What changed in this filing

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Item 1. Financial Statements

2020-10-29 compared with 2020-04-30 · 255 added, 339 removed, 575 unchanged (51% of the section changed)

Financial Statements (Unaudited)

Consolidated Balance Sheets as of March 29, 2020 and June 30, 2019

Consolidated Statements of Operations for the three and nine months ended March 29, 2020 and March 31, 2019

Consolidated Statements of Comprehensive Loss for the three and nine months ended March 29, 2020 and March 31, 2019

Consolidated Statement s of Shareholders' Equity for the nine months ended March 29, 2020 and March 31, 2019

Consolidated Statements of Cash Flows for the nine months ended March 29, 2020 and March 31, 2019

Consolidated Balance Sheets as of September 27, 2020 and June 28, 2020

Consolidated Statements of Operations for the three months ended September 27, 2020 and September 29, 2019

Consolidated Statements of Comprehensive Loss for the three months ended September 27, 2020 and September 29, 2019

Consolidated Statements of Shareholders' Equity for the three months ended September 27, 2020 and September 29, 2019

Consolidated Statements of Cash Flows for the three months ended September 27, 2020 and September 29, 2019

Notes to Unaudited Consolidated Financial Statements

1 unchanged sentence

in millions of U.S.

Dollars, except share data) March 29, 2020 June 30, 2019

Dollars, except share data in thousands September 27, 2020 June 28, 2020

Current assets:

33 unchanged sentences

Preferred stock, par value $ 0.01 ;

3,000 shares authorized at March 29, 2020 and June 30, 2019;

3,000 shares authorized at September 27, 2020 and June 28, 2020;

none issued and outstanding

Common stock, par value $ 0.00125 ;

200,000 shares authorized at March 29, 2020 and June 30, 2019;

108,153 and 106,570 shares issued and outstanding at March 29, 2020 and June 30, 2019, respectively

200,000 shares authorized at September 27, 2020 and June 28, 2020;

110,296 and 109,230 shares issued and outstanding at September 27, 2020 and June 28, 2020, respectively

Additional paid-in-capital 3,116.2 3,106.2

7 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Nine months ended

March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Three months ended

September 27, 2020 September 29, 2019

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 3.6 3.6

Loss on disposal or impairment of other assets 0.3 5.3 2.1 5.7

(Gain) loss on disposal or impairment of other assets ( 0.2 ) 1.0

Goodwill impairment 105.7 —

Other operating expense 13.4 7.2

Operating (loss) income ( 49.8 ) ( 11.1 ) ( 145.1 ) 9.7

Non-operating expense, net 14.5 8.4 7.8 23.7

Operating loss ( 170.0 ) ( 38.9 )

Non-operating expense (income), net 14.0 ( 1.6 )

Loss before income taxes ( 184.0 ) ( 37.3 )

Income tax (benefit) expense ( 2.9 ) 2.8 ( 1.2 ) 9.3

Net loss from continuing operations ( 61.4 ) ( 22.3 ) ( 151.7 ) ( 23.3 )

Net loss from discontinued operations — ( 205.4 ) — ( 218.0 )

Income tax expense 0.1 0.5

Net loss ( 184.1 ) ( 37.8 )

2 unchanged sentences

Basic and diluted loss per share

Continuing operations attributable to controlling interest ($ 0.57 ) ($ 0.22 ) ($ 1.41 ) ($ 0.23 )

Net loss attributable to controlling interest ($ 1.68 ) ($ 0.35 )

2 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Dollars) September 27, 2020 September 29, 2019

Net loss ($ 184.1 ) ($ 37.8 )

Other comprehensive loss:

Currency translation loss — ( 0.3 ) — ( 0.8 )

Net unrealized (loss) gain on available-for-sale securities ( 1.9 ) 2.0 ( 1.7 ) 2.8

Net unrealized gain on available-for-sale securities — 0.5

Comprehensive loss ( 184.1 ) ( 37.3 )

13 unchanged sentences

Balance at September 27, 2020 110,296 $ 0.1 $ 3,116.2 ($ 1,223.6 ) $ 16.0 $ 1,908.7 $ 6.4 $ 1,915.1

Net (loss) income — — — ( 52.8 ) — ( 52.8 ) 0.3 ( 52.5 )

Unrealized loss on available-for-sale securities — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 )

Comprehensive (loss) income ( 53.1 ) 0.3 ( 52.8 )

Tax withholding on vested equity awards — — ( 0.4 ) — — ( 0.4 ) — ( 0.4 )

Stock-based compensation — — 13.4 — — 13.4 — 13.4

Exercise of stock options and issuance of shares 334 — 10.7 — — 10.7 — 10.7

Balance at December 29, 2019 108,031 $ 0.1 $ 2,919.5 ($ 938.1 ) $ 9.7 $ 1,991.2 $ 5.3 $ 1,996.5

Net (loss) income — — — ( 61.6 ) — ( 61.6 ) 0.2 ( 61.4 )

Unrealized loss on available-for-sale securities — — — — ( 1.9 ) ( 1.9 ) — ( 1.9 )

Comprehensive (loss) income ( 63.5 ) 0.2 ( 63.3 )

Tax withholding on vested equity awards — — ( 1.5 ) — — ( 1.5 ) — ( 1.5 )

Stock-based compensation — — 11.6 — — 11.6 — 11.6

Exercise of stock options and issuance of shares 122 — 1.7 — — 1.7 — 1.7

Balance at March 29, 2020 108,153 $ 0.1 $ 2,931.3 ($ 999.7 ) $ 7.8 $ 1,939.5 $ 5.5 $ 1,945.0

The accompanying notes are an integral part of the consolidated financial statements

5 unchanged sentences

Net loss — — — ( 37.8 ) — ( 37.8 ) — ( 37.8 )

Currency translation gain — — — — 0.3 0.3 — 0.3

Unrealized loss on available-for-sale securities — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 )

Comprehensive loss ( 11.1 ) — ( 11.1 )

Tax withholding on vested equity awards — — ( 10.8 ) — — ( 10.8 ) — ( 10.8 )

Stock-based compensation — — 12.1 — — 12.1 — 12.1

Exercise of stock options and issuance of shares 1,032 — 15.5 — — 15.5 — 15.5

Convertible note issuance — — 110.6 — — 110.6 — 110.6

Adoption of ASC 606 — — — 10.3 — 10.3 — 10.3

Balance at September 23, 2018 102,520 $ 0.1 $ 2,676.5 ($ 483.5 ) $ 0.6 $ 2,193.7 $ 5.0 $ 2,198.7

Net loss — — — ( 2.5 ) — ( 2.5 ) — ( 2.5 )

Currency translation loss — — — — ( 0.9 ) ( 0.9 ) — ( 0.9 )

Unrealized gain on available-for-sale securities — — — — 0.5 0.5 — 0.5

1 unchanged sentence

Tax withholding on vested equity awards — — ( 14.3 ) — — ( 14.3 ) — ( 14.3 )

Repurchased shares — — — — — — — —

Stock-based compensation — — 17.4 — — 17.4 — 17.4

Exercise of stock options and issuance of shares 1,127 — 18.6 — — 18.6 — 18.6

Balance at December 30, 2018 103,073 $ 0.1 $ 2,703.6 ($ 486.0 ) $ 0.8 $ 2,218.5 $ 5.0 $ 2,223.5

Net (loss) income — — — ( 227.8 ) — ( 227.8 ) 0.1 ( 227.7 )

Currency translation loss — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 )

Unrealized gain on available-for-sale securities — — — — 2.0 2.0 — 2.0

Comprehensive loss ( 226.1 ) 0.1 ( 226.0 )

Tax withholding on vested equity awards — — ( 0.5 ) — — ( 0.5 ) — ( 0.5 )

Stock-based compensation — — 15.6 — — 15.6 — 15.6

Exercise of stock options and issuance of shares 1,442 — 53.3 — — 53.3 — 53.3

Balance at March 31, 2019 104,515 $ 0.1 $ 2,772.0 ($ 713.8 ) $ 2.5 $ 2,060.8 $ 5.1 $ 2,065.9

