrying value to the fair value.

The total impairment adjustments against this investment that we have recognized through Other (expense) income, net in the Consolidated Statements of Operations are presented in the following table:

	Year Ended
(In thousands)	December 30, 2017			December 31, 2016			January 2, 2016
Impairment of cost-basis investment	$	(1,761	)	$	(1,459	)	$	(492	)

Through December 30, 2017, we have reduced the value of our investment by approximately $3.7 million. The net balance of our investment included in Other long-term assets in the Consolidated Balance Sheets is detailed in the following table:

(In thousands)	Total
Balance at January 2, 2016	$	4,508
Investment made during fiscal year	1,000
Impairment of cost-basis investment	(1,459		)
Balance at December 31, 2016	4,049
Impairment of cost-basis investment	(1,761		)
Balance at December 30, 2017	$	2,288

At December 30, 2017, our maximum exposure to loss as a result of involvement with this VIE totals $2.9 million, which is comprised of the $2.3 million fair value of our investment plus $0.6 million of prepaid royalties further described in the section below on the related collaborative arrangement.

Collaborative Arrangement

Concurrent with the initiation of the investment discussed above, we entered into a collaborative arrangement with the investee. Under this arrangement, the parties undertook the development of certain fast, multi-touch sensing devices for touch screen controller applications. The new development and licensing agreements we entered into in 2017 specified the transfer of certain Intellectual Property ("IP") from the investee to us, payment of royalties from us to the investee and from investee to us for future sales of co-developed products, as well as an agreement to perform certain services for each other at no charge. We will also make periodic payments to the investee. These will be automatically credited against any future revenue share amount owed to investee and will be accounted for as prepaid royalties under ASC 340-10-05-05. The schedule of periodic payments for prepaid royalties is as follows:

		Amount of each
Fiscal Year	Frequency	payment (In thousands)
2017	In the fourth calendar quarter	$	625
2018	At the end of each calendar quarter	$	875
2019	At the end of each calendar quarter	$	1,250

At December 30, 2017, royalties prepaid to the investee total $0.6 million and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheets. There is no liability related to these payments as they are contractually associated with specific future periods.

Collaborative Arrangement

Cost Method Investment and Collaborative Arrangement

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

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

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

We assessed this investment for impairment as of December 30, 2017 by applying a fair value analysis using a revenue multiple approach. This yielded a fair value for our ownership stake of $2.3 million, which was less than its carrying value at the date of assessment. We determined that this impairment was other-than-temporary and adjusted the carrying value to the fair value.

The total impairment adjustments against this investment that we have recognized through Other (expense) income, net in the Consolidated Statements of Operations are presented in the following table:

	Year Ended
(In thousands)	December 30, 2017			December 31, 2016			January 2, 2016
Impairment of cost-basis investment	$	(1,761	)	$	(1,459	)	$	(492	)

Through December 30, 2017, we have reduced the value of our investment by approximately $3.7 million. The net balance of our investment included in Other long-term assets in the Consolidated Balance Sheets is detailed in the following table:

(In thousands)	Total
Balance at January 2, 2016	$	4,508
Investment made during fiscal year	1,000
Impairment of cost-basis investment	(1,459		)
Balance at December 31, 2016	4,049
Impairment of cost-basis investment	(1,761		)
Balance at December 30, 2017	$	2,288

At December 30, 2017, our maximum exposure to loss as a result of involvement with this VIE totals $2.9 million, which is comprised of the $2.3 million fair value of our investment plus $0.6 million of prepaid royalties further described in the section below on the related collaborative arrangement.

Collaborative Arrangement

Concurrent with the initiation of the investment discussed above, we entered into a collaborative arrangement with the investee. Under this arrangement, the parties undertook the development of certain fast, multi-touch sensing devices for touch screen controller applications. The new development and licensing agreements we entered into in 2017 specified the transfer of certain Intellectual Property ("IP") from the investee to us, payment of royalties from us to the investee and from investee to us for future sales of co-developed products, as well as an agreement to perform certain services for each other at no charge. We will also make periodic payments to the investee. These will be automatically credited against any future revenue share amount owed to investee and will be accounted for as prepaid royalties under ASC 340-10-05-05. The schedule of periodic payments for prepaid royalties is as follows:

		Amount of each
Fiscal Year	Frequency	payment (In thousands)
2017	In the fourth calendar quarter	$	625
2018	At the end of each calendar quarter	$	875
2019	At the end of each calendar quarter	$	1,250

At December 30, 2017, royalties prepaid to the investee total $0.6 million and are included in Prepaid expenses and other current assets in our Consolidated Balance Sheets. There is no liability related to these payments as they are contractually associated with specific future periods.