Balance at September 29, 2019 107,697 $ 0.1 $ 2,895.8 ($ 885.3 ) $ 10.0 $ 2,020.6 $ 5.0 $ 2,025.6

The accompanying notes are an integral part of the consolidated financial statements

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019

Dollars) September 27, 2020 September 29, 2019

Operating activities:

Net loss from continuing operations ($ 151.7 ) ($ 23.3 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Net loss ($ 184.1 ) ($ 37.8 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 33.9 28.6

Amortization of debt issuance costs and discount 17.2 12.7

Amortization of debt issuance costs and discount, net of capitalized interest 9.4 5.6

Stock-based compensation 15.7 16.9

Goodwill impairment 105.7 —

Loss on disposal or impairment of long-lived assets 0.2 1.0

Amortization of premium/discount on investments 1.5 —

Realized (gain) loss on sale of investments ( 1.3 ) 0.1

Loss on equity investment 9.2 12.4

Loss (gain) on equity investment 3.4 ( 3.5 )

Foreign exchange (gain) loss on equity investment ( 0.5 ) 0.1

7 unchanged sentences

Accrued contract liabilities ( 2.1 ) 7.2

Net cash (used in) provided by operating activities of continuing operations ( 39.5 ) 179.7

Net cash provided by operating activities of discontinued operations — 9.3

Cash (used in) provided by operating activities ( 39.5 ) 189.0

Cash provided by (used in) operating activities 0.4 ( 20.0 )

Investing activities:

5 unchanged sentences

Proceeds from sale of short-term investments 7.2 31.8

Net cash used in investing activities of continuing operations ( 152.2 ) ( 177.1 )

Net cash used in investing activities of discontinued operations — ( 15.4 )

Cash used in investing activities ( 16.0 ) ( 52.3 )

Financing activities:

Proceeds from long-term debt borrowings — 95.0

Payments on long-term debt borrowings, including finance lease obligations ( 0.1 ) —

Proceeds from convertible notes — 575.0

Payments of debt issuance costs — ( 12.9 )

Proceeds from issuance of common stock 16.5 18.6

Tax withholding on vested equity awards ( 12.8 ) ( 13.2 )

Net cash provided by financing activities of continuing operations 14.4 341.0

Net cash provided by financing activities of discontinued operations — —

Commitment fee on long-term incentive agreement ( 0.5 ) —

Cash provided by financing activities 3.1 5.4

19 unchanged sentences

Note 1 – Basis of Presentation and New Accounting Standards

(the Company) is an innovator of wide bandgap semiconductors, focused on silicon carbide and gallium nitride materials, products for power and radio-frequency (RF) applications and specialty lighting-class light emitting diode (LED) products.

The Company's silicon carbide and gallium nitride (GaN) materials and products are targeted for applications such as transportation, power supplies, inverters, wireless systems, and the Company's LEDs are targeted for indoor and outdoor lighting, electronic signs and signals and video displays.

(the Company) is an innovator of wide bandgap semiconductors, focused on silicon carbide and gallium nitride materials, devices for power and radio-frequency (RF) applications and specialty lighting-class light emitting diode (LED) products.

The Company's silicon carbide and gallium nitride (GaN) materials and devices are targeted for applications such as transportation, power supplies, inverters and wireless systems.

The Company's LEDs are targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays.

The Company operates in two reportable segments:

4 unchanged sentences

The Company's LED products enable its customers to develop and market LED-based products for lighting, video screens, automotive and specialty lighting applications.

Previously, the Company designed, manufactured and sold LED lighting fixtures and lamps for the commercial, industrial and consumer markets.

The Company referred to these product lines as the Lighting Products business unit.

As discussed in Note 2, “Discontinued Operations,” on May 13, 2019, the Company sold its Lighting Products business unit to IDEAL Industries, Inc.

Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations.

The majority of the Company's products are manufactured at its production facilities located in North Carolina, California, Arkansas and China.

The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging.

The Company operates research and development facilities in North Carolina, Arizona, Arkansas, California and China (including Hong Kong).

Additionally, the Company is in the process of building a silicon carbide fabrication facility in New York.

The Company operates research and development facilities in North Carolina, Arizona, Arkansas, New York, California and China (including Hong Kong).

is a North Carolina corporation established in 1987, and its headquarters are in Durham, North Carolina.

As discussed more fully below in Note 16, “Subsequent Events,” on October 18, 2020, the Company entered into a definitive agreement to sell certain assets and subsidiaries comprising its LED Products segment (the LED Business) to SMART Global Holdings, Inc.

(SGH) and its wholly owned subsidiary Chili Acquisition, Inc.

(collectively with SGH, SMART) for up to $ 300 million, including fixed upfront and deferred payments and contingent consideration (the LED Business Divestiture).

Following the completion of the LED Business Divestiture, the Company will operate solely in the Wolfspeed segment.

Basis of Presentation

The consolidated financial statements presented herein have been prepared by the Company and have not been audited.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at March 29, 2020, and for all periods presented, have been made.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at September 27, 2020, and for all periods presented, have been made.

All material intercompany accounts and transactions have been eliminated.

5 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2020 (fiscal 2020).

The results of operations for the three and nine months ended March 29, 2020 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 28, 2020 (fiscal 2020).

The results of operations for the three months ended September 27, 2020 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 27, 2021 (fiscal 2021).

Additionally, the impact of the COVID-19 pandemic to the results of operations is uncertain.

Historical periods presented include reclassifications to reflect discontinued operations (see Note 2, "Discontinued Operations").

The preparation of consolidated financial statements in conformity with U.S.

1 unchanged sentence

Actual amounts could differ materially from those estimates.

Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 outbreak as of March 29, 2020 and through the date of this Quarterly Report using reasonably available information as of those dates.

Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 outbreak as of September 27, 2020 and through the date of this Quarterly Report using reasonably available information as of those dates.

The accounting matters assessed included, but were not limited to, allowance for doubtful accounts, the carrying value of goodwill and other long-lived tangible and intangible assets, the potential impact to earnings of unrealized losses on investments, valuation allowances for tax assets and the ability to estimate an annual effective tax rate.

While the assessments resulted in no material impacts to the consolidated financial statements as of and for the quarter

ended March 29, 2020, the Company believes the full impact of the outbreak remains uncertain and will continue to assess if ongoing developments related to the outbreak may cause future material impacts to our consolidated financial statements.

The Company revised net cash provided by operating activities and net cash provided by financing activities for the nine months ended March 31, 2019 to correct the presentation of tax withholding for stock option exercises.

The Company increased net cash provided by operating activities by $ 12.4 million and decreased net cash provided by financing activities by the same amount.

The Company concluded this error was not material individually or in the aggregate to any of the periods impacted.

Certain prior period amounts related to the Lighting Products business unit in the accompanying statements of cash flows have been reclassified to conform to the current year presentation.

These reclassifications pertain to the presentation of discontinued operations within operating, investing and financing activities.

This reclassification did not impact cash provided by (used in) operating, investing, or financing activities.

ended September 27, 2020, the Company believes the full impact of the outbreak remains uncertain and will continue to assess if ongoing developments related to the outbreak may cause future material impacts to our consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

Leases (Topic 842) (ASC 842), and ASU 2018-10:

Codification Improvements to ASC 842, Leases.

These ASUs require that a lessee recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term and requires enhanced disclosures about an entity’s leasing arrangements.

The Company adopted this standard on July 1, 2019, under the modified retrospective transition approach with the cumulative effect of application recognized at the effective date, without adjustment to prior comparative periods.

The Company elected to utilize the transition package of practical expedients that allows the Company to not reassess (1) whether any expired or existing contracts are leases, or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases.

Further, the Company elected the practical expedient to not separate lease and non-lease components for all leases and account for the combined lease and non-lease components as a single lease component.

The Company also made an accounting policy election to exclude leases with an initial term of 12 months or less from the consolidated balance sheets.

The adoption of the new standard resulted in the recognition of $ 12.2 million of lease liabilities with corresponding right-of-use assets of $ 12.3 million as of July 1, 2019.

As required, the right-of-use assets include the effect of reclassifying certain balances including deferred and prepaid rent, a portion of facilities-related restructuring accrual reserves, and a favorable lease intangible asset previously recognized in connection with an acquisition.

The Company did not have a cumulative-effect adjustment to retained earnings as a result of the adoption of the new standard.

The standard did not materially impact the Company's results from operations and had no impact on cash flows.

See Note 4, "Leases," for additional disclosures, as required by the new standard.

The reported results as of and for the three and nine months ended March 29, 2020 reflect the application of the new accounting guidance, while the reported results for prior periods have not been adjusted and continue to be reported in accordance with the Company's historical accounting under ASC 840, Leases.

Accounting Pronouncements Pending Adoption

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This ASU introduces a new accounting model known as Current Expected Credit Losses (“CECL”).

CECL requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for receivables at the time the financial asset is originated or acquired.

The expected credit losses are adjusted each period for changes in expected lifetime credit losses.

This model replaces the multiple existing impairment models in current GAAP, which generally require that a loss be incurred before it is recognized.

The new standard will also apply to receivables arising from revenue transactions such as contract assets and accounts receivables.

There are other provisions within the standard affecting how impairments of other financial assets may be recorded and presented, as well as expanded disclosures.

The Company will adopt this standard on June 29, 2020 and is currently evaluating the impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The ASU also improves consistent application and simplifies other areas of Topic 740 by clarifying and amending existing guidance.

Early adoption is permitted, provided that the Company reflects any adjustments as of the beginning of the annual period that includes the interim period for which such early adoption occurs.

Additionally, the Company must adopt all the amendments in the same period if early adoption is elected.

The Company will adopt this standard on or before June 28, 2021 and does not expect this standard to have a material impact on its consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-13 , Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13).

This standard replaces the incurred loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses.

The Company adopted this standard using the modified retrospective transition method on June 29, 2020, the first day of the Company's 2021 fiscal year.

Upon adoption, prior period balances were not adjusted and the Company determined no cumulative-effect adjustment to retained earnings as of June 29, 2020 was required.

Under this new standard, expected credit losses for the Company's receivables are evaluated on a collective (pool) basis and aggregated on the basis of similar risk characteristics.

These aggregated risk pools are reassessed at each measurement date.

A combination of factors is considered in determining the appropriate estimate of expected credit losses, including broad-based economic indicators as well as customers' financial strength, credit standing, payment history and any historical defaults.

Available-for-sale debt securities in an unrealized loss position at each measurement date are individually evaluated for expected credit losses.

The Company evaluates whether the unrealized loss is due to market factors or changes in the investment holdings' credit rating.

An expected credit loss will be recorded when an investment in an unrealized loss position is determined to have lost value from a decreased credit rating and the Company does not expect to recover the fair value of the security.

Accounting Pronouncements Pending Adoption

Convertible Debt Instruments

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).

This standard simplifies the accounting for convertible instruments by eliminating the cash conversion and the beneficial conversion accounting models.

This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity.

The update requires an entity to use the if-converted method for all convertible instruments in the diluted earnings per share calculation.

An entity may use either a modified or full retrospective approach for adoption.

The Company expects to adopt this standard by June 27, 2022 and is currently evaluating the impact on its consolidated financial statements.

Note 2 – Discontinued Operations

On May 13, 2019, the Company completed the sale of (a) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts, and real estate of the Company used by the Company's Lighting Products business unit, which includes LED lighting fixtures, lamps and corporate lighting solutions for commercial, industrial and consumer applications, and (b) all of the issued and outstanding equity interests of E-conolight LLC (E-conolight), Cree Canada Corp.

and Cree Europe S.r.l., each a wholly owned subsidiary of the Company (collectively, the Lighting Products business unit) to IDEAL, pursuant to the Purchase Agreement, dated March 14, 2019, as amended, between the Company and IDEAL (the Purchase Agreement).

The Company retained certain liabilities associated with the Lighting Products business unit arising prior to the closing of the sale.

The Lighting Products business unit represented the Lighting Products segment disclosed in the Company's historical financial statements.

The aggregate net proceeds from the sale of the Lighting Products business unit was $ 219.0 million in cash, which is subject to certain adjustments.

Additionally, the Company is entitled to an earnout payment subject to the future performance of the Lighting Products business unit.

In connection with the transaction, the Company and IDEAL entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to IDEAL certain intellectual property owned by the Company and licensed to IDEAL certain additional intellectual property owned by the Company;

(ii) a Transition Services Agreement (the TSA), which is designed to ensure a smooth transition of the Lighting Products business unit to IDEAL;

(iii) an LED Supply Agreement (the LED Supply Agreement), pursuant to which the Company will supply IDEAL with certain LED chip and component products for three years;

and (iv) a Real Estate License Agreement, which will allow IDEAL to use certain premises owned by the Company to conduct certain operations of the Lighting Products business unit after closing.

The Company recognized a loss on the sale of $ 66.2 million.

The Company has classified the results of the Lighting Products business unit as discontinued operations, the results of which for the three and nine months ended March 31, 2019 are as follows:

Three months ended Nine months ended

(in millions of U.S.

Dollars) March 31, 2019 March 31, 2019

Revenue, net $ 109.4 $ 376.0

Cost of revenue, net 82.5 287.5

Gross profit 26.9 88.5

Operating expenses:

Research and development 8.8 27.4

Sales, general and administrative 21.2 68.2

Amortization or impairment of acquisition-related intangibles 2.0 9.1

Goodwill impairment charges 197.6 197.6

Loss on disposal or impairment of long-lived assets 1.8 2.1

Other operating expense 0.5 1.9

Operating loss ( 205.0 ) ( 217.8 )

Non-operating income ( 0.2 ) ( 0.5 )

Loss before income taxes ( 204.8 ) ( 217.3 )

Income tax expense 0.6 0.7

Net loss ($ 205.4 ) ($ 218.0 )

The Company did not have any discontinued operations activity for the three and nine months ended March 29, 2020.

The Company recognized $ 2.5 million and $ 8.1 million in administrative fees for the three and nine months ended March 29, 2020 relating to the TSA, of which $ 1.7 million are included in accounts receivable, net in the consolidated balance sheets as of

March 29, 2020.

These fees were recorded as a reduction of sales, general and administrative expense in the consolidated statements of operations.

The Company recognized $ 3.2 million and $ 9.7 million in revenue for the three and nine months ended March 29, 2020 related to the LED Supply Agreement, of which $ 0.8 million was included in accounts receivable, net in the consolidated balance sheets as of March 29, 2020.

Additionally, the Company recorded a contract liability of $ 10.5 million relating to the LED Supply Agreement as of March 29, 2020.

The contract liability is recognized in contract liabilities and other long-term liabilities on the consolidated balance sheets.

The Company did not have any discontinued operations activity for the three months ended September 27, 2020 and September 29, 2019.

Note 3 – Revenue Recognition

In accordance with ASC 606, the Company follows a five-step approach defined by the new standard for recognizing revenue, consisting of the following:

In accordance with FASB Accounting Standards Codification 606 "Revenue from Contracts with Customers" (ASC 606), the Company follows a five-step approach defined by the new standard for recognizing revenue, consisting of the following:

(1) identify the contract with a customer;

4 unchanged sentences

Contract liabilities primarily include various rights of return and customer deposits, as well as deferred revenue, price protection guarantees and the Company's liability under the LED Supply Agreement.

Contract liabilities were $ 86.1 million as of March 29, 2020 and $ 80.4 million as of June 30, 2019.

The increase was primarily due to increased net customer deposits.

Contract liabilities were $ 78.3 million as of September 27, 2020 and $ 80.3 million as of June 28, 2020.

The decrease was primarily due to lower reserve liabilities and continued fulfillment on the LED Supply Agreement.

Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the balance sheet.

1 unchanged sentence

Disaggregated revenue by geography is presented in Note 14, "Reportable Segments".

For the three and nine months ended March 29, 2020, the Company recognized revenue of $ 1.1 million and $ 3.3 million that was included in contract liabilities as of June 30, 2019.

For the three months ended September 27, 2020, the Company recognized revenue of $ 1.0 million that was included in contract liabilities as of June 28, 2020.

The amount recognized primarily related to the recognition of contingent liabilities related to the LED Supply Agreement and deferred revenue.

Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was not material for the three and nine months ended March 29, 2020.

Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was not material for the three months ended September 27, 2020.

Note 4 – Leases

2 unchanged sentences

Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations primarily relate to Wolfspeed manufacturing space in Malaysia.

Accounting Policy

At lease inception, the Company determines an arrangement is a lease if the contract involves the use of a distinct identified asset, the lessor does not have substantive substitution rights and the Company obtains control of the asset throughout the period by obtaining substantially all of the economic benefit of the asset and the right to direct the use of the asset.

Right-of-use assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease.

Assets and liabilities are recognized based on the present value of lease payments over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more.

The exercise of the renewal option is at the Company's sole discretion and the Company considers these options in determining the lease term used to establish its right-of-use assets and lease liabilities.

The Company will remeasure its lease liability and adjust the related right-of-use asset upon the occurrence of the following:

lease modifications not accounted for as a separate contract;

a triggering event that changes the certainty of the lessee exercising an option to renew or terminate the lease, or purchase the underlying asset;

a change to the amount probable of being owed by the Company under a residual value guarantee;

or the resolution of a contingency upon which the variable lease payments are based such that those payments become fixed.

Because most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

The Company would use the implicit rate when readily determinable.

Operating lease expense is generally recognized on a straight-line basis over the lease term.

Finance lease assets are amortized on a straight-line basis over the shorter of the useful life of the asset or the lease term.

Interest expense on the finance lease liability is recognized using the effective interest rate method and is presented within interest expense on the Company’s consolidated statements of operations.

The Company has agreements with lease and non-lease components, which are accounted for as a single lease component.

Leases with a lease term of 12 months or less are not recorded on the balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates, are not included in the right-of-use assets or liabilities.

These variable lease payments are expensed as incurred.

The Company's finance lease obligations primarily relate to Wolfspeed manufacturing space in Malaysia and a 49 -year ground lease on a future silicon carbide fabrication facility in New York.

Balance Sheet

Lease assets and liabilities as of March 29, 2020, and the corresponding balance sheet classifications, are as follows (in millions of U.S.

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S.

Operating Leases:

September 27, 2020 June 28, 2020

Right-of-use asset (1)

$ 14.4 $ 14.0

Current lease liability (2)

11 unchanged sentences

Statement of Operations

Operating lease expense was $ 1.5 million and $ 4.5 million for three and nine months ended March 29, 2020.

Short-term lease expense, variable lease expense and lease income were immaterial for the three and nine months ended March 29, 2020.

Finance lease amortization was $ 0.2 million and interest expense was less than $ 0.1 million for the three and nine months ended March 29, 2020.

Operating lease expense was $ 1.6 million and $ 1.4 million for the three months ended September 27, 2020 and September 29, 2019, respectively.

Short-term lease expense, variable lease expense and lease income were immaterial for the three months ended September 27, 2020 and September 29, 2019.

Finance lease amortization was $ 0.2 million and interest expense was $ 0.1 million for the three months ended September 27, 2020.

Finance lease amortization and interest expense were not recorded for the three months ended September 29, 2019.

Cash flow information consisted of the following:

Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020

Dollars) September 27, 2020 September 29, 2019

Cash used in operating activities:

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Finance lease additions — —

(1) Less than $0.1 million for the nine months ended March 29, 2020.

Non-cash investing activities (1) :

Transfer of finance lease liability to accounts payable and accrued expenses 4.2 —

(1) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of March 29, 2020 were as follows (in millions of U.S.

Maturities of operating and finance lease liabilities as of September 27, 2020 were as follows (in millions of U.S.

Fiscal Year Ending Operating Leases Finance Leases Total

12 unchanged sentences

Weighted average discount rate (2)

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2019 and under the previous lease accounting standard ASC 840, the aggregate future non-cancelable minimum rental payments on its operating leases as of June 30, 2019, were as follows:

Fiscal Years Ending (in millions of U.S.

June 28, 2020 $ 4.1

June 27, 2021 2.3

June 26, 2022 1.2

June 25, 2023 0.7

June 30, 2024 —

Total future minimum rental payments $ 8.3

3.32 % 2.77 %

(1) Weighted average remaining lease term of finance leases without the 49 -year ground lease is 77 months.

(2) Weighted average discount rate of finance leases without the 49 -year ground lease is 3.40 %.

Note 5 – Financial Statement Details

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(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Billed trade receivables $ 106.7 $ 111.3

3 unchanged sentences

Accounts receivable, net $ 108.5 $ 114.0

Changes in the Company’s allowance for bad debts were as follows:

(in millions of U.S.

Dollars) September 27, 2020

Balance at beginning of period $ 1.3

Current period provision change —

Write-offs, net of recoveries ( 0.1 )

Balance at end of period $ 1.2

Inventories consisted of the following:

(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Raw material $ 47.5 $ 47.0

5 unchanged sentences

(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Accounts payable, trade $ 123.7 $ 106.9

5 unchanged sentences

Other operating expense consisted of the following:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Dollars) September 27, 2020 September 29, 2019

Factory optimization restructuring $ 1.6 $ 1.2

8 unchanged sentences

(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Currency translation gain $ 9.5 $ 9.5

Net unrealized loss on available-for-sale securities ( 1.7 ) —

Net unrealized gain on available-for-sale securities (1)

Accumulated other comprehensive income, net of taxes $ 16.0 $ 16.0

(1) Amounts as of September 27, 2020 and June 28, 2020 include a $ 2.4 million loss related to tax on unrealized gain (loss) on available-for-sale securities.

Reclassifications Out of Accumulated Other Comprehensive Income

The Company reclassified a net gain of $ 1.2 million and $ 1.3 million out of accumulated other comprehensive income for the three and nine months ended March 29, 2020 and reclassified a net loss of $ 0.0 million and $ 0.1 million out of accumulated other comprehensive income for the three and nine months ended March 31, 2019.

Less than $ 0.1 million was reclassified for each of the three month periods ended September 27, 2020 and September 29, 2019.

Amounts were reclassified to non-operating expense, net on the consolidated statements of operations.

1 unchanged sentence

The following table summarizes the components of non-operating expense, net:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Foreign currency loss (gain), net $ 0.3 $ 0.5 ($ 0.8 ) $ 1.1

(Gain) loss on sale of investments, net ( 1.2 ) — ( 1.3 ) 0.1

Gain on arbitration proceeding ( 8.0 ) — ( 8.0 ) —

Loss on equity investment, net 19.1 3.8 9.2 12.4

Interest expense 7.5 7.4 22.6 18.8

Dollars) September 27, 2020 September 29, 2019

Foreign currency loss, net $ — $ 0.1

Loss (gain) on equity investment, net 3.4 ( 3.5 )

Interest income ( 2.7 ) ( 5.5 )

Interest expense, net of capitalized interest 13.1 7.4

Other, net 0.2 ( 0.1 )

Non-operating expense, net $ 14.0 ($ 1.6 )

The change in loss on equity investment, net is due to the increase in the Lextar Electronics Corporation (Lextar) stock price.

The gain on arbitration proceeding is due to an award from an arbitration proceeding related to defective inventory.

The change in loss (gain) on equity investment, net is due to the decrease in the Lextar Electronics Corporation (Lextar) stock price.

Statements of Cash Flows - non-cash activities

Nine months ended

Non-cash operating activities March 29, 2020 March 31, 2019

Three months ended

Non-cash operating activities September 27, 2020 September 29, 2019

Lease asset and liability additions (1)

Lease asset and liability modifications, net 1.8 0.5

(1) $ 12.2 million relates to the increase of right-of-use assets and matching lease liabilities as a result of adopting ASC 842.

Non-cash investing and financing activities

Transfer of finance lease liability to accounts payable and accrued expenses (2)

(1) The total amount of lease asset and liability additions for the three months ended September 29, 2019 relates to the increase of right-of-use assets and matching lease liabilities as a result of adopting ASC 842.

See Note 4, "Leases", for further information.

Accrued property and equipment as of March 29, 2020 and March 31, 2019 was $ 6.8 million and $ 15.2 million, respectively.

(2) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.

Accrued property and equipment as of September 27, 2020 and September 29, 2019 was $ 108.2 million and $ 8.8 million, respectively.

Note 6 – Investments

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Other long-term investments consist of the Company's ownership interest in Lextar.

Short-term investments as of March 29, 2020 and June 30, 2019 consisted of the following:

March 29, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Short-term investments as of September 27, 2020 and June 28, 2020 consisted of the following:

September 27, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Credit Loss Allowance (1)

Estimated Fair Value

Municipal bonds $ 119.6 $ 2.3 $ — $ — $ 121.9

3 unchanged sentences

Certificates of deposit 33.7 — — — 33.7

certificates of deposit 5.2 — — 5.2

Variable rate demand note 2.5 — — 2.5

Commercial paper 6.5 — — — 6.5

1 unchanged sentence

June 28, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (2)

Estimated Fair Value

Municipal bonds $ 130.0 $ 2.0 $ — $ 132.0

3 unchanged sentences

Certificates of deposit 95.3 — — 95.3

certificates of deposit 22.4 — — 22.4

Variable rate demand note 2.5 — — 2.5

1 unchanged sentence

Total short-term investments $ 794.0 $ 8.9 $ — $ 802.9

(1) Credit loss allowance is applicable beginning in the first quarter of fiscal 2021 due to adoption of ASU 2016-13, which replaced the Company's other than temporary impairment analysis with an expected credit losses model.

(2) The Company had an unrealized loss of less than $0.1 million as of June 28, 2020.

The Company does not include accrued interest in estimated fair values of short-term investments and does not record an allowance for credit losses on receivables related to accrued interest.

Accrued interest receivable was $ 4.1 million and $ 4.3 million as of September 27, 2020 and June 28, 2020, respectively, and is recorded in other current assets on the consolidated balance sheets.

When necessary, write offs of noncollectable interest income are recorded as a reversal to interest income.

There were no write offs of noncollectable interest income for each of the three month periods ended September 27, 2020 and September 29, 2019.

The following tables present the gross unrealized losses and estimated fair value of the Company’s short-term investments, aggregated by investment type and the length of time that individual securities have been in a continuous unrealized loss position:

March 29, 2020

September 27, 2020

Less than 12 Months Greater than 12 Months Total

3 unchanged sentences

agency securities 16.0 ( 0.1 ) — — 16.0 ( 0.1 )

treasury securities 23.8 — — — 23.8 —

Total $ 51.6 ($ 0.1 ) $ — $ — $ 51.6 ($ 0.1 )

2 unchanged sentences

Less than 12 Months Greater than 12 Months Total

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

Fair Value Unrealized Loss (1)

Fair Value Unrealized Loss Fair Value Unrealized Loss

Municipal bonds $ 14.3 $ — $ — $ — $ 14.3 $ —

4 unchanged sentences

Number of securities with an unrealized loss 46 — 46

(1) S ecurities with an unrealized loss of less than 12 months as of June 28, 2020 have an unrealized loss value of less than $0.1 million, individually and in the aggregate.

The Company utilizes specific identification in computing realized gains and losses on the sale of investments.

Realized gains of $ 1.2 million and $ 1.3 million for the three and nine month periods ended March 29, 2020 and realized losses of $ 0.0 million and $ 0.1 million for the three and nine month periods ended March 31, 2019 are included in non-operating expense in the consolidated statements of operations.

Unrealized gains and losses are included as a separate component of equity, net of tax, unless the loss is determined to be other-than-temporary.

The Company evaluates its investments for possible impairment or a decline in fair value below cost basis that is deemed to be other-than-temporary on a periodic basis.

It considers such factors as the length of time and extent to which the fair value has been below the cost basis, the financial condition of the investee, and its ability and intent to hold the investment for a period of time that may be sufficient for an anticipated full recovery in market value.

The Company's unrealized losses as of March 29, 2020 are impacted significantly from negative market conditions surrounding the COVID-19 outbreak.

Given the speed and frequency of continuously evolving developments with respect to this outbreak, the Company's believes the full extent of the outbreak is uncertain as of March 29, 2020.

Due to the short-term nature of these losses and the Company's ability to satisfy current obligations using cash already on hand, which will allow the Company to hold on to the investment for a period of time that may be sufficient for an anticipated full recovery in market value, the Company does not consider the decline in its investments to be impaired as of March 29, 2020.

The Company will continue to assess if ongoing developments related to the outbreak may cause these unrealized losses to become other-than-temporary.

The contractual maturities of short-term investments as of March 29, 2020 were as follows:

There were less than $0.1 million of realized losses on the sale of investments for each of the three month periods ended September 27, 2020 and September 29, 2019.

Realized losses are included in non-operating expense in the consolidated statements of operations.

Unrealized gains and losses are included as a separate component of equity, net of tax, unless the Company evaluates there is an expected credit loss.

The Company evaluates its investments for expected credit losses.

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of September 27, 2020 until the investments fully recover in market value.

None of the investments with an unrealized loss as of September 27, 2020 had credit downgrades in the current period.

No allowance for credit losses was recorded as of September 27, 2020.

The contractual maturities of short-term investments as of September 27, 2020 were as follows:

Within One Year After One, Within Five Years After Five, Within Ten Years After Ten Years Total

4 unchanged sentences

Certificates of deposit 33.7 — — — 33.7

certificates of deposit 5.2 — — — 5.2

Variable rate demand note — — — 2.5 2.5

Commercial paper 6.5 — — — 6.5

11 unchanged sentences

The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents, short-term investments and long-term investments.

As of March 29, 2020 and June 30, 2019, financial assets utilizing Level 1 inputs included money market funds and U.S.

As of September 27, 2020 and June 28, 2020, financial assets utilizing Level 1 inputs included money market funds and U.S.

treasury securities.

4 unchanged sentences

These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility.

The Company did not have any financial assets requiring the use of Level 3 inputs as of March 29, 2020 and June 30, 2019.

The Company did not have any financial assets requiring the use of Level 3 inputs as of September 27, 2020 and June 28, 2020.

The following table sets forth financial instruments carried at fair value within the U.S.

GAAP hierarchy:

March 29, 2020 June 30, 2019

September 27, 2020 June 28, 2020

(in millions of U.S.

2 unchanged sentences

Money market funds $ 176.6 $ — $ — $ 176.6 $ 199.9 $ — $ — $ 199.9

Corporate bonds — — — — — 15.0 — 15.0

agency securities — 13.0 — 13.0 — 19.6 — 19.6

9 unchanged sentences

Certificates of deposit — 33.7 — 33.7 — 95.3 — 95.3

certificates of deposit — 32.5 — 32.5 — 50.2 — 50.2

Commercial paper — 6.5 — 6.5 — 11.0 — 11.0

6 unchanged sentences

Note 8 – Goodwill and Intangible Assets

Goodwill by reporting unit as of March 29, 2020 was as follows:

The following table summarizes changes in goodwill during the three months ended September 27, 2020:

(in millions of U.S.

Dollars) March 29, 2020

Wolfspeed $ 349.7

LED Products 180.3

Total $ 530.0

There were no changes in goodwill during the nine months ended March 29, 2020.

Dollars) Wolfspeed LED Products Total

Balance at June 28, 2020 $ 349.7 $ 180.3 $ 530.0

Impairment — ( 105.7 ) ( 105.7 )

Balance at September 27, 2020 $ 349.7 $ 74.6 $ 424.3

The Company reviews goodwill for impairment whenever events or circumstances indicate potential impairment.

In the first quarter of fiscal 2021, the Company determined it would more likely than not sell all or a portion of the assets comprising the LED Products segment below carrying value.

As a result of this triggering event, the Company recorded an impairment to goodwill of $ 105.7 million as of September 27, 2020.

As of September 27, 2020, the potential sale had not met the held-for-sale criteria.

On October 18, 2020, the Company entered into a definitive agreement with SMART related to the LED Business Divestiture.

See Note 16, "Subsequent Events," for additional information on the transaction.

Intangible Assets, net

The following table presents the components of intangible assets, net:

March 29, 2020 June 30, 2019

September 27, 2020 June 28, 2020

(in millions of U.S.

3 unchanged sentences

Non-compete agreements 12.2 ( 7.8 ) 4.4 12.2 ( 7.1 ) 5.1

Trade names, finite-lived 0.5 ( 0.5 ) — 0.5 ( 0.5 ) —

Trade names 0.5 ( 0.5 ) — 0.5 ( 0.5 ) —

Acquisition related intangible assets 235.4 ( 110.9 ) 124.5 235.4 ( 107.3 ) 128.1

1 unchanged sentence

Total intangible assets $ 350.2 ($ 174.8 ) $ 175.4 $ 350.0 ($ 170.4 ) $ 179.6

Total amortization of acquisition-related intangibles assets was $ 3.7 million and $ 10.9 million for the three and nine months ended March 29, 2020 and $ 3.9 million and $ 11.7 million for the three and nine months ended March 31, 2019, respectively.

Total amortization of patents and licensing rights was $ 2.3 million and $ 6.8 million for the three and nine months ended March 29, 2020 and $ 2.4 million and $ 7.3 million for the three and nine months ended March 31, 2019.

In the first quarter of fiscal 2020, $ 0.9 million of developed technology, net relating to a favorable lease was reclassified as a right-of-use asset in accordance with the Company's adoption of ASC 842, Leases.

Total amortization of acquisition-related intangibles assets was $ 3.6 million and $ 3.6 million for the three months ended September 27, 2020 and September 29, 2019, respectively.

Total amortization of patents and licensing rights was $ 2.3 million and $ 2.2 million for the three months ended September 27, 2020 and September 29, 2019.

Total future amortization expense of intangible assets is estimated to be as follows:

2 unchanged sentences

Acquisition Related Intangibles Patents Total

June 28, 2020 (remainder of fiscal 2020) $ 3.6 $ 2.2 $ 5.8

June 27, 2021 $ 10.9 $ 6.6 $ 17.5

2 unchanged sentences

June 30, 2024 10.4 6.0 16.4

June 29, 2025 10.4 4.8 15.2

Thereafter 68.3 18.7 87.0

2 unchanged sentences

Revolving Line of Credit

As of March 29, 2020, the Company had a $ 125.0 million secured revolving line of credit (the Credit Agreement) under which the Company can borrow, repay and reborrow loans from time to time prior to its scheduled maturity date of January 9, 2023.

On March 27, 2020, the Company entered into an amendment to the Credit Agreement to reduce the aggregate amount of the revolving line of credit available from $ 250.0 million to $ 125.0 million and to replace the Credit Agreement's financial covenants with a single covenant requiring the Company to maintain a ratio of certain cash equivalents and marketable securities to outstanding loans and letter of credit obligations greater than 1.25 :1.

As of September 27, 2020, the Company had a $ 125.0 million secured revolving line of credit (the Credit Agreement) under which the Company can borrow, repay and reborrow loans from time to time prior to its scheduled maturity date of January 9, 2023.

The Credit Agreement requires the Company to maintain a ratio of certain cash equivalents and marketable securities to outstanding loans and letter of credit obligations greater than 1.25 :1, with no other financial covenants.

The Company classifies balances outstanding under the Credit Agreement as long-term debt in the consolidated balance sheets.

As of March 29, 2020, the Company had no outstanding borrowings under the Credit Agreement, $ 125.0 million in available commitments under the Credit Agreement and $ 87.6 million available for borrowing.

For the three and nine months ended March 29, 2020, the average interest rate was 0.00 %.

As of March 29, 2020, the unused line fee on available borrowings is 25 basis points.

As of September 27, 2020, the Company had no outstanding borrowings under the Credit Agreement, $ 125.0 million in available commitments under the Credit Agreement and $ 125.0 million available for borrowing.

For the three months ended September 27, 2020, the average interest rate was 0.00 %.

As of September 27, 2020, the unused line fee on available borrowings is 25 basis points.

2023 Convertible Notes

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Upon conversion, the Company will pay or deliver cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election.

In accounting for the issuance of the convertible senior notes, the Company separated the 2023 Notes into liability and equity components.

The carrying amount of the liability of the equity component representing the conversion option was $ 110.6 million and was determined by deducting the fair value of the liability component from the par value of the 2023 Notes.

2026 Convertible Notes

On April 21, 2020, the Company sold $ 500.0 million aggregate principal amount of 1.75 % convertible senior notes due May 1, 2026 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (the 2026 Notes).

The total net proceeds from the debt offerings was approximately $ 561.4 million.

The conversion rate will initially be 21.1346 shares of common stock per one thousand dollars in principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $ 47.32 per share of common stock).

The conversion rate will be subject to adjustment for some events, but will not be adjusted for any accrued and unpaid interest.

In addition, following certain corporate events that occur prior to the maturity date, or following the Company's issuance of a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2026 Notes in connection with such a corporate event, or who elects to convert any 2026 Notes called for redemption during the related redemption period in certain circumstances.

The Company may not redeem the 2026 Notes prior to May 1, 2023.

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on a redemption date occurring on or after May 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, if the last reported sales price of its common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

The redemption price will be 100 % of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company undergoes certain fundamental changes related to the Company's common stock, holders may require the Company to repurchase for cash all or any portions of their 2026 Notes at a fundamental repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders may convert their 2026 Notes at their option at any time prior to the close of business on the business day immediately preceding November 3, 2025 only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending June 30, 2020 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1.0 thousand principal amount of 2026 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of its common stock and the conversion rate on each such trading day;

(3) if the Company calls such 2026 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date;

or (4) upon the occurrence of specified corporate events.

On or after November 3, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2026 Notes at any time, regardless of the foregoing circumstances.

Upon conversion, the Company will pay or deliver cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election.

The Company used approximately $ 144.3 million of the net proceeds from the sale of the 2026 Notes to repurchase approximately $ 150.2 million aggregate principal amount of the 2023 Notes, including approximately $ 0.2 million of accrued interest on such notes, in privately negotiated transactions.

Accounting for 2023 Notes and 2026 Notes (collectively, the Notes)

In accounting for the issuance of the 2023 Notes and 2026 Notes, the Company separated the Notes into liability and equity components.

The carrying amount of the liability of the equity component representing the conversion option was $ 110.6 million and $ 145.4 million for the 2023 and 2026 Notes, respectively.

The amounts were determined by deducting the fair value of the liability component from the par value of each of the Notes.

Due to the partial extinguishment of the 2023 Notes, the equity component of the 2023 Notes was reduced by $ 27.7 million.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the debt discount), along with related issuance fees are amortized to interest expense over the term of the 2023 Notes at an effective interest rate of 0.49 %.

The excess of the principal amount of the liability component over its carrying amount (the debt discount), along with related issuance fees, are amortized to interest expense over the term of the Notes at an effective annual interest rate of 5.87 % and 7.45 % for the 2023 and 2026 Notes, respectively.

The net carrying amount of the liability component of the Notes is as follows:

(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Principal $ 999.8 $ 999.8

3 unchanged sentences

(in millions of U.S.

Dollars) March 29, 2020 June 30, 2019

Dollars) September 27, 2020 June 28, 2020

Discount related to value of conversion option $ 262.3 $ 262.3

Partial extinguishment of 2023 Notes ( 27.7 ) ( 27.7 )

Debt issuance costs ( 6.3 ) ( 6.3 )

Net carrying amount $ 228.3 $ 228.3

The interest expense recognized related to the 2023 Notes is as follows:

Three months ended Nine months ended

The interest expense, net recognized related to the Notes is as follows:

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Interest expense $ 1.3 $ 1.2 $ 3.8 $ 2.9

Amortization of discount and issuance costs 5.8 5.5 17.2 12.7

Total interest expense $ 7.1 $ 6.7 $ 21.0 $ 15.6

The estimated fair value of the 2023 Notes is $ 540.8 million as of March 29, 2020, as determined by a Level 2 valuation.

Dollars) September 27, 2020 September 29, 2019

Interest expense, net of capitalized interest $ 3.2 $ 1.3

Amortization of discount and issuance costs, net of capitalized interest 9.4 5.6

Total interest expense, net $ 12.6 $ 6.9

The Company capitalizes interest related to the Notes in connection with the building of a new silicon carbide fabrication facility in New York.

For the three months ended September 27, 2020, the Company capitalized $ 0.2 million of interest expense and $ 0.4 million of amortization of discount and issuance costs.

No interest expense was capitalized for the three months ended September 29, 2019.

The estimated fair value of the Notes is $ 1,333.2 million as of September 27, 2020, as determined by a Level 2 valuation.

Note 10 – Loss Per Share

The details of the computation of basic and diluted loss per share are as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

Dollars, except share data) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Net loss from continuing operations ($ 61.4 ) ($ 22.3 ) ($ 151.7 ) ($ 23.3 )

Net income attributable to noncontrolling interest 0.2 0.1 0.5 0.1

Loss from continuing operations attributable to controlling interest ( 61.6 ) ( 22.4 ) ( 152.2 ) ( 23.4 )

Net loss from discontinued operations — ( 205.4 ) — ( 218.0 )

Dollars, except share data) September 27, 2020 September 29, 2019

Net loss attributable to controlling interest ($ 184.4 ) ($ 37.8 )

1 unchanged sentence

Loss per share - basic and diluted:

Continuing operations attributable to controlling interest ($ 0.57 ) ($ 0.22 ) ($ 1.41 ) ($ 0.23 )

Discontinued operations $ — ($ 1.98 ) $ — ($ 2.12 )

Net loss attributable to controlling interest ($ 1.68 ) ($ 0.35 )

Diluted net loss per share is the same as basic net loss per share for the periods presented due to potentially dilutive items being anti-dilutive given the Company's net loss.

For the three and nine months ended March 29, 2020, 5.2 million and 5.5 million of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For the three and nine months ended March 31, 2019, 9.1 million and 9.8 million of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

Future earnings per share of the Company are also subject to dilution from conversion of its convertible notes under certain conditions as described in Note 9, “Long-term Debt.”

For the three months ended September 27, 2020 and September 29, 2019, 4.5 million and 5.9 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

Future earnings per share of the Company are also subject to dilution from conversion of its Notes under certain conditions as described in Note 9, “Long-term Debt.”

Note 11 – Stock-Based Compensation

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Stock Option Awards

A summary of stock option awards outstanding as of March 29, 2020 and changes during the nine months then ended is as follows:

A summary of stock option awards outstanding as of September 27, 2020 and changes during the three months then ended is as follows:

(shares in thousands) Number of Shares Weighted Average Exercise Price

3 unchanged sentences

Forfeited or expired ( 9 ) $ 63.67

Outstanding at March 29, 2020 1,789 $ 40.96

Outstanding at September 27, 2020 600 $ 33.49

Restricted Stock Awards and Units

A summary of nonvested restricted stock awards (RSAs) and restricted stock unit awards (RSUs) outstanding as of March 29, 2020 and changes during the nine months then ended is as follows:

A summary of nonvested restricted stock awards (RSAs) and restricted stock unit awards (RSUs) outstanding as of September 27, 2020 and changes during the three months then ended is as follows:

(awards and units in thousands) Number of RSAs/RSUs Weighted Average

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Forfeited ( 103 ) $ 37.75

Nonvested at March 29, 2020 2,822 $ 44.79

Nonvested at September 27, 2020 2,774 $ 55.10

Stock-Based Compensation Valuation and Expense

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Total stock-based compensation expense was classified in the consolidated statements of operations as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Dollars) September 27, 2020 September 29, 2019

Cost of revenue, net $ 3.6 $ 2.2

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Note 12 – Income Taxes

The change in our effective tax rate for the three months ended March 29, 2020 was primarily due to impacts from the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

In general, the variation between the Company's effective income tax rate and the U.S.

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and (iii) projected tax credits generated.

On March 27, 2020, the U.S.

government enacted the CARES Act, which contained changes to the U.S.

tax law that included, among other items, the temporary removal of the taxable income limitation on the utilization of net operating losses, the ability for a five-year carryback of certain net operating losses, and the adjustment to the carryforward period of certain net operating losses.

For the three and nine months ended March 29, 2020, the Company recognized a net $ 5.1 million discrete tax benefit due to the net operating loss provisions of the CARES Act.

The Company did not record an income tax benefit related to the goodwill impairment described in Note 8, “Goodwill and Intangible Assets,” as the impairment is non-deductible for income tax purposes.

The Company assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction.

The Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

and Luxembourg deferred tax assets, as of the nine months ended March 29, 2020.

As of June 30, 2019, the U.S.

valuation allowance was $ 177.6 million.

During the nine months ended March 29, 2020, the Company decreased the U.S.

valuation allowance by $ 0.6 million primarily due to impacts from the CARES Act and the expiration of certain statutes of limitations on the Company's liability for unrecognized tax benefits.

As of June 30, 2019, the Luxembourg valuation allowance was $ 7.6 million.

During the nine months ended March 29, 2020, the Company increased this valuation allowance by $ 2.0 million due to year-to-date losses in Luxembourg.

and Luxembourg deferred tax assets, as of the three months ended September 27, 2020.

GAAP requires a two-step approach to recognizing and measuring uncertain tax positions.

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As of June 28, 2020, the Company's liability for unrecognized tax benefits was $ 7.4 million.

During the nine months ended March 29, 2020, the Company decreased its unrecognized tax benefits by $ 0.7 million primarily due to the expiration of statute requirements.

As a result, the total liability for unrecognized tax benefits as of March 29, 2020 was $ 7.5 million.

During the three months ended September 27, 2020, the Company did no t record any material movement in its unrecognized tax benefits.

As a result, the total liability for unrecognized tax benefits as of September 27, 2020 was $ 7.4 million.

If any portion of this $ 7.4 million is recognized, the Company will then include that portion in the computation of its effective tax rate.

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The outcomes in these matters are not reasonably estimable.

As a result of a Focused Compliance Inspection and a Compliance Evaluation Inspection at the Company's Durham, North Carolina facility, the United States Environmental Protection Agency (“EPA”) raised a potential non-compliance issue with certain requirements of the North Carolina Waste Management Law.

The Company is currently negotiating a settlement with the EPA to resolve the issue and pay a penalty, which is expected to be approximately $ 0.3 million.

Grant Disbursement Agreement (GDA) with the State of New York

The Company currently has a GDA with the State of New York Urban Development Corporation (doing business as Empire State Development).

The GDA provides a potential total grant amount of $ 500.0 million to partially and fully reimburse the Company for certain property, plant and equipment costs related to the Company's construction of a new silicon carbide fabrication facility in Marcy, New York.

The GDA was signed in the fourth quarter of fiscal 2020 and requires the Company to satisfy a number of objectives for the Company to receive reimbursements through the span of the 13 -year agreement.

These objectives include maintaining a certain level of local employment, investing a certain amount in locally administered research and development activities and the payment of an annual commitment fee for the first six years .

Additionally, the Company has agreed, under a separate agreement (the SUNY Agreement), to sponsor the creation of two endowed faculty chairs and fund a scholarship program at SUNY Polytechnic Institute.

The annual cost of satisfying the objectives of the GDA and the SUNY Agreement, excluding the direct and indirect costs associated with employment, varies from $ 1.0 million to $ 5.2 million per year through fiscal 2031.

Note 14 – Reportable Segments

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Financial Results by Reportable Segment

The tables below reflect the results of the Company's reportable segments as reviewed by the CODM for the three and nine month periods ended March 29, 2020 and March 31, 2019.

The tables below reflect the results of the Company's reportable segments as reviewed by the CODM for the three month periods ended September 27, 2020 and September 29, 2019.

The Company used the same accounting policies to derive the segment results reported below as those used in the Company’s consolidated financial statements.

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The Company allocates these indirect costs based on a reasonable measure of utilization that considers the specific facts and circumstances of the costs being allocated.

Unallocated costs in the table below consisted primarily of manufacturing employees’ stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans, and matching contributions under the Company’s 401(k) plan.

Unallocated costs in the table below consisted primarily of manufacturing employees’ stock-based compensation, expenses for quarterly or annual incentive plans, and matching contributions under the Company’s 401(k) plan.

These costs were not allocated to the reportable segments' gross profit because the Company’s CODM does not review them regularly when evaluating segment performance and allocating resources.

The cost of goods sold (COGS) acquisition related cost adjustment includes acquisition costs related to our acquisition of the RF Power (RF Power) business of Infineon Technologies AG (Infineon) impacting cost of revenue for fiscal 2019.

These costs were not allocated to the reportable segments' gross profit for fiscal 2019 because they represent an adjustment which does not provide comparability to the corresponding prior period and therefore were not reviewed by the Company's CODM when evaluating segment performance and allocating resources.

For the first quarter of fiscal 2021, unallocated costs include incremental costs relating to operating manufacturing operations during the COVID-19 pandemic.

These incremental costs are primarily comprised of increased cleaning costs, cleaning supplies and protective equipment, as well as the costs from implementing preventative safety measures, including increased wellness checks and time off policies.

Additionally, unallocated costs for the first quarter of fiscal 2021 included underutilization charges related to transitioning certain LED Products operations to Wolfspeed operations.

Revenue, gross profit and gross margin for each of the Company's segments were as follows:

Three months ended Nine months ended

March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Three months ended

September 27, 2020 September 29, 2019

Wolfspeed revenue $ 115.5 $ 127.7

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Unallocated costs (1)

COGS acquisition related costs — ( 1.4 ) — ( 2.6 )

( 10.7 ) ( 6.9 )

Consolidated gross profit $ 54.0 $ 74.2

Consolidated gross margin 24.9 % 30.6 %

(1) Unallocated costs for the three months ended September 27, 2020 include $ 0.9 million in incremental manufacturing costs relating to COVID-19.

Geographic Information

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Disaggregated revenue from external customers by geographic area is as follows:

Three months ended Nine months ended

March 29, 2020 March 31, 2019 March 29, 2020 March 31, 2019

Three months ended

September 27, 2020 September 29, 2019

(in millions of U.S.

Dollars) Revenue % of Revenue Revenue % of Revenue Revenue % of Revenue Revenue % of Revenue

Dollars) Revenue % of Revenue Revenue % of Revenue

United States $ 56.7 26.2 % $ 55.4 22.8 %

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Inventories for each of the Company's segments were as follows:

March 29, 2020 June 30, 2019

September 27, 2020 June 28, 2020

Wolfspeed $ 106.7 $ 97.3

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All restructuring costs are recorded in other operating expense on the consolidated statement of operations.

Corporate Restructuring

In April 2018, the Company approved a corporate restructuring plan.

The purpose was to restructure and realign the Company's cost base with the long-range business strategy that was announced in February 2018.

The restructuring activity was completed in the second quarter of fiscal 2019.

For the three and nine months ended March 31, 2019, $ 0.0 million and $ 2.6 million was expensed relating to this corporate restructuring plan.

Factory Optimization Restructuring

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As part of the plan, the Company will incur restructuring charges associated with the movement of equipment as well as disposals on certain long-lived assets.

The Company expects approximately $ 70.0 million in restructuring charges related to the factory optimization plan to be incurred through 2024.

For the three and nine months ended March 29, 2020, the Company expensed and paid $ 1.1 million and $ 3.5 million of restructuring charges related to the factory optimization plan.

In September 2019, the Company announced its intent to build the new fabrication facility in Marcy, New York to complement the factory expansion underway at its U.S.

campus headquarters in Durham, North Carolina.

The Company has not started building the facility and is currently evaluating the impact of this decision on future restructuring charges.

The Company has commenced the building of the New York facility and is currently evaluating the impact of this decision on future restructuring charges.

The Company expects approximately $ 70.0 million in restructuring charges related to the factory optimization plan to be incurred through 2024.

For the three months ended September 27, 2020 and September 29, 2019, the Company expensed $ 1.6 million and $ 1.2 million of restructuring charges related to the factory optimization plan, respectively, of which $ 0.2 million is accrued for as of September 27, 2020.

Corporate Restructuring

In September 2020, the Company realigned certain resources to further focus on areas vital to our growth while driving efficiencies.

As a result, the Company recorded $ 3.2 million in severance-related costs during the three months ended September 27, 2020, of which $ 1.5 million is accrued for as of September 27, 2020.

Sales Representatives Restructuring

In July 2019, the Company realigned its sales resources as part of the Company's transition to a more focused semiconductor company.

As a result, the Company recorded $ 0.0 million and $ 0.8 million in contract termination costs during the three and nine months ended March 29, 2020, of which $ 0.3 million is accrued in other current liabilities as of March 29, 2020.

As a result, the Company recorded $ 0.8 million in contract termination costs during the three months ended September 29, 2019, all of which has been paid as of September 27, 2020.

Note 16 - Subsequent Events

On April 21, 2020, the Company issued and sold $ 500.0 million aggregate principal amount of 1.75 % convertible senior notes due May 1, 2026 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the initial purchasers (the 2026 Notes).

The total net proceeds from the debt offering was approximately $ 561.4 million.

The 2026 Notes are unsecured, senior obligations of the Company, and interest will be payable semi-annually in arrears.

The 2026 Notes are convertible, at a holder's election, in multiples of $1,000 principal amount, into cash, shares of the Company’s common stock, or a combination thereof, at the Company’s election, at the applicable conversion rate only under certain circumstances or certain periods specified within the Indenture governing the 2026 Notes.

The initial conversion rate for the 2026 Notes is 21.1346 shares of common stock per $1,000 principal amount of notes, subject to adjustment as provided in the Indenture.

The Company used approximately $ 144.3 million of the net proceeds from the offering to repurchase approximately $ 150.2 million aggregate principal amount of the 2023 Notes, including approximately $ 0.2 million of accrued interest on such notes, in privately negotiated transactions.

The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes.

On October 18, 2020, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) with SMART with respect to the LED Business Divestiture.

The transaction is targeted to close in the first calendar quarter of 2021, subject to customary closing conditions and governmental approvals.

Pursuant to the Purchase Agreement, the Company will sell to SMART, and SMART will (i) purchase from the Company, (a) certain equipment, inventory, intellectual property rights, contracts, and real estate comprising the Company’s LED Products segment, (b) all of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited, a limited liability company organized under the laws of the People’s Republic of China and an indirect wholly owned subsidiary of the Company, and (c) the Company’s ownership interest in Cree Venture LED Company Limited, the Company’s joint venture with San’an Optoelectronics Co., Ltd.

(collectively, the LED Business);

and (ii) assume certain liabilities related to the LED Business.

The Company will retain certain assets used in and pre-closing liabilities associated with the LED Products segment.

The purchase price for the LED Business consists of (i) a payment of $ 50 million in cash, subject to customary adjustments, (ii) an unsecured promissory note issued to the Company by SGH in the amount of $ 125 million (the Purchase Price Note), (iii) the

potential to receive an earn-out payment of up to $ 125 million based on the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing (the Earnout Period), also payable in the form of a unsecured promissory note of SGH (the Earnout Note), and (iv) the assumption of certain liabilities.

The Purchase Price Note and the Earnout Note, if earned, will accrue interest at a rate of three-month LIBOR plus 3.0 % with interest paid every three months and one bullet payment of principal and all accrued and unpaid interest will be payable on each note’s maturity date.

The Purchase Price Note will mature on August 15, 2023, and the Earnout Note, if issued, will mature on the third anniversary of the completion of the Earnout Period.

In connection with the closing of the LED Business Divestiture, the Company and SMART will also enter into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which will assign to SMART certain intellectual property owned by the Company and its affiliates and license to SMART certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement, which is designed to ensure a smooth transition of the LED Business to SMART, (iii) a Wafer Supply and Fabrication Services Agreement, pursuant to which the Company will supply SMART with certain silicon carbide materials and fabrication services for four years, and (iv) a Real Estate License Agreement, which will allow SMART to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing.

The completion of the LED Business Divestiture is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including the receipt of governmental and regulatory consents and approvals and expiration of any mandatory waiting period related thereto, and other customary closing conditions.

The Purchase Agreement provides for customary termination rights of the parties and also provides that, in the event the Purchase Agreement is terminated in connection with certain specified regulatory-related circumstances, SMART may be required to pay the Company a termination fee of $ 4 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